<PAGE> 1
As filed with the Securities and Exchange Commission on October 8, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20529
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 22, 1997
Commission File Number: 000-22685
VORNADO REALTY L.P.
(Exact name of registrant as specified in its charter)
MARYLAND 13-3925979
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(Address of principal executive offices) (Zip Code)
(201) 587-1000
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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<PAGE> 2
Items 1-4 Not Applicable.
Item 5. Other Events.
CHARLES E. SMITH:
On September 22, 1997, Vornado Realty Trust entered into an
agreement to acquire a 15% limited partnership interest in Charles
E. Smith Commercial Realty, L.P. for $60 million. Charles E. Smith
Commercial Realty, L.P. is being formed to own interests in and
manage approximately 7.2 million square feet of office properties
in Crystal City, Alexandria, Virginia, a suburb of Washington,
D.C., and to manage an additional 14 million square feet of office
and other commercial properties in the Washington, D.C. area. The
Crystal City properties in which Charles E. Smith Commercial
Realty, L.P. will own an interest, are now owned by other various
Charles E. Smith affiliates. The closing, which is expected to
occur at the end of October, is subject to receipt of consents
from various parties and other conditions.
HOTEL PENNSYLVANIA:
On September 25, 1997, Vornado Realty Trust acquired a 40%
interest in the Hotel Pennsylvania, which is located on Seventh
Avenue in New York City opposite Madison Square Garden. The
property was acquired in a joint venture with Hotel Properties
Limited and Planet Hollywood International, Inc. The venture
intends to create a sports-themed hotel and entertainment complex.
Under the joint venture agreement, Hotel Properties Limited and
Planet Hollywood International, Inc. will have 40% and 20%
interests, respectively. The joint venture acquired the hotel for
approximately $159 million, of which $120 million is newly-issued
5 year financing. The Hotel Pennsylvania contains approximately
800,000 square feet of hotel space with 1,700 rooms and 400,000
square feet of retail and office space. Vornado will manage the
site's retail and office space, and Hotel Properties will manage
the hotel.
COLD STORAGE:
On September 26, 1997, Vornado Realty Trust entered into
merger agreements pursuant to which its newly formed preferred
stock affiliates ("Preferred Stock Affiliates") will acquire
Americold Corporation ("Americold") and URS Logistics, Inc.
("URS") (collectively "Cold Storage"). The consideration for the
Americold transaction is approximately $582 million, including
$111 million in cash and $471 million in indebtedness. The
consideration for the URS transaction is approximately $367
million, including $178 million in cash and $189 million in
indebtedness.
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<PAGE> 3
The Preferred Stock Affiliates entered into an agreement with
Crescent Real Estate Equities Limited Partnership ("Crescent") to
make these acquisitions pursuant to which the Preferred Stock
Affiliates would hold a 60% interest in the investment and
Crescent a 40% interest.
Affiliates of Kelso & Company, Inc., which have a controlling
interest in both Americold and URS, have granted consents or
irrevocable proxies with respect to both transactions. Each
transaction is not conditioned on the closing of the other, and
both are expected to close in the fourth quarter of 1997.
The forgoing is qualified in its entirety by reference to
Exhibits 99.3 through 99.6.
The Charles E. Smith, Hotel Pennsylvania and Cold Storage
transactions were arrived at through arm's-length negotiations and
were consummated through a subsidiary of Vornado Realty L.P..
Vornado Realty Trust owns 90.4% of Vornado Realty L.P. (the
"Operating Partnership") and is the sole general partner.
Item 6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) - (b) There are filed herewith (a) the historical financial
statements of Americold, URS, Montehiedra Town Center
("Montehiedra") and the Riese Properties ("Riese") commencing on
page 7 and (b) the Condensed Consolidated Pro Forma Balance Sheet
of the Operating Partnership as of June 30, 1997 and the
Condensed Consolidated Pro Forma Statement of Income of the
Operating Partnership for the six months ended June 30, 1997 and
the year ended December 31, 1996, commencing on page 68, prepared
to give Pro Forma effect to the proposed acquisition of Americold
and URS, completed acquisitions of Montehiedra and Riese and
investments in Charles E. Smith Commercial Realty L.P. and the
Hotel Pennsylvania. The Pro Forma data also includes certain
previously reported acquisitions which were included in Form 8-K's
previously filed with the Securities and Exchange Commission in
1997.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Deloitte & Touche LLP
23.5 Consent of Deloitte & Touche LLP
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
99.1 Press Release, dated September 22, 1997, of Vornado
Realty Trust, announcing the acquisition of a 15%
limited partnership interest in Charles E. Smith
Commercial Realty, L.P.
99.2 Press Release, dated September 25, 1997, of Vornado
Realty Trust, announcing the acquisition of a 40%
interest in Hotel Pennsylvania.
99.3 Press Release, dated September 29, 1997, of Vornado
Realty Trust, announcing the acquisition of Americold
Corporation and URS Logistics, Inc. and the formation
of a partnership with Crescent Real Estate Equities
Company.
99.4 Agreement and Plan of Merger, dated as of September
26, 1997 among Vornado Realty Trust, Atlanta Parent,
Inc., Atlanta Storage Acquisition Co. and URS
Logistics, Inc.
99.5 Agreement and Plan of Merger, dated as of September
26, 1997 among Vornado Realty Trust, Portland Parent,
Inc., Portland Storage Acquisition Co. and Americold
Corporation.
99.6 Agreement dated September 28, 1997 between Atlanta
Parent Incorporated, Portland Parent Incorporated
and Crescent Real Estate Equities Limited
Partnership.
</TABLE>
Item 8. Not Applicable.
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<PAGE> 5
<TABLE>
<CAPTION>
Page
7(a) Financial statements Reference
---------
<S> <C>
Americold Corporation
Independent Auditors' Report..........................................7
Consolidated Balance Sheets as of the
last day of February 1996 and 1997...................................8
Consolidated Statements of Operations
for the years ended on the last day of
February 1995, 1996 and 1997........................................10
Consolidated Statements of Common Stockholders' Deficit for
the years ended on the last day of February 1995, 1996 and
1997............................................................... 11
Consolidated Statements of Cash Flows for the
years ended on the last day of
February 1995, 1996 and 1997................................... 12
Notes to Consolidated Financial Statements as of
the last day of February 1996 and 1997............................. 14
Consolidated Balance Sheet as of the last day
of August 1997................................................. 35
Consolidated Statements of Operations for the
six months ended on the last day of
August 1996 and 1997........................................... 36
Consolidated Statements of Cash Flows, for the
six months ended on the last day of
August 1996 and 1997........................................... 37
Notes to Consolidated Financial Statements as
of the last day of August 1996 and 1997........................ 38
URS Logistics, Inc. and Subsidiary
Independent Auditor's Report....................................... 42
Consolidated Balance Sheets as of
December 31, 1996 and 1995..................................... 43
Consolidated Statements of Operations for the
Years ended December 31, 1996, 1995
and 1994....................................................... 44
Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 1996, 1995
and 1994....................................................... 45
Consolidated Statements of Cash Flows for the
Years ended December 31, 1996, 1995 and 1994................... 46
Notes to Consolidated Financial Statements as
of and for the Years ended December 31, 1996
and 1995....................................................... 48
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
Consolidated Balance Sheet as of June 30, 1997..................... 55
Consolidated Statements of Operations for the
six months ended June 30, 1997 and 1996....................... 57
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996....................... 58
Notes to Consolidated Financial Statements
as of and for the six months ended
June 30, 1997 and 1996........................................ 59
Montehiedra Town Center
Independent Auditors' Report....................................... 60
Statements of Revenue and Certain Expenses for
the Year ended December 31, 1996 and the
three months ended March 31, 1997 and 1996.................... 61
Notes to Statements of Revenue and Certain Expenses................ 62
Riese Properties
Independent Auditors' Report....................................... 64
Statement of Revenues and Certain Expenses
for the Year ended April 30, 1997 and
the six months ended April 30, 1997 and 1996.................. 65
Notes to Statements of Revenues and Certain Expenses............... 66
(b) Pro Forma financial information
Condensed Consolidated Pro Forma Balance
Sheet as at June 30, 1997........................................ 69
Condensed Consolidated Pro Forma Income
Statement for the six months ended
June 30, 1997.................................................... 70
Condensed Consolidated Pro Forma Income
Statement for the Year ended
December 31, 1996................................................ 72
Notes to Condensed Consolidated Pro Forma
Financial Statements............................................. 74
</TABLE>
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<PAGE> 7
[PEAT MARWICK LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
Americold Corporation:
We have audited the consolidated balance sheets of Americold Corporation as of
the last day of February 1996 and 1997, and the related consolidated statements
of operations, common stockholders' deficit and cash flows for each of the years
in the three-year period ended the last day of February 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Americold
Corporation as of the last day of February 1996 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended the last day of February 1997, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
May 2, 1997
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<PAGE> 8
AMERICOLD CORPORATION
Consolidated Balance Sheets
Last day of February 1996 and 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Assets 1996 1997
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,857 $ 13,702
Trade receivables, less allowance for doubtful accounts
of $218 and $396, respectively 25,461 27,560
Other receivables 3,512 3,138
Prepaid expenses 4,286 3,828
Tax refund receivable 3,336 2,636
Other current assets 845 891
--------- --------
Total current assets 58,297 51,755
Net property, plant and equipment 375,851 384,484
Cost in excess of net assets acquired, less accumulated
amortization of $22,138 and $24,644, respectively 77,255 74,749
Debt issuance costs, less accumulated amortization
of $3,987 and $5,168, respectively 6,627 11,041
Other noncurrent assets 8,962 9,005
--------- ---------
Total assets $ 526,992 $ 531,034
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Liabilities, Preferred Stock and Common Stockholders' Deficit 1996 1997
------------------------------------------------------------- ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 11,363 $ 16,116
Accrued interest 19,056 18,466
Accrued expenses 11,604 13,660
Deferred revenue 5,707 5,555
Current maturities of long-term debt 2,732 5,229
Other current liabilities 4,630 5,259
--------- ---------
Total current liabilities 55,092 64,285
Long-term debt, less current maturities 461,667 465,834
Deferred income taxes 102,041 98,524
Other noncurrent liabilities 9,861 10,347
--------- ---------
Total liabilities 628,661 638,990
--------- ---------
Preferred stock, Series A, $100 par value. Authorized 1,000,000
shares; issued and outstanding 52,936 shares 5,771 5,753
--------- ---------
Common stockholders' deficit:
Common stock, $.01 par value. Authorized 10,000,000 shares; issued
and outstanding 4,931,194 and 4,995,556 shares, respectively 49 50
Additional paid-in capital 50,173 51,182
Retained deficit (157,345) (164,580)
Adjustment for minimum pension liability (317) (361)
--------- ---------
Total common stockholders' deficit (107,440) (113,709)
Commitments and contingencies - -
--------- ---------
Total liabilities, preferred stock and common stockholders' deficit $ 526,992 $ 531,034
========= =========
</TABLE>
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<PAGE> 10
AMERICOLD CORPORATION
Consolidated Statements of Operations
Years ended last day of February 1995, 1996 and 1997
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $ 215,207 $ 279,788 $ 310,767
--------- --------- ---------
Operating expenses:
Cost of sales 138,132 194,936 228,762
Amortization of cost in excess of net assets acquired 2,535 2,773 2,506
Selling and administrative expenses 25,955 28,525 31,142
Employee stock ownership plan expense 750 750 500
--------- --------- ---------
Total operating expenses 167,372 226,984 262,910
--------- --------- ---------
Gross operating margin 47,835 52,804 47,857
--------- --------- ---------
Other income (expense):
Interest income 1,870 1,199 932
Interest expense (55,344) (56,610) (56,678)
Amortization of debt issuance costs (1,276) (964) (1,185)
Gain on insurance settlement 16,953 - -
Reorganization expenses - (7,344) (771)
Other, net 753 (591) 701
--------- --------- ---------
Total other expense (37,044) (64,310) (57,001)
--------- --------- ---------
Income (loss) before income taxes and extraordinary item 10,791 (11,506) (9,144)
Provision (benefit) for income taxes 5,227 (3,426) (2,604)
--------- --------- ---------
Income (loss) before extraordinary item 5,564 (8,080) (6,540)
Extraordinary item, net of income tax benefit of $1,158 - (1,794) -
--------- --------- ---------
Net income (loss) $ 5,564 $ (9,874) $ (6,540)
========= ========= =========
Income (loss) per share:
Income (loss) before extraordinary item $ 1.00 $ (1.80) $ (1.46)
Extraordinary item - (.37) -
--------- --------- ---------
Net income (loss) per common share $ 1.00 $ (2.17) $ (1.46)
========= ======== =========
Weighted average number of shares outstanding 4,864 4,867 4,952
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 11
AMERICOLD CORPORATION
Consolidated Statements of Common Stockholders' Deficit
Years ended last day of February 1995, 1996 and 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Adjustment
for
Additional minimum Total common
Common paid-in Retained pension stockholders'
stock capital deficit liability deficit
----- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance last day of February 1994 $ 49 $ 49,082 $(151,653) $ (55) $(102,577)
Purchase of common stock (3,065 shares) - (60) - - (60)
11.5% preferred stock dividend - - (190) - (190)
Undeclared cumulative preferred stock dividend - - (496) - (496)
Adjustment for minimum pension liability - - - 12 12
Net income - - 5,564 - 5,564
-------- -------- -------- -------- --------
Balance last day of February 1995 49 49,022 (146,775) (43) (97,747)
Issuance of common stock (26,685 shares) - 436 - - 436
13.5% preferred stock dividend - 715 (219) - 496
Undeclared cumulative preferred stock dividend - - (477) - (477)
Adjustment for minimum pension liability - - - (274) (274)
Net loss - - (9,874) - (9,874)
-------- -------- -------- -------- ---------
Balance last day of February 1996 49 50,173 (157,345) (317) (107,440)
Issuance of common stock (64,362 shares) 1 1,009 - - 1,010
13.5% preferred stock dividend - - (237) - (237)
Undeclared cumulative preferred stock dividend - - (458) - (458)
Adjustment for minimum pension liability - - - (44) (44)
Net loss - - (6,540) - (6,540)
-------- -------- -------- -------- --------
Balance last day of February 1997 $ 50 $ 51,182 $(164,580) $ (361) $(113,709)
======== ======== ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 12
AMERICOLD CORPORATION
Consolidated Statements of Cash Flows
Years ended last day of February 1995, 1996 and 1997
(In Thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,564 $ (9,874) $ (6,540)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 20,140 19,682 20,697
Amortization of cost in excess of net assets acquired 2,535 2,773 2,506
Amortization of debt issuance costs 1,276 964 1,185
Amortization of original issue discount 1,369 430 -
Gain (loss) on sale of assets (286) (555) 25
Gain on insurance settlement (16,953) - -
Other amortization 302 570 570
Write-off of unamortized issuance costs - 962 -
Write-off of original issuance discount - 1,989 -
Write-off of long-term investment - 750 -
Change in assets and liabilities:
Receivables (6,952) (6,358) (1,725)
Prepaid expenses (1,268) 954 458
Tax refund receivable 1,012 (3,057) 700
Other current assets (67) (150) (46)
Accounts payable 1,291 4,622 4,753
Accrued interest 349 1,373 (590)
Accrued expenses 3,833 259 2,806
Deferred revenue 1,142 (207) (152)
Other current liabilities (1,032) 718 629
Deferred income taxes 1,540 (4,057) (3,517)
Other noncurrent liabilities (1,111) 772 (2,901)
---------- --------- ---------
Net cash provided by operating activities 12,684 12,560 18,858
---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 13
AMERICOLD CORPORATION
Consolidated Statements of Cash Flows, Continued
(In Thousands)
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of assets $ 1,105 $ 6,169 $ 1,658
Expenditures for property, plant and equipment (13,203) (34,183) (33,634)
Purchase of long-term investment (447) -- --
Proceeds from insurance policies 26,343 -- --
Expenditures for logistics software (1,650) (230) (56)
Other items, net 287 646 943
-------- --------- ---------
Net cash provided (used) by investing activities 12,435 (27,598) (31,089)
-------- --------- ---------
Cash flows from financing activities:
Principal payments under capital lease and other
debt obligations (2,087) (2,752) (2,425)
Proceeds from mortgage 13,475 -- 15,222
Retirement of note and mortgage (9,044) -- (11,376)
Proceeds from sale of senior subordinated notes -- -- 120,000
Retirement of senior subordinated debentures -- -- (115,000)
Retirement of mortgage bonds -- (10,000) --
Release of escrow funds 2,714 20,083 4,820
Deposit of escrow funds -- (4,768) --
Debt issuance costs (846) (269) (5,668)
Purchase of treasury stock (60) -- --
Issuance of stock -- 438 218
Preferred stock dividend -- -- (715)
-------- --------- ---------
Net cash provided by financing activities 4,152 2,732 5,076
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents 29,271 (12,306) (7,155)
Cash and cash equivalents at beginning of year 3,892 33,163 20,857
-------- --------- ---------
Cash and cash equivalents at end of year $ 33,163 $ 20,857 $ 13,702
======== ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest, net of
amounts capitalized $ 53,626 $ 54,806 $ 57,268
Cash paid during the year for income taxes 2,675 2,531 58
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations incurred to lease new
equipment 1,120 844 243
Sale proceeds placed in escrow 1,483 450 5,334
Exchange of senior subordinated debentures -- 115,000 --
Employee stock ownership plan contribution made
with common stock -- -- 750
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 14
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements
Last day of February 1996 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies and methods of their application that significantly
affect the determination of financial position, cash flows and results
of operations are as follows:
(a) Business Description
Americold Corporation (the "Company") provides integrated logistics
services for the frozen food industry consisting of warehousing and
transportation management. These services are provided through the
Company's network of 49 refrigerated warehouses and its refrigerated
transportation management unit. The Company has a wholly-owned
warehousing subsidiary, Americold Services Corporation.
In addition, the Company operates a limestone quarry. This business is
not significant to the Company as a whole and is not required to be
reported as a separate industry segment.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Americold
Corporation and its wholly-owned subsidiary. All significant
intercompany transactions, profits and balances have been eliminated.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
generally provided on the straight-line method over the estimated
useful lives of the respective assets ranging from 3 to 45 years for
financial reporting purposes and on accelerated methods for income tax
purposes where possible. Property held under capital leases (at
capitalized value) is amortized on the straight-line method over its
estimated useful life, limited generally by the lease period. The
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<PAGE> 15
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
amortization of the property held under capital leases is included with
depreciation expense. Estimated remaining useful lives are reviewed
periodically for reasonableness and any necessary change is generally
effected at the beginning of the accounting period in which the
revision is adopted.
Maintenance and repairs are expensed in the year incurred; major
renewals and betterments of equipment and refrigeration facilities are
capitalized and depreciated over the remaining life of the asset.
(d) Cost in Excess of Net Assets Acquired
On December 24, 1986, all the outstanding capital stock of the Company
was acquired by a private group consisting of affiliates of Kelso &
Company, Inc., certain institutional investors and certain key
employees and members of the Company's management. The acquisition of
the Company was accounted for as a purchase. An allocation of the
purchase price was made to the acquired assets and liabilities based on
their estimated fair market values at the date of acquisition. The
unallocated purchase price is the Company's estimate of goodwill
associated with the acquisition and is being amortized using the
straight-line method over a period of 40 years.
The Company assesses the recoverability of the goodwill by determining
whether the amortization of the goodwill balance over its remaining
useful life can be recovered through projected undiscounted future net
income. The amount of goodwill impairment, if any, is measured based on
projected discounted future net income using a discount rate reflecting
the Company's current average cost of funds.
(e) Debt Issuance Costs
Debt issuance costs incurred are amortized over the term of the related
debt.
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<PAGE> 16
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
(f) Income Taxes
Income taxes are computed using the asset and liability method. Under
the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws.
(g) Management Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(h) Revenue Recognition
The Company's revenues are primarily derived from services provided to
customers in both handling and storing frozen products and from freight
services. Handling and storage revenue is based primarily upon the
total weight of frozen product received into and held in storage and is
recognized as earned, not as billed. Differences between revenue earned
and revenue billed are recorded as deferred revenue. Approximately 50%
of the handling revenue is deferred until the customer's products are
released. The freight services revenues and direct costs are recognized
upon delivery of freight.
(i) Income (Loss) Per Share
Income (loss) per common share is computed by dividing net income
(loss) less preferred dividend requirements, by the weighted average of
common shares outstanding.
(j) Major Customers
Consolidated net sales to H. J. Heinz Company and subsidiaries amounted
to approximately $45.5 million, $108.1 million and $149.9 million in
the years ended
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<PAGE> 17
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
the last day of February 1995, 1996 and 1997, respectively. No other
customer accounted for 10% or more of consolidated net sales.
(k) Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents. There were cash
equivalents of $15.4 million and $10.0 million as of the last day of
February 1996 and 1997, respectively.
(l) New Accounting Standards
Effective March 1, 1996, the Company adopted Financial Accounting
Standard Board Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This statement generally requires assessment
of recoverability of an asset after events or circumstances that
indicate an impairment to the asset and its future cash flows. Any
impairment loss would be recognized as a one-time charge to earnings
affecting results of operations, but would not affect the cash flow of
the Company. There was no impairment loss to report upon adoption.
Effective March 1, 1996, the Company adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No.
123 requires that, except for transactions with employees that are
within the scope of Accounting Principles Board Opinion No. 25 ("APB
No. 25"), all transactions in which goods or services are the
consideration received for the issuance of equity instruments are to be
accounted for based on the fair value of the consideration received or
the fair value of the equity instrument issued, whichever is more
reliably measurable. However, it also allows an entity to continue to
measure compensation costs for those plans using the intrinsic value
based method of accounting prescribed by APB No. 25. Entities electing
to follow the accounting methods of APB No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if
the fair value method of accounting defined in SFAS No. 123 had been
applied.
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<PAGE> 18
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
Pro forma disclosures required for entities that elect to continue to
measure compensation cost using APB No. 25 must include the effects of
all awards granted in fiscal years that begin after December 15, 1994.
The Company has elected to continue using APB No. 25 and make the
necessary SFAS No. 123 pro forma disclosures.
The Company has not implemented the requirements of Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128"), although it will be
required to do so for fiscal years beginning March 1, 1997 and
thereafter.
This Statement establishes a different method of computing net income
per share than is currently required under the provisions of Accounting
Principles Board Opinion No. 15. Under SFAS No. 128, the Company will
be required to present both basic net income per share and diluted net
income per share. The Company estimates that the adoption of SFAS No.
128 will not have a material impact on its income per share.
(2) Net Property, Plant and Equipment
Net property, plant and equipment consists of the following (in
thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------------------
1996 1997
---- ----
<S> <C> <C>
Land $ 31,911 $ 35,038
Refrigerated facilities, buildings
and land improvements 450,402 467,496
Machinery and equipment 67,661 74,599
-------- --------
549,974 577,133
Less accumulated depreciation 174,123 192,649
-------- --------
$375,851 $384,484
======== ========
</TABLE>
-18-
<PAGE> 19
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
(3) Other Noncurrent Assets
Other noncurrent assets consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1996 1997
---- ----
<S> <C> <C>
Restricted funds held by trustee $5,037 $5,407
Real estate owned 300 300
Security deposits 261 261
Other 3,364 3,037
------ ------
$8,962 $9,005
====== ======
</TABLE>
(4) Leases
Assets under capital leases are included in net property, plant and
equipment and consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1996 1997
---- ----
<S> <C> <C>
Refrigerated facilities,
buildings and land improvements $ 7,075 $ 7,075
Machinery and equipment 4,635 3,124
------- -------
11,710 10,199
Less accumulated depreciation 4,108 3,368
------- -------
$ 7,602 $ 6,831
======= =======
</TABLE>
-19-
<PAGE> 20
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
Future minimum lease payments under noncancelable leases for years
ended after the last day of February 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ending the last Capital Operating
day of February leases leases
--------------- ------ ------
<S> <C> <C>
1998 $ 4,013 $ 6,298
1999 782 5,348
2000 590 4,290
2001 509 3,211
2002 350 3,072
Thereafter 742 20,540
-------- ---------
Total minimum lease payments $ 6,986 $ 42,759
========
Less amounts representing interest 1,235
--------
Present value of net minimum
lease payments $ 5,751
========
</TABLE>
Included in expenses for the years ended the last day of February 1995,
1996 and 1997 are approximately $9.5 million, $7.7 million and $7.2
million, respectively, of rental expense net of sublease rentals for
operating leases.
The Company has arranged for up to $25.0 million in lease financing of
which approximately $17.7 million was used as of the last day of
February 1997.
In November 1996, the Company entered into a sale/leaseback transaction
of its Pasco, Washington facility. Of the approximately $6.8 million of
net proceeds, the Company received approximately $1.5 million at
closing and the remaining $5.3 million was placed in escrow with the
Trustee under the indenture governing the Company's first mortgage
bonds. The Company has until November 1997 to substitute the
unencumbered property for the total amount of cash, or any portion
thereof, held in escrow. Any escrowed funds remaining after the one
year period will be used to repurchase outstanding mortgage bonds. The
deferred gain resulting from the sale/leaseback transaction of
approximately $2.7 million is being amortized over the approximate ten
year life of the lease.
-20-
<PAGE> 21
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
(5) Accrued Expenses
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-------------------------
1996 1997
--------- ---------
<S> <C> <C>
Accrued payroll $ 3,565 $ 3,747
Accrued vacation pay 2,462 2,831
Accrued taxes 1,022 1,163
Accrued employee stock ownership
plan contribution 750 500
Other 3,805 5,419
--------- ---------
$ 11,604 $ 13,660
========= =========
</TABLE>
(6) Other Current Liabilities
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-------------------------
1996 1997
--------- ---------
<S> <C> <C>
Workers' compensation $ 991 $ 693
Pension 1,100 2,110
Other 2,539 2,456
--------- ---------
$ 4,630 $ 5,259
========= =========
</TABLE>
-21-
<PAGE> 22
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
(7) Long-term Debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1996 1997
---- ----
<S> <C> <C>
Capital lease obligations (9.3% and 9.1%
weighted average interest rate,
respectively) $ 6,720 $ 5,751
Senior subordinated debentures - 15% fixed
due May 1, 2007 115,000 --
Senior subordinated notes - 12.875% fixed,
due May 1, 2008. Interest rate may
increase by 1% effective November 1, 1997 -- 120,000
First mortgage bonds, Series A - 11.45%
fixed, due June 30, 2002, interest
payments only to January 1, 1999
with principal amortization commencing
July 1, 1999 140,000 140,000
First mortgage bonds, Series B - 11.5%
fixed, due March 1, 2005, interest
payments only to September 1, 2003
with a mandatory sinking fund payment
of $88,125 on March 1, 2004 176,250 176,250
Mortgage notes payable - various interest
rates ranging from 8.6% to 13.6% requiring
monthly principal and interest payments
with maturities ranging from 2006 to 2017 26,429 29,062
-------- --------
464,399 471,063
Less current maturities of long-term debt 2,732 5,229
-------- --------
$461,667 $465,834
======== ========
</TABLE>
-22-
<PAGE> 23
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
The Company has issued first mortgage bonds and the bonds are secured
by mortgages or deeds of trust on 31 of the Company's facilities. The
Company entered into an indenture in connection with the issuance of
the first mortgage bonds which, like the Company's revolving credit
agreement with the Company's primary bank, requires the Company to meet
certain affirmative and restrictive covenants. Significant restrictive
items include, among others, limitations on additional indebtedness,
liens, dividends, capital expenditures, asset dispositions, lease
commitments and investments. Also, certain "pro forma debt service"
ratios and senior debt to net worth ratios must be maintained. At
February 28, 1997, the Company was in compliance with all such
covenants.
The Company was notified in December 1996 that the Metropolitan Life
Insurance Company (the "Met") sold its entire $140 million holdings of
the Company's Series A, 11.45% First Mortgage Bonds. As a result of
such transaction, the Second Amended and Restated Investment Agreement,
dated May 5, 1995, between the Met and the Company, which included
certain financial covenants and other restrictive covenants, was
terminated.
On April 9, 1996, the Company sold $120.0 million aggregate principal
amount of the Company's 12.875% Notes. The interest rate on the 12.875%
Notes can be increased from 12.875% to 13.875% if the 12.875% Notes are
not rated "B3 or higher" by Moody's Investor Services, and "B- or
higher" by Standard & Poor's, by November 1, 1997. The 12.875% Notes
have been rated "B-" by Standard & Poor's since they were issued, and
as of February 28, 1997, "Caa" by Moody's Investor Services.
The available amount under the Company's revolving credit agreement was
$23.1 million as of the last day of February 1997, of which $8.7
million of letters of credit were outstanding. No cash borrowings were
outstanding at February 28, 1997.
As of the last day of February 1997, aggregate annual maturities of
long-term debt are as follows (in thousands):
-23-
<PAGE> 24
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
<TABLE>
<CAPTION>
Year ended the last
day of February
-------------------
<S> <C>
1998 $ 5,229
1999 2,463
2000 32,502
2001 38,642
2002 38,282
Thereafter 353,945
---------
$ 471,063
=========
</TABLE>
(8) Employee Benefit Plans
(a) Defined Benefit Pension Plans
The Company has defined benefit pension plans which cover substantially
all employees, other than union employees covered by union pension
plans under collective bargaining agreements. Benefits under these
plans are based on years of credited service and compensation during
the years preceding retirement or on years of credited service and
established monthly benefit levels.
Pension expense for all plans, including plans jointly administered by
industry and union representatives, totaled $1.4 million, $1.7 million
and $1.9 million for years ended the last day of February 1995, 1996
and 1997, respectively. Actuarial valuations for defined benefit plans
are performed as of the end of the plan year. The most recent actuarial
valuations are as of the last day of February 1997.
The funded status of the Company's defined benefit pension plans and
the accrued pension expense amounts recognized in the Company's
consolidated financial statements within other noncurrent liabilities,
as of the last day of February 1996 and 1997, are as follows (in
thousands):
-24-
<PAGE> 25
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
<TABLE>
<CAPTION>
Last day of Last day of
February 1996 February 1997
----------------------------- ----------------------------
Plans with Plans with Plans with Plans with
assets in accumulated assets in accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations:
Vested benefits $ 19,902 $ 7,382 $ 19,805 $ 7,740
Nonvested benefits 220 128 947 316
-------- -------- -------- -------
20,122 7,510 20,752 8,056
Effect of assumed future
compensation increases 3,808 -- 4,379 --
-------- -------- -------- -------
Projected benefit obligations
for services rendered to date 23,930 7,510 25,131 8,056
Plan assets at fair value 20,644 6,005 22,227 6,659
-------- -------- -------- -------
Projected benefit obligations in excess
of plan assets 3,286 1,505 2,904 1,397
Unrecognized prior service cost (119) (108) (85) (101)
Unrecognized net gain (loss) from past
experience different from that assumed
and effects of changes in assumptions 1,323 (317) 1,277 (361)
-------- -------- -------- -------
Accrued pension liability $ 4,490 $ 1,080 $ 4,096 $ 935
======== ======== ======== =======
</TABLE>
Net periodic pension expense for the years ended the last day of
February 1995, 1996 and 1997 includes the following components (in
thousands):
<TABLE>
<CAPTION>
Last day of February
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 1,107 $ 1,165 $ 1,186
Interest cost on projected
benefit obligation 2,121 2,293 2,431
Actual return on plan assets (2,554) (4,301) (2,826)
Net amortization and deferral (143) 1,541 109
------- ------- -------
$ 531 $ 698 $ 900
======= ======= =======
</TABLE>
-25-
<PAGE> 26
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
Actuarial assumptions used for determining pension liabilities were:
<TABLE>
<CAPTION>
Last day of February
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate for interest cost 8.5% 8.0% 8.0%
Rate of increase in future
compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of
return on plan assets 10.5% 10.5% 10.5%
</TABLE>
Plan assets are assigned to several investment management companies and are
invested in various equity and fixed fund investments in accordance with the
Company's investment policy.
(b) Employee Stock Ownership Plan
The Company established an employee stock ownership plan, effective
March 1, 1987, which is intended to provide qualifying employees an
equity interest in the Company, as well as potential retirement
benefits. The trust established under the plan is designed to invest
primarily in the Company's stock. Contributions by the Company, in the
form of common or preferred stock of the Company, or cash, or a
combination thereof, may be made to the trustee on behalf of eligible
participants for each plan year as determined by the Company's Board of
Directors. Participating employees with vested benefits, upon
retirement or termination, have the option of retaining the stock or
selling it back to the Company at its fair market value.
(c) Postretirement Benefits Other Than Pensions
In addition to providing retirement benefits, the Company provides
certain health care and life insurance benefits for retired employees.
These benefits are provided to substantially all employees other than
certain union employees who have elected not to participate.
-26-
<PAGE> 27
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
The total of accumulated postretirement benefits obligation (APBO),
which is an unfunded obligation, is as follows:
<TABLE>
<CAPTION>
Last day of February
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Retirees $2,314 $2,375 $2,618
Active employees 1,511 1,832 2,209
------ ------ ------
$3,825 $4,207 $4,827
====== ====== ======
</TABLE>
The components of net periodic postretirement expense for the years
ended the last day of February are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Service cost benefits earned
in period $ 104 $ 114 $ 123
Interest cost on APBO 313 334 383
Amortization of unamortized
prior service cost (22) (22) (8)
----- ----- -----
$ 395 $ 426 $ 498
===== ===== =====
</TABLE>
The discount rate used to determine the APBO and net periodic expense
as of February 28, 1995 was 9.0%, and as of February 29, 1996 and
February 28, 1997 was 8.5%.
For fiscal 1997, an 11% increase in the medical cost trend rate was
assumed. This rate is projected to decrease incrementally to 5.5% after
nine years. A 1% increase in the medical trend rate would increase the
APBO by $0.2 million and increase the net periodic expense by a
negligible amount.
-27-
<PAGE> 28
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
9. Common Stockholders' Deficit
The Company has reserved 300,000 shares of common stock for issuance
under a stock option plan established in 1987. Under the plan, options
are granted by the Compensation Committee of the Board of Directors to
purchase common stock at a price not less than 85% of the fair market
value on the date the option is granted.
Stock options outstanding and transactions involving the stock option
plan are summarized for the years ended the last day of February as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 257,934 $16.06 253,795 $16.17 249,656 $15.45
Granted -- -- -- -- 160,000 12.30
Exercised -- -- -- -- (21,748) 10.00
Cancelled -- -- -- -- (160,000) 19.77
Forfeited (4,139) 10.00 (4,139) 10.00 (2,760) 10.00
------- ------ ------- ------ ------- ------
Outstanding at end of year 253,795 $16.17 249,656 $16.26 225,148 $11.63
======= ====== ======= ====== ======= ======
Options exercisable at
year end 185,795 $14.57 213,656 $15.45 65,148 $10.00
======= ====== ======= ====== ======= ======
Weighted average grant date
fair value of options granted
during the year $ 0 $ 0 $ 2.67
====== ====== ======
</TABLE>
The Company has computed the value of all options granted during fiscal
1997 using the minimum value method as prescribed under SFAS No. 123
for pro forma disclosure purposes. The following weighted average
assumptions were used for the grants made in fiscal 1997: risk free
interest rate at 6.875%; expected life of ten years; and dividend rate
of zero percent.
-28-
<PAGE> 29
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
The total value of options granted during fiscal 1997 was computed at
$428,000. The options granted in fiscal 1997 have a five-year vesting
schedule and compensation will be amortized on a pro forma basis over
that period.
The options granted in fiscal 1997 had not vested as of the last day of
February 1997 and therefore there would be no compensation cost in the
current year under the pro forma disclosure provisions of SFAS No. 123.
The effects of applying SFAS No. 123 in the pro forma disclosure are
not indicative of future amounts.
As of February 28, 1997, options for 225,148 shares were outstanding
with exercise prices between $10.00 and $12.30, and a remaining
weighted average contractual life of 6.7 years.
10. Preferred Stock
The Company has contributed shares of its Series A, variable rate,
cumulative preferred stock to the Americold Employee Stock Ownership
Plan (ESOP). The preferred stock is redeemable by participants of the
plan. As of the last day of February 1996 and 1997, dividends not
declared on the Company's cumulative preferred stock total
approximately $477,000 and $458,000, respectively.
11. Income Taxes
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Federal:
Current $ 2,867 $ -- $ 250
Deferred 1,494 (2,858) (2,422)
------- ------- -------
4,361 (2,858) (2,172)
------- ------- -------
</TABLE>
-29-
<PAGE> 30
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
<TABLE>
<S> <C> <C> <C>
State:
Current 820 -- 112
Deferred 46 (568) (544)
------- ------- -------
$ 5,227 $(3,426) $(2,604)
======= ======= =======
</TABLE>
Following is a reconciliation of the difference between income taxes
computed at the federal statutory rate and the provision for income
taxes (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Computed income tax expense
(benefit) at federal statutory
rate $ 3,777 $(4,027) $(3,200)
State and local income taxes,
net of federal income tax
benefits 563 (369) (280)
Amortization of cost in excess of
net assets acquired 887 970 876
------- ------- -------
$ 5,227 $(3,426) $(2,604)
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the related amounts used for income
tax purposes. Significant components of the Company's deferred tax
liabilities as of the last day of February 1996 and 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment, due to
differences in depreciation and
prior accounting treatment $(110,574) $(109,099)
--------- ---------
</TABLE>
-30-
<PAGE> 31
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
<TABLE>
<S> <C> <C>
Deferred tax assets:
Receivables, due to allowance for
doubtful accounts 86 155
Employee compensation and other
benefits 1,879 3,605
Capital leases, net 1,714 1,617
Postretirement benefits other than
pensions, due to accrual for
financial reporting purposes 1,650 1,794
Alternative minimum tax credit
carryforwards 2,865 3,192
Other, net 1,659 1,532
--------- --------
Total deferred tax assets 9,853 11,895
--------- --------
Net deferred tax liability
before valuation allowance (100,721) (97,204)
Deferred tax asset valuation allowance (1,320) (1,320)
--------- --------
$(102,041) $(98,524)
========= ========
</TABLE>
The valuation allowance for deferred tax assets as of March 1, 1995 was
$1.3 million. The valuation allowance is required to reduce the amount
of deferred tax assets to an amount which will more likely than not be
realized.
At February 28, 1997, the Company has an alternative minimum tax credit
carryforward of approximately $3.2 million available to offset future
regular taxes in excess of future alternative minimum taxes.
12. Extraordinary Item
In conjunction with the exchange of the senior subordinated debentures
and the repurchase of the $10.0 million of first mortgage bonds in
fiscal 1996, as discussed in note 15, unamortized original issue
discount of approximately $2.0
-31-
<PAGE> 32
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
million and unamortized issuance costs of approximately $1.0 million
were written off, resulting in an extraordinary loss, net of taxes, of
approximately $1.8 million.
13. Disclosures About The Fair Value of Financial Instruments
Cash, Trade Receivables, Other Receivables, Accounts Payable and
Accrued Expenses
The carrying amount of these items approximates fair value because of
the short maturity of these instruments.
Long-Term Debt
The fair values of each of the Company's long-term debt instruments are
based on (a) the amount of future cash flows associated with each
instrument discounted using the Company's current borrowing rate for
similar debt instruments of comparable maturity; (b) in the case of the
first mortgage bonds Series B and senior subordinated notes, market
price; or (c) in the case of the first mortgage bonds - Series A, at
par, because there is not a market for such securities (in thousands).
<TABLE>
<CAPTION>
As of the last day
of February 1997
----------------
Estimated
Carrying fair market
amount value
------ -----
<S> <C> <C>
Senior subordinated notes $120,000 $124,500
First mortgage bonds - Series A 140,000 140,000
First mortgage bonds - Series B 176,250 185,063
Mortgage notes payable 29,062 29,062
</TABLE>
-32-
<PAGE> 33
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could
significantly affect the estimates.
14. Gain on Insurance Settlement
Gain on insurance settlement of approximately $17.0 million relates to
the Company's settlement of its first party claims with its insurance
carriers for business interruption, property damage and out-of-pocket
expenses with respect to the December 1991 fire at the Company's Kansas
City, Kansas warehouse facility. No previous income recognition was
determinable until the Company had settled all of the lawsuits and
claims related to the fire.
15. Plan of Reorganization Under Chapter 11
On May 9, 1995, the Company filed a prepackaged plan of reorganization
(the "Plan") under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of Oregon (the
"Court"). The principal purpose of the Plan was to reduce the Company's
short-term cash requirements with respect to payments due on its
subordinated indebtedness and to adjust certain restrictive financial
covenants and certain other provisions contained in the Amended and
Restated Investment Agreement, dated March 2, 1993, between the Company
and the Met. On June 19, 1995, the Court approved the Company's
Disclosure Statement dated April 14, 1995 and the Company's
solicitation of votes to accept or reject the Plan, and confirmed the
Plan. On June 30, 1995, the Plan became effective.
In connection with the Plan, the Company rejected certain lease
agreements relating to four warehouse facilities at Watsonville,
Oakland and San Francisco, California; and Chicago, Illinois. In
February 1996, the Company settled all lease rejection issues with the
lessor of three properties located in Watsonville, Oakland
-33-
<PAGE> 34
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements - (continued)
and San Francisco, California. Such settlement did not involve the
payment of any damages by the Company. In September 1996, the Company
settled all lease rejection issues with the lessor of the Chicago,
Illinois property. Such settlement, representing one year's rent
recovery by the lessor as provided by the Bankruptcy Code, required a
payment of approximately $0.4 million.
The Company has expensed the settlement payment and related
professional fees and all professional fees and similar expenditures
incurred related to the prepackaged bankruptcy as "reorganization
expenses."
-34-
<PAGE> 35
PART I - Financial Information
Item 1. Financial Statements
AMERICOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
Last day of February 1997 and August 1997
(In thousands, except share data)
<TABLE>
<CAPTION>
Last day of Last day of
February 1997 August 1997
------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,702 $ 16,315
Trade receivables, net 27,560 28,677
Other receivables, net 3,138 3,319
Prepaid expenses 3,828 3,276
Tax refund receivable 2,636 2,669
Other current assets 891 733
--------- ---------
Total current assets 51,755 54,989
Property, plant and equipment, less accumulated depreciation
of $192,649 and $202,385, respectively 384,484 375,501
Cost in excess of net assets acquired, less accumulated
amortization of $24,644 and $25,897, respectively 74,749 73,496
Other noncurrent assets 20,046 19,425
--------- ---------
Total assets $ 531,034 $ 523,411
========= =========
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 16,116 $ 12,989
Accrued interest 18,466 18,161
Accrued expenses 13,660 13,993
Deferred revenue 5,555 6,022
Current maturities of long-term debt 5,229 5,242
Other current liabilities 5,259 5,119
--------- ---------
Total current liabilities 64,285 61,526
Long-term debt, less current maturities 465,834 464,581
Deferred income taxes 98,524 97,532
Other noncurrent liabilities 10,347 10,443
--------- ---------
Total liabilities 638,990 634,082
--------- ---------
Preferred stock, $100 par value; authorized 1,000,000 shares;
issued and outstanding 52,936 and 46,797 shares, respectively 5,753 5,477
--------- ---------
Common stockholders' deficit:
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding 4,995,556 and
5,037,823 shares, respectively 50 50
Additional paid-in capital 51,182 51,870
Retained deficit (164,580) (167,707)
Equity adjustment to recognize minimum pension liability (361) (361)
--------- ---------
Total common stockholders' deficit (113,709) (116,148)
--------- ---------
Total liabilities, preferred stock and
common stockholders' deficit $ 531,034 $ 523,411
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-35-
<PAGE> 36
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and six months ended last day of August 1996 and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
last day of last day of last day of last day of
August 1996 August 1997 August 1996 August 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 73,139 $ 73,299 $152,535 $145,807
-------- -------- -------- --------
Operating expenses:
Cost of sales 55,024 53,457 114,489 106,085
Amortization of cost in excess of
net assets acquired 626 626 1,253 1,253
Selling and administrative expenses 7,312 7,545 15,035 15,219
-------- -------- -------- --------
Total operating expenses 62,962 61,628 130,777 122,557
-------- -------- -------- --------
Gross operating margin 10,177 11,671 21,758 23,250
-------- -------- -------- --------
Other (expense) income:
Interest expense (13,721) (13,893) (29,256) (27,816)
Reorganization expenses (403) -- (403) --
Other, net (46) 722 468 785
-------- -------- -------- --------
Total other expense (14,170) (13,171) (29,191) (27,031)
-------- -------- -------- --------
Loss before income taxes (3,993) (1,500) (7,433) (3,781)
Benefit for income taxes 1,320 343 2,424 992
-------- -------- -------- --------
Net loss $ (2,673) $ (1,157) $ (5,009) $ (2,789)
======== ======== ======== ========
Net loss per common share $ (0.58) $ (0.26) $ (1.09) $ (0.62)
======== ======== ======== ========
Weighted average number of shares
outstanding 4,931 5,012 4,931 5,004
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-36-
<PAGE> 37
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS Six
months ended last day of August 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
Six months Six months
ended last ended last
day of day of
August 1996 August 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,009) $(2,789)
Adjustments to reconcile net loss to
net cash provided (used) by operating activities:
Depreciation 10,203 10,534
Amortization and other noncash expenses 2,086 2,310
Changes in assets and liabilities (5,826) (176)
Provision for deferred taxes (2,424) (992)
--------- -------
Net cash provided (used) by operating activities (970) 8,887
--------- -------
Cash flows from investing activities:
Net expenditures for property, plant
and equipment (15,220) (5,979)
Other items, net 291 754
--------- -------
Net cash used by investing activities (14,929) (5,225)
--------- -------
Cash flows from financing activities:
Principal payments under capitalized
lease and other debt obligations (1,457) (1,240)
Proceeds from sale of senior subordinated notes 120,000 --
Retirement of senior subordinated debentures (115,000) --
Debt issuance costs (5,379) (50)
Release of escrowed funds 4,820 167
Issuance of stock -- 74
--------- -------
Net cash provided (used) by financing activities 2,984 (1,049)
--------- -------
Net increase (decrease) in cash and cash equivalents (12,915) 2,613
Cash and cash equivalents at beginning of period 20,857 13,702
--------- -------
Cash and cash equivalents at end of period $ 7,942 $16,315
========= =======
Supplemental disclosure of cash flow information:
Cash paid year-to-date for interest,
net of amounts capitalized $ 28,920 $28,121
========= =======
Capital lease obligations incurred to lease new equipment $ 231 $ --
========= =======
Cash paid during the year for income taxes $ 24 $ 34
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-37-
<PAGE> 38
AMERICOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet as of the last day of August 1997; the
related consolidated statements of operations for the six months ended
the last day of August 1996 and August 1997; and the related
consolidated statements of cash flows for the six months ended the last
day of August 1996 and August 1997 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted of
normal recurring items. Interim results are not necessarily indicative
of results for a full year. The financial information presented herein
should be read in conjunction with the financial statements included in
the registrant's Annual Report on Form 10-K for the year ended the last
day of February 1997.
2. COMMON STOCKHOLDERS' DEFICIT
The Company has reserved 300,000 shares of common stock for issuance
under a stock option plan established in 1987. Under the plan, options
are granted by the Compensation Committee of the Board of Directors to
purchase common stock at a price not less than 85% of the fair market
value on the date the option is granted.
Information with regard to the plan as of the last day of August 1997
follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
------ -----
<S> <C> <C>
Outstanding at beginning of year 225,148 $11.63
Granted - -
Exercised (3,449) 10.00
Cancelled - -
Forfeited (690) 10.00
------- ------
Outstanding 221,009 $11.66
======= ======
</TABLE>
-38-
<PAGE> 39
<TABLE>
<S> <C> <C>
Options exercisable 93,009 $10.79
======= ======
</TABLE>
All stock options will become fully exercisable upon the completion of
the merger discussed in Note 8.
3. PROVISION FOR INCOME TAXES
The provision for income taxes was computed using a tax rate of 39.2%.
The tax rate was applied to loss before income taxes, after adjusting
for amortization of cost in excess of net assets acquired.
4. LOSS PER COMMON SHARE
Loss per common share is computed by dividing net loss, less preferred
dividend requirements, by the weighted average number of common shares
outstanding. See Exhibit 11, Statement Regarding Computation of Per
Share Earnings.
5. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes highly liquid instruments, with
original maturities of three months or less when purchased. There were
cash equivalents totaling $10.0 million and $13.0 million as of the
last day of February 1997 and August 1997, respectively.
6. LONG-TERM DEBT
On April 9, 1996, the Company sold $120.0 million aggregate principal
amount of the Company's 12.875% Senior Subordinated Notes due 2008. The
Company used $115.0 million of the proceeds to redeem at par on May 9,
1996 the Company's 15% Senior Subordinated Debentures due 2007. The
remaining proceeds were used to pay transaction costs. The interest
rate on the notes can be increased from 12.875% to 13.875% if the notes
are not rated "B- or higher" by Standard & Poor's and "B3 or higher" by
Moody's Investors Service by November 1, 1997. The notes have been
rated "B-" by Standard and Poor's since they were issued, and as of
September 30, 1997, "Caa" by Moody's Investors Service.
-39-
<PAGE> 40
7. NEW ACCOUNTING STANDARDS
The Company has not implemented the reporting requirements of Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS No. 128"), although it will be
required to do so during the fourth quarter of fiscal 1998 and
thereafter. This Statement establishes a different method of computing
net income per share than is currently required under the provisions of
Accounting Principles Board Opinion No. 15. Under SFAS No. 128, the
Company will be required to present both basic net income per share and
diluted net income per share. The Company estimates that the adoption
of SFAS No. 128 will not have a material impact on its income per
share.
The Company has not implemented the reporting requirements of Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), although it
will be required to do so during the first quarter of fiscal 1999 and
thereafter. This Statement establishes standards for reporting and
display of comprehensive income and its components. The Company does
not believe that the adoption of SFAS No. 130 will have a material
impact on its financial statement presentation.
The Company has not implemented the reporting requirements of Financial
Accounting Standards Board Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131"),
although it will be required to do so for fiscal 1999 and thereafter.
This statement establishes standards for reporting operating segments
in annual financial statements and requires selected information about
operating segments in interim financial statements. The Company
believes it may be required to show information not currently
disclosed.
8. SUBSEQUENT EVENT
On September 29, 1997, the Company announced that it had entered into a
merger agreement pursuant to which Vornado Realty Trust ("Vornado")
would acquire the Company. Vornado announced that, in addition, it had
also entered into a merger agreement to acquire URS Logistics, Inc.
(Kelso & Company, who owns a controlling interest in the Company, holds
approximately 57% of the common equity of URS Logistics, Inc). Vornado
also announced that it had entered into a partnership agreement with
Crescent Real Estate Equities Company ("Crescent") to make the
acquisitions, with Vornado controlling 60% of the partnership and
Crescent 40%.
-40-
<PAGE> 41
The consideration for the acquisition of the Company is approximately
$582 million, including $111 million in cash and $471 million in
indebtedness. The price to be paid to the shareholders per common share
is $20.70. The purchase price also includes the redemption of the
Company's preferred stock for $100 per share, its par value, plus
accrued and unpaid dividends to the date of closing, and the buyout of
all existing stock options at $20.70 per share, less the exercise price
of each option share. The transaction is expected to close no later
than December 31, 1997.
The Company believes that the transaction, when completed, will afford
the Company the opportunity to improve its capital structure and
provide substantial capital to support warehouse growth.
-41-
<PAGE> 42
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
URS Logistics, Inc.:
We have audited the accompanying consolidated balance sheets of URS Logistics,
Inc. (the "Company") and subsidiary as of December 31, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and subsidiary as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
Atlanta, Georgia
March 7, 1997
(October 3, 1997 as to Note 10)
42
<PAGE> 43
URS LOGISTICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash investments $ 904,000 $ 1,722,000
Trade accounts receivable, less allowance for doubtful
accounts of $100,000 in 1996 and 1995 17,345,000 14,391,000
Other current assets 2,072,000 1,775,000
Refundable income taxes 1,015,000 190,000
Deferred income taxes 2,303,000 2,206,000
----------- -----------
Total current assets 23,639,000 20,284,000
OTHER ASSETS:
Loan closing costs 4,334,000 4,952,000
Investment in partnership 2,838,000 2,058,000
Other 872,000 954,000
----------- -----------
Total other assets 8,044,000 7,964,000
PROPERTY, PLANT, AND EQUIPMENT:
Land 15,617,000 14,286,000
Buildings and improvements 228,610,000 219,323,000
Machinery and equipment 70,036,000 66,440,000
Construction-in-progress 1,772,000 2,005,000
----------- -----------
316,035,000 302,054,000
Less accumulated depreciation 86,474,000 73,209,000
Property, plant, and equipment, net 229,561,000 228,845,000
CAPITALIZED LEASES:
Refrigerated warehouse facilities 15,828,000 15,828,000
Equipment 5,321,000 2,967,000
----------- -----------
21,149,000 18,795,000
Less accumulated depreciation 3,401,000 2,720,000
----------- -----------
Capitalized leases, net 17,748,000 16,075,000
----------- -----------
$278,992,000 $273,168,000
============ =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 14,898,000 $ 13,590,000
Current portion of:
Long-term debt 5,523,000 4,938,000
Capitalized lease obligations 869,000 470,000
------------ ------------
Total current liabilities 21,290,000 18,998,000
LONG-TERM DEBT - Less current portion 147,660,000 147,701,000
CAPITALIZED LEASE OBLIGATIONS - Less current portion 16,499,000 15,015,000
DEFERRED INCOME TAXES 50,761,000 51,337,000
OTHER LIABILITIES 1,892,000 1,968,000
STOCKHOLDERS' EQUITY:
Common stock; par value $.10 per share; 100,000 shares
authorized; 48,687 shares issued and outstanding at
December 31, 1996 and 1995 5,000 5,000
Additional paid-in capital 44,766,000 44,766,000
Accumulated deficit (3,296,000) (6,160,000)
------------- ----------
41,475,000 38,611,000
Less:
Due from stockholders 288,000 361,000
Treasury stock - 192 shares and 96 shares at December 31,
1996 and 1995, at cost 297,000 101,000
------------ ------------
Stockholders' equity, net 40,890,000 38,149,000
-- --
------------ ------------
$278,992,000 $273,168,000
============ ============
</TABLE>
See notes to consolidated financial statements.
43
<PAGE> 44
URS LOGISTICS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
- ----------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
REVENUES $ 144,229,000 $ 138,938,000 $ 126,337,000
OPERATING EXPENSES:
Cost of services 94,931,000 94,967,000 87,984,000
General and administrative 12,259,000 10,239,000 9,728,000
Depreciation and amortization 14,574,000 14,958,000 13,484,000
------------- ------------- ---------------
Total operating expenses 121,764,000 120,164,000 111,196,000
------------- ------------- ---------------
22,465,000 18,774,000 15,141,000
INTEREST EXPENSE (18,037,000) (18,425,000) (18,446,000)
INTEREST INCOME 263,000 215,000 105,000
------------- ------------- ---------------
(17,774,000) (18,210,000) (18,341,000)
------------- ------------- ---------------
NET INCOME (LOSS) BEFORE
INCOME TAXES 4,691,000 564,000 (3,200,000)
INCOME TAX (EXPENSE) BENEFIT (1,827,000) (324,000) 552,000
------------- ------------- ---------------
NET INCOME (LOSS) $ 2,864,000 $ 240,000 $ (2,648,000)
============= ============= ===============
</TABLE>
See notes to consolidated financial statements.
44
<PAGE> 45
URS LOGISTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL ----------------
NUMBER PAR PAID-IN ACCUMULATED DUE FROM NUMBER
OF SHARES VALUE CAPITAL DEFICIT STOCKHOLDERS OF SHARES COST
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - December 31, 1993 40,508 $ 4,000 $36,035,000 $(3,752,000) $(433,000)
Sale of common stock:
Proceeds 8,179 1,000 9,099,000
Transaction costs (368,000)
-----------
8,731,000
Purchase of treasury shares 72,000 96 $(101,000)
Net loss (2,648,000)
------ ------- ----------- ----------- --------- --- ----------
BALANCE - December 31, 1994 48,687 $ 5,000 $44,766,000 $(6,400,000) $(361,000) 96 $(101,000)
Net income 240,000
------ ------ ----------- ----------- ---------- --- ----------
BALANCE - December 31, 1995 48,687 5,000 44,766,000 (6,160,000) (361,000) 96 (101,000)
Purchase of treasury shares 73,000 96 (196,000)
Net income 2,864,000
------ ------ ----------- ----------- --------- --- ----------
BALANCE - December 31, 1996 48,687 $ 5,000 $44,766,000 $(3,296,000) $ (288,000) 192 $ (297,000)
====== ======= =========== =========== ========== === ==========
</TABLE>
See notes to consolidated financial statements.
45
<PAGE> 46
URS LOGISTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,864,000 $ 240,000 $(2,648,000)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 14,574,000 14,958,000 13,484,000
Gain on disposal of assets (7,000) (20,000) (24,000)
Partnership earnings (687,000) (172,000) (125,000)
Changes in assets and liabilities:
Trade accounts receivable (2,954,000) 1,270,000 (1,261,000)
Other current assets (297,000) (293,000) (455,000)
Accounts payable and accrued expenses 1,308,000 (950,000) 3,983,000
Deferred income taxes (673,000) (1,304,000) (1,370,000)
Other liabilities (76,000) 136,000 137,000
Refundable income taxes (825,000) (42,000) 168,000
----------- ----------- -----------
Net cash provided by operating activities 13,227,000 13,823,000 11,889,000
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (13,994,000) (12,828,000) (21,212,000)
Proceeds from disposals of property, plant, and equipment 9,000 20,000 6,384,000
Contribution to partnership (630,000) (701,000)
Partnership distributions 537,000 414,000 285,000
Payments received on notes receivable 42,000 33,000 28,000
Decrease in other long-term assets 40,000 35,000 146,000
----------- ----------- -----------
Net cash used in investing activities (13,996,000) (13,027,000) (14,369,000)
FINANCING ACTIVITIES:
Proceeds from borrowings 11,483,000 21,000,000
Payments on long-term debt (10,939,000) (18,765,000) (4,508,000)
Principal payments under capital lease obligations (470,000) (708,000) (570,000)
Purchase of treasury stock (123,000) (29,000)
Loan closing costs (1,813,000) (414,000)
Proceeds from issuance of common stock,
net of transaction costs 8,732,000
Debt service reserve refunding 4,000 193,000
----------- ----------- -----------
Net cash used in financing activities (49,000) (282,000) 3,404,000
----------- ----------- -----------
NET CHANGE IN CASH AND CASH INVESTMENTS (818,000) 514,000 924,000
CASH AND CASH INVESTMENTS:
Beginning of year 1,722,000 1,208,000 284,000
----------- ----------- -----------
End of year $ 904,000 $1,722,000 $ 1,208,000
========== ========== ===========
</TABLE>
(Continued)
46
<PAGE> 47
URS LOGISTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Interest paid, net of amount capitalized $ 18,045,000 $18,396,000 $ 18,444,000
============= =========== ============
Income taxes paid $ 3,324,000 $ 2,138,000 $ 423,000
============= =========== ============
</TABLE>
SUPPLEMENTAL INFORMATION ABOUT NONCASH FINANCING
INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations of $2,353,000 were incurred during the year ended
December 31, 1996 when the Company entered into new leases for equipment.
See notes to consolidated financial statements.
(Concluded)
47
<PAGE> 48
URS LOGISTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of URS
Logistics, Inc. (formerly United Refrigerated Services, Inc. - the
"Company") and its wholly owned subsidiary, United Refrigerated Services
of Texarkana, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation. The Company operates and manages
public refrigerated warehouses in the continental United States.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Depreciation and amortization are computed on the straight-line method
over the estimated remaining useful lives of the respective assets, which
are generally 50 years for buildings, 20 years for building improvements,
and 5-12 years for machinery and equipment. Depreciation and amortization
begin the month in which the asset is placed into service. For federal
income tax purposes, accelerated depreciation methods and shorter lives
are utilized.
Loan closing costs are capitalized and amortized on the straight-line
method over the term of the loan to which they apply.
Lease agreements are classified as capital or operating in accordance
with Statement of Financial Accounting Standards ("SFAS") 13, "Accounting
for Leases," including subsequent amendments and interpretations.
Capitalized leases are recorded at the lower of the present value of
future lease payments or the fair market value of the property.
Capitalized leases are depreciated on a straight-line basis over the
lease terms for real estate and the estimated asset life or lease term
for equipment, whichever is shorter.
The Company charges construction costs with interest on borrowed funds
during the construction period of major facilities. This interest is
subsequently charged to operations through depreciation over the life of
capitalized property. Approximately $190,000, $280,000, and $406,000 of
interest was capitalized during the years ended December 31, 1996, 1995
and 1994, respectively.
The Company defines "cash and cash investments" as all unrestricted cash
and highly liquid investments with an original maturity of three months
or less.
Revenues include storage and handling fees and management fees for
locations managed on behalf of third parties. Costs related to managed
facilities are included in operating expenses.
The Company charges customers for certain storage and handling in
advance, but defers the related revenue until it has been earned.
Unearned revenue of approximately $2,088,000, $2,423,000, and
48
<PAGE> 49
$2,430,000 is included in accounts payable and accrued expenses at
December 31, 1996, 1995, and 1994, respectively.
The Company records deferred income taxes for the difference in the bases
of assets and liabilities for tax and financial statement purposes and
the enacted rates in effect in the years that the differences are
expected to reverse.
The Company evaluates possible impairment of noncurrent assets and
recognition of impairment losses whenever circumstances indicate that the
carrying value of such assets may be less than their fair values.
Certain reclassifications of prior year balances have been made to
conform with current year financial statement presentation.
2. INVESTMENT IN PARTNERSHIP
The Company's wholly owned subsidiary is a partner with an unrelated
third party (collectively the "Partnership") for the purpose of operating
a public refrigerated warehouse in Texarkana, Arkansas. The investment is
accounted for using the equity method.
The Company is entitled to 50% of the Partnership's earnings. Included in
revenues in 1996, 1995, and 1994 are $687,000, $172,000, and $125,000,
respectively, representing the Company's equity in the earnings of the
Partnership.
The partnership owns land and building and is responsible for the related
mortgage debt. The Company has guaranteed approximately $3,735,000 that
represents 50% of the mortgage debt.
3. LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Term Note A $ 11,700,000 $16,639,000
Term Note B 42,000,000 42,000,000
Term Note C 73,000,000 73,000,000
Line of credit borrowings 26,483,000 21,000,000
Mortgage loan, interest at 11.08%
Equipment notes, interest at 9.75%
to 11.05%
-------------- ------------
153,183,000 152,639,000
Less current portion 5,523,000 4,938,000
-------------- ------------
$ 147,660,000 $147,701,000
============== ============
</TABLE>
Term Notes A, B, and C, issued in 1989, require semi-annual payments of interest
only at 11.52% for initial periods of 5, 10, and 15 years, respectively. Term
Note A requires semi-annual principal and interest payments of $3,358,000 from
June 15, 1994 through December 15, 1998. Term Note B requires semi-annual
principal and interest payments of $5,642,000 from June 15, 1999 through
December 15,
49
<PAGE> 50
2003. Term Note C requires semi-annual principal and interest payments of
$9,806,000 from June 15, 2004 through December 15, 2008.
The Company's revolving line of credit currently provides for borrowings of up
to $30,000,000, with availability reduced by outstanding borrowings and letters
of credit issued (outstanding letters of credit totaled $3,517,000 at December
31, 1996). Under certain circumstances, the Company can obtain up to an
additional $10,000,000 in borrowing capacity by meeting certain financial
targets and by providing additional collateral.
Beginning on June 30, 1998, amount of available credit declines under certain
circumstances. The line matures and the outstanding balance becomes payable in
full on June 2, 2000, the fifth anniversary of the line.
At the Company's option, borrowings under the line bear interest at formula
rates based on the Federal Funds rate, the prime rate, or Eurodollar lending
rates. The weighted average interest rate applicable to borrowings at December
31, 1996 was 8.60%.
The Company has entered into interest rate swap agreements to reduce the impact
of changes in interest rates on its line of credit borrowings. At December 31,
1996, the Company had outstanding two interest rate swap agreements with
commercial banks, having a total notional principal amount of $16 million. These
agreements effectively convert the Company's floating reference interest rate
(based on three-month LIBOR) on $16 million of its revolving line of credit
borrowings to a fixed reference rate of 5.42%. The interest rate swap agreements
mature in December 1997. Although the Company is exposed to credit loss in the
event of nonperformance by the other parties to the interest rate swap
agreements, the Company does not anticipate nonperformance by the
counterparties. The interest rate swap agreements resulted in an immaterial
amount of net interest income for the year ended December 31, 1996.
The loan agreements covering the Term Notes and the revolving line of credit
contain covenants requiring maintenance of certain financial ratios, earnings
levels, and net worth. The agreements also place restrictions on additional
borrowings, dividend payments, stock redemptions, mergers, and sale of assets.
The Company is in compliance with all such covenants at December 31, 1996.
The weighted average interest rate on the debt outstanding at December 31, 1996
was 11.02%. All long-term debt is collateralized by substantially all owned
property, plant, and equipment.
As of December 31, 1996 approximate annual principal payments on total
long-term debt are:
<TABLE>
<S> <C>
1997 $ 5,523,000
1998 6,178,000
1999 16,631,000
2000 23,899,000
2001 8,295,000
Thereafter 92,657,000
-----------------
$ 153,183,000
=================
</TABLE>
4. LEASE COMMITMENTS
The Company leases two refrigerated warehouse facilities from entities owned by
a significant shareholder. These leases are classified as capital leases. The
lease terms expire on April 1, 2013. Fixed
50
<PAGE> 51
rental payments under these leases aggregate $1,650,000 annually. The Company
also leases under an operating lease one refrigerated warehouse facility from an
entity owned by a significant shareholder. The lease term expires on December
30, 2010 and may be extended for two five-year periods at the option of the
Company. The future minimum lease payments under this lease are set at
$1,120,000 annually.
The Company also has both capital and operating lease agreements for equipment
and other facilities. The Company pays taxes, insurance, and maintenance costs
on substantially all of the leased property. Lease terms generally range from 5
to 20 years with renewal or purchase options.
As of December 31, 1996, future minimum lease payments under these leases are as
follows:
<TABLE>
<CAPTION>
Refrigerated Warehouse
Facilities and Equipment Headquarters
------------------------- Facility Total
Capitalized Operating Operating Operating
Leases Leases Lease Leases
<S> <C> <C> <C> <C>
1997 $ 2,363,000 $8,376,000 $ 429,000 $ 8,805,000
1998 2,401,000 7,312,000 476,000 7,788,000
1999 2,401,000 6,648,000 487,000 7,135,000
2000 2,273,000 6,262,000 434,000 6,696,000
2001 2,398,000 5,920,000 445,000 6,365,000
Thereafter 18,495,000 35,215,000 913,000 36,128,000
---------- ---------- ------- ----------
Total minimum obligations 30,331,00 $69,733,000 $3,184,000 $72,917,000
========== ========= ==========
Less interest portion 12,963,000
----------
Present value of net
minimum payments 17,368,000
Less current portion 869,000
-------
$16,499,000
===========
</TABLE>
Included in the above future minimum lease payments are the following future
payments to related parties:
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
<S> <C> <C>
1997 $1,650,000 $1,120,000
1998 1,650,000 1,120,000
1999 1,650,000 1,120,000
2000 1,650,000 1,120,000
2001 1,650,000 1,120,000
Thereafter 18,449,000 10,076,000
---------- ----------
Total minimum obligations $26,699,000 $15,676,000
=========== ===========
</TABLE>
Rental expense for all operating leases was $9,092,000 in 1996, $9,202,000 in
1995, and $8,261,000 in 1994.
51
<PAGE> 52
5. TAXES ON INCOME
Deferred income taxes at December 31, 1996 and 1995 consist of the tax effects
of temporary differences in the basis of assets and liabilities for financial
reporting and tax purposes as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current assets:
Deferred revenue $ 814,000 $ 945,000
Accrued expenses 1,489,000 1,261,000
-------------- ----------
$ 2,303,000 $2,206,000
============== ==========
Noncurrent liabilities:
Depreciation $ 52,848,000 $54,126,000
Other (2,087,000) (2,789,000)
-------------- ----------
$ 50,761,000 $1,337,000
============= ==========
</TABLE>
Tax benefit (expense) for December 31, 1996, 1995, and 1994 consists of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current Expense:
Federal $ (1,707,000) $(1,109,000) $ (696,000)
State (793,000) (519,000) (122,000)
-------- -------- --------
(2,500,000) (1,628,000) (818,000)
Deferred Benefit 673,000 1,304,000 1,370,000
------- --------- ---------
Net (Expense) Benefit $ (1,827,000) $ (324,000) $ 552,000
============= =========== ==========
</TABLE>
Reconciliations of the differences between the federal statutory rate in
1996, 1995, and 1994 and the effective tax rate in those years are as
follows:
<TABLE>
<S> <C> <C> <C>
Federal statutory rate 35.0% 34.9% (35.0)%
State taxes, net of Federal benefit 6.7 6.6 6.4
Non-deductible expenses 2.7 17.7 3.4
Increase in tax credit carryforward (6.2) 0.0 0.0
Other 0.8 (1.8) 7.9
-------------------------
Effective tax rate 38.9% 57.4% (17.3)%
=========================
</TABLE>
In 1996,the Company amended certain of its previously filed tax returns.
The amended filings resulted in an increase in certain tax credit
carryforward amounts, which have been included as a reduction of 1996 tax
expense.
The Company has alternative minimum tax credit carryforwards for tax
purposes of approximately $1,813,000 at December 31, 1996, which have
been recognized for financial reporting purposes.
6. SIGNIFICANT CUSTOMERS
In 1996, revenues from two customers represented 10% each of total
revenue. In 1995, revenues from one customer represented 10% of total
revenue. A significant portion of the Company's customers operate in the
processed foods industry.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term
debt was approximately $166,047,000 at December 31, 1996 and $169,283,000
at December 31, 1995. Based on the contractual interest rates and
maturity dates of the Company's interest rate swaps, the fair value of
such swaps at December 31, 1996 was not significant.
52
<PAGE> 53
8. EMPLOYEE BENEFIT PLANS
Profit Sharing - The Company has a defined contribution employee benefit
plan which covers all eligible employees. The Company's profit sharing
expense was $1,536,000 in 1996, $1,509,000 in 1995, and $1,378,000 in
1994. The plan was also allows contributions by plan participants in
accordance with Section 401(k) of the Internal Revenue Code.
Deferred Compensation - The Company has deferred compensation and
supplemental retirement plan agreements with certain of its executives.
The agreements provide for certain benefits at retirement or disability,
and also provide for survivor benefits in the event of death of the
employee. The Company charges expense for the accretion of the liability
each year.
The Company is presently funding the plan through a life insurance
program which protects it against losses due to acceleration of benefits
arising from disability or death and provides for the funds expected to
be needed for the normal benefits.
The net expense for all deferred compensation and supplemental retirement
plans was approximately $207,000 for 1996, $179,000 for 1995, and
$170,000 for 1994.
9. STOCK WARRANTS AND TRANSACTIONS
In October 1996, the Company issued warrants to certain employees that
allow the holders to purchase up to 4,535 shares of the Company's
common stock. These warrants were outstanding and vested at December 31,
1996 and were exercisable only in the event of a change in control of the
Company. The warrants were issued in four series, each series becoming
exercisable if the exit value, as defined, exceeded the threshold value
specified in each series. Generally, exit value is equivalent to the
price per share realized in a change in control transaction.
The exercise price of all warrants is $1,100 per share. In the event of a
change in control, the warrant holder may elect to receive a cash payment
equal to the excess of the exit value over the exercise price of the
warrant. The Company recorded no expense in connection with these
warrants for the year ended December 31, 1996 (see Note 10).
On December 1, 1994, a preexisting shareholder purchased an additional
8,179 shares of common stock for total consideration of $9,100,000,
$6,100,000 of which was paid in cash and the remaining amount paid by
means of forgiveness of the Company's $3,000,000 promissory note payable
to such shareholder. In addition, in consideration of shareholder's prior
furnishing of the promissory note and its agreement to forego all
interest due under such note, the shareholder received warrants to
purchase an additional 1,250 shares of common stock at par value,
exercisable at any time prior to the tenth anniversary of their issuance.
10. SUBSEQUENT EVENTS
On June 27, 1997, the Company entered into an agreement amending and
restating the credit facility dated June 2, 1995 among the Company's
various lending institutions party thereto and Bankers Trust Company, as
agent. The agreement included a $40,000,000 Revolving Credit Facility
with a five-year term and a $40,000,000 term loan with a six-year
maturity. Both the term loan and borrowings under the line bear interest
at formula rates based on the Federal Funds rate, the Prime rate, or
Eurodollar lending rates. The term loan currently bears a rate of LIBOR
plus 3%. All amounts outstanding under the original credit agreement were
paid with proceeds from the term loan. There have been no borrowings
under the amended and restated Revolving Credit Facility.
Also on June 27, 1997, the Company executed an agreement to purchase a
frozen and dry warehouse complex located in Montezuma, Georgia, together
with related equipment and other tangible and intangible property. In
addition, the seller engaged the Company to provide on going logistical
services. Total purchase price of the warehouse complex was approximately
$9,200,000 and was financed through the term loan.
On September 26, 1997, the Company's shareholders signed an agreement to
sell 100% of the Company's common stock to Vornado Realty Trust
("Vornado") for approximately $365,000,000 less debt and adjusted for the
change in working capital, as defined, at final closing. Final
consummation of the transaction is anticipated by December 31, 1997.
53
<PAGE> 54
In connection with the sale of the Company to Vornado, warrants issued to
employees for 3,000 shares of the Company's common stock will become
exercisable. The remaining 1,535 warrants will expire. The Company
recorded $6,837,000 of expense in connection with the exercise of these
warrants.
54
<PAGE> 55
URS LOGISTICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash investments $ 3,728,000 $ 904,000
Trade accounts receivable, less allowance for doubtful
accounts of $100,000 in 1997 and 1996 13,359,000 17,345,000
Other current assets 3,535,000 2,072,000
Refundable income taxes 150,000 1,015,000
Deferred income taxes 2,303,000 2,303,000
------------ ------------
Total current assets 23,075,000 23,639,000
OTHER ASSETS:
Loan closing costs 5,441,000 4,334,000
Investment in partnership 2,854,000 2,838,000
Other 1,050,000 872,000
------------ ------------
Total other assets 9,345,000 8,044,000
PROPERTY, PLANT, AND EQUIPMENT:
Land 15,704,000 15,617,000
Buildings and improvements 235,776,000 228,610,000
Machinery and equipment 74,284,000 70,036,000
Construction-in-progress 4,909,000 1,772,000
------------ ------------
330,673,000 316,035,000
Less accumulated depreciation 93,424,000 86,474,000
------------ ------------
Property, plant, and equipment, net 237,249,000 229,561,000
CAPITALIZED LEASES:
Refrigerated warehouse facilities 15,828,000 15,828,000
Equipment 6,629,000 5,321,000
------------ ------------
22,457,000 21,149,000
Less accumulated depreciation 4,014,000 3,401,000
------------ ------------
Capitalized leases, net 18,443,000 17,748,000
------------ ------------
$288,112,000 $278,992,000
============ ============
(Continued)
</TABLE>
55
<PAGE> 56
URS LOGISTICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 11,932,000 $ 14,898,000
Current portion of:
Long-term debt 5,841,000 5,523,000
Capitalized lease obligations 895,000 869,000
------------- -------------
Total current liabilities 18,668,000 21,290,000
LONG-TERM DEBT - Less current portion 158,175,000 147,660,000
CAPITALIZED LEASE OBLIGATIONS - Less current portion 17,311,000 16,499,000
DEFERRED INCOME TAXES 49,905,000 50,761,000
OTHER LIABILITIES 1,719,000 1,892,000
STOCKHOLDERS' EQUITY:
Common stock; par value $.10 per share; 100,000 shares
authorized; 48,687 shares issued and outstanding at
June 30, 1997 and December 31, 1996 5,000 5,000
Additional paid-in capital 44,766,000 44,766,000
Accumulated deficit (1,999,000) (3,296,000)
------------- -------------
42,772,000 41,475,000
Less:
Due from stockholders 91,000 288,000
Treasury stock - 240 shares and 192 shares at June 30,
1997 and December 31, 1996, at cost 347,000 297,000
------------- -------------
Stockholders' equity, net 42,334,000 40,890,000
------------- -------------
$288,112,000 $ 278,992,000
------------- -------------
See notes to condensed consolidated financial statements.
(Concluded)
</TABLE>
56
<PAGE> 57
URS LOGISTICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES $ 76,320,000 $ 71,219,000
OPERATING EXPENSES:
Cost of services 51,273,000 46,091,000
General and administrative 5,968,000 5,060,000
Depreciation and amortization 7,872,000 7,209,000
------------ ------------
Total operating expenses 65,113,000 58,360,000
------------ ------------
11,207,000 12,859,000
INTEREST EXPENSE (9,183,000) (9,157,000)
INTEREST INCOME 102,000 141,000
------------ ------------
Total expense (9,081,000) (9,016,000)
------------ ------------
NET INCOME BEFORE INCOME TAXES 2,126,000 3,843,000
INCOME TAX EXPENSE (829,000) (1,499,000)
------------ ------------
NET INCOME $ 1,297,000 $ 2,344,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
57
<PAGE> 58
URS LOGISTICS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------
1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,297,000 $ 2,344,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 7,872,000 7,209,000
Gain on disposal of assets (1,000)
Partnership earnings (449,000) (276,000)
Changes in assets and liabilities:
Trade accounts receivable 3,986,000 1,074,000
Other current assets (1,463,000) (1,315,000)
Accounts payable and accrued expenses (2,966,000) 612,000
Deferred income taxes (856,000) (902,000)
Other liabilities (173,000) 29,000
Refundable income taxes 865,000 190,000
------------ ------------
Net cash provided by operating activities 8,113,000 8,964,000
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (14,638,000) (4,289,000)
Additions to capitalized leases (1,308,000)
Proceeds from disposals of property, plant, and equipment 2,000
Contributions to partnership (630,000)
Distributions from partnership 433,000 26,000
Payments received on notes receivable 17,000 19,000
Change in other long term assets (195,000) 77,000
------------ ------------
Net cash used in investing activities (15,691,000) (4,795,000)
FINANCING ACTIVITIES:
Proceeds from borrowings 47,000,000 5,000,000
Payments on long-term debt (36,167,000) (7,402,000)
Additions to capitalized lease obligations 1,309,000 20,000
Principal payments under capital lease obligations (471,000) (247,000)
Payments received on notes receivable shareholders 197,000
Purchase of treasury stock (50,000)
Loan closing costs (1,416,000)
------------ ------------
Net cash provided by (used in) financing activities 10,402,000 (2,629,000)
------------ ------------
NET CHANGE IN CASH AND CASH INVESTMENTS 2,824,000 1,540,000
CASH AND CASH INVESTMENTS:
Beginning of period 904,000 1,722,000
------------ ------------
End of period $ 3,728,000 $ 3,262,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
58
<PAGE> 59
URS LOGISTICS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles which in certain
instances require the use of management's estimates. The information
contained in these condensed consolidated financial statements and notes for
the six-month periods ended June 30, 1997 and 1996 is unaudited but, in the
opinion of management, all adjustments necessary for a fair presentation of
such information have been made. All adjustments are of a normal recurring
nature. Reclassifications of certain 1996 amounts have been made to conform
with the 1997 presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to
applicable rules and regulations of the Securities and Exchange Commission.
2. CONSOLIDATION POLICY
The condensed consolidated financial statements include the accounts of URS
Logistics, Inc. (formerly United Refrigerated Services, Inc. - the
"Company") and its wholly owned subsidiary, United Refrigerated Services of
Texarkana, Inc. All significant intercompany accounts and transactions have
been eliminated in consolidation.
3. NATURE OF OPERATIONS
The Company operates and manages public refrigerated warehouses in the
continental United States.
The Company records deferred income taxes for the difference in the bases of
assets and liabilities for tax and financial statement purposes and the
enacted rates in effect in the years that the differences are expected to
reverse.
The Company evaluates possible impairment of noncurrent assets and
recognition of impairment losses whenever circumstances indicate that the
carrying value of such assets may be less than their fair values. There was
no impact on the Company's financial statements of adopting this policy for
the year ended December 31, 1995.
Certain reclassifications of prior year balances have been made to conform
with current year financial statement presentation.
4. RECENT EVENTS
On June 27, 1997, the Company entered into an agreement amending and
restating the credit facility dated June 2, 1995 among the Company's various
lending institutions party thereto and Bankers Trust Company, as agent. The
agreement included a $40,000,000 Revolving Credit Facility with a five-year
term and a $40,000,000 term loan with a six-year maturity. Both the term
loan and borrowings under the line bear interest at formula rates based on
the Federal Funds rate, the Prime rate, or Eurodollar lending rates. The
term loan currently bears a rate of LIBOR plus 3%. All amounts outstanding
under the original credit agreement were paid with proceeds from the term
loan. There have been no borrowings under the amended and restated Revolving
Credit Facility.
Also on June 27, 1997, the Company executed an agreement to purchase a
frozen and dry warehouse complex located in Montezuma, Georgia, together
with related equipment and other tangible and intangible property. In
addition, the Seller engaged the Company to provide on-going logistical
services. Total purchase price of the warehouse complex was approximately
$9,200,000 and was financed through the term loan.
On September 26, 1997, the Company's shareholders signed an agreement to
sell 100% of the Company's common stock to Vornado Realty Trust for
approximately $365,000,000 less debt and adjusted for change in working
capital at final closing. Final consummation of the transaction is
anticipated by December 31, 1997.
In connection with the sale of the Company to Vornado, warrants issued to
employees for 2,000 shares of the Company's common stock will become
exercisable. The remaining 1,525 warrants will expire. The Company recorded
$6,837,000 of expense in connection with the exercise of these warrants.
59
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Vornado Realty Trust:
We have audited the statement of revenue and certain expenses of The Montehiedra
Town Center (the "Property"), as described in Note 1, for the year ended
December 31, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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.
The accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a Form 8-K to be filed by Vornado Realty
Trust, as described in Note 1, and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the statement of revenue and certain expenses of the
Property, as described in Note 1, for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
Boston, Massachusetts
October 3, 1997
60
<PAGE> 61
THE MONTEHIEDRA TOWN CENTER
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996 1996
------------------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUE:
Minimum and percentage rents $ 2,059 $1,793 $8,086
Tenant recoveries 470 350 2,104
Other income 57 16 106
------- ------- ------
Total revenues 2,586 2,159 10,296
------- ------- ------
CERTAIN EXPENSES:
Real estate taxes 87 88 349
Management fee 65 54 211
General operating expenses 433 403 1,973
------- ------- ------
Total certain expenses 585 545 2,533
------- ------- ------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 2,001 $1,614 $7,763
======= ====== ======
</TABLE>
See notes to statements of revenue and certain expenses.
61
<PAGE> 62
THE MONTEHIEDRA TOWN CENTER
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. ORGANIZATION AND BASIS OF PRESENTATION
The statements of revenue and certain expenses reflect the operations of The
Montehiedra Town Center (the "Property"), a 529,000 square foot shopping
center located in Rio Piedras, Puerto Rico. The Property was developed and
owned by Big Beaver of Rio Piedras Development Corporation, a wholly owned
subsidiary of Kmart Corporation. On April 18, 1997, Big Beaver of Rio
Piedras Development Corporation sold its interest in the Property to Vornado
Montehiedra Acquisition L.P. The statements of revenue and certain expenses
are to be included in a Form 8-K to be filed by Vornado Realty Trust.
The accounting records of the Property are maintained in accordance with
generally accepted accounting principles. The accompanying financial
statement excludes certain expenses such as interest, depreciation and
amortization, certain professional fees, and other costs not directly
related to the future operations of the Property.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
The statements of revenue and certain expenses for the three-month periods
ended March 31, 1997 and 1996 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring
adjustments) necessary for the fair presentation of these statements of
revenue and certain expenses for the interim periods have been included. The
results for such interim periods are not necessarily indicative of the
results for an entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Rental income is recognized from leases with scheduled
rent increases on a straight-line basis over the lease term. The excess of
straight-line rent over amounts currently due amounted to $262,662 for the
year ended December 31, 1996, and $57,015 and $65,665 for the three-month
periods ended March 31, 1997 and 1996, respectively, and are included in
minimum rent on the accompanying statements of revenue and certain expenses.
Percentage rents and escalation rents based upon payments for taxes,
insurance, utilities and maintenance by tenants are estimated and accrued.
3. RELATED-PARTY TRANSACTIONS
Kmart Corporation, the parent company of Big Beaver of Rio Piedras
Development Corporation, and Builders Square, Inc., a wholly owned
subsidiary of Kmart Corporation, lease space at the Property. The related
rental income and reimbursements included in the statements of revenue and
certain expenses for the year ended December 31, 1996 totaled $2,938,593.
62
<PAGE> 63
4. RENTAL UNDER OPERATING LEASES
The Property's operations consist of leasing retail space in an enclosed
regional shopping center. The leases are operating leases expiring in
various years through 2019. The leases generally provide for a fixed minimum
annual rent, percentage rents based on sales volume and reimbursements for
certain real estate taxes and operating costs. Two of the tenants at the
shopping center lease a total of 48% of the gross leasable area, and
accounted for approximately 30% of the total rental income and
reimbursements for the year ended December 31, 1996. Future minimum fixed
rents, including related-party leases, in place at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
<S> <C>
1997 $ 7,854,290
1998 7,889,511
1999 7,937,324
2000 8,031,788
2001 8,149,108
Thereafter 76,964,680
--------------
Total $ 116,826,701
==============
</TABLE>
* * * * * *
63
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Vornado Realty Trust
We have audited the statement of revenues and certain expenses of the
Riese Properties, as described in Note 1 for the year ended April 30, 1997. This
financial statement is the responsibility of Vornado Realty Trust's management.
Our responsibility is to express an opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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.
The accompanying statement of revenue and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in the Current Report on Form 8-K of
Vornado Realty Trust as described in Note 1, and is not intended to be a
complete presentation of Riese Properties' revenue and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the statement of revenues and certain expenses
of The Riese Properties as described in Note 1 for the year ended April 30, 1997
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 7, 1997
64
<PAGE> 65
THE RIESE PROPERTIES
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the
For the Six Months Ended Year
------------------------ Ended
April 30, 1997 April 30, 1996 April 30, 1997
-------------- -------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
REVENUES:
Base rent $1,208 $1,232 $2,493
Tenant recoveries 65 70 159
Other income 34 30 41
------ ------ ------
Total Revenues 1,307 1,332 2,693
------ ------ ------
CERTAIN EXPENSES:
Real estate taxes 402 439 798
Repairs & maintenance 47 46 107
Professional fees 244 163 431
Utilities 56 58 121
Insurance 35 58 67
Management fee 128 129 263
Administrative 89 90 154
------ ------ ------
Total Certain Expenses 1,001 983 1,941
------ ------ ------
REVENUES IN EXCESS OF
CERTAIN EXPENSES $ 306 $ 349 $ 752
====== ====== ======
</TABLE>
See notes to Statements of Revenues and Certain Expenses.
65
<PAGE> 66
THE RIESE PROPERTIES
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
Note 1 - ORGANIZATION AND BASIS OF PRESENTATION
On June 27, 1997, Vornado acquired for approximately $26,000,000 four properties
previously owned by affiliates of the Riese Organization ("The Riese
Properties"). These properties are located in Manhattan, New York. Vornado also
made a $41,000,000 mortgage loan to Riese Affiliates cross collateralized by ten
other Manhattan properties. This increasing rate loan bears an initial interest
rate of 9.75% and has a five year term.
The statements of revenues and certain expenses reflect the operations of the
Riese Properties. The accounting records of the Riese Properties are maintained
in accordance with generally accepted accounting principles. The accompanying
financial statements exclude certain expenses such as interest, depreciation and
amortization, certain professional fees, and other costs not directly related to
the future operations of the Riese Properties.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting
period. The ultimate results could differ from those estimates.
The statements of revenues and certain expenses for the six month periods ended
April 30, 1997 and 1996 are unaudited; however, in the opinion of management,
all adjustments (consisting solely of normal recurring adjustments) necessary
for the fair presentation of these statements of revenue and certain expenses
for the interim periods have been included. The results for such interim periods
are not necessarily indicative of the results for an entire year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Rental income is recognized from leases with scheduled rent increases on a
straight-line basis over the lease term. Escalation rents based upon payments
for taxes, insurance, utilities and maintenance by tenants are estimated and
accrued. Total revenues do not include rent for space occupied by Riese.
66
<PAGE> 67
Note 3 - OPERATING LEASES
The Riese Properties are leased to various tenants with lease terms expiring in
various years through 2008. The following is a schedule, by years, of the
approximate minimum future rentals required under these operating leases as of
April 30, 1997:
<TABLE>
Year Ending
April 31, Amount
<S> <C>
1998 $ 4,034,000
1999 3,962,000
2000 3,754,000
2001 3,498,000
2002 3,287,000
Thereafter 15,486,000
-----------
Total $34,021,000
===========
</TABLE>
67
<PAGE> 68
Pro Forma Financial Information:
The unaudited condensed consolidated pro forma financial information
attached presents (i) the condensed consolidated pro forma statements of income
for the Operating Partnership for the year ended December 31, 1996 and the six
months ended June 30, 1997, as if the previously reported acquisitions (Mendik
Company, 90 Park Avenue and Arbor Property Trust) and the acquisition of
Americold and URS (collectively "Cold Storage"), Montehiedra, Riese, Charles E.
Smith Commercial Realty L.P. and the Hotel Pennsylvania (collectively presented
as "Unrelated Acquisitions") had occurred on January 1, 1996 and (ii) the
condensed consolidated pro forma balance sheet of the Operating Partnership as
of June 30, 1997, as if the above acquisitions had occurred on June 30, 1997 or
the date of acquisition, if earlier.
The unaudited condensed consolidated pro forma financial information is
not necessarily indicative of what the Operating Partnership's actual results of
operations or financial position would have been had these transactions been
consummated on the dates indicated, nor does it purport to represent the
Operating Partnership's results of operations or financial position for any
future period. The results of operations for the period ended June 30, 1997 are
not necessarily indicative of the operating results for the full year.
The unaudited condensed consolidated pro forma financial information
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in Vornado's Annual Report on Form 10-K for the year
ended December 31, 1996, as amended, and the Quarterly Report on Form 10-Q for
the period ended June 30, 1997 and the financial statements of Americold, URS,
Montehiedra and Riese included or incorporated by reference herein or
incorporated by reference. In management's opinion, all adjustments necessary to
reflect these transactions have been made. All share and per share amounts have
been restated to reflect the 100% stock dividend announced on October 7, 1997.
68
<PAGE> 69
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PREVIOUSLY
---------------------------------------------- REPORTED
PREVIOUSLY OPERATING
REPORTED PRO FORMA PARTNERSHIP
VORNADO ACQUISITIONS ADJUSTMENTS PRO FORMA
---------------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
ASSETS:
Real estate, net $ 877,427 $ 141,898 $ 185,000 (A) $ 1,290,150
102,100 (B)
(16,275)(B)
Cash and cash equivalents 260,485 260,485
Investment in and advances to
Preferred Stock Affiliates
Investment in and advances to
Alexander's, Inc. 108,100 108,100
Investment in partnerships 38,275 38,275
Investment in and advances to
management companies 13,008 13,008
Officer's deferred compensation
expense 10,419 10,419
Mortgage loans receivable 243,001 (185,000)(A) 58,001
Receivable arising from straight-
lining of rents 19,619 19,619
Other assets 72,362 13,180 (2,861)(C) 82,681
----------------- -------------------- -------------------- ----------------------
$ 1,642,696 $ 155,078 $ 82,964 $ 1,880,738
================= ==================== ==================== ======================
LIABILITIES:
Notes and mortgages payable $ 859,283 $ 124,873 $ 984,156
Deferred leasing fee income 10,550 10,550
Officer's deferred compensation
payable 25,000 25,000
Other liabilities 30,429 13,930 44,359
----------------- -------------------- ----------------------
925,262 138,803 1,064,065
----------------- -------------------- ----------------------
EQUITY 717,434 16,275 $ 102,100 (B) 816,673
(16,275)(B)
(2,861)(C)
----------------- -------------------- -------------------- ----------------------
$ 1,642,696 $ 155,078 $ 82,964 $ 1,880,738
================= ==================== ==================== ======================
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA OPERATING
COLD UNRELATED PARTNERSHIP
STORAGE ACQUISITIONS PRO FORMA
-------------------- ------------------- ----------------------
<S> <C> <C> <C>
ASSETS:
Real estate, net $ 1,290,150
Cash and cash equivalents $ (204,000)(BB) 56,485
Investment in and advances to
Cold Storage 204,000 (BB) 204,000
Investment in and advances to
Alexander's, Inc. 108,100
Investment in partnerships 77,000 (SS) 115,275
Investment in and advances to
management companies 13,008
Officer's deferred compensation
expense 10,419
Mortgage loans receivable 58,001
Receivable arising from straight-
lining of rents 19,619
Other assets 82,681
-------------------- ------------------- ----------------------
$ - $ 77,000 $ 1,957,738
==================== =================== ======================
LIABILITIES:
Notes and mortgages payable $ 77,000 (SS) $ 1,061,156
Deferred leasing fee income 10,550
Officer's deferred compensation
payable 25,000
Other liabilities 44,359
------------------- ----------------------
77,000 1,141,065
------------------- ----------------------
EQUITY 816,673
-------------------- ------------------- ----------------------
$ - $ 77,000 $ 1,957,738
==================== =================== ======================
</TABLE>
69
<PAGE> 70
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------- PREVIOUSLY
PREVIOUSLY REPORTED
REPORTED PRO FORMA OPERATING PARTNERSHIP
VORNADO ACQUISITIONS (1) ADJUSTMENTS PRO FORMA
-------------------- -------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
REVENUES:
Property rentals $ 63,471 $ 58,493 $ 1,775 (D) $ 123,739
Expense reimbursements 15,161 13,502 28,663
Other income 1,327 3,451 (2,622)(E) 2,156
------------------- ------------------ ------------------- --------------------
79,959 75,446 (847) 154,558
------------------- ------------------ ------------------- --------------------
EXPENSES:
Operating 26,658 27,530 54,188
Depreciation and amortization 8,429 6,828 368 (F) 16,608
983 (G)
General and administrative 4,748 3,453 (1,607)(E) 5,825
(769)(H)
Amortization of officer's deferred
compensation expense 12,498 12,498
------------------- ------------------ ------------------- --------------------
52,333 37,811 (1,025) 89,119
------------------- ------------------ ------------------- --------------------
Operating income (loss) 27,626 37,635 178 65,439
(Loss) income applicable to
Cold Storage -
Income applicable to Alexander's 2,842 2,842
Equity in net income of
management companies 520 964 (E) 1,484
Equity in net income of investees 282 362 276 (I) 920
Interest income on mortgage
notes receivable 4,305 (3,045)(J) 1,260
Interest and dividend income 6,774 899 7,673
Interest and debt expense (17,350) (13,111) 4,537 (K) (29,745)
(4,410)(L)
589 (M)
Net gain on marketable securities 579 579
------------------- ------------------ ------------------- --------------------
Net income (loss) 25,578 25,785 (911) 50,452
Preferred unit distribution (4,855) (5,137)(O) (9,992)
Preferred allocations (2,100) (3,084)(N) (5,184)
------------------- ------------------ ------------------- --------------------
Net income (loss) applicable to
Class A units $ 18,623 $ 25,785 $ (9,132) $ 35,276
=================== ================== =================== ====================
Net income per Class A unit,
based on 53,437,682 and
56,434,764 units, respectively $ 0.35
===================
OTHER DATA:
Funds from Operations (2):
Net income (loss) applicable to
Class A units $ 18,623 $ 25,785 $ (9,132) $ 35,276
Depreciation and amortization
of real property 7,857 4,727 1,351 13,935
Straight-lining of property rent
escalations (1,487) 1,169 (1,775) (2,093)
Leasing fees received in excess
of income recognized 1,303 1,303
Proportionate share of adjustments
to income from equity
investments to arrive at FFO 887 832 1,719
Non-recurring lease cancellation
income and write-off of related
costs (11,581) (11,581)
------------------- ------------------ ------------------- --------------------
$ 27,183 $ 20,932 $ (9,556) $ 38,559
=================== ================== =================== ====================
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 50,989 $ 15,377 $ (2,701) $ 63,665
Investing activities $ (629,813) $ (5,754) $ (328,638) $ (964,205)
Financing activities $ 688,954 $ (7,126) $ 290,287 $ 972,115
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
COLD UNRELATED PRO FORMA OPERATING PARTNERSHIP
STORAGE ACQUISITIONS (1) ADJUSTMENTS PRO FORMA
------------------ ----------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Property rentals $ 3,267 $ 1,093 (LL) $ 128,099
Expense reimbursements 535 29,198
Other income 91 2,247
------------------- ---------------- --------------------
3,893 1,093 159,544
------------------- ---------------- --------------------
EXPENSES:
Operating 1,586 55,774
Depreciation and amortization 3,697 (II) 20,305
General and administrative 5,825
Amortization of officer's deferred
compensation expense 12,498
------------------- ---------------- --------------------
1,586 3,697 94,402
------------------- ---------------- --------------------
Operating income (loss) 2,307 (2,604) 65,142
(Loss) income applicable to
Cold Storage $ (3,970)(CC) 6,942 (DD) 2,972
Income applicable to Alexander's 2,842
Equity in net income of
management companies 1,484
Equity in net income of investees 1,899 (MM) 2,819
Interest income on mortgage
notes receivable 1,999 (JJ) 3,259
Interest and dividend income 7,673
Interest and debt expense (7,650)(EE) (41,392)
(3,997)(KK)
Net gain on marketable securities 579
------------------ ------------------- ---------------- --------------------
Net income (loss) (3,970) 2,307 (3,411) 45,378
Preferred unit distributions (9,992)
Preferred allocations (5,184)
------------------ ------------------- ---------------- --------------------
Net income (loss) applicable to
Class A units $ (3,970) $ 2,307 $ (3,411) $ 30,202
================== =================== ================ ====================
Net income per Class A unit,
based on 53,437,682 and
56,434,764 units, respectively $ .54
====================
OTHER DATA:
Funds from Operations (2):
Net income (loss) applicable to
Class A units $ (3,970) $ 2,307 $ (3,411) $ 30,202
Depreciation and amortization
of real property 3,697 17,632
Straight-lining of property rent
escalations (57) (2,150)
Leasing fees received in excess
of income recognized 1,303
Proportionate share of adjustments
to income from equity
investments to arrive at FFO 15,573 17,292
Non-recurring lease cancellation
income and write-off of related
costs (11,581)
------------------ ------------------- ---------------- --------------------
$ 11,603 $ 2,250 $ 286 $ 52,698
================== =================== ================ ====================
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 11,190 $ 2,250 $ 286 $ 76,414
Investing activities $ (12,450) $ - $ - $ (976,655)
Financing activities $ 6,332 $ - $ - $ 978,447
</TABLE>
70
<PAGE> 71
(1) Certain revenue and expense items have been reclassified to conform to
Vornado's presentation.
(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Operating Partnership to incur
and service debt, to make capital expenditures and to fund other cash
needs. Funds from operations may not be comparable to similarly titled
measures employed by other REITs since a number of REITs, including the
Operating Partnership's, method of calculating funds from operations is
different from that used by NAREIT. Funds from operations, as defined
by NAREIT, represents net income applicable to common shares before
depreciation and amortization, extraordinary items and gains or losses
on sales of real estate. Funds from operations as disclosed above has
been modified to adjust for the effect of straight-lining of property
rentals for rent escalations and leasing fee income.
71
<PAGE> 72
CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PREVIOUSLY
--------------------------- REPORTED
PREVIOUSLY OPERATING PRO FORMA HISTORICAL
REPORTED PRO FORMA PARTNERSHIP COLD UNRELATED
VORNADO ACQUISITIONS(1) ADJUSTMENTS PRO FORMA STORAGE ACQUISITIONS(1)
--------- --------------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Property rentals $ 87,424 $134,756 $ 7,071 (P) $ 229,207 $10,579
(44)(Q)
Expense reimbursements 26,644 35,388 62,032 2,263
Other income 2,819 5,977 (5,378)(Q) 3,418 147
--------- ----------- ----------- ---------- -----------
116,887 176,121 1,649 294,657 12,989
--------- ----------- ---------- ---------- -----------
EXPENSES:
Operating 36,412 78,049 (39)(Q) 114,538 4,474
116 (R)
Depreciation and amortization 11,589 18,515 (144)(Q) 41,816
9,981 (S)
1,875 (T)
General and administrative 5,167 8,956 (3,788)(Q) 8,162
(2,173)(U)
Amortization of officer's deferred
compensation expense 2,083 2,083
--------- ----------- ---------- ---------- -----------
55,251 105,520 5,828 166,599 4,474
--------- ----------- ---------- ---------- -----------
Operating income (loss) 61,636 70,601 (4,179) 128,058 8,515
(Loss) income applicable to
Cold Storage $ (8,346)(FF)
Income applicable to Alexander's 7,956 7,956
Equity in net income of
management companies 1,855 1,471 (Q) 3,326
Equity in net income of investees 1,663 1,755 (V) 3,418
Interest income on mortgage
notes receivable 2,579 2,579
Interest and dividend income 3,151 2,536 (20)(Q) 5,667
Interest and debt expense (16,726) (34,692) 9,016 (W) (53,940)
(12,775)(X)
1,237 (Y)
Net gain on marketable
securities 913 913
--------- ----------- ---------- ---------- ---------- ------------
Net income (loss) 61,364 40,108 (3,495) 97,977 (8,346) 8,515
Preferred unit distributions (19,800)(AA) (19,800)
Preferred allocations (10,372)(Z) (10,372)
--------- ----------- ---------- ---------- ---------- ------------
Net income (loss) applicable to
Class A units $ 61,364 $ 40,108 $ (33,667) $ 67,805 $ (8,346) $ 8,515
========= =========== ========== ========== ========== ============
Net income per Class A unit,
based on 49,206,884 and
52,203,966 units, respectively $ 1.25
=========
OTHER DATA:
Funds from Operations (2):
Net income (loss) applicable to
Class A units $ 61,364 $ 40,108 $ (33,667) $67,805 $ (8,346) $ 8,515
Depreciation and amortization
of real property 10,583 18,515 11,712 40,810
Straight-lining of property rent
escalations (2,676) (2,413) (7,071) (12,160) (263)
Leasing fees received in excess
of income recognized 1,805 1,805
Proportionate share of adjustments
to income from equity
investments to arrive at FFO (1,760) 2,747 (970) 17 30,239
--------- ----------- ---------- ---------- ---------- -----------
$ 69,316 $ 58,957 $ (29,996) $ 98,277 $ 21,893 $ 8,252
========= =========== ========== ========== ========== ===========
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ 70,703 $ 58,016 $ 42 $ 128,761 $ 22,614 $ 996
Investing activities $ 14,912 $ (8,690) $(513,638) $(507,416) $(26,510) $ (240)
Financing activities $(15,046) $(21,075) $ 455,209 $ 419,088 $ 2,956 $ 1,044
<CAPTION>
OPERATING
PRO FORMA PARTNERSHIP
ADJUSTMENTS PRO FORMA
-------------- ---------------
<S> <C> <C>
REVENUES:
Property rentals $ 2,186 (QQ) $ 241,972
Expense reimbursements 64,295
Other income 3,565
-------------- ---------------
2,186 309,832
-------------- ---------------
EXPENSES:
Operating 119,012
Depreciation and amortization 8,126 (NN) 49,942
General and administrative 8,162
Amortization of officer's deferred
compensation expense 2,083
-------------- ---------------
8,126 179,199
-------------- ---------------
Operating income (loss) (5,940) 130,633
(Loss) income applicable to
Cold Storage 13,885 (GG) 5,539
Income applicable to Alexander's 7,956
Equity in net income of
management companies 3,326
Equity in net income of investees 2,191 (RR) 5,609
Interest income on mortgage
notes receivable 3,998 (OO) 6,577
Interest and dividend income 5,667
Interest and debt expense (15,300) (HH) (79,312)
(10,072) (PP)
Net gain on marketable 913
securities
-------------- ---------------
Net income (loss) (11,238) 86,908
Preferred unit distributions (19,800)
Preferred allocations (10,372)
-------------- ---------------
Net income (loss) applicable to
Class A units $ (11,238) $ 56,736
============== ===============
Net income per Class A unit,
based on 49,206,884 and
52,203,966 units, respectively $ 1.09
==============
OTHER DATA:
Funds from Operations (2):
Net income (loss) applicable to
Class A units $ (11,238) $56,736
Depreciation and amortization
of real property 8,126 48,936
Straight-lining of property rent
escalations (12,423)
Leasing fees received in excess
of income recognized 1,805
Proportionate share of adjustments
to income from equity
investments to arrive at FFO 30,256
-------------- ---------------
$ (3,112) $ 125,310
============== ===============
CASH FLOW PROVIDED BY (USED) IN:
Operating activities $ (3,112) $ 147,305
Investing activities $(130,000) $(664,166)
Financing activities $ 130,000 $ 553,088
</TABLE>
72
<PAGE> 73
(1) Certain revenue and expense items have been reclassified to conform to
Vornado's presentation.
(2) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs
which is disclosed in the Consolidated Statements of Cash Flows for the
applicable periods. There are no material legal or functional
restrictions on the use of funds from operations. Funds from operations
should not be considered as an alternative to net income as an
indicator of the Operating Partnership's operating performance or as an
alternative to cash flows as a measure of liquidity. Management
considers funds from operations a supplemental measure of Operating
performance and along with cash flow from operating activities,
financing activities, and investing activities, it provides investors
with an indication of the ability of the Operating Partnership to incur
and service debt, to make capital expenditures and to fund other cash
needs. Funds from operations may not be comparable to similarly titled
measures employed by other REITs since a number of REITs, including the
Operating Partnership's, method of calculating funds from operations is
different from that used by NAREIT. Funds from operations, as defined
by NAREIT, represents net income applicable to common shares before
depreciation and amortization, extraordinary items and gains or losses
on sales of real estate. Funds from operations as disclosed above has
been modified to adjust for the effect of straight-lining of property
rentals for rent escalations and leasing fee income.
73
<PAGE> 74
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PREVIOUSLY REPORTED ACQUISITIONS (MENDIK COMPANIES, 90 PARK AVENUE AND ARBOR
REALTY TRUST):
Pro Forma June 30, 1997 Balance Sheet:
(A) Reclassification of investment in 90 Park Avenue to real estate.
(B) Assumed issuance of 2,997,082 common shares, with a fair value of
$102,100 (based on an average price of $34.066 per share), in exchange
for all of the common shares of Arbor.
(C) Write-off of deferred assets of Arbor as reflected in the values
allocated to the real estate and the debt in accordance with APB No.
16.
Pro Forma June 30, 1997 Income Statement:
(D) To adjust rentals for the period from January 1, 1997 to April 14, 1997
arising from the straight-lining of property rentals for rent
escalations based on the remaining terms of the applicable Mendik
leases.
(E) To reflect adjustments required to record the Company's investment in
the Mendik management company for the period from January 1, 1997 to
April 14, 1997 under the equity method of accounting.
(F) Increase in depreciation for the period from January 1, 1997 to April
14, 1997 due to allocation of the Mendik purchase price.
(G) Adjustment to depreciation based on allocation of the Arbor purchase
price and the reclassification of the 90 Park Avenue investment to real
estate.
(H) Reflects the elimination of Arbor management expenses in connection
with the merger.
(I) Increase in equity in investees for the period from January 1, 1997 to
April 14, 1997 due to net decrease in interest expense on refinanced
Mendik debt.
(J) Elimination of interest income earned on mortgage loan receivable from
90 Park Avenue for the period from May 7, 1997 (date of acquisition) to
June 30, 1997.
(K) Reflects decrease in interest expense and loan cost amortization for
the period from January 1, 1997 to April 14, 1997 resulting from the
reduction and refinancing of Mendik debt.
(L) Reflects interest expense of $4,410 for the six months ended June 30,
1997 (January 1, 1997 to May 6, 1997) on the 90 Park Avenue investment
of $185,000, based on an average interest rate of approximately 7.0%.
(M) Reflects elimination of amortization of deferred financing costs of
$589 for the six months ended June 30, 1997 on existing Arbor debt.
(N) To reflect preferential distributions for the period from January 1,
1997 to April 14, 1997 relating to the Mendik Transaction.
(O) To reflect preferred stock dividends at a rate of 6.50% plus
amortization of the underwriting discount for the period from January
1, 1997 to April 14, 1997 on the proportionate number of Series A
Preferred Shares used to fund the Mendik acquisition.
Pro Forma December 31, 1996 Income Statement:
(P) To adjust rentals arising from the straight-lining of property rentals
for rent escalations based on the remaining terms of the applicable
Mendik leases.
(Q) To reflect adjustments required to record the Company's investment in
the Mendik management company under the equity method of accounting.
(R) Increase in Mendik operating expenses due to contract changes.
(S) Increase in depreciation due to preliminary allocation of the Mendik
purchase price.
(T) Adjustment to depreciation based on allocation of the Arbor purchase
price and the reclassification of the 90 Park Avenue investment to real
estate.
(U) Reflects the elimination of Arbor management expenses in connection
with the merger.
(V) Increase in equity in investees, due to net decrease in interest
expense on refinanced Mendik debt.
(W) Reflects decrease in interest expense and loan cost amortization
resulting from the reduction and refinancing of the Mendik debt.
(X) Reflects interest expense on the 90 Park Avenue investment of $185,000,
based on an average interest rate of approximately 7.0%.
(Y) Reflects elimination of amortization of deferred financing costs on
existing Arbor debt.
(Z) To reflect preferential distributions relating to the Mendik
Transaction.
(AA) To reflect preferred stock dividends at a rate of 6.50% plus
amortization of the underwriting discount on the proportionate number
of Series A Preferred Shares used to fund the Mendik acquisition.
74
<PAGE> 75
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COLD STORAGE:
On September 26, 1997, Vornado entered into merger agreements pursuant to
which its newly formed Preferred Stock Affiliates will acquire Americold
Corporation and URS Logistics, Inc. (collectively, "Cold Storage"). The
Preferred Stock Affiliates entered into an agreement with Crescent Real Estate
Equities Limited Partnership ("Crescent") to make these acquisitions. While a
definitive structure has not yet been determined, it is anticipated that Vornado
will own directly or indirectly an approximate 60% non-voting interest in Cold
Storage. Accordingly Vornado expects to account for this investment on the
equity method. In connection with the acquisition of Americold, certain of
Americold's existing debt may be in default upon completion of the merger.
Below is summarized pro forma information of Cold Storage:
COLD STORAGE CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------ PRO FORMA
AMERICOLD URS PRO FORMA COLD
CORPORATION* LOGISTICS, INC. ADJUSTMENT STORAGE
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 16,315 $ 3,728 $ 20,043
Property, plant, equipment, and
capitalized leases, net 375,501 255,692 $ 492,833 (a) 1,124,026
Cost in excess of net assets $ 197,133 (a) 197,133
acquired, net 73,496 (73,496)(b) -
Other 58,099 28,692 (11,000)(c) 75,791
----------------- ----------------- ----------------- -----------------
$ 523,411 $ 288,112 $ 605,470 $1,416,993
================= ================= ================= =================
LIABILITIES:
Accounts payable, accrued
expenses and other $ 60,705 $ 13,651 $ 74,356
Long-term debt 469,823 164,016 633,839
Capitalized leases 18,206 18,206
Deferred income taxes and other 103,554 49,905 197,133 (a) 350,592
----------------- ----------------- ----------------- -----------------
634,082 245,778 197,133 1,076,993
(DEFICIT) EQUITY (110,671) 42,334 $ 492,833 (a) 340,000
(73,496)(b)
(11,000)(c)
----------------- ----------------- ----------------- -----------------
$ 523,411 $ 288,112 $ 605,470 $1,416,993
================= ================= ================= =================
VORNADO'S SHARE OF EQUITY $ 204,000
=================
</TABLE>
* As of the last day of August 1997
(a) To preliminarily allocate the purchase cost to property, plant and
equipment, cost in excess of net assets acquired and the tax effect
thereon.
(b) To write-off cost in excess of net assets acquired in accordance with
Accounting Principles Board Opinion No. 16 ("APB No. 16").
(c) To write-off deferred loan costs in accordance with APB No. 16.
75
<PAGE> 76
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COLD STORAGE (CONTINUED):
COLD STORAGE CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------ PRO FORMA
AMERICOLD URS PRO FORMA COLD
CORPORATION* LOGISTICS, INC. ADJUSTMENTS STORAGE
------------------- -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ 145,807 $ 76,319 $ 222,126
Operating expenses 112,023 57,241 $ 1,211 (d) 170,475
------------------- -------------------- ------------------ ------------------
Gross operating margin 33,784 19,078 (1,211) 51,651
Other income (expense):
Interest expense (27,816) (9,183) 9,275 (e) (27,131)
593 (f)
Depreciation and amortization (10,534) (7,872) (5,615)(g) (24,021)
Management fees (7,084)(h) (7,084)
Other, net 785 103 888
------------------- -------------------- ------------------ ------------------
(Loss) income before income taxes (3,781) 2,126 (4,042) (5,697)
Benefit (provision) for income taxes 992 (829) (1,217)(i) (1,054)
------------------- -------------------- ------------------ ------------------
Net (loss) income $ (2,789) $ 1,297 $ (5,259) $ (6,751)
=================== ==================== ================== ==================
VORNADO'S SHARE OF NET LOSS $ (3,970)
==================
</TABLE>
* For the period ended on the last day of August 1997
COLD STORAGE CONDENSED CONSOLIDATED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------ PRO FORMA
AMERICOLD URS PRO FORMA COLD
CORPORATION* LOGISTICS, INC. ADJUSTMENTS STORAGE
------------------- -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $ 310,767 $ 144,229 $ 454,996
Operating expenses 242,213 107,190 $ 2,422 (d) 351,825
------------------- -------------------- ------------------ ------------------
Gross operating margin 68,554 37,039 (2,422) 103,171
Other income (expense):
Interest expense (57,863) (18,037) 18,549 (e) (56,166)
1,185 (f)
Depreciation and amortization (20,697) (14,574) (11,229)(g) (46,500)
Management fees (14,169)(h) (14,169)
Other, net 862 263 1,125
------------------- -------------------- ------------------ ------------------
(Loss) income before income taxes (9,144) 4,691 (8,086) (12,539)
Benefit (provision) for income taxes 2,604 (1,827) (2,433)(i) (1,656)
------------------- -------------------- ------------------ ------------------
Net (loss) income $ (6,540) $ 2,864 $ (10,519) $ (14,195)
=================== ==================== ================== ==================
VORNADO'S SHARE OF NET LOSS $ (8,346)
==================
</TABLE>
* For the period ended on the last day of February 1997
(d) To adjust amortization of cost in excess of net assets acquired in
accordance with APB No. 16.
(e) To adjust decrease in interest expense from the refinancing of
$600,000 of existing debt at a rate of 8.5%.
(f) To eliminate amortization of deferred loan costs in accordance with APB
No. 16.
(g) To adjust depreciation expense based on the preliminary allocation of
the purchase cost.
(h) To reflect non-taxable management fees due to Vornado's based on
1% of the combined Cold Storage assets.
(i) To reflect income taxes on pro forma adjustments at 40%.
76
<PAGE> 77
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COLD STORAGE (CONTINUED):
The acquisition will be recorded under "purchase accounting" applying the
provisions of APB No. 16. The estimated purchase price at the date of
acquisition is comprised of:
<TABLE>
<CAPTION>
Vornado's
Total 60% Share
---------- ----------
<S> <C> <C>
Cash $ 289,000 $ 173,400
Estimated fees and expenses 51,000 30,600
---------- ----------
340,000 204,000
Debt 660,000 396,000
---------- ----------
$1,000,000 $ 600,000
========== ==========
</TABLE>
The respective purchase costs were allocated to acquired assets and assumed
liabilities using their relative fair values as of the closing dates, based on
valuations and other studies which are not yet complete. Accordingly, the excess
of the purchase cost over the net assets acquired has not yet been allocated to
individual assets and liabilities. However, Vornado believes that the excess
purchase price will be allocated principally to property, plant and equipment.
FOOTNOTES:
Pro Forma June 30, 1997 Balance Sheet:
(BB) To reflect loan receivable in connection with Cold Storage acquisition.
Pro Forma June 30, 1997 Income Statement:
(CC) To reflect Vornado's share of net loss per the Cold Storage Condensed
Consolidated Pro Forma Income Statement for the Six Months Ended June 30,
1997.
(DD) To reflect Vornado's share of the management fee income received from Cold
Storage.
(EE) To reflect interest expense at 7.5% on the loans by Vornado in connection
with the Cold Storage acquisition.
Pro Forma December 31, 1996 Income Statement:
(FF) To reflect Vornado's share of net loss per the Cold Storage Condensed
Consolidated Pro Forma Income Statement for the Year Ended December 31,
1996.
(GG) To reflect Vornado's share of the management fee income received from Cold
Storage.
(HH) To reflect interest expense at 7.5% on the loans by Vornado in connection
with the Cold Storage acquisition.
UNRELATED ACQUISITIONS:
On April 18, 1997, Vornado acquired the Montehiedra Town Center in San Juan,
Puerto Rico from Kmart for $74 million of which $63 million is newly issued 10
year financing. The Montehiedra shopping center, which opened in 1994, contains
525,000 square feet, including a 135,000 square foot Kmart.
On June 30, 1997, Vornado acquired for approximately $26 million four properties
previously owned by affiliates of the Riese Organization. These properties are
located in midtown Manhattan. Vornado also made a $41 million mortgage loan to
Riese Affiliates cross collateralized by ten other Manhattan properties. This
five year increasing rate loan bears an initial interest rate of 9.75%.
On September 22, 1997 Vornado entered into an agreement to acquire a 15% limited
partnership interest in Charles E. Smith Commercial Realty Limited Partnership
for $60 million. Charles E. Smith Commercial Realty Limited Partnership is being
formed to own interests in and manage approximately 7.2 million square feet of
office properties in Crystal City, Alexandria, Virginia, a suburb of Washington
D.C., and to manage an additional 14 million square feet of office and other
commercial properties in the Washington D.C. area. The Crystal City properties
in which Charles E. Smith Commercial Realty Limited Partnership will own an
interest are now owned by various Charles E. Smith affiliates.
On September 25, 1997 Vornado acquired a 40% interest in Hotel Pennsylvania,
which is located on Seventh Avenue in New York City, opposite Madison Square
Garden. The property was acquired in a joint venture with Hotel Properties
Limited and Planet Hollywood International, Inc. The venture intends to create a
sports-themed hotel and entertainment complex. Under the joint venture
agreement, Hotel Properties Limited and Planet Hollywood International, Inc.
will have 40% and 20% interests, respectively. The joint venture acquired the
hotel for approximately $159 million, of which $120 million is newly-issued 5
year financing. The Hotel Pennsylvania contains approximately 800,000 square
feet of hotel space with 1,700 rooms and 400,000 square feet of retail and
office space. Vornado will manage the site's retail and office space, and Hotel
Properties will manage the hotel.
FOOTNOTES:
Pro Forma June 30, 1997 Income Statement:
(II) Adjustment to depreciation expense for the period from January 1, 1997 to
date of acquisitions based on the allocation of the purchase price.
(JJ) Adjustment to interest income for the period from January 1, 1997 to the
date of the Riese acquisition on mortgage note receivable $41,000 at a rate
of 9.75%.
(KK) Adjustment to interest expense for the period from January 1, 1997 to date
of acquisitions based on the amount of the investments.
(LL) To reflect rent from new leases entered into with the Riese organization.
(MM) To reflect equity in income from investment in Charles E. Smith Commercial
Realty Limited Partnership and the Hotel Pennsylvania.
Pro Forma December 31, 1996 Income Statement:
(NN) Adjustment to depreciation based on the allocation of the purchase price.
(OO) Adjustment to interest income on the mortgage note receivable with the
Riese organization of $41,000 at a rate of 9.75%.
(PP) Adjustment to interest expense based on the amount of the investments.
(QQ) To reflect rent from new leases entered into with the Riese organization.
(RR) To reflect equity in income from investment in Charles E. Smith Commercial
Realty Limited Partnership and the Hotel Pennsylvania.
Pro Forma June 30, 1997 Balance Sheet:
(SS) To reflect investments in Charles E. Smith Commercial Realty Limited
Partnership ($60,000) and Hotel Pennsylvania ($17,000).
77
<PAGE> 78
VORNADO REALTY L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VORNADO REALTY L.P.
-----------------------------------
(Registrant)
By: Vornado Realty Trust
General Partner
Date: October 8, 1997 /s/ Joseph Macnow
-----------------------------------
JOSEPH MACNOW
Vice President,
Chief Financial Officer
78
<PAGE> 79
INDEX TO EXHIBITS
Page
Exhibit No. Exhibit Reference
- ----------- ------- ---------
23.1 Consent of KPMG Peat Marwick LLP 80
23.2 Consent of KPMG Peat Marwick LLP 81
23.3 Consent of Deloitte & Touche LLP 82
23.4 Consent of Deloitte & Touche LLP 83
23.5 Consent of Deloitte & Touche LLP 84
99.1 Press Release, dated September 22, 1997,
of Vornado Realty Trust, announcing the
acquisition of a 15% limited partnership
interest in Charles E. Smith Commercial
Realty, L.P. 85
99.2 Press Release, dated September 25, 1997,
of Vornado Realty Trust, announcing the
acquisition of a 40% interest in Hotel
Pennsylvania. 86
99.3 Press Release, dated September 29, 1997,
of Vornado Realty Trust, announcing the
acquisition of Americold Corporation and
URS Logistics, Inc. and the formation of
a partnership with Crescent Real Estate
Equities Company. 87
99.4 Agreement and Plan of Merger, dated as of
September 26, 1997 among Vornado Realty
Trust, Atlanta Parent, Inc., Atlanta
Storage Acquisition Co. and URS Logistics,
Inc. 88
99.5 Agreement and Plan of Merger, dated as of
September 26, 1997 among Vornado Realty
Trust, Portland Parent, Inc. Portland
Storage Acquisition Co. and Americold
Corporation. 151
99.6 Agreement dated September 28, 1997 between
Atlanta Parent Incorporated, Portland
Parent Incorporated and Crescent Real
Estate Equities, Limited Partnership. 214
79
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
Americold Corporation:
We consent to the incorporation by reference to the Registration Statement No.
333-29013 of Vornado Realty Trust and Vornado Realty L.P. and the Post Effective
Amendment to Registration Statement No. 33-62395 of Vornado Realty Trust both on
Form S-3, of our report dated May 2, 1997, with respect to the consolidated
balance sheets of Americold Corporation as of the last day of February 1996 and
1997, and the related consolidated statements of operations, common
stockholders' deficit and cash flows for each of the years in the three-year
period ended the last day of February 1997, which report appears in the Form
8-K of Vornado Realty L.P. dated September 22, 1997.
KPMG PEAT MARWICK LLP
Portland, Oregon
October 6, 1997
80
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
Americold Corporation:
We consent to the inclusion of our report dated May 2, 1997, with respect to
the consolidated balance sheets of Americold Corporation as of the last day of
February 1996 and 1997, and the related consolidated statements of operations,
common stockholders' deficit, and cash flows for each of the years in the
three-year period ended the last day of February 1997, which report appears in
the Form 8-K of Vornado Realty L.P. dated September 22, 1997.
KPMG PEAT MARWICK LLP
Portland, Oregon
October 6, 1997
81
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement No.
333-29013 of Vornado Realty Trust and Vornado Realty L.P. and the Post Effective
Amendment to Registration Statement No. 33-62395 of Vornado Realty Trust both on
Form S-3, of our report dated March 7, 1997 (October 3, 1997 as to Note 10) on
the consolidated financial statements of URS Logistics, Inc. for the year ended
December 31, 1996, which report appears in the Form 8-K of Vornado Realty L.P.
dated September 22, 1997.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
October 3, 1997
82
<PAGE> 1
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement No.
333-29013 of Vornado Realty Trust and Vornado Realty L.P. and the Post Effective
Amendment to Registration Statement No. 33-62395 of Vornado Realty Trust both on
Form S-3, of our report dated October 3, 1997 on the statement of revenues and
certain expenses of the Montehiedra Town Center for the year ended December 31,
1996, which report appears in the Form 8-K of Vornado Realty L.P. dated
September 22, 1997.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 3, 1997
83
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement No.
333-29013 of Vornado Realty Trust and Vornado Realty L.P. and the Post Effective
Amendment to Registration Statement No. 33-62395 of Vornado Realty Trust both on
Form S-3, of our report dated October 3, 1997 on the combined statement of
revenues and certain expenses of the Riese Properties for the year ended April
30, 1997, which report appears in the Form 8-K of Vornado Realty L.P. dated
September 22, 1997.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 7, 1997
84
<PAGE> 1
EXHIBIT 99.1
CONTACT: JOSEPH MACNOW
(201) 587-1000
VORNADO REALTY TRUST
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
FOR IMMEDIATE RELEASE - SEPTEMBER 22, 1997
SADDLE BROOK, NEW JERSEY.......VORNADO REALTY TRUST
(NYSE:VNO) today announced that it has entered into an agreement to acquire a
15% limited partnership interest in Charles E. Smith Commercial Realty, L.P. for
$60 million. Charles E. Smith Commercial Realty, L.P. is being formed to own
interests in and manage approximately 7.2 million square feet of office
properties in Crystal City, Alexandria, Virginia, a suburb of Washington D.C.,
and to manage an additional 14 million square feet of office and other
commercial properties in the Washington, D.C. area. The Crystal City properties
in which Charles E. Smith Commercial Realty, L.P. will own an interest are now
owned by various Charles E. Smith affiliates.
The closing which is expected to occur at the end of October, is
subject to receipt of consents from various parties and other conditions.
Vornado Realty Trust is a fully-integrated equity real estate
investment trust.
Certain statements contained herein may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, risks
associated with the timing of and costs associated with property improvements,
financing commitments and general competitive factors.
####
85
<PAGE> 1
EXHIBIT 99.2
CONTACT: JOSEPH MACNOW
(201) 587-1000
VORNADO REALTY TRUST
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
FOR IMMEDIATE RELEASE - SEPTEMBER 25, 1997
SADDLE BROOK, NEW JERSEY.......VORNADO REALTY TRUST
(NYSE:VNO) today announced that it has acquired a 40% interest in New York
City's Hotel Pennsylvania, which is strategically located on Seventh Avenue
opposite Madison Square Garden. The property was acquired in a joint venture
with Hotel Properties Limited and Planet Hollywood International, Inc. The
venture intends to create a sports-themed hotel and entertainment complex.
Under the joint venture agreement, Hotel Properties Limited and
Planet Hollywood International, Inc. will have 40% and 20% interests,
respectively. Hotel Properties Limited, a Singapore publicly listed company
co-founded by Ong Beng Seng, has interests primarily in the retail,
entertainment, lodging and leisure industries.
The joint venture acquired the hotel for approximately $159
million, of which $120 million is newly-issued 5 year financing.
The Hotel Pennsylvania contains approximately 800,000 square feet
of hotel space with 1,700 rooms and 400,000 square feet of retail and office
space. Vornado will manage the site's retail and office space, and Hotel
Properties will manage the hotel.
Vornado Realty Trust is a fully-integrated equity real estate
investment trust.
Certain statements contained herein may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, risks
associated with the timing of and costs associated with property improvements,
financing commitments and general competitive factors and a change in retailer
or consumer acceptance of products and services.
####
86
<PAGE> 1
EXHIBIT 99.3
CONTACT: JOSEPH MACNOW
(201) 587-1000
VORNADO REALTY TRUST
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
VORNADO AND CRESCENT IN PARTNERSHIP
TO ACQUIRE TWO COLD STORAGE COMPANIES
FOR IMMEDIATE RELEASE - SEPTEMBER 29, 1997
SADDLE BROOK, NEW JERSEY.....VORNADO REALTY TRUST (NYSE:VNO) today
announced that it has entered into merger agreements pursuant to which its
preferred stock affiliates will acquire Americold Corporation and URS Logistics,
Inc. The consideration for the Americold transaction is approximately $582
million, including $111 million in cash and $471 million in indebtedness. The
consideration for the URS Logistics transaction is approximately $367 million,
including $178 million in cash and $189 million in indebtedness.
Vornado also announced that it has entered into a partnership
agreement with Crescent Real Estate Equities Company to make this acquisition.
Vornado will hold a 60% interest in the partnership and Crescent a 40% interest.
Kelso & Company, Inc., which has a controlling interest in both
Americold and URS, has granted consents or irrevocable proxies with respect to
both transactions. Each transaction is not conditioned on the closing of the
other, and both are expected to close in the fourth quarter of 1997.
Americold Corporation, headquartered in Portland, Oregon, under
the leadership of CEO Ron Dykehouse, is the nation's largest logistics and cold
storage warehouse company. The company was the first to develop, implement and
manage a fully integrated distribution logistics system serving the frozen food
industry. Today, as the largest provider of third-party, temperature controlled
logistics services, an increasing number of food processors are taking advantage
of Americold's expertise in executing their specific, complex distribution
requirements.
URS Logistics, Inc. headquartered in Atlanta, Georgia, under the
leadership of CEO Dan McNamara, provides refrigerated and frozen storage and
distribution to the leading food manufacturers in the nation. URS is the volume
leader in frozen food consolidation and distribution services. URS is the first
company in the freezer environment to implement bar-code scanning throughout
their entire network, resulting in the ability to track the movement and
handling of its customers products from point of manufacturer through to the
retailer or food service provider.
Vornado and Crescent intend to provide growth capital to further
support the long-term development of Americold and URS.
Vornado Realty Trust is a fully-integrated equity real estate
investment trust.
Certain statements contained herein may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, risks
associated with the timing of and costs associated with property improvements,
financing commitments and general competitive factors.
# # # #
87
<PAGE> 1
EXHIBIT 99.4
AGREEMENT AND PLAN OF MERGER
AMONG
VORNADO REALTY TRUST
ATLANTA PARENT, INC.
ATLANTA STORAGE ACQUISITION CO.
AND
URS LOGISTICS, INC.
Dated as of September 26, 1997
88
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS......................................................1
ARTICLE II
THE MERGER.......................................................8
2.1 The Merger..................................................8
2.2 Certificate of Incorporation................................9
2.3 By-Laws.....................................................9
2.4 Directors and Officers......................................9
2.5 Effective Time..............................................9
ARTICLE III
DETERMINATION OF WORKING CAPITAL;
CONVERSION OF SHARES............................................10
3.1 Working Capital Adjustment.................................10
3.2 URS Common Stock...........................................12
3.3 Warrants...................................................13
3.4 Dissenting Shares..........................................13
3.5 Acquisition Co. Common Stock...............................14
3.6 Exchange of Shares and Warrants............................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF URS...........................18
4.1 Organization, etc..........................................18
4.2 Authorization and Binding Obligation.......................19
4.3 Capitalization.............................................20
4.4 Consents and Approvals; No Conflicts.......................21
4.5 Financial Statements.......................................22
4.6 Undisclosed Liabilities....................................22
89
<PAGE> 3
4.7 Governmental Approvals and Authorizations..................23
4.8 Compliance with Laws.......................................23
4.9 Absence of Certain Payments............................23
4.10 Real Property.............................................24
4.11 Personal Property.........................................25
4.12 Intellectual Property.....................................26
4.13 Absence of Conflicts of Interest..........................27
4.14 Contracts.................................................27
4.15 Labor Matters.............................................27
4.16 Employee Benefit Plans....................................28
4.17 Actions Pending...........................................30
4.18 Affiliate Transactions....................................31
4.19 Absence of Certain Changes................................31
4.20 Insurance.................................................31
4.21 Taxes.....................................................31
4.22 Environmental Matters.....................................33
4.23 Brokers, Finders, etc.....................................34
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF VORNADO, THE PARENT AND ACQUISITION CO.......................35
5.1 Organization and Standing..................................35
5.2 Authorization and Binding Obligation.......................35
5.3 Consents and Approvals; No Conflicts.......................36
5.4 Litigation.................................................37
5.5 Finders and Investment Bankers.............................37
5.6 Financing..................................................37
ARTICLE VI
COVENANTS.......................................................37
6.1 Conduct of Business........................................37
6.2 Third-Party Consents.......................................41
6.3 Compliance with GCL; Filings...............................41
6.4 Additional Agreements......................................41
6.5 Acquisition Proposals......................................42
6.6 Public Announcements.......................................43
6.7 Consent of the Parent......................................43
90
<PAGE> 4
6.8 Transfer Taxes.............................................43
6.9 Treatment of Books and Records.............................43
6.10 Indemnification of Officers and Directors.................44
6.11 Access....................................................44
6.12 Repayment of Indebtedness.................................45
6.13 Post-Closing True-Up......................................45
6.14 Management Bonus Amount Arrangements......................45
ARTICLE VII
CLOSING CONDITIONS..............................................46
7.1 Conditions Precedent to the Obligations of
All Parties.....................................................46
7.2 Additional Conditions to the Obligation of
URS.............................................................46
7.3 Conditions Precedent to Obligations of the
Parent and Acquisition Co.......................................47
ARTICLE VIII
CLOSING.........................................................49
8.1 Time and Place.............................................49
8.2 Filings at the Closing; Other Actions......................49
ARTICLE IX
NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS........................................49
ARTICLE X
TERMINATION RIGHTS..............................................50
10.1 Termination...............................................50
10.2 Procedure and Effect of Termination.......................51
ARTICLE XI
OTHER PROVISIONS................................................51
11.1 Amendment and Modification................................51
91
<PAGE> 5
11.2 Benefit and Assignment....................................51
11.3 No Third-Party Beneficiaries..............................52
11.4 Entire Agreement..........................................52
11.5 Expenses..................................................52
11.6 Headings..................................................53
11.7 Choice of Law.............................................53
11.8 Notices...................................................53
11.9 Counterparts..............................................55
92
<PAGE> 6
SCHEDULES
Schedule 1.31 Knowledge
Schedule 1.34(a) and (b) Management Bonus Amount
Schedule 1.58 Warrants
Schedule 2.4 Officers of Surviving Corporation
Schedule 4.1(a) URS Qualification
Schedule 4.1(b) URS Subsidiaries; Qualification
Schedule 4.1(c) Third Party Interests
Schedule 4.3 Capitalization
Schedule 4.4 Consents and Approvals; No
Conflicts
Schedule 4.5 Financial Statements
Schedule 4.6 Undisclosed Liabilities
Schedule 4.7 Governmental Approvals and
Authorization
Schedule 4.8 Compliance with Laws
Schedule 4.10 Real Property
Schedule 4.12 Intellectual Property
Schedule 4.12(b) Certain Third Party Interests
Schedule 4.13 Conflicts of Interest
Schedule 4.14 Contracts
Schedule 4.15 Labor Matters
Schedule 4.16 Plans
Schedule 4.16(f) Retiree Health and Life Benefit
Obligations
Schedule 4.16(g) Conflicts with Employment
Arrangements
Schedule 4.17 Litigation
Schedule 4.18 Affiliate Transactions
Schedule 4.19 Adverse Changes
Schedule 4.20 Insurance
Schedule 4.21 Taxes
Schedule 4.22 Environmental Matters
Schedule 4.23 URS Finders
Schedule 5.5 Vornado Finders
Schedule 6.1 Conduct of Business
Schedule 6.1(h) Post-Signing Bonus Arrangements
93
<PAGE> 7
EXHIBITS
Exhibit 7.3(e) Form of Waiver Letter
94
<PAGE> 8
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 26, 1997 (the
"Agreement"), among Vornado Realty Trust, a Maryland real estate investment
trust ("Vornado"), ATLANTA PARENT, INC. a Delaware corporation (the "Parent"),
ATLANTA STORAGE ACQUISITION CO., a Delaware corporation and a wholly-owned
subsidiary of the Parent ("Acquisition Co."), and URS LOGISTICS, INC., a
Delaware corporation ("URS").
ARTICLE I
DEFINITIONS
Unless otherwise stated, the following terms when used herein have
the meanings assigned to them below.
1.1 "Acquisition Co." has the meaning set forth in the preamble to
this Agreement.
1.2 "Affiliate" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
1.3 "Aggregate Exercise Proceeds" means the aggregate Exercise Price
payable upon exercise of all of the Warrants with an Exercise Price of less than
the Per Share Price.
1.4 "Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any Governmental
Authority and (ii) orders, decisions, rulings, injunctions, judgments, awards
and decrees or consents of or agreements with any Governmental Authority.
95
<PAGE> 9
1.5 "Board" has the meaning set forth in Section 4.2(b) hereof.
1.6 "BT Credit Agreement" means the Credit Agreement, dated as of
June 2, 1995, among URS, Bankers Trust Company, as agent, and the various
lending institutions party thereto, as amended and restated as of June 27,
1997.
1.7 "Business Day," whether or not initially capitalized, means
every day of the week excluding Saturdays, Sundays and federal holidays.
1.8 "Certificate" has the meaning set forth in Section 3.6(a)
hereof.
1.9 "Certificate of Merger" has the meaning set forth in Section 2.5
hereof.
1.10 "Closing" has the meaning set forth in Section 8.1.
1.11 "Closing Date" means the date on which the Closing occurs.
1.12 "Closing Statement" has the meaning set forth in Section 3.1.
1.13 "Code" means the Internal Revenue Code of 1986, as amended,
together with all regulations and rulings issued thereunder by any Governmental
Authority.
1.14 "Contracts" has the meaning set forth in Section 4.14 hereof.
1.15 "Debt Payoff Amount" means the aggregate amount that would be
required to repay in full as of the Effective Time all indebtedness under each
of the MetLife Loan Agreement and the BT Credit Agreement, together with any
interest due and unpaid thereon and 74% of the amount
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(representing the after-tax cost to URS) of any redemption, repayment or
prepayment fees, surcharges, premiums or penalties associated therewith, as
agreed in good faith between Vornado and URS based on letters furnished to URS
by The Metropolitan Life Insurance Company and Bankers Trust Company as of or
shortly before the Closing Date.
1.16 "Dissenting Shares" has the meaning set forth in Section 3.4
hereof.
1.17 "Effective Time" has the meaning set forth in Section 2.5
hereof.
1.18 "Environmental Laws" means all Applicable Laws relating to the
protection of human health, safety or the environment.
1.19 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with the regulations and rulings issued thereunder
by any Governmental Authority.
1.20 "Exercise Price" means, with respect to any Warrant, the price
at which the holder of such Warrant is entitled to purchase one share of URS
Common Stock upon exercise of such Warrant.
1.21 "Filings" has the meaning set forth in Section 6.3(b) hereof.
1.22 "Financial Statements" has the meaning set forth in Section 4.5
hereof.
1.23 "GAAP" means United States generally accepted accounting
principles.
1.24 "GCL" means the General Corporation Law of the State of
Delaware.
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1.25 "Governmental Approvals" has the meaning set forth in Section
4.7 hereof.
1.26 "Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question.
1.27 "HSRA" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations adopted thereunder.
1.28 "IRS" means the Internal Revenue Service of the United States.
1.29 "Kelso" means Kelso & Company.
1.30 "Kelso Fee" means 74% of the payment (representing the
after-tax cost to URS) to be made to Kelso at the Effective Time, as provided
for in Section 7.2(e) hereof.
1.31 "Knowledge" means, with respect to URS or any URS Subsidiary,
the actual knowledge of any of the officers set forth on Schedule 1.31 hereto.
1.32 "Leased Property" has the meaning set forth in Section 4.10
hereto.
1.33 "Liens" means all debts, liens, security interests, mortgages,
pledges, judgments, trusts, adverse claims, liabilities, encumbrances, material
rights of way, charges which are liens and other impairments of title of any
kind other than Permitted Liens.
1.34 "Management Bonus Amount" means 74% of the payments
(representing the after-tax cost to URS) to be made
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at or after the Effective Time to the individuals, and in the aggregate amount
set forth on Schedule 1.34 hereto.
1.35 "Material Adverse Effect" means a material adverse effect on
the business, assets, properties, liabilities or financial condition of URS and
the URS Subsidiaries, taken as a whole or on the ability of URS timely to
consummate the transactions contemplated hereby.
1.36 "Merger" has the meaning set forth in Section 2.1 hereof.
1.37 "Merger Consideration" means the difference of (x) the sum of
$365,000,000 plus or minus, as the case may be, the Working Capital Adjustment,
as determined pursuant to Section 3.1 minus (y) the sum of (A) the Debt Payoff
Amount, plus (B) the Management Bonus Amount, plus (C) the Kelso Fee.
1.38 "MetLife Loan Agreement" means the Loan Agreement, dated as of
December 23, 1988, by and between Metropolitan Life Insurance Company and United
Refrigerated Services, Inc., as amended by a First Amendment to Loan Agreement
dated as of January 16, 1990, a Second Amendment to Loan Agreement dated as of
October 25, 1990, a Third Amendment to Loan Agreement dated as of May 1, 1991, a
Fourth Amendment to Loan Agreement dated as of April 5, 1993, a Fifth Amendment
to Loan Agreement dated as of November 10, 1994 and a Sixth Amendment to Loan
Agreement dated as of April 16, 1997.
1.39 "Outstanding URS Shares" means the shares of URS Common Stock
issued and outstanding immediately prior to the Effective Time, assuming the
exercise of all of the Warrants with an Exercise Price of less than the Per
Share Price and the issuance of all of the shares of URS Common Stock issuable
in respect thereof.
1.40 "Owned Property" has the meaning set forth in Section 4.10
hereof.
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1.41 "Parent" has the meaning set forth in the preamble to this
Agreement.
1.42 "Per Share Price" means the sum of (i) the Merger Consideration
plus (ii) the Aggregate Exercise Proceeds divided by the total number of
Outstanding URS Shares.
1.43 "Permitted Liens" has the meaning set forth in Section 4.10
hereof.
1.44 "Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
any Governmental Authority or any other government or political subdivision or
an agency or instrumentality thereof.
1.45 "Plans" has the meaning set forth in Section 4.16 hereof.
1.46 "Real Property" has the meaning set forth in Section 4.10
hereof.
1.47 "Real Estate Laws" means any applicable building, zoning,
subdivision and other land use and similar laws, codes, ordinances, rules,
regulations and orders of Governmental Authorities.
1.48 "Returns" has the meaning set forth in Section 4.21 hereof.
1.49 "Surviving Corporation" has the meaning set forth in Section
2.1 hereof.
1.50 "Surviving Corporation Common Stock" has the meaning set forth
in Section 3.5 hereof.
1.51 "Tax" has the meaning set forth in Section 4.21 hereof.
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1.52 "Transfer Taxes" means all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar Taxes and fees imposed by any Governmental Authority in connection with
a merger.
1.53 "URS" has the meaning set forth in the preamble to this
Agreement.
1.54 "URS Common Stock" means the common stock, par value $.10 per
share, of URS.
1.55 [Intentionally Omitted]
1.56 "URS Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other entity of which URS owns, directly or
indirectly, at least a majority of the securities or other ownership interests
having by the terms thereof ordinary voting power or otherwise has the right or
power to elect a majority of the board of directors or other Persons performing
similar functions of such corporation, partnership, limited liability company,
joint venture or other entity.
1.57 "Vornado" has the meaning set forth in the preamble to this
Agreement.
1.58 "Warrants" means the warrants to purchase URS Common Stock
issued pursuant to the Warrant Agreements listed on Schedule 1.58 hereto.
1.59 "Working Capital" shall mean, as of any date of determination,
the excess, determined on a basis consistent with the preparation of the August
31 balance sheet included in the Financial Statements, of (a) the sum of (i) the
aggregate current assets, including cash and cash equivalents, short-term
investments, prepaid expenses, current deferred tax assets and other current
assets, of URS and the URS Subsidiaries on a consolidated basis as of such
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date, plus (ii) all cash expended by URS or any URS Subsidiary on or prior to
such date in respect of (A) the amounts referred to in Section 7.2(e)(i) hereof,
(B) the fee to Kelso referred to in Section 7.2(e)(ii) hereof or (C) any expense
of a type referred to in Section 11.5 hereof (the items referred to in clause
(A), (B) and (C) are collectively, the "Excluded Liabilities"), over (b) the
current liabilities, including accounts payable, current income taxes payable
and accrued expenses and any other current liabilities, of URS and the URS
Subsidiaries on a consolidated basis as of such date, other than any such
liability in respect of any Excluded Liability or any liability for any current
portion of any indebtedness under the MetLife Loan Agreement or the BT Credit
Agreement.
1.60 "Working Capital Adjustment" shall mean the difference (which
may be a positive or a negative number) between (x) $12,147,000 (i.e., Working
Capital as of August 31, 1997) and (y) Working Capital, as determined pursuant
to Section 3.1.
ARTICLE II
THE MERGER
2.1 The Merger. In accordance with the provisions of this Agreement
and the GCL, at the Effective Time (i) Acquisition Co. shall be merged with and
into URS (the "Merger"), and URS shall be the surviving corporation of the
Merger (hereinafter sometimes called the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Delaware; (ii)
the name, identity, existence, rights, privileges, powers, franchises,
properties and assets of URS shall continue unaffected and unimpaired; and (iii)
the separate existence of Acquisition Co. shall cease, and all of the rights,
privileges, powers, franchises, properties and assets of Acquisition Co. shall
be vested in URS. The name of the surviving corporation shall be "URS Logistics,
Inc."
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2.2 Certificate of Incorporation. The Restated Certificate of
Incorporation of URS in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein or by law, except that Article FOURTH thereof shall
be amended and restated in its entirety as follows:
"The total number of shares of stock which the Company shall have
authority to issue is 1,000 shares of Common Stock, par value $0.001
per share."
2.3 By-Laws. The By-Laws of URS in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended, altered or repealed as provided therein.
2.4 Directors and Officers. The directors of Acquisition Co.
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation until his or her
successor is appointed and qualified or until his or her earlier death,
resignation or removal. The individuals set forth on Schedule 2.4 shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-Laws of the Surviving Corporation until
his or her successor is appointed and qualified or until his or her earlier
death, resignation or removal.
2.5 Effective Time. The Merger shall become effective simultaneously
with the filing of a Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with Sections 251 and 103 of the GCL (the
"Certificate of Merger"). The Certificate of Merger shall be filed
simultaneously with the Closing. The date and time when the Merger shall become
effective is hereinafter referred to as the "Effective Time".
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ARTICLE III
DETERMINATION OF WORKING CAPITAL;
CONVERSION OF SHARES
3.1 Working Capital Adjustment. (a) If Working Capital as of
immediately prior to the Effective Time is less than $12,147,000 (i.e., Working
Capital as of August 31, 1997), the Merger Consideration shall be reduced by the
amount by which Working Capital as of immediately prior to the Effective Time is
less than such amount (the "Working Capital Reduction"). If Working Capital as
of the Effective Time is greater than $12,147,000, the Merger Consideration
shall be increased by the amount by which Working Capital as of the Effective
Time is greater than such amount (the "Working Capital Addition"). The dollar
value of the Working Capital Reduction or Working Capital Addition, as the case
may be, is referred to as the "Working Capital Adjustment".
(b) Not later than 10 days nor earlier than 30 days prior to the
Closing, URS shall prepare in good faith, on a basis consistent with the August
31, 1997 balance sheet included in the Financial Statements, and shall deliver
to Vornado, an estimate (the "Working Capital Estimate") of the Working Capital
Adjustment as of immediately prior to the then anticipated Effective Time, a
statement as to whether the Working Capital Adjustment is estimated to be a
Working Capital Reduction or a Working Capital Addition, and such other
supporting information and documentation as Vornado may reasonably request with
respect thereto. On the Closing Date, the Parent shall deposit into an escrow
account (the "Escrow Account") maintained by Citibank, N.A., as escrow agent
pursuant to an escrow agreement containing such terms as the parties shall
negotiate in good faith (the "Escrow Agreement"), an amount of cash (such cash,
the "Escrowed Funds") equivalent to (i) two, multiplied by (ii) the dollar value
of the Working Capital Estimate (without regard to
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whether the Working Capital Estimate reflects a Working Capital Reduction or
Working Capital Addition); provided that the Escrowed Funds shall not be less
than $3.5 million.
(c) As soon as practicable following the Effective Time, but in no
event later than 15 days following the Effective Time, Vornado shall prepare in
good faith, on a basis consistent with URS' August 31, 1997 balance sheet, and
deliver to Kelso, as representative of the former holders of URS Common Stock, a
calculation (the "Working Capital Calculation") of the Working Capital
Adjustment as of the Effective Time, together with such supporting information
and documentation as Kelso may reasonably request with respect thereto.
(d) During the 15-day period following Kelso's receipt of the
Working Capital Calculation, the Surviving Corporation shall provide Kelso
reasonable access, during normal business hours, and upon reasonable notice, to
URS' accounting and financial records and Vornado's working papers relating to
the Working Capital Adjustment; provided that such access does not unreasonably
disrupt the normal operations of URS. The Working Capital Calculation shall
become final and binding upon the parties, and the Working Capital Adjustment
shall be conclusively determined for purposes of this Agreement at the
conclusion of such 15-day period, or earlier if Kelso accepts in writing the
Working Capital Calculation, unless Kelso gives written notice of its
disagreement with the Working Capital Calculation (a "Notice of Disagreement")
to Vornado prior to the end of such period. Any notice of Disagreement shall (i)
specify in reasonable detail the nature of any disagreement so asserted and (ii)
include only disagreements based on (x) mathematical errors or (y) the Working
Capital Calculation not being calculated in accordance with this Agreement. If a
Notice of Disagreement is received by Vornado in a timely manner, then the
Working Capital Calculation shall become final and binding upon the parties and
the holders of URS Common Stock, and the Working Capital Adjustment shall be
conclusively determined for purposes of
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this Agreement, on the earlier of (i) the date Vornado and Kelso resolve in
writing any differences they have with respect to the matters specified in the
Notice of Disagreement, or (ii) the date any disputed matters are finally
resolved in writing by the Arbitrating Auditor (as defined below).
(e) During the 15-day period following the delivery of a Notice of
Disagreement, Vornado and Kelso shall seek in good faith to resolve in writing
any differences which they may have with respect to the matters specified in the
Notice of Disagreement and URS shall provide Kelso with reasonable access,
during normal business hours, and upon reasonable notice, to URS' accounting and
financial records and Vornado's working papers relating to the Working Capital
Calculation; provided that such access does not unreasonably disrupt the normal
operations of URS. At the end of such 15-day period, Vornado and Kelso shall
submit to the final and unappealable decision of such New York City office of a
"Big Six" auditing firm that is independent with respect to Kelso, URS and
Vornado as shall be selected by mutual agreement of Vornado and Kelso (such
independent auditor, the "Arbitrating Auditor") for review and resolution of any
and all matters which remain in dispute and which were properly included in the
Notice of Disagreement. Vornado and Kelso agree to use reasonable efforts to
cause the Arbitrating Auditor to render a decision resolving the matters
submitted to it within 15 days following submission of the matter thereto.
3.2 URS Common Stock. (a) At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
URS Common Stock (except for (i) any shares of URS Common Stock then owned
beneficially or of record by the Parent or Acquisition Co. or any other
subsidiary of the Parent, (ii) shares of URS Common Stock then held in the
treasury of URS or by any URS Subsidiary, and (iii) Dissenting Shares) issued
and outstanding immediately prior to the Effective Time shall be converted into
the right to receive cash from the Parent in
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an amount equal to the Per Share Price, as determined pursuant to Section 1.42.
(b) Each share of URS Common Stock which is then owned beneficially
or of record by the Parent or Acquisition Co. or any other direct or indirect
subsidiary of the Parent shall, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled and retired and cease to exist,
without any conversion thereof.
(c) Each share of URS Common Stock held in URS's treasury or by any
URS Subsidiary immediately prior to the Effective Time shall, by virtue of the
Merger, be canceled and retired and cease to exist, without any conversion
thereof.
(d) The holders of shares of URS Common Stock shall, as of the
Effective Time, cease to have any rights as stockholders of URS, except such
rights, if any, as they may have pursuant to Section 262 of the GCL, or
alternatively, the right to receive their pro rata share of the Merger
Consideration, as determined and paid in the manner set forth in this Agreement.
3.3 Warrants. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, each Warrant with an
Exercise Price that is less than the Per Share Price issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive cash from the Parent in an amount equal to the product of (i) the number
of shares of URS Common Stock into which such Warrant is exercisable times (ii)
the excess of the Per Share Price, as determined pursuant to Section 3.1, over
the Exercise Price for such Warrant. URS shall cause each Warrant having an
Exercise Price equal to or in excess of the Per Share Price to be cancelled. In
this regard, URS will take all actions required under the Warrant Plan governing
the Warrants.
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3.4 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of URS Common Stock which are held by stockholders who
shall have effectively dissented from the Merger and perfected their appraisal
rights in accordance with the provisions of Section 262 of the GCL (the
"Dissenting Shares"), shall not be converted into or be exchangeable for the
right to receive any Merger Consideration, but the holders thereof shall be
entitled to payment from the Surviving Corporation of the appraised value of
such shares in accordance with the provisions of Section 262 of the GCL;
provided, however, that if any such holder shall have failed to perfect such
appraisal rights or shall have effectively withdrawn or lost such rights, his or
her shares of URS Common Stock shall thereupon be converted into and
exchangeable for, at the Effective Time, their pro rata share of the Merger
Consideration, as determined and paid in the manner set forth in this Agreement.
3.5 Acquisition Co. Common Stock. Each share of common stock, par
value $.01 per share, of Acquisition Co. (the "Acquisition Co. Common Stock"),
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and exchangeable for one fully paid and non-assessable share of
common stock, par value $.10 per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"). From and after the Effective Time, each outstanding
certificate theretofore representing shares of Acquisition Co. Common Stock
shall be deemed for all purposes to evidence ownership of and to represent the
number of shares of Surviving Corporation Common Stock into which such shares of
Acquisition Co. Common Stock shall have been converted. Promptly after the
Effective Time, the Surviving Corporation shall issue to the Parent a stock
certificate or certificates representing 1,000 shares of Surviving Corporation
Common Stock in exchange for the certificate or certificates which formerly
represented shares of Acquisition Co. Common Stock, which shall be canceled.
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3.6 Exchange of Shares and Warrants. (a) On and after the Closing
Date, each holder of an outstanding certificate or certificates which prior
thereto represented shares of URS Common Stock (the "Stock Certificates") shall,
upon surrender to the Surviving Corporation of such Stock Certificate or Stock
Certificates, be entitled to the amount of cash into which the aggregate number
of shares of URS Common Stock previously represented by such Stock Certificate
or Stock Certificates surrendered shall have been converted into the right to
receive pursuant to this Agreement. In addition, on the Closing Date, each
holder of an outstanding Warrant which prior thereto represented the right to
purchase shares of URS Common Stock in accordance with the terms of the
applicable Warrant Agreement (the "Warrant Certificates" and together with the
Stock Certificates, the "Certificates") shall, upon surrender to the Exchange
Agent of such Warrant Certificate or Warrant Certificates to the Surviving
Corporation, be entitled to the amount of cash into which such Warrant
Certificate or Warrant Certificates have been converted pursuant to Section 3.3
of this Agreement. All payments in respect of shares of URS Common Stock and
Warrants the Certificates for which are surrendered on the Closing Date shall be
made by the Parent in immediately available funds on the Closing Date, which
shall be paid in respect of each share of URS Common Stock and each Warrant as
follows:
(i) Payments in respect of the portion of the Per Share Price
attributable to the portion of the Merger Consideration not deposited in
the Escrow Account shall be made by the Parent in immediately available
funds on the Closing Date (in exchange for Stock Certificates which are
surrendered on the Closing Date) or as soon as practicable following
surrender of the related Certificates (in the case of Certificates
surrendered following the Closing Date).
(ii) If the Working Capital Adjustment is a Working Capital
Addition, then, promptly following the final determination thereof,
payments in respect of the
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portion of the Per Share Price attributable to any Working Capital
Addition shall be disbursed from the Escrow Account to the holders of
shares of URS Common Stock and to the holders of Warrants pro rata
according to their holdings (calculated on a fully-diluted basis), with
the remaining escrowed funds disbursed to Vornado, in each case as soon as
practicable following determination of the Working Capital Adjustment in
accordance with Section 3.1 and, in the case of disbursements to holders
of shares or Warrants, following the surrender of the related
Certificates.
(iii) If the Working Capital Adjustment is a Working Capital
Reduction, then, promptly following the determination thereof, a payment
equivalent to the Working Capital Reduction shall be disbursed from the
Escrow Account to Vornado, with the remaining escrowed funds disbursed
from the Escrow Account to the holders of shares of URS Common Stock and
to the holders of Warrants pro rata according to their holdings
(calculated on a fully-diluted basis), in each case as soon as practicable
following determination of the Working Capital Adjustment in accordance
with Section 3.1 and, in the case of disbursements to holders of shares or
Warrants, following the surrender of the related Certificates.
All disbursements from the Escrow Account shall be made in
accordance with the provisions of the Escrow Agreement. With respect to any
Certificate alleged to have been lost, stolen or destroyed, the owner or owners
of such Certificate, other than the URS Shareholders, shall be entitled to the
consideration set forth above upon delivery to the Surviving Corporation of an
affidavit of such owner or owners setting forth such allegation and an indemnity
agreement to indemnify the Parent and the Surviving Corporation against any
claim that may be made against either or both of them on account of the alleged
loss, theft or destruction of any such Certificate or the delivery of the
payment set forth above.
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(b) If consideration is to be delivered to a Person other than the
Person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to delivery of the consideration that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such consideration shall pay
any transfer or other Taxes required by reason of the payment to a Person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such Tax has been paid or is not
applicable.
(c) Until surrendered in accordance with the provisions of this
Section 3.6, from and after the Effective Time, each Certificate (other than (i)
Certificates representing shares of URS Common Stock owned beneficially or of
record by the Parent, Acquisition Co. or any other subsidiary of the Parent,
(ii) Certificates representing shares of URS Common Stock held in URS's treasury
or by any URS Subsidiary and (iii) Dissenting Shares in respect of which
appraisal rights are perfected) shall represent for all purposes the right to
receive cash pursuant to Section 3.2(a) or 3.3, as applicable, as determined
and paid in the manner set forth in this Agreement.
(d) After the Effective Time there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of URS Common
Stock or Warrants that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the applicable
consideration referred to in Section 3.6(c) hereof.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF URS
URS hereby represents and warrants to Vornado, the Parent and
Acquisition Co. as follows:
4.1 Organization, etc. (a) URS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. URS is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not individually or in the
aggregate have a Material Adverse Effect or materially restrict the ability of
URS to conduct business as presently conducted by it in such jurisdiction. Each
jurisdiction where URS is so qualified is listed on Schedule 4.1(a) hereto.
Except as set forth on Schedule 4.1(b) hereto, there are no URS Subsidiaries
and, except as set forth on Schedule 4.1(b) hereto, URS does not own, directly
or indirectly, any capital stock of or equity interests in any Person. URS has
heretofore delivered or made available to the Parent accurate and complete
copies of the Restated Certificate of Incorporation and By Laws of URS, as
amended and in effect on the date hereof. The stock certificate books and
ledgers of URS, which have been made available to the Parent - accurately
reflect, at the date hereof, the ownership of the issued and outstanding capital
stock of URS.
(b) Each URS Subsidiary is listed on Schedule 4.1(b) hereto, is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry out its
business as now being conducted. Each
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URS Subsidiary is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed would not individually
or in the aggregate have a Material Adverse Effect or materially restrict the
ability of such URS Subsidiary to conduct business as presently conducted by it
in such jurisdiction. Each jurisdiction where each URS Subsidiary is so
qualified is listed on Schedule 4.1(b) hereto. URS has heretofore delivered to
the Parent accurate and complete copies of the Certificate of Incorporation and
By Laws of each URS Subsidiary, as amended and in effect on the date hereof.
(c) Except as set forth on Schedule 4.1(c) hereto, URS owns of
record and beneficially 100% of the issued and outstanding capital stock and all
other equity interests in each URS Subsidiary, free and clear of any Liens.
4.2 Authorization and Binding Obligation. (a) URS has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. URS's execution, delivery and
performance of this Agreement has been duly and validly authorized by all
necessary corporate action on the part of URS and this Agreement has been duly
executed and delivered by URS. Except for the actions referred to in Section
4.2(b) hereof, which actions are in full force and effect, and the giving of
notice in accordance with Section 228(d) of the GCL, no other corporate action
or proceedings on the part of URS are necessary to authorize this Agreement or
the consummation of the transactions contemplated hereby. This Agreement
constitutes the valid and binding obligation of URS, enforceable against URS in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar rights of creditors generally
and by general principles of equity.
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(b) The URS Board of Directors (the "Board") has authorized the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and has not withdrawn such authorization.
Subsequent to the giving of such authorization, Kelso Investment Associates IV,
L.P., as the beneficial and record owner of the URS Common Stock as set forth in
Schedule 4.3 hereto, has executed and not withdrawn an action by written consent
in lieu of meeting of stockholders adopting this Agreement. A true and complete
copy of such approvals by the Board and such consent of Kelso Investment
Associates IV, L.P. has been delivered to the Parent.
4.3 Capitalization. (a) The authorized URS Common Stock and other
authorized capital stock of URS and each of the URS Subsidiaries is as set forth
on Schedule 4.3 hereto. All issued and outstanding shares of URS Common Stock
and other equity interests of URS and each of the URS Subsidiaries are duly
authorized, validly issued, fully paid, non-assessable and free of preemptive
rights. Schedule 4.3 hereto sets forth the name of each Person who owns
beneficially or of record any shares of URS Common Stock, each Person who owns
beneficially or of record any shares of capital stock and other equity interests
of any URS Subsidiary and, in the case of URS and each URS Subsidiary, the
number of shares owned by each such Person.
(b) Except as set forth on Schedule 4.3 hereto, there are not now,
and at the Effective Time there will not be, any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments of any nature
whatsoever obligating URS or any of the URS Subsidiaries to issue, transfer,
deliver or sell, or cause to be issued, transferred, delivered or sold, any
additional shares of URS Common Stock or other equity interest of URS or any of
the URS Subsidiaries, or any securities or obligations convertible into or
exchangeable for any such URS Common Stock or other equity interests, or
obligating URS or any of the URS Subsidiaries to grant, extend or enter into any
such agreement or commitment and no authorization therefor has
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been given or made by URS or any URS Subsidiary. Except for the arrangements
described in Schedule 4.3 hereto, there are no contractual arrangements that
obligate URS or any URS Subsidiary to (i) repurchase, redeem or otherwise
acquire any of its capital stock or its other equity interests or (ii) pay any
Person any consideration that is calculated with reference to the consideration
to be paid to the URS Stockholders under this Agreement.
4.4 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA and as set forth on Schedule 4.4 hereto and the
approvals referred to in Section 4.2(b) hereof, the giving of notice in
accordance with Section 228(d) of the GCL and the filing and recordation of the
Certificate of Merger as required by the GCL, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority or other third
party is necessary for the consummation by URS of the transactions contemplated
by this Agreement, except where the failure to make such filing or obtain such
authorization, consent or approval would not individually or in the aggregate
have a Material Adverse Effect. Neither the execution and delivery of this
Agreement by URS nor the consummation by URS of the transactions contemplated
hereby, nor compliance by URS with any of the provisions hereof, will (i) result
in any violation of any provision of the Certificate of Incorporation or By Laws
of URS or any URS Subsidiary, (ii) violate any Applicable Law or (iii) except as
set forth on Schedule 4.4 hereto, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default or
give rise to a right of any Person to terminate, cancel or accelerate the
payment or performance of any liability, obligation or commitment under any
contract (including any Contract listed in Schedule 4.14 hereto) to which URS or
any of the URS Subsidiaries is a party, or by which any of their respective
properties are bound, except, in the case of clauses (ii) and (iii) above, where
such violation, breach, default or right of termination, cancellation or
acceleration would not individually or in the aggregate have a Material Adverse
Effect.
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4.5 Financial Statements. URS has furnished the Parent with (i) a
consolidated balance sheet of URS as at December 31, 1996 and consolidated
statements of operations, changes in stockholders' equity (deficit) and cash
flows of URS for such year, together with the related audit report of Deloitte &
Touche and (ii) an unaudited consolidated balance sheet of URS as at August 31,
1997 and a consolidated statement of operations of URS for the eight-month
period ended August 31, 1997. All such financial statements are referred to
herein collectively as the "Financial Statements". Other than as set forth in
Schedule 4.5 hereto, the Financial Statements (including any related schedules
and/or notes) have been prepared in accordance with GAAP consistently applied
throughout the periods presented, except that the unaudited financial statements
are subject to year-end adjustments and do not contain footnotes. The balance
sheets included in the Financial Statements fairly present, in all material
respects, the financial position of URS and the URS Subsidiaries as at the date
thereof, and the statements of operations, changes in stockholders' equity
(deficit) and cash flows included in the Financial Statements fairly present, in
all material respects, the results of the operations, changes in stockholders'
equity (deficit) and cash flows, respectively, of URS and the URS Subsidiaries
for the periods indicated.
4.6 Undisclosed Liabilities. Except (i) to the extent reflected or
reserved against in the August 31, 1997 balance sheet of URS included in the
Financial Statements, (ii) to the extent specifically set forth on Schedule 4.6
hereto, and/or (iii) for obligations of URS arising in the ordinary course of
the performance of its responsibilities under any Contracts (as defined in
Section 4.14 hereof) listed on Schedule 4.14 or any agreement which is not
required to be listed on Schedule 4.14 because of the limitations set forth in
Section 4.14, neither URS nor any URS Subsidiary has any liabilities or
obligations of any nature, whether liquidated, unliquidated, accrued, absolute,
contingent or otherwise which individually or in the aggregate would have a
Material Adverse Effect.
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4.7 Governmental Approvals and Authorizations. Except as set forth
in Schedule 4.7 hereto, all approvals, permits, qualifications, authorizations,
licenses, franchises, consents, orders, registrations or other approvals
(collectively, the "Governmental Approvals") of all Governmental Authorities
which are necessary in order to permit URS and the URS Subsidiaries to carry on
their respective businesses have been obtained and are in full force and effect,
except where the failure to obtain such approval, permit, qualification,
authorization, license, franchise, consent, order, registration or other
approval, or the failure to be in full force and effect, would not individually
or in the aggregate have a Material Adverse Effect. There has been no violation,
cancellation, suspension or revocation of any Governmental Approval. This
Section 4.7 does not relate to environmental matters, which are the subject of
Section 4.22.
4.8 Compliance with Laws. Except as set forth on Schedule 4.8,
neither URS nor any URS Subsidiary is in conflict with or in violation or
breach of or default under (a) any Applicable Law or (b) any provision of its
organizational documents, and since December 31, 1996, neither URS nor any URS
Subsidiary has received any written notice alleging any such conflict,
violation, breach or default, except for any such violations, breaches or
defaults which would not individually or in the aggregate have a Material
Adverse Effect. This Section 4.8 does not relate to environmental matters, which
are the subject of Section 4.22.
4.9 Absence of Certain Payments. None of Kelso, URS, any URS
Subsidiary, or any director, officer, employee or agent of, or consultant or
other representative of, URS or any URS Subsidiary, or any other Person
authorized to act on behalf thereof, has unlawfully offered, paid or agreed to
pay, directly or indirectly, any money or anything of value to or for the
benefit of any individual who is or was an official or employee or candidate for
office of any Governmental Authority, or any employee or agent of any
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customer or supplier of URS or any URS Subsidiary, except for any such offer,
payment or agreement to pay which would not individually or in the aggregate
have a Material Adverse Effect and would not reasonably be expected to subject
URS or any URS Subsidiary to any damage or penalty in any civil, criminal or
governmental litigation or proceeding.
4.10 Real Property. Schedule 4.10 hereto sets forth a complete list
of (i) all real property and all interests in real property owned in fee by URS
or the URS Subsidiaries (individually, an "Owned Property") and (ii) all real
property and all interests in real property leased by URS or the URS
Subsidiaries (individually, a "Leased Property"; together with the Owned
Property, the "Real Property"). URS and the URS Subsidiaries have (i) good,
marketable and insurable fee title to all Owned Property, and (ii) good and
valid leasehold interests in all Leased Property, and in the case of all of the
Owned Properties and those leasehold estates covered by the applicable title
insurance policies and update letters or endorsements (as the case may be) set
forth on Schedule 4.10 hereto, such title is free and clear of any Liens, except
(a) those created or permitted under the BT Credit Agreement or the MetLife Loan
Agreement, (b) as disclosed in those certain title insurance policies and update
letters or endorsements, as the case may be, set forth on Schedule 4.10 hereto,
and (c) other easements, rights of way and minor and immaterial liens, charges
or encumbrances that do not interfere with the use of the Real Property in the
normal conduct of the business of URS and the URS Subsidiaries and that do not
materially impair the value of the Real Property (collectively, the "Permitted
Liens"). Complete and correct copies of each lease relating to the Leased
Property described on Schedule 4.10 hereto have been furnished or made
available to the Parent. The current use and operation of the Real Property does
not violate in any material respect any instrument of record affecting the Real
Property. Except as disclosed on Schedule 4.10 hereto, no damage or destruction
has occurred and, to the Knowledge of URS, no condemnation or rezoning
proceeding has been threatened or
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commenced with respect to any of the Real Property that would individually or in
the aggregate materially impair the continued use or operation of the Owned
Property or the Leased Property. The Owned Property is in compliance with all
Real Estate Laws, and neither URS nor any URS Subsidiary has any Knowledge of
any written notice of violation or claimed violation of any Real Estate Law, in
either case except where such violation or lack of compliance would not,
individually or in the aggregate, materially restrict the ability of URS or any
URS Subsidiary to conduct its business as presently conducted by it at any
location. Except as disclosed on Schedule 4.10 hereto, neither URS nor any URS
Subsidiary is obligated under or a party to any option, right of first refusal
or other contractual right to purchase, acquire, sell or dispose of any Real
Property. Neither URS nor any URS Subsidiary is a lessor, sublessor or grantor
under any lease, sublease or other instrument granting to another Person any
right to the possession, lease, occupancy or enjoyment of the Real Property,
other than pursuant to the agreements listed on Schedule 4.14 hereto. This
Section 4.10 does not relate to environmental matters, which are the subject of
Section 4.22.
4.11 Personal Property. URS has previously delivered to the Parent a
schedule, as of December 31, 1996, which schedule includes a complete list of
each item of tangible personal property or assets owned by URS or any URS
Subsidiary having a value of $5,000 or more. URS and each of the URS
Subsidiaries has good and valid title to all tangible personal property and
assets which it owns, including the material tangible personal property
reflected in the August 31, 1997 balance sheet included in the Financial
Statements as being owned by URS or such URS Subsidiary, as the case may be,
except for such tangible personal property and assets disposed of in the
ordinary course of business, consistent with past practice, since August 31,
1997 having a value not in excess of $250,000. URS and each of the URS
Subsidiaries has a valid legal right to use all tangible personal property and
assets which it does not own but uses in the conduct of its business, except
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where the failure to have such valid legal right would not individually or in
the aggregate have a Material Adverse Effect.
4.12 Intellectual Property. (a) URS and each URS Subsidiary
possesses all patents, trademarks, service marks, trade names, copyrights and
licenses that are necessary for the use or ownership of its respective
properties and assets, and the maintenance and operation of its respective
businesses as currently conducted. Neither URS nor any URS Subsidiary uses any
registered trademarks, trade names, copyrights or patents (or have applications
therefor pending) in connection with their respective businesses, except for
those set forth on Schedule 4.12 hereto (collectively referred to as the
"Intellectual Property"). Except as set forth on Schedule 4.12 hereto, the
Intellectual Property is owned by URS or a URS Subsidiary, as indicated Schedule
4.12 hereto, and are not subject to any license, royalty arrangement or dispute.
To the Knowledge of URS, no registered trademark or trade name used by URS or
any URS Subsidiary infringes on any trademark or trade name in any state or
country in which such trademark or trade name is used by URS or such URS
Subsidiary. Neither URS nor any URS Subsidiary has received written notification
of infringement of any patent, copyright, trademark or trade name, or any
application therefor, from any Person.
(b) Each of URS and each URS Subsidiary possesses the right to use
all of its logistics and RF software and related data bases that are necessary
for the conduct of its respective operations as currently conducted. To the
Knowledge of URS, no other Person has any material interest in any such software
or data bases (other than any licensee or licensor thereof which is not an
officer, director or Affiliate of URS or any URS Subsidiary).
4.13 Absence of Conflicts of Interest. Except as set forth on
Schedule 4.13 hereto, none of the URS Stock-
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holders nor any officer, director or Affiliate of URS or any URS Subsidiary has
any material interest in any material contract or material property (real or
personal), tangible or intangible, used in the business of URS or any URS
Subsidiary.
4.14 Contracts. Schedule 4.14 hereto lists (or describes in the case
of oral contracts) each contract, note, debt instrument, lease, sublease,
warehouse services agreement, covenant not to compete, supply agreement,
guarantee, licensing agreement, partnership agreement, joint venture agreement,
employment agreement (other than employment agreements set forth on Schedule
4.16 hereto), collective bargaining agreement or other agreement or commitment
of any kind, whether written or oral, to which URS or any URS Subsidiary is a
party (other than agreements set forth on Schedule 4.16 hereto) or by which
either of them is bound (each, a "Contract"), provided that such Schedule need
not list (i) any written or oral Contract or related written Contracts under
which the aggregate payments required to be made by or to URS or any URS
Subsidiary over the life of the Contract or Contracts are less than $300,000,
(ii) any rate quote or (iii) any warehouse receipt. Complete copies of every
written Contract listed on Schedule 4.14 hereto have been previously made
available to the Parent. Each of URS and the URS Subsidiaries has performed all
material obligations required to be performed by it to date under the Contracts
(and every employment contract listed on Schedule 4.16 hereto), and neither URS
nor any URS Subsidiary has received written (or, to the Knowledge of URS, oral)
notice that it is in material default in the performance of any of its
obligations under any Contract.
4.15 Labor Matters. Except as described on Schedule 4.15 hereto,
since December 31, 1996, there have been no work stoppages or labor difficulties
relating to employees of URS or the URS Subsidiaries. There are no labor
disputes currently subject to any unfair labor practice complaint, grievance
procedure, arbitration or litigation, nor is there any default or any event
which, with
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notice or the passage of time or both, would become a default, under any
agreement with any labor union or association representing employees of URS or
any URS Subsidiary, except for any such dispute, procedure, arbitration,
litigation or default which would not individually or in the aggregate have a
Material Adverse Effect. There are no strikes, picketing, work stoppages or
representation petitions pending or, to URS's Knowledge, threatened with respect
to any employee of URS or any URS Subsidiary.
4.16 Employee Benefit Plans. (a) Schedule 4.16 hereto contains a
true and complete list of each "employee benefit plan", as such term is defined
in Section 3(3) of ERISA, and each bonus, medical incentive or deferred
compensation, severance, retention, change in control, equity incentive or other
material employee benefit plan, program or policy maintained or contributed to
by URS or any URS Subsidiary for the benefit of its respective employees or
former employees or with respect to which URS or a URS Subsidiary is obligated
to contribute on behalf of its employees and current or former directors
(collectively, the "Plans"). URS has made available to the Parent true and
complete copies of all Plans; all related trust agreements and insurance
contracts forming a part of any Plans; the most recent actuarial and trust
reports prepared for any such Plan; the most recent Form 5500 filed in respect
of each such Plan and all schedules thereto; the most recent determination
letter issued in respect of each such Plan; the current summary plan
descriptions with respect to such Plans for which such a description has been
distributed; and all amendments to any such document.
(b) Each Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS with respect to
"TRA" (as defined in Section 1 of Rev. Proc. 93-39) as to the qualification
thereof under Section 401(a) of the Code and, to the Knowledge of URS, no
amendment has been made to any such Plan since the date of such determination
letter that has or would result in the disqualification of such Plan
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under Section 401(a) of the Code. Each of the Plans has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code. There are no material pending
or, to the Knowledge of URS, threatened claims by or on behalf of any of the
Plans or by any employee participating therein (other than routine claims for
benefits). All contributions required to have been made by URS and the URS
Subsidiaries to any Plan pursuant to applicable law (including, without
limitation, ERISA and the Code) have been made on a timely basis. Neither URS
nor any of the URS Subsidiaries has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, could subject URS or any of the URS Subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in
an amount which could be material.
(c) As of the date hereof, no liability under Title IV of ERISA
(other than for the payment of premiums under Section 4007) has been or is
expected to be incurred by URS or any URS Subsidiary with respect to any
ongoing, frozen or terminated "single employee plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them.
(d) No Plan is or within the preceding six years has been a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or a
multiple employer plan within the meaning of Section 4063 or 4064 of ERISA.
(e) Except for URS and each URS Subsidiary, no other trade or
business, whether or not incorporated, is currently or, within the preceding six
years, has been required to be treated as a "single employer" with URS pursuant
to clause (b), (c) or (m) of Section 414 of the Code.
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(f) Neither URS nor any URS Subsidiary has any obligations for
retiree health and life benefits under any Plan, except as set forth on Schedule
4.16(f).
(g) Except as set forth on Schedule 4.16(g) hereto, the consummation
of the transactions contemplated by this Agreement will not (i) entitle any
employees of URS or any URS Subsidiary to severance pay, (ii) accelerate the
time of payments or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any Plan or (iii) result in any breach or violation of, or a
default under, any of the Plans.
4.17 Actions Pending. Except as set forth in Schedule 4.17 hereto,
there is no civil, criminal or administrative action, suit, hearing, claim,
litigation, proceeding or investigation pending or, to the Knowledge of URS,
threatened, against or affecting URS or any URS Subsidiary or the business or
any of the assets of URS or any URS Subsidiary, or which seeks to enjoin or
prohibit, or otherwise questions the validity of, any action taken or to be
taken in connection with this Agreement, and there is no order, decision,
ruling, injunction, judgment, award or decree or consent of or agreements with
any Governmental Authority against or affecting URS or any URS Subsidiary or the
business or assets of URS or any URS Subsidiary, or which enjoins or prohibits,
any action taken or to be taken in connection with this Agreement.
4.18 Affiliate Transactions. Except as set forth on Schedule 4.18
hereto, there are no existing agreements, understandings or arrangements between
URS or any URS Subsidiary, on the one hand, and any Affiliate of URS or any URS
Subsidiary, on the other hand.
4.19 Absence of Certain Changes. Except as set forth on Schedule
4.19 hereto, since August 31, 1997, (a) URS and the URS Subsidiaries have
conducted their respective businesses in the ordinary and usual course of
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their respective businesses, and (b) there has not been any change in the
financial condition, assets, owned or leased properties, business or results of
operations of URS or any URS Subsidiary that, individually or in the aggregate,
has had a Material Adverse Effect and (c) neither URS nor any URS Subsidiary has
taken any action of the type described in any clause of Section 6.1.
4.20 Insurance. Schedule 4.20 hereto lists all material insurance
policies maintained by, or for the benefit of, URS or any URS Subsidiary, as an
insured. All such insurance policies are in full force and effect, all premiums
due thereon have been paid and no notice of termination of any such policy has
been received by the insured thereunder.
4.21 Taxes. Except as set forth on Schedule 4.21 hereto, or as
reflected or reserved against in the December 31, 1996 balance sheet included
in the Financial Statements, (i) URS and the URS Subsidiaries have (or by the
Closing Date will have) duly and timely filed or caused to be filed all Tax
Returns that are required to be filed on or before the Closing Date or the time
for filing such returns shall have been validly extended to a date after the
Closing Date (collectively, the "Returns"), except to the extent that the
failure to so file would not individually or in the aggregate have a Material
Adverse Effect; (ii) URS and the URS Subsidiaries have paid all Taxes shown or
required to be shown on such Returns, and have (or by the Closing Date will
have) withheld and remitted to the appropriate Taxing Authority, all Taxes that
are required to be withheld on or before the Closing Date, except to the extent
that the failure to so pay, withhold or remit would not individually or in the
aggregate have a Material Adverse Effect; (iii) no claim in writing by the IRS
or any other Taxing Authority for assessment or collection of Taxes, that are or
may become payable by URS or the URS Subsidiaries or chargeable as a Lien upon
the assets thereof, has been received by URS or any URS Subsidiary; (iv) Federal
income tax returns for the taxable years of URS through the taxable year ended
1991
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have been examined and closed; (v) neither URS nor any URS Subsidiary has
granted any extension or waiver of the limitation period applicable to any
Returns, which period (after giving effect to such extension or waiver) has not
yet expired; (vi) neither URS nor any URS Subsidiary has received any notice in
writing of any claim, audit, action, suit, proceeding or investigation now
pending against or with respect to URS or any URS Subsidiary in respect of any
Tax; (vii) there are no requests for rulings or determinations in respect of
any Tax pending between URS or any URS Subsidiary, on the one hand, and any
Taxing Authority on the other; (viii) neither URS nor any URS Subsidiary has (A)
been a member of an affiliated group, or (B) filed or been included in a
combined, consolidated or unitary Return, in each case involving group members
other than URS and the URS Subsidiaries; and (ix) neither URS nor any of the URS
Subsidiaries has (a) elected to be treated as a "real estate investment trust"
for federal income tax purposes for any taxable year ending after December 31,
1993 or (b) acquired, since January 1, 1994, a substantial portion of the assets
of an entity whose election to be treated as a "real estate investment trust"
has been terminated or revoked. Schedule 4.21 hereto contains a list of states,
territories and jurisdictions (whether foreign or domestic) with respect to
which any income Tax Return has been filed by URS or any URS Subsidiary within
the last three taxable years.
For purposes of this Agreement: (a) "Tax" means any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid to or by URS or any URS Subsidiary, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profits tax, custom duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or penalty,
addition to tax or additional amount imposed by any Governmental Authority
(domestic or foreign) (a "Taxing Authority"), (b) "Taxes" shall have a
correlative meaning and (c) "Tax Returns" shall mean reports, returns,
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information statements relating to Taxes or other documents filed or maintained
or required to be filed or maintained, in connection with any Tax.
4.22 Environmental Matters. Except as set forth on Schedule 4.22
hereto and in the environmental reports, studies, assessments, sampling results
or other written environmental analyses listed therein (the "Environmental
Reports"), URS's and each URS Subsidiary's operation and use of its assets and
the Real Property are in compliance in all respects with all Environmental Laws,
except to the extent that any such noncompliance would not individually or in
the aggregate have a Material Adverse Effect. Except as set forth on Schedule
4.22 or in the Environmental Reports listed thereon, URS and the URS
Subsidiaries have obtained all environmental, health and safety permits
necessary for the operation of the business of URS and the URS Subsidiaries as
presently conducted, and all such permits are in full force and effect and URS
and each URS Subsidiary are in compliance in all respects with the terms and
conditions of each such permit, except, in each case, to the extent that any
such failure to obtain or noncompliance would not individually or in the
aggregate have a Material Adverse Effect.
Except as disclosed in Schedule 4.22 or in the Environmental Reports
and except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, (i) no property currently owned or
operated by URS or any URS Subsidiary, including the Owned and Leased
Properties, has been contaminated in any material respect with any substance
regulated under any Environmental Law such that any removal or remedial action
is required under Applicable Law; (ii) URS and the URS Subsidiaries are not
subject to any material liability for any off-site disposal or contamination;
and (iii) there are no other conditions or violations involving URS or any URS
Subsidiary (including the presence of asbestos, underground storage tanks,
chlorofluorocarbons, Freon and polychlorinated biphenyls) that are likely to
result in any material claims,
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liabilities or costs or any restrictions on the ownership, use or transfer of
any Owned or Leased Property in connection with any Environmental Law. Except as
disclosed in Schedule 4.22, URS is not in possession of any environmental
reports, studies, assessments, sampling results or other written environmental
analyses relating to any Owned Property other than the Environmental Reports and
a copy of each of these Environmental Reports has been made available to Parent
at least five days prior to the date hereof.
4.23 Brokers, Finders, etc. Except as described on Schedule 4.23,
neither URS nor any URS Subsidiary has employed, or is subject to the valid
claim of, any broker, finder or other financial intermediary in connection with
the transactions contemplated by this Agreement or the transactions contemplated
hereby, who might be entitled to a fee or commission in connection herewith or
therewith.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF VORNADO, THE PARENT AND ACQUISITION CO.
Vornado, the Parent and Acquisition Co., jointly and severally,
represent and warrant to URS as follows:
5.1 Organization and Standing. Vornado is a real estate investment
trust duly organized and in good standing under the laws of the State of
Maryland and has the power and authority to carry on its business as presently
conducted, except where the failure to be so qualified would not have a material
adverse effect on its ability to timely perform its obligations hereunder or
consummate the transactions contemplated hereby. The Parent is a Delaware
corporation duly organized and in good standing under the laws of the State of
Delaware and has the power and authority to carry on its business as presently
conducted, except where the failure to be so qualified would not have a
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material adverse effect on its ability to timely perform its obligations
hereunder or consummate the transactions contemplated hereby. Acquisition Co.
is a corporation, duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as presently conducted, except where the
failure to be so qualified would not have a material adverse effect on its
ability to timely perform its obligations hereunder or consummate the
transactions contemplated hereby.
5.2 Authorization and Binding Obligation. Each of Vornado, the
Parent and Acquisition Co. has all necessary corporate or other power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Vornado, the Parent and Acquisition Co. and the consummation by Vornado, the
Parent and Acquisition Co. of the transactions contemplated hereby have been
duly and validly authorized and approved by all necessary corporate (or other)
action on the part of each of Vornado, the Parent and Acquisition Co. and no
other corporate action or other proceedings on the part of Vornado, the Parent
or Acquisition Co. is necessary to authorize this Agreement or the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Vornado, the Parent and Acquisition Co. and constitutes
a valid and binding obligation of Vornado, the Parent and Acquisition Co.,
enforceable against Vornado, the Parent and Acquisition Co. in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar rights of creditors generally and by
general principles of equity.
5.3 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA and filing and recordation of the Certificate of Merger
as required by the GCL, no filing with, and no permit, authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Vornado, the Parent or Acquisition
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Co. of the transactions contemplated by this Agreement, except where the failure
to make such filing or obtain such permit, authorization, consent or approval,
would not have a material adverse effect on such Person's ability to timely
perform its obligations hereunder or consummate the transactions contemplated
hereby. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by Vornado,
the Parent or Acquisition Co. with any of the provisions hereof will (a) result
in any violation of any provision of the organizational documents of Vornado,
the Parent or Acquisition Co., (b) violate any Applicable Law, or (c) result in
a material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a material default (or give rise to any right of
termination, cancellation or acceleration) under, any material contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit,
Plan or other instrument or obligation to which Vornado, the Parent or
Acquisition Co. is a party, or by which either of them or any of their
respective properties is bound, except in the case of clauses (b) and (c) above,
where such violation, breach, default or right of termination would not have a
material adverse effect on such Person's ability to timely perform its
obligations hereunder or to consummate the transactions contemplated hereby.
5.4 Litigation. There is no claim, litigation, proceeding or
investigation pending or, to the best of Vornado's, the Parent's or Acquisition
Co.'s knowledge, threatened, which seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken by Vornado, the
Parent or Acquisition Co. in connection with this Agreement or which would have
a material adverse effect on such Person's ability to timely perform its
respective obligations hereunder or to consummate the transactions contemplated
hereby.
5.5 Finders and Investment Bankers. None of Vornado, the Parent or
Acquisition Co. has employed, or is subject to the valid claim of, any broker,
finder or other
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financial intermediary in connection with the transactions contemplated by this
Agreement or the transactions contemplated hereby, who might be entitled to a
fee or commission in connection herewith or therewith, payable by URS or any URS
Subsidiary.
5.6 Financing. Vornado has available to it pursuant to existing
credit facilities sufficient cash on hand to allow it to pay the Merger
Consideration, consummate the transactions contemplated hereby and pay related
fees and expenses.
ARTICLE VI
COVENANTS
6.1 Conduct of Business. During the period from the date hereof to
the Closing Date, URS covenants and agrees that it will and will cause the URS
Subsidiaries to carry on their businesses in the ordinary course of business,
in substantially the same manner as heretofore conducted, and will use its
reasonable commercial efforts to preserve intact its and the URS Subsidiaries'
present business organization, keep available the services of their respective
officers and Employees and preserve their relationships with customers and
suppliers and others having business dealings with them, to the end that their
goodwill and going business shall be maintained following the Closing. Without
limiting the generality of the foregoing, except as expressly permitted by this
Agreement or with the prior written consent of the Parent, such consent not to
be unreasonably withheld or delayed, or as set forth on Schedule 6.1 hereto, URS
covenants and agrees that it will not, and it will not permit any URS Subsidiary
to do, or agree to do, on or after the date hereof, any of the following, on or
before the Closing:
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(a) amend their respective certificates of incorporation or by-laws
or other organizational documents;
(b) rescind, modify, amend or otherwise change or affect any of the
resolutions of the Board recommending adoption of this Agreement and
authorization of the Merger;
(c) issue, sell, transfer, assign, pledge, convey or dispose of any
security or equity interest or any security convertible into or
exchangeable or exercisable for any security or equity interest,
including, without limitation, any subscriptions, options, warrants,
calls, conversions or other rights, agreements, commitments, arrangements
or understandings of any kind obligating URS or any URS Subsidiary,
contingently or otherwise, to issue or sell, or cause to be issued or
sold, any security or equity interest of URS or any URS Subsidiary or any
security convertible into or exchangeable or exercisable for any security
or equity interest;
(d) split, combine or reclassify any shares of any class of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any class of its capital stock, or redeem or
otherwise acquire any shares of such capital stock;
(e) write off any receivables, except in the ordinary course of
business consistent with past practice;
(f) sell, assign, lease or otherwise transfer or dispose of any
material assets except in the ordinary course of business consistent with
past practice in an aggregate amount not in excess of $250,000, unless the
same shall be replaced with assets of equal or greater value and utility;
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(g) (i) except in the ordinary course of business consistent with
past practice under existing lines of credit, create, incur or assume any
liability, including obligations in respect of capital leases, or make or
commit to make capital expenditures in excess of $100,000 each or $250,000
in the aggregate, or create, incur, assume, maintain or permit to exist
any indebtedness in an aggregate amount greater than $250,000 for URS and
the URS Subsidiaries combined; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except for
assumptions, guarantees or endorsements by URS of the obligations of any
URS Subsidiary in the ordinary course of business consistent with past
practice; (iii) except as set forth on Schedule 6.1 hereto, make any
loans, advances or capital contributions to, or investments in, any other
Person (other than customary loans or advances in the ordinary course of
business consistent with past practice to Employees not to exceed $100,000
in the aggregate and extensions of credit made to customers on a trade
receivable basis in the ordinary course of business consistent with past
practice; or (iv) create, assume or permit to exist any Lien upon their
assets, except for those in existence on the date of this Agreement and
except for those additional Liens created in the ordinary course of
business consistent with past practice;
(h) except as set forth on Schedule 6.1(h) hereto (i) increase or
modify or agree to increase or modify the compensation, bonuses or other
benefits or perquisites of any Employee of URS or any URS Subsidiary,
except for salary increases granted in the ordinary course of business
consistent with past practice, or (ii) pay or commit to pay any
compensation, bonus, pension or other retirement benefit or allowance,
fringe benefit or other benefit not required by the terms of an existing
Plan, or collective bargaining agreement as in effect on the date hereof
or
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otherwise in the ordinary course of business consistent with past
practice;
(i) make any new elections, or make any changes to current
elections, with respect to Taxes;
(j) change their auditors, fail to maintain their books and records
in accordance with GAAP or materially change their auditing or bookkeeping
practices;
(k) take or fail to take any action that would cause any of its
representations and warranties not to be true and correct on the Closing
Date in the manner required by Section 7.3(b) hereof;
(l) cancel or materially amend or modify any agreements or any real
or material personal property leases;
(m) other than in the ordinary course of business, cancel or
materially amend or modify any agreements with customers; or
(n) enter into any new agreements with any customers with a duration
of more than one year.
6.2 Third-Party Consents. URS covenants and agrees that it will and
will cause each URS Subsidiary to use reasonable commercial efforts to obtain,
prior to Closing, the consents of third parties and Governmental Authorities set
forth on Schedule 4.4 hereto.
6.3 Compliance with GCL; Filings. (a) As soon as practicable and in
any event within ten (10) days after the date of this Agreement, URS will
prepare and deliver to each stockholder of URS a notice, in accordance with
Sections 228(d) and 262(d)(2) of the GCL, regarding (i) the execution of this
Agreement, (ii) the Board's approval of this Agreement, (iii) the execution by
each URS Stockholder of an action by written consent in lieu of a meeting of
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stockholders adopting the Merger and (iv) the availability of appraisal rights
under Section 262 of the GCL.
(b) As promptly as practicable, each of URS, the Parent and
Acquisition Co. shall properly prepare and file any filings required under any
Federal, state, county, local or municipal law relating to the Merger and the
transactions contemplated herein (such filings, together with the filings
required under the HSRA, are, collectively, the "Filings"). The Parent and
Acquisition Co., on the one hand, and URS, on the other, shall promptly notify
the other of the receipt of any comments on, or any request for amendments or
supplements to, the Filings by any governmental official, and each of URS, the
Parent and Acquisition Co. will supply the other with copies of all
correspondence between it and each of its subsidiaries and representatives, on
the one hand, and any appropriate governmental official, on the other hand, with
respect to the Filings.
6.4 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use (and URS shall cause
the URS Subsidiaries to use) their commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to cooperate
with one another in connection with the foregoing, including using its
commercially reasonable efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under Applicable Law, to defend
all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, to cause to be lifted or
rescinded any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby, and to effect all necessary registrations and Filings.
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6.5 Acquisition Proposals. None of URS or any of URS's employees,
representatives or agents (collectively, the "URS Representatives") shall,
directly or indirectly, solicit or initiate inquiries or proposals from or enter
into any agreement with respect to, or provide any confidential information to
or participate in any discussions or negotiations with, any Persons or group
(other than the Parent, Acquisition Co. and their respective subsidiaries and
their respective directors, officers, employees, representatives and agents)
concerning any sale of assets or shares of URS Common Stock, any assets or
shares of capital stock of any URS Subsidiary or any merger, consolidation or
similar transaction involving URS or any URS Subsidiary (except, in all cases,
for any sale of immaterial assets, in the ordinary course of business consistent
with past practices). URS will promptly cease and URS will cause to be
terminated by the URS Subsidiaries any existing discussions or negotiations
with any third parties conducted heretofore with respect to any of the foregoing
and will use its reasonable commercial efforts to retrieve and/or cause to be
destroyed any and all nonpublic information concerning URS or any URS Subsidiary
that has been furnished to third parties in connection therewith.
6.6 Public Announcements. The Parent and URS will consult with one
another before issuing any press release or otherwise making any public
statement with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation
without the consent of the Parent and URS, except based on the advice of counsel
for URS or the Parent, as the case may be, as required by Applicable Law.
6.7 Consent of the Parent. The Parent, as the sole shareholder of
Acquisition Co., by executing this Agreement hereby consents to the execution,
delivery and performance of this Agreement by Acquisition Co. and such consent
shall be treated for all purposes as a vote duly
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adopted at a meeting of the shareholders of Acquisition Co. held for such
purpose.
6.8 Transfer Taxes. (a) The Parent shall be responsible for the
payment of, and shall indemnify the URS Stockholders against, all Transfer Taxes
arising out of or in connection with or attributable to the transactions
effected pursuant to this Agreement.
(b) As between the URS Stockholders, on the one hand, and the
Parent, on the other hand, the party that has the primary responsibility under
Applicable Law for filing any Tax return required to be filed in respect of
Transfer Taxes shall prepare and timely file such Tax return, provided that such
party's preparation of such Tax return shall be subject to the other party's
approval, which approval shall not be withheld or delayed unreasonably.
6.9 Treatment of Books and Records. For a period of three years
after the Closing Date, at least 30 days prior to discarding or destroying any
books or records relating to the business of URS, the Parent shall give Kelso,
as a representative of the URS Stockholders, notice of its intended action and
an opportunity for Kelso to retain any of the books or records proposed to be
discarded or destroyed by the Parent or URS, as the case may be. Prior to the
destruction of any such books or records, Kelso shall have the right, upon
reasonable advance request, to have access to such books and records during
normal business hours to enable any or all of the URS Stockholders to fulfill
their Tax or other ordinary course of business obligations.
6.10 Indemnification of Officers and Directors. The Parent agrees
that for the entire period from the Effective Time until at least six (6) years
after the Effective Time the Certificate of Incorporation and the By-Laws of the
Surviving Corporation shall contain the provisions with respect to
indemnification and exculpation from liability set forth in URS's Certificate
of
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Incorporation and By-Laws as of the date of this Agreement, which provisions
shall not be amended, repealed or otherwise modified during such period in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
URS unless such modification is required by Applicable Law.
6.11 Access. Upon reasonable notice, and except as may otherwise be
required by Applicable Law, URS shall (and shall cause the URS Subsidiaries to)
afford the Parent's officers, agents and advisors reasonable access, during
normal business hours throughout the period prior to the Effective Time, to its
properties, books, contracts and records and, during such period, URS shall (and
shall cause the URS Subsidiaries to) furnish to the Parent and its agents and
advisors all information concerning its business, properties and personnel as
they may reasonably request, provided that no investigation pursuant to this
Section shall affect or be deemed to modify any representation or warranty made
by URS. All such information shall be governed by the terms of the
Confidentiality Agreement referred to in Section 11.4.
6.12 Repayment of Indebtedness. If requested by the Parent prior to
the Closing, the Company will repay all indebtedness under each of the MetLife
Loan Agreement and the BT Credit Agreement (using funds supplied by the Parent).
6.13 Post-Closing True-Up. In the event that at any time subsequent
to the Closing, URS repays the indebtedness under the MetLife Loan Agreement
and the aggregate amount of indebtedness repaid, together with any interest due
thereon and the prepayment, redemption or prepayment fees, surcharges, premiums
or penalties associated with such repayment are less than the Prepayment Price
(as defined in Section 1.1 of the MetLife Loan Agreement) that would be payable
at such time were such indebtedness repaid at such time pursuant to the terms of
the MetLife Loan Agreement, as
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in effect on the date hereof (the amount of such difference being referred to
herein as the "Prepayment Shortfall"), then Vornado shall promptly pay to Kelso,
as a representative of the former holders of URS Common Stock an amount equal to
one-half of the Prepayment Shortfall and such payment shall be distributed to
the former holders of URS Common Stock and Warrants with an Exercise Price in
excess of the Per Share Price ratably in proportion to their respective holdings
(calculated on a fully diluted basis).
6.14 Management Bonus Amount Arrangements. Prior to the Closing,
Parent and URS shall make arrangements, reasonably satisfactory to URS, for the
payment of the portion of the Management Bonus Amount set forth on Schedule
1.34(b) to each of the applicable individuals and in the applicable amounts
specified by URS in writing prior to the Effective Time; it being understood and
agreed that URS shall consult with Vornado regarding the selection of such
individuals and such amounts. Such arrangements shall include an escrow and
shall provide, among other things, that all such payments shall be made to each
individual by no later than 90 days after the Effective Time so long as such
individual has not voluntarily terminated his employment with URS prior to such
90th day after the Effective Time.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions Precedent to the Obligations of All Parties. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSRA shall have expired or been
terminated.
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(b) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any Governmental
Authority shall be in effect which would be reasonably likely to (i) make
the consummation of the Merger by Vornado, the Parent, Acquisition Co. or
URS illegal or (ii) otherwise prevent the consummation of the Merger.
7.2 Additional Conditions to the Obligation of URS. The obligation
of URS to effect the Merger is also subject to the fulfillment at or prior to
the Effective Time of the following additional conditions:
(a) The Parent and Acquisition Co. shall each have performed in all
material respects each of its respective obligations under this Agreement
required to be performed by it on or prior to the Effective Time pursuant
to the terms hereof.
(b) The representations and warranties of the Parent and Acquisition
Co. contained in this Agreement shall be true and correct in all material
respects, in each case when made and, unless such representation or
warranty is made as of a specific date (in which case it shall be true and
correct in all material respects as of such date), at and as of the
Effective Time as if made at and as of such time.
(c) URS shall have received a certificate, dated the Closing Date,
of the President or any Vice President of the Parent to the effect that
the conditions specified in paragraphs (a) and (b) of this Section 7.2
have been fulfilled.
(d) Each of Parent and Acquisition Co. shall have reaffirmed all of
URS's obligations under each of the Employment Agreements listed on
Schedule 4.16 hereto.
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(e) URS shall have paid, or cause to be paid, (i) the portion of the
Management Bonus Amount set forth on Schedule 1.34(a) hereto to the
individuals and in the amounts designated by URS in writing prior to the
Effective Time and (ii) a fee of $3,000,000 to Kelso in respect of Kelso's
services in connection with the consummation of the transactions provided
for hereby.
(f) URS shall have received the opinion of Sullivan & Cromwell,
special counsel to Vornado, the Parent and Acquisition Co., in form and
substance reasonably satisfactory to URS, as to the due authorization,
execution and delivery of this Agreement by such parties.
7.3 Conditions Precedent to Obligations of the Parent and
Acquisition Co. The obligations of the Parent and Acquisition Co. to effect the
Merger are also subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(a) URS shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it on or
prior to the Effective Time pursuant to the terms hereof.
(b) The representations and warranties of URS set forth in this
Agreement that are qualified by reference to a Material Adverse Effect
shall be true and correct, and all other representations and warranties of
URS shall be true and correct, except for failures to be true and correct
as would not, individually or in the aggregate, have a Material Adverse
Effect, as of the date of this Agreement and as of the Effective Time as
though made as of the Effective Time (except to the extent any such
representation or warranty expressly speaks as of an earlier date, in
which case it shall have been true and correct in all material respects as
of such date).
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(c) The Parent shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer of URS, to the effect that the
conditions specified in paragraphs (a) and (b) of this Section 7.3 have
been fulfilled.
(d) The Consulting Agreement, dated as of November 30, 1994,
between URS and Rutledge & Company, Inc., the Consulting Agreement, dated
as of April 6, 1993 between URS and Vero Industries, and the Consulting
Agreement, dated as of April 6, 1993, between the Company and Kelso &
Company, shall each have been terminated without further obligation to URS
or any URS Subsidiary.
(e) The Waiver Letter, attached hereto as Exhibit 7.3(e) and
pursuant to which each of Mr. Hanns Pielenz, UniFridge Holding Corporation
and Refrigerated Warehouse Investments Holding Corporation has waived
their "property put" rights under each of the Lease Agreements, shall
continue to be in full force and effect.
(f) Vornado, the Parent and the Subsidiary shall each have received
the opinion of Debevoise & Plimpton, special counsel to URS, in form and
substance reasonably satisfactory to Vornado, as to the due authorization,
execution and delivery of this Agreement by URS and the absence of any
agreements among the shareholders of URS or with any potential purchasers
of URS that conflict with the execution, delivery and performance of this
Agreement.
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ARTICLE VIII
CLOSING
8.1 Time and Place. Subject to the satisfaction or waiver of all
applicable conditions in Article VII, the closing of the Merger (the "Closing")
shall take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New
York, N.Y. 10022, at 10:00 a.m., local time, on the third business day following
the satisfaction of the condition set forth in Section 7.1(a) or on such other
date as URS and the Parent may agree.
8.2 Filings at the Closing; Other Actions. At the Closing, the
Parent and URS shall cause the Certificate of Merger to be filed and recorded in
accordance with the provisions of Sections 103 and 251 of the GCL, and shall
take any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
ARTICLE IX
NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS
All of the representations and warranties contained in this
Agreement or any representations and warranties contained in any certificate,
document or instrument delivered pursuant to this Agreement shall terminate as
of the Closing. The covenants set forth in Sections 3.4, 3.5, 6.6, 6.8, 6.9,
6.10, 6.13 and 6.14 herein shall survive for the respective periods set forth
therein.
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ARTICLE X
TERMINATION RIGHTS
10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of the Parent and URS;
(b) by either the Parent or URS if the Merger shall not have been
consummated on or before January 15, 1998; provided, however, that the
right to terminate this Agreement shall not be available to any party
whose failure to fulfill any obligation of this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
before the aforesaid date;
(c) by the Parent, if URS shall have materially breached any of its
covenants herein or if URS shall have made a material misrepresentation
and not cured the same within 15 days of notice of such breach or
misrepresentation;
(d) by URS, if either the Parent or Acquisition Co. shall have
materially breached any of its covenants herein or if either the Parent or
Acquisition Co. shall have made a material misrepresentation herein and
not cured the same within 15 days of notice of such breach or
misrepresentation; or
(e) by either the Parent or URS, if any court of competent
jurisdiction or other governmental agency of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and
non-appealable.
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10.2 Procedure and Effect of Termination. In the event of
termination and abandonment of the Merger by the Parent or URS pursuant to
Section 10.1 hereof, notice thereof shall forthwith be given to URS or the
Parent, respectively, and this Agreement shall terminate and the Merger shall be
abandoned, without further action by any of the parties hereto. Vornado and
Acquisition Co. each agrees that any termination by the Parent or URS,
respectively, shall be conclusively binding upon it, whether given expressly on
its behalf or not. If this Agreement is terminated as provided herein, no party
hereto shall have any liability or further obligation to any other party to this
Agreement except that any termination shall be without prejudice to the rights
of any party hereto arising out of a breach by any other party of any covenant
or agreement contained in this Agreement, and except that the provisions of
Sections 6.6, 11.4 and 11.5 hereof shall survive such termination.
ARTICLE XI
OTHER PROVISIONS
11.1 Amendment and Modification. Subject to Applicable Law, this
Agreement may be amended, modified or supplemented only by mutual written
agreement of the parties hereto.
11.2 Benefit and Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party to this
Agreement without the prior written consent of the other parties hereto. Any
purported assignment made in contravention of the previous sentence shall be
null and void.
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11.3 No Third-Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any Person other than the parties hereto and their
respective heirs, successors and permitted assigns, except for the rights set
forth in Sections 3.1, 6.9, 6.10, 6.13 and 6.14 hereof.
11.4 Entire Agreement. This Agreement and the Confidentiality
Agreement, dated as of July 28, 1997, between URS and Vornado and the exhibits
and schedules hereto and thereto embody the entire agreement and understanding
of the parties hereto and supersede any and all prior agreements, arrangements
and understandings relating to the matters provided for herein and therein. No
amendment, waiver of compliance with any provision or condition hereof or
consent pursuant to this Agreement shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement of any
amendment, waiver or consent is sought. Acquisition Co. hereby agrees that any
consent or waiver of compliance given by the Parent hereunder shall be
conclusively binding upon it, whether given expressly on its behalf or not. No
party is making any representation or warranty whatsoever, express or implied,
except the representations and warranties contained in this Agreement and each
party acknowledges and agrees that it has not relied on or been induced to enter
into this Agreement by any representation or warranty other than those expressly
set forth herein.
11.5 Expenses. Except as otherwise provided in this Agreement, each
of the Parent and Acquisition Co., on the one hand, and URS, on the other hand,
shall be responsible for the payment of their respective expenses, including
legal and accounting fees, in connection with the preparation, negotiation and
closing of this Agreement and the transactions contemplated hereby.
11.6 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
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11.7 Choice of Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws, except insofar as the laws of the state
of Delaware are mandatorily applicable to the Merger, and the state and federal
courts of New York shall have exclusive jurisdiction over any controversy or
claim arising out of or relating to this Agreement.
11.8 Notices. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
(a) If to Vornado, the Parent or Acquisition Co., to it at:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, NJ 07663
Telecopy #: (201) 291-1093
Attention: Mr. Michael D. Fascitelli
with copies to:
Sullivan & Cromwell
1701 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telecopy #: (202) 293-6330
Attention: Janet T. Geldzahler, Esq.
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(b) If to URS, to it at:
URS Logistics, Inc.
One Concourse Parkway
Suite 450
Atlanta, Georgia 30328
Telecopy #: (770) 280-3985
Attention: Mr. Fred Beilstein
with copies to:
Kelso & Company
320 Park Avenue
24th Floor
New York, NY 10022
Telecopy #: (212) 223-2379
Attention: James J. Connors, II, Esq.
and:
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30355
Telecopy #: (404) 873-8701
Attention: Jonathan Golden, Esq.
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
fax, on the next day following the day on which
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such fax was sent, provided that a copy is also sent by certified or registered
mail.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
VORNADO REALTY TRUST
By: /s/ Michael D. Fascitelli
________________________
Name:
Title:
ATLANTA PARENT, INC.
By: /s/ Michael D. Fascitelli
________________________
Name:
Title:
ATLANTA STORAGE ACQUISITION CO.
By: /s/ Michael D. Fascitelli
__________________________
Name:
Title:
URS LOGISTICS, INC.
By: /s/ Daniel F. McNamara
__________________________
Name: Daniel F. McNamara
Title: President and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 99.5
AGREEMENT AND PLAN OF MERGER
AMONG
VORNADO REALTY TRUST,
PORTLAND PARENT, INC.
PORTLAND STORAGE ACQUISITION CO.,
AND
AMERICOLD CORPORATION
Dated as of September 26, 1997
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<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS......................................................1
ARTICLE II
THE MERGER.......................................................7
2.1 The Merger..............................................7
2.2 Articles of Incorporation...............................8
2.3 By-Laws.................................................8
2.4 Directors and Officers..................................8
2.5 Shareholders' Meeting...................................9
2.6 Effective Time..........................................9
ARTICLE III
CONVERSION OF SHARES.............................................9
3.1 Americold Stock.........................................9
3.2 Options................................................11
3.3 Dissenting Shares......................................11
3.4 Acquisition Co. Common Stock...........................11
3.5 Payment for Shares. ..................................12
3.6 Adjustment to Prevent Dilution.........................15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMERICOLD.....................15
4.1 Organization, etc......................................15
4.2 Authorization and Binding Obligation...................17
4.3 Capitalization.........................................18
4.4 Consents and Approvals; No Conflicts...................19
4.5 Financial Statements; SEC Reports......................20
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4.6 Undisclosed Liabilities................................21
4.7 Governmental Approvals and Authorizations..............22
4.8 Compliance with Laws...................................22
4.9 Absence of Certain Payments............................22
4.10 Real Property..........................................23
4.11 Property...............................................24
4.12 Intellectual Property..................................25
4.13 Absence of Conflicts of Interest.......................26
4.14 Contracts..............................................26
4.15 Labor Matters..........................................27
4.16 Employee Benefit Plans.................................27
4.17 Actions Pending........................................30
4.18 Affiliate Transactions.................................30
4.19 Absence of Certain Changes. ..........................30
4.20 Insurance..............................................30
4.21 Taxes..................................................31
4.22 Environmental Matters..................................32
4.23 Brokers, Finders, etc..................................34
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF VORNADO, THE PARENT AND ACQUISITION CO.......................34
5.1 Organization and Standing..............................34
5.2 Authorization and Binding Obligation...................35
5.3 Consents and Approvals; No Conflicts...................35
5.4 Litigation.............................................36
5.5 Finders and Investment Bankers.........................36
5.6 Financing, etc.........................................37
ARTICLE VI
COVENANTS.......................................................37
6.1 Conduct of Business....................................37
6.2 Third-Party Consents...................................40
6.3 Compliance with OBCA; Filings; Information
Statement..............................................40
6.4 Additional Agreements..................................42
6.5 Acquisition Proposals..................................42
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6.6 Public Announcements...................................43
6.7 Consent of the Parent..................................43
6.8 Transfer Taxes.........................................44
6.9 Officers' and Directors' Insurance;
Indemnification of Officers and Directors..............44
6.10 Americold Indebtedness.................................44
6.11 Access.................................................45
6.12 Management Arrangements................................45
ARTICLE VII
CLOSING CONDITIONS..............................................45
7.1 Conditions Precedent to the Obligations of
All Parties............................................45
7.2 Additional Conditions to the Obligation of
Americold..............................................46
7.3 Conditions Precedent to Obligations of
Vornado, the Parent and Acquisition Co.................47
ARTICLE VIII
CLOSING.........................................................49
8.1 Time and Place.........................................49
8.2 Filings at the Closing; Other Actions..................49
ARTICLE IX
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.......................................................49
ARTICLE X
TERMINATION RIGHTS..............................................49
10.1 Termination............................................49
10.2 Procedure and Effect of Termination....................50
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ARTICLE XI
OTHER PROVISIONS................................................51
11.1 Amendment and Modification.............................51
11.2 Benefit and Assignment.................................51
11.3 No Third-Party Beneficiaries...........................51
11.4 Entire Agreement.......................................51
11.5 Expenses...............................................52
11.6 Headings...............................................52
11.7 Choice of Law..........................................52
11.8 Notices................................................52
11.9 Counterparts...........................................54
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SCHEDULES
Schedule 1.5 Americold Indebtedness
Schedule 1.38 Knowledge
Schedule 1.48 Options
Schedule 2.4 Officers of Surviving Corporation
Schedule 4.1(a) Americold Qualification
Schedule 4.1(b) Americold Subsidiaries;
Qualification
Schedule 4.1(c) Third Party Interests
Schedule 4.3 Capitalization
Schedule 4.4 Consents and Approvals; No
Conflicts
Schedule 4.5 Financial Statements
Schedule 4.6 Undisclosed Liabilities
Schedule 4.7 Governmental Approvals and
Authorizations
Schedule 4.8 Compliance with Laws
Schedule 4.10 Real Property
Schedule 4.11 Property
Schedule 4.12 Intellectual Property
Schedule 4.13 Contracts
Schedule 4.14 Conflicts of Interest
Schedule 4.15 Labor Matters
Schedule 4.16 Plans
Schedule 4.17 Litigation
Schedule 4.18 Affiliate Transactions
Schedule 4.19 Adverse Changes
Schedule 4.20 Insurance
Schedule 4.21 Taxes
Schedule 4.22 Environmental Matters
Schedule 4.23 Americold Finders
Schedule 6.1 Conduct of Business
Schedule 6.1(d) Certain Agreements
Schedule 6.1(g) Financing Matters
Schedule 6.1(h) Employee Matters
Schedule 6.2 Third Party Consents
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EXHIBITS
Exhibit A Americold Principal Shareholders
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 26, 1997 (the
"Agreement"), among VORNADO REALTY TRUST, a Maryland real estate investment
trust ("Vornado"), PORTLAND PARENT, INC., a Delaware corporation (the "Parent"),
PORTLAND STORAGE ACQUISITION CO., a Delaware corporation and a wholly-owned
subsidiary of the Parent ("Acquisition Co."), and AMERICOLD CORPORATION, an
Oregon corporation ("Americold").
ARTICLE I
DEFINITIONS
Unless otherwise stated, the following terms when used herein have
the meanings assigned to them below.
1.1 "Acquisition Co." has the meaning set forth in the preamble to
this Agreement.
1.2 "Affiliate" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
1.3 "Americold" has the meaning set forth in the preamble to this
Agreement.
1.4 "Americold Common Stock" means the common stock, par value $.01
per share, of Americold.
1.5 "Americold Indebtedness" means the indebtedness of Americold
under the agreements and instruments listed in Schedule 1.5 hereto.
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1.6 "Americold Preferred Stock" means the Series A Variable Rate
Cumulative Preferred Stock, par value $100 per share, of Americold.
1.7 "Americold Principal Shareholder" means each of the Persons set
forth on Exhibit A to this Agreement.
1.8 "Americold Representatives" has the meaning set forth in Section
6.5 hereof.
1.9 "Americold Shareholders' Meeting" has the meaning set forth in
Section 2.5 hereof.
1.10 "Americold Subsidiary" means any corporation, partnership,
limited liability company, joint venture or other entity of which Americold
owns, directly or indirectly, at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power or
otherwise has the right or power to elect a majority of the board of directors
or other Persons performing similar functions of such corporation, partnership,
limited liability company, joint venture or other entity.
1.11 "Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances, codes or orders of any Governmental
Authority and (ii) orders, decisions, rulings, injunctions, judgments, awards
and decrees or consents of or agreements with any Governmental Authority.
1.12 "Articles of Merger" has the meaning set forth in Section 2.6
hereof.
1.13 "Board" has the meaning set forth in Section 4.2(b) hereof.
1.14 "Business Day," whether or not initially capitalized, means
every day of the week excluding Saturdays, Sundays and federal holidays.
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1.15 "Certificates" has the meaning set forth in Section 3.5(a)
hereof.
1.16 "Closing" means the closing of the Merger.
1.17 "Closing Date" means the date on which the Closing occurs.
1.18 "Code" means the Internal Revenue Code of 1986, as amended,
together with all regulations and rulings issued thereunder by any Governmental
Authority.
1.19 "Common Stock Consideration" means $20.70.
1.20 "Contracts" has the meaning set forth in Section 4.14 hereof.
1.21 "DGCL" means the Delaware General Corporation Law.
1.22 "Dissenting Shares" has the meaning set forth in Section 3.3
hereof.
1.23 "Effective Time" has the meaning set forth in Section 2.6
hereof.
1.24 "Environmental Laws" means all Applicable Laws relating to the
protection of human health or the environment.
1.25 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with the regulations and rulings issued thereunder
by any Governmental Authority.
1.26 "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended.
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1.27 "Exercise Price" means, with respect to any Option, the price
at which the holder of such Option is entitled to purchase one share of
Americold Common Stock upon exercise of such Option.
1.28 "Filings" has the meaning set forth in Section 6.3(b) hereof.
1.29 "Financial Statements" has the meaning set forth in Section 4.5
hereof.
1.30 "GAAP" means United States generally accepted accounting
principles.
1.31 "Governmental Approvals" has the meaning set forth in Section
4.7 hereof.
1.32 "Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, in each case to the extent the same has jurisdiction over the
Person or property in question.
1.33 "HSRA" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations adopted thereunder.
1.34 "Information Statement" has the meaning set forth in Section
2.5 hereof.
1.35 "IRS" means the Internal Revenue Service of the United States.
1.36 "Kelso" means Kelso & Company.
1.37 "Kelso Fee" has the meaning set forth in Section 7.2(f).
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1.38 "Knowledge" means, with respect to Americold or any Americold
Subsidiary, the actual knowledge of any of the individuals set forth on Schedule
1.38 hereto.
1.39 "Leased Property" has the meaning set forth in Section 4.10
hereof.
1.40 "Liens" means all debts, liens, security interests, mortgages,
pledges, judgments, trusts, adverse claims, liabilities, encumbrances, material
rights of way, charges which are liens and other impairments of title of any
kind other than Permitted Liens.
1.41 "Material Adverse Effect" means a material adverse effect on
the business, assets, properties, liabilities or financial condition of
Americold and the Americold Subsidiaries, taken as a whole, or on the ability of
Americold timely to consummate the transactions contemplated hereby.
1.42 "Merger" has the meaning set forth in Section 2.1 hereof.
1.43 "Merger Consideration" means the sum of the aggregate Common
Stock Consideration and the aggregate Preferred Stock Consideration.
1.44 "Merger Filings" has the meaning set forth in Section 2.6
hereof.
1.45 "Notice" has the meaning set forth in Section 6.3(a) hereof.
1.46 "OBCA" means the Oregon Business Corporation Act.
1.47 "Option Consideration" has the meaning set forth in Section 3.2
hereof.
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1.48 "Options" means the outstanding options to purchase Americold
Common Stock issued prior to the date hereof pursuant to the option plans listed
on Schedule 1.48 hereto.
1.49 "Owned Property" has the meaning set forth in Section 4.10
hereof.
1.50 "O.R.S." means the Oregon Revised Statutes, as amended.
1.51 "Parent" has the meaning set forth in the preamble to this
Agreement.
1.52 "Permitted Liens" has the meaning set forth in Section 4.10
hereof.
1.53 "Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
any Governmental Authority or any other government or political subdivision or
an agency or instrumentality thereof.
1.54 "Plans" has the meaning set forth in Section 4.16 hereof.
1.55 "Preferred Stock Consideration" means $100.00, plus the amount
per share of all accrued and unpaid dividends on the Preferred Stock to the
Closing Date.
1.56 "Real Property" has the meaning set forth in Section 4.10
hereof.
1.57 "Real Estate Laws" means any applicable building, zoning,
subdivision and other land use and similar laws, codes, ordinances, rules,
regulations and orders of Governmental Authorities.
1.58 "Returns" has the meaning set forth in Section 4.21 hereof.
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1.59 "SEC" means the United States Securities and Exchange
Commission.
1.60 "SEC Reports" has the meaning set forth in Section 4.5(b)
hereof.
1.61 "Surviving Corporation" has the meaning set forth in Section
2.1 hereof.
1.62 "Surviving Corporation Common Stock" has the meaning set forth
in Section 3.4 hereof.
1.63 "Tax" has the meaning set forth in Section 4.21 hereof.
1.64 "Takeover Statute" has the meaning set forth in Section 4.2(d)
hereof.
1.65 "Transfer Taxes" means all sales (including, without
limitation, bulk sales), use, value added, documentary, stamp, gross receipts,
registration, transfer, conveyance, excise, recording, license and other
similar Taxes and fees imposed by any Governmental Authority in connection with
a merger.
1.66 "Vornado" has the meaning set forth in the preamble of this
Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. In accordance with the provisions of this Agreement
and the OBCA and the DGCL, at the Effective Time (i) Acquisition Co. shall be
merged with and into Americold (the "Merger"), and Americold shall be the
surviving corporation of the Merger (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Oregon;
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(ii) the name, identity, existence, rights, privileges, powers, franchises,
properties and assets of Americold shall continue unaffected and unimpaired; and
(iii) the separate existence of Acquisition Co. shall cease, and all of the
rights, privileges, powers, franchises, properties and assets of Acquisition Co.
shall be vested in Americold. The name of the surviving corporation shall be
"Americold Corporation."
2.2 Articles of Incorporation. The Articles of Incorporation of
Americold in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided therein or by law, except that Article III thereof shall be amended
and restated in its entirety as follows:
"The aggregate number of
shares which the
Corporation shall have
authority to issue is 1,000
shares of Common Stock, par
value $.01 per share."
2.3 By-Laws. The By-Laws of Americold in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended, altered or repealed as provided therein.
2.4 Directors and Officers. The directors of Acquisition Co.
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation until his or her
successor is appointed and qualified or until his or her earlier death,
resignation or removal. The individuals set forth on Schedule 2.4 shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and By-Laws of the Surviving Corporation until his
or her successor is appointed and
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qualified or until his or her earlier death, resignation or removal.
2.5 Shareholders' Meeting. Americold shall, as soon as practicable
following the date of this Agreement, duly call, convene and hold a meeting of
its shareholders (the "Americold Shareholders' Meeting") for the purpose of
obtaining the approval of this Agreement by the shareholders of Americold
entitled to vote thereon.
2.6 Effective Time. The Merger shall become effective upon the later
to occur of the filing of articles of merger with the Secretary of State of the
State of Oregon in accordance with O.R.S. 60.494 and 60.501 (the "Articles of
Merger") and the filing with the Secretary of State of the State of Delaware of
a certificate of merger in accordance with Sections 252 and 103 of the DGCL
(together with the Articles of Merger, the "Merger Filings"). The Merger Filings
shall be filed simultaneously with the Closing. The date and time when the
Merger shall become effective is hereinafter referred to as the "Effective
Time."
ARTICLE III
CONVERSION OF SHARES
3.1 Americold Stock. (a) At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Americold Common Stock (except for (i) any shares of Americold Common Stock then
owned beneficially or of record by Vornado, the Parent or Acquisition Co. or any
other subsidiary of Vornado, (ii) shares of Americold Common Stock then held in
the treasury of Americold or any Americold Subsidiary, and (iii) Dissenting
Shares) issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive cash from the Parent in an amount per share
equal to the Common Stock Consideration.
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(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Americold Preferred
Stock (except for (i) any shares of Americold Preferred Stock then owned
beneficially or of record by Vornado, the Parent or Acquisition Co. or any
other subsidiary of Vornado and (ii) shares of Americold Preferred Stock then
held in the treasury of Americold or any Americold Subsidiary) issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive cash from the Parent in an amount per share equal to the
Preferred Stock Consideration.
(c) Each share of Americold Common Stock or Americold Preferred
Stock which is then owned beneficially or of record by Vornado, the Parent or
Acquisition Co. or any other direct or indirect subsidiary of Vornado shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be canceled and retired and cease to exist, without any conversion thereof.
(d) Each share of Americold Common Stock or Americold Preferred
Stock held in the treasury of Americold or any Americold Subsidiary immediately
prior to the Effective Time shall, by virtue of the Merger, be canceled and
retired and cease to exist, without any conversion thereof.
(e) The holders of certificates representing shares of Americold
Common Stock or Americold Preferred Stock shall, as of the Effective Time, cease
to have any rights as shareholders of Americold, except such rights, if any, as
they may have pursuant to the OBCA, and, except as aforesaid, their sole right
shall be the right to receive their pro rata share of the Common Stock
Consideration or the Preferred Stock Consideration, as the case may be, as
determined and paid in the manner set forth in this Agreement.
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3.2 Options. Prior to the Effective Time, Americold shall take such
actions as may be necessary such that immediately prior to the Effective Time,
each Option outstanding immediately prior to the Effective Time, whether or not
then exercisable, shall be canceled and only entitle the holder thereof to
receive, as soon as reasonably practicable after the surrender thereof, cash in
an amount (the "Option Consideration") equal to the product of (i) the number of
shares of Americold Common Stock into which such Option is exercisable times
(ii) the excess of the Common Stock Consideration over the Exercise Price for
such Option.
3.3 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Americold Common Stock which are held by shareholders
who shall have effectively dissented from the Merger and perfected their
dissenters' rights in accordance with the provisions of O.R.S. 60.564 and 60.571
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive any Common Stock Consideration, but the holders thereof shall
be entitled to payment from the Surviving Corporation of the fair value of such
shares in accordance with the provisions of O.R.S. 60.577; provided, however,
that if any such holder shall have failed to perfect such appraisal rights or
shall have effectively withdrawn or lost such rights, pursuant to O.R.S. 60.687
or otherwise, his or her shares of Americold Common Stock shall thereupon be
converted into and exchangeable for, at the Effective Time, their pro rata share
of the aggregate Common Stock Consideration as determined and paid in the
manner set forth in this Agreement.
3.4 Acquisition Co. Common Stock. Each share of common stock, par
value $.01 per share, of Acquisition Co. (the "Acquisition Co. Common Stock"),
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and exchangeable for one fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving Corporation ("Surviving
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Corporation Common Stock"). From and after the Effective Time, each outstanding
certificate theretofore representing shares of Acquisition Co. Common Stock
shall be deemed for all purposes to evidence ownership of and to represent the
number of shares of Surviving Corporation Common Stock into which such shares of
Acquisition Co. Common Stock shall have been converted. Promptly after the
Effective Time, the Surviving Corporation shall issue to the Parent a stock
certificate or certificates representing 1,000 shares of Surviving Corporation
Common Stock in exchange for the certificate or certificates which formerly
represented shares of Acquisition Co. Common Stock, which shall be canceled.
3.5 Payment for Shares. (a) Prior to the Effective Time, the Parent
shall designate a business entity regularly engaged in such work and which is
reasonably satisfactory to Americold to act as Paying Agent with respect to the
Merger (the "Paying Agent"). Each record holder (other than Vornado, Parent,
Acquisition Co. or any other subsidiary of Vornado) of Americold Common Stock or
Americold Preferred Stock immediately prior to the Effective Time will be
entitled to receive, upon surrender to the Paying Agent of the certificates
representing such shares of Americold Common Stock or Americold Preferred Stock,
as the case may be (collectively, the "Certificates") for cancellation, cash in
an amount equal to the product of the number of shares of Americold Common Stock
or Americold Preferred Stock previously represented by the Certificates
multiplied by the Common Stock Consideration or Preferred Stock Consideration,
as the case may be, subject to any required withholding of taxes. At or prior to
the Effective Time, the Parent shall make available to the Paying Agent
sufficient funds to make all payments in amounts determined pursuant to the
preceding sentence. No interest shall accrue or be paid on the cash payable upon
the surrender of the Certificates. Any funds delivered or made available to the
Paying Agent pursuant to this Section 3.5(a) and not exchanged for Certificates
within six months after the Effective Time will be returned by the Paying Agent
to the
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Surviving Corporation, which thereafter will act as Paying Agent, subject to the
rights of holders of unsurrendered Certificates under this Section 3.5(a), and
any former shareholders of the Company who have not previously exchanged their
Certificates will thereafter be entitled to look only to the Surviving
Corporation for payment of their claim for the consideration set forth in
Section 3.1, without any interest, but will have no greater rights against the
Surviving Corporation than may be accorded to general creditors thereof under
applicable law. Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to a holder of shares of Americold Common Stock or
Americold Preferred Stock for any cash or interest delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws. As
soon as practicable after the Effective Time, the Surviving Corporation will
cause the Paying Agent to mail to each record holder of shares of Americold
Common Stock and Americold Preferred Stock (other than the Americold Principal
Shareholders) (i) a form of letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates will
pass, only upon proper delivery of the Certificates to the Paying Agent), which
letter shall be in customary form, and (ii) instructions for use in effecting
the surrender of the Certificates for payment.
(b) With respect to any Certificate alleged to have been lost,
stolen or destroyed, the owner or owners of such Certificate shall be entitled
to the consideration set forth above upon delivery to the Surviving Corporation
of an affidavit of such owner or owners setting forth such allegation and an
indemnity agreement to indemnify Vornado, the Parent and the Surviving
Corporation, on terms reasonably satisfactory to Vornado, against any claim that
may be made against any of them on account of the alleged loss, theft or
destruction of any such Certificate or the delivery of the payment set forth
above.
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(c) Notwithstanding Section 3.5(a), immediately following the
Effective Time, each Americold Principal Shareholder, upon surrender of the
Certificate or Certificates representing all of the shares of Americold Common
Stock and Americold Preferred Stock owned by such Americold Principal
Shareholder together with the related letter of transmittal, shall be entitled
to receive, in immediately available funds, the amount of cash into which the
aggregate number of shares of Americold Common Stock and Americold Preferred
Stock represented by such Certificate or Certificates surrendered shall have
been converted pursuant to this Agreement.
(d) If consideration is to be delivered to a Person other than the
Person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition to delivery of the consideration that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such consideration shall pay
any transfer or other Taxes required by reason of the payment to a Person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such Tax has been paid or is not
applicable.
(e) Until surrendered in accordance with the provisions of this
Section 3.5, from and after the Effective Time, each Certificate (other than (i)
Certificates representing shares of Americold Common Stock or Americold
Preferred Stock owned beneficially or of record by Vornado, the Parent,
Acquisition Co. or any other subsidiary of Vornado, (ii) Certificates
representing shares of Americold Common Stock or Americold Preferred Stock held
in the treasury Americold or any Americold Subsidiary and (iii) Dissenting
Shares in respect of which appraisal rights are perfected) shall represent for
all purposes the right to receive the cash pursuant to Section 3.1(a) or (b), as
applicable, as determined and paid in the manner set forth in this Agreement.
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(f) After the Effective Time there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of Americold
Common Stock, shares of Americold Preferred Stock or Options that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the applicable consideration referred to in this
Section 3.5.
3.6 Adjustment to Prevent Dilution. In the event that Americold
changes the number of shares of Americold Common Stock or Americold Preferred
Stock or securities convertible or exchangeable into or exercisable for shares
of Americold Common Stock or Americold Preferred Stock issued and outstanding
prior to the Effective Time as a result of a reclassification, stock split
(including a reverse split), stock dividend or distribution, recapitalization,
merger, subdivision, issuer tender or exchange offer, or other similar
transaction, the Common Stock Consideration and Preferred Stock Consideration
shall be equitably adjusted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMERICOLD
Americold hereby represents and warrants to the Parent and
Acquisition Co. as follows:
4.1 Organization, etc. (a) Americold is a corporation duly organized
and validly existing under the laws of the State of Oregon and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Americold is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or licensed
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would not individually or in the aggregate have a Material Adverse Effect or
materially restrict the ability of Americold to conduct business as presently
conducted by it in such jurisdiction. Each jurisdiction where Americold is so
qualified is listed on Schedule 4.1(a) hereto. Except as set forth on Schedule
4.1(b) hereto, there are no Americold Subsidiaries and, except as set forth on
Schedule 4.1(b) hereto, Americold does not own, directly or indirectly, any
capital stock of or equity interests in any Person. Americold has heretofore
delivered or made available to the Parent accurate and complete copies of the
Articles of Incorporation and By-Laws of Americold, as amended and in effect on
the date hereof. The stock certificate books and ledgers of Americold, which
have been made available to the Parent, accurately reflect, at the date hereof,
the ownership of the issued and outstanding capital stock of Americold.
(b) Each Americold Subsidiary is listed on Schedule 4.1(b) hereto,
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry out
its business as now being conducted. Each Americold Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not individually or in the
aggregate have a Material Adverse Effect or materially restrict the ability of
such Americold Subsidiary to conduct business as presently conducted by it in
such jurisdiction. Each jurisdiction where each Americold Subsidiary is so
qualified is listed on Schedule 4.1(b) hereto. Americold has heretofore
delivered to the Parent accurate and complete copies of the Articles of
Incorporation and By-Laws or other organizational documents of each Americold
Subsidiary, as amended and in effect on the date hereof.
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(c) Except as set forth on Schedule 4.1(c) hereto, Americold owns of
record and beneficially 100% of the issued and outstanding capital stock and all
other equity interests in each Americold Subsidiary, free and clear of any
Liens.
4.2 Authorization and Binding Obligation. (a) Americold has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Subject to the approvals
referred to in Section 2.5, Americold's execution, delivery and performance of
this Agreement has been duly and validly authorized by all necessary corporate
action on the part of Americold and this Agreement has been duly executed and
delivered by Americold. Except for the actions referred to in Sections 2.5,
4.2(b) and 4.2(d) hereof, which actions are in full force and effect, and the
giving of notice in accordance with O.R.S. 60.214, 60.561 and 60.567, no other
corporate action or proceedings on the part of Americold are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. Subject to the approvals referred to in Section 2.5, this Agreement
constitutes the valid and binding obligation of Americold, enforceable against
Americold in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar rights of
creditors generally and by general principles of equity.
(b) The Board of Directors of Americold (the "Board") has authorized
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and has not withdrawn such authorization. A
true and complete copy of such approvals by the Board has been delivered to the
Parent. The Board of Directors of Americold has received the opinion of its
financial advisors, Houlihan, Lokey, Howard & Zukin, to the effect that the
consideration to be paid by Parent to the holders of the shares of Americold
Common Stock and Americold Preferred Stock in the Merger is fair to such holders
from a financial point of view.
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(c) Subsequent to the giving of the authorization referred to in the
preceding paragraph, each Americold Principal Shareholder has executed and
delivered to the Parent an irrevocable proxy authorizing the Parent to vote, at
the Americold Shareholders' Meeting, the shares of Americold Common Stock set
forth opposite such Americold Principal Shareholder's name on Exhibit A hereto,
which shares represent all shares of Americold Common Stock owned beneficially
or of record by such Americold Principal Shareholder, in favor of adopting this
Agreement. Each Americold Principal Shareholder acknowledges, and the proxy
recites, that such proxy is coupled with an interest.
(d) The Board has taken all appropriate action so that the entry
into this Agreement, the granting of the proxies provided for under Section
4.2(c) hereof and the consummation of the transactions contemplated by this
Agreement shall be exempted from the provisions of O.R.S. 60.801-60.816 and
60.825. No other "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation, including, without
limitation, O.R.S. 60.801-60.816 and 60.825 (each, a "Takeover Statute") or any
applicable anti-takeover provision in the Articles of Incorporation and By-laws
of Americold is, or at the Effective Time will be, applicable to Americold, the
shares of Americold Common Stock and Americold Preferred Stock, the Merger or
the other transactions contemplated by this Agreement.
4.3 Capitalization. (a) The authorized Americold Common Stock and
other authorized capital stock of Americold and each of the Americold
Subsidiaries is as set forth on Schedule 4.3 hereto. All issued and outstanding
shares of Americold Common Stock and other equity interests of Americold and
each of the Americold Subsidiaries are duly authorized, validly issued, fully
paid, non-assessable and free of preemptive rights. Schedule 4.3 hereto sets
forth the name of each Person who owns beneficially or of record any shares of
capital stock and other equity interests of
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any Americold Subsidiary and, in the case of each Americold Subsidiary, the
number of shares owned by each such Person.
(b) Except as set forth on Schedule 4.3 hereto, there are not now,
and at the Effective Time there will not be, any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments of any nature
whatsoever obligating Americold or any of the Americold Subsidiaries to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered or
sold, any additional shares of Americold Common Stock or other equity interest
of Americold or any of the Americold Subsidiaries, or any securities or
obligations convertible into or exchangeable for any such Americold Common Stock
or other equity interests, or obligating Americold or any of the Americold
Subsidiaries to grant, extend or enter into any such agreement or commitment and
no authorization therefor has been given or made by Americold or any Americold
Subsidiary. Except for the arrangements described in Schedule 4.3 hereto, there
are no contractual arrangements that obligate Americold or any Americold
Subsidiary to (i) repurchase, redeem or otherwise acquire any of its capital
stock or its other equity interests or (ii) pay any Person any consideration
that is calculated with reference to the consideration to be paid to the
Americold Shareholders under this Agreement.
4.4 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA and as set forth on Schedule 4.4 hereto and the
approvals referred to in Sections 2.5 and 4.2(b) hereof, the giving of notice
in accordance with O.R.S. 60.214 and the filing and recordation of the Merger
Filings as required by the OBCA and the DGCL, no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority or other third
party is necessary for the consummation by Americold of the transactions
contemplated by this Agreement, except where the failure to make such filing or
obtain such authorization, consent or approval would not individually or in the
aggregate have a Material Adverse Effect. Subject to
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obtaining such approvals and making such filings, neither the execution and
delivery of this Agreement by Americold nor the consummation by Americold of the
transactions contemplated hereby, nor compliance by Americold with any of the
provisions hereof, will (i) result in any violation of any provision of the
Articles of Incorporation or By-Laws or other organizational documents of
Americold or any Americold Subsidiary, (ii) violate any Applicable Law or (iii)
except as set forth on Schedule 4.4 hereto, result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default or
give rise to a right of any Person to terminate, cancel or accelerate the
payment or performance of any liability, obligation or commitment under any
contract (including any Contract listed in Schedule 4.13 hereto) to which
Americold or any of the Americold Subsidiaries is a party, or by which any of
their respective properties are bound, except, in the case of clauses (ii) and
(iii) above, where such violation, breach, default or right of termination,
cancellation or acceleration would not individually or in the aggregate have a
Material Adverse Effect.
4.5 Financial Statements; SEC Reports. (a) Americold has furnished
the Parent with (i) a consolidated balance sheet of Americold as at February
28, 1997 and consolidated statements of operations, changes in shareholders'
equity (deficit) and cash flows of Americold for such year, together with the
related audit report of KPMG Peat Marwick LLP and (ii) an unaudited consolidated
balance sheet of Americold as of August 31, 1997 and an unaudited consolidated
statement of operations of Americold for the six-month period ended August 31,
1997. All such financial statements are referred to herein collectively as the
"Financial Statements." Other than as set forth in Schedule 4.5 hereto, the
Financial Statements (including any related schedules and/or notes) have been
prepared in accordance with GAAP consistently applied throughout the periods
presented, except that the unaudited financial statements are subject to
year-end adjustments and do not contain footnotes. The balance sheets included
in the
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Financial Statements fairly present, in all material respects, the financial
position of Americold and the Americold Subsidiaries as at the dates thereof,
and the statements of operations, changes in shareholders' equity (deficit) and
cash flows included in the Financial Statements fairly present, in all material
respects, the results of the operations, changes in shareholders' equity
(deficit) and cash flows, respectively, of Americold and the Americold
Subsidiaries for the periods indicated.
(b) The Company has filed all forms, reports, statements and
schedules with the SEC required to be filed pursuant to the Exchange Act, and
the regulations of the SEC thereunder, since January 1, 1996. As of their
respective dates, all reports (including the financial statements included or
incorporated therein) filed by Americold with the SEC (collectively, the "SEC
Reports") complied in all material respects with all applicable requirements of
the Exchange Act and the regulations of the SEC thereunder applicable to such
SEC Reports, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
4.6 Undisclosed Liabilities. Except (i) to the extent reflected or
reserved against in the August 31, 1997 balance sheet of Americold included in
the Financial Statements, (ii) to the extent specifically set forth on Schedule
4.6 hereto, and/or (iii) for obligations of Americold arising in the ordinary
course of the performance of its responsibilities under any Contracts (as
defined in Section 4.14 hereof) listed on Schedule 4.14 or any agreement which
is not required to be listed on Schedule 4.14 because of the limitations set
forth in Section 4.14, neither Americold nor any Americold Subsidiary has any
liabilities or obligations of any nature, whether liquidated, unliquidated,
accrued, absolute, contingent or otherwise which would individually or in the
aggregate have a Material Adverse Effect.
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4.7 Governmental Approvals and Authorizations. Except as set forth
in Schedule 4.7 hereto, all approvals, permits, qualifications, authorizations,
licenses, franchises, consents, orders, registrations or other approvals
(collectively, the "Governmental Approvals") of all Governmental Authorities
which are necessary in order to permit Americold and the Americold Subsidiaries
to carry on their respective businesses have been obtained and are in full force
and effect, except where the failure to obtain such approval, permit,
qualification, authorization, license, franchise, consent, order, registration
or other approval, or the failure to be in full force and effect, would not
individually or in the aggregate have a Material Adverse Effect. There has been
no violation, cancellation, suspension or revocation of any such Governmental
Approval. This Section 4.7 does not relate to environmental matters, which are
the subject of Section 4.22.
4.8 Compliance with Laws. Except as set forth on Schedule 4.8
hereto, neither Americold nor any Americold Subsidiary is in conflict with or in
violation or breach of or default under (a) any Applicable Law or (b) any
provision of its organizational documents, and since February 28, 1997, neither
Americold nor any Americold Subsidiary has received any written notice alleging
any such conflict, violation, breach or default, except for any such violations,
breaches or defaults which would not individually or in the aggregate have a
Material Adverse Effect. This Section 4.8 does not relate to environmental
matters, which are the subject of Section 4.22.
4.9 Absence of Certain Payments. Neither Americold, any Americold
Subsidiary, or any director, officer, employee or agent of, or consultant or
other representative of, Americold or any Americold Subsidiary, or any other
Person authorized to act on behalf thereof, has unlawfully offered, paid or
agreed to pay, directly or indirectly, any money or anything of value to or for
the benefit of any individual who is or was an official or employee or candidate
for office of any Governmental Author-
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ity, or any employee or agent of any customer or supplier of Americold or any
Americold Subsidiary, except for any such offer, payment or agreement to pay
which would not individually or in the aggregate have a Material Adverse Effect
and would not reasonably be expected to subject Americold or any Americold
Subsidiary to any damage or penalty in any civil, criminal or governmental
litigation or proceeding.
4.10 Real Property. Schedule 4.10 hereto sets forth a complete list
of (i) all real property and all interests in real property owned in fee by
Americold or the Americold Subsidiaries (individually, an "Owned Property") and
(ii) all real property and all interests in real property leased by Americold
or the Americold Subsidiaries (individually, a "Leased Property"; together with
the Owned Property, the "Real Property"). Except as set forth on Schedule 4.10
hereto, Americold and the Americold Subsidiaries have (i) good, marketable and
insurable fee title to all Owned Property, and (ii) good and valid leasehold
interests in all Leased Property, and in the case of all of the Owned Properties
and those leasehold estates covered by the title insurance policies and update
letters or endorsements (as the case may be) set forth on Schedule 4.10 hereto,
such title is free and clear of any Liens, except (a) those created or permitted
under the Americold Indebtedness, (b) as disclosed in those certain owner's
title insurance policies and update letters or endorsements, as the case may be,
set forth on Schedule 4.10 hereto, and (c) other easements, rights of way and
minor and immaterial liens, charges or encumbrances that do not interfere with
the use of the Real Property in the normal conduct of the business of Americold
and the Americold Subsidiaries and that do not materially impair the value of
the Real Property (collectively, the "Permitted Liens"). Complete and correct
copies of each deed or lease relating to the Real Property described on Schedule
4.10 hereto have been furnished or made available to the Parent. The current use
and operation of the Real Property does not violate in any material respect any
instrument of record affecting the Real Property.
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Except as disclosed on Schedule 4.10 hereto, since February 28, 1997, no damage
or destruction has occurred and, to the Knowledge of Americold, no condemnation
or rezoning proceeding has been threatened or commenced with respect to any of
the Real Property that would individually or in the aggregate materially impair
the continued use or operation of the Owned Property or the Leased Property. To
the Knowledge of Americold, the Owned Property is in compliance with all Real
Estate Laws, and neither Americold nor any Americold Subsidiary has any
Knowledge of any written notice of violation or claimed violation of any Real
Estate Law, in either case except where such violation or lack of compliance
would not individually or in the aggregate materially restrict the ability of
Americold or any Americold Subsidiary to conduct its business as presently
conducted by it at any location. Except as disclosed on Schedule 4.10 hereto,
neither Americold nor any Americold Subsidiary is obligated under or a party to
any option, right of first refusal or other contractual right to purchase,
acquire, sell or dispose of any Real Property. Neither Americold nor any
Americold Subsidiary is a lessor, sublessor or grantor under any lease, sublease
or other instrument granting to another Person any right to the possession,
lease, occupancy or enjoyment of the Real Property, other than pursuant to any
agreements listed on Schedule 4.14 hereto. This Section 4.10 does not relate to
environmental matters, which are the subject of Section 4.22.
4.11 Property. Schedule 4.11 hereto sets forth a complete list as of
August 31, 1997 of each item of property, plant and equipment owned or leased by
Americold or any Americold Subsidiary. Except as set forth on Schedule 4.11
hereto, Americold and each of the Americold Subsidiaries has good and valid
title to all tangible personal property and assets which it owns, including the
material tangible personal property reflected in the balance sheets included in
the Financial Statements as being owned by Americold or such Americold
Subsidiary, as the case may be, except for such tangible personal property and
assets
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disposed of in the ordinary course of business, consistent with past practice,
since August 31, 1997 having a value not in excess of $250,000. Americold and
each of the Americold Subsidiaries has a valid legal right to use all assets
which it does not own but uses in the conduct of its business, except where the
failure to have such valid legal right would not individually or in the
aggregate have a Material Adverse Effect.
4.12 Intellectual Property. (a) Americold and each Americold
Subsidiary possesses all patents, trademarks, service marks, trade names,
copyrights and licenses that are necessary for the use or ownership of its
respective properties and assets, and the maintenance and operation of its
respective businesses as currently conducted. Neither Americold nor any
Americold Subsidiary uses any registered trademarks, trade names, copyrights or
patents (or have applications therefor pending) in connection with their
respective businesses, except for those set forth on Schedule 4.12 hereto
(collectively referred to as the "Intellectual Property"). Except as set forth
on Schedule 4.12 hereto, the Intellectual Property is owned by Americold or a
Americold Subsidiary, as indicated on Schedule 4.12 hereto, and is not subject
to any license, royalty arrangement or dispute. To the Knowledge of Americold,
except as set forth on Schedule 4.12 hereto, no registered trademark or trade
name used by Americold or any Americold Subsidiary infringes on any trademark or
trade name in any state or country in which such trademark or trade name is used
by Americold or such Americold Subsidiary. Neither Americold nor any Americold
Subsidiary has received written notification of infringement of any patent,
copyright, trademark or trade name, or any application therefor, from any
Person.
(b) Americold and each Americold Subsidiary possesses the right to
use all of its logistics and RF software and related data bases for the conduct
of its respective operations as currently conducted. To the Knowledge of
Americold, no other Person has any material interest in any such software or
data bases (other than any
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licensor thereof which is not an officer, director or Affiliate of Americold,
any Americold Subsidiary or any Americold Principal Shareholder).
4.13 Absence of Conflicts of Interest. Except as set forth on
Schedule 4.13 hereto, none of the Americold Principal Shareholders nor any
officer, director or Affiliate of Americold or any Americold Subsidiary has any
material interest in any material contract or material property (real or
personal), tangible or intangible, used in the business of Americold or any
Americold Subsidiary.
4.14 Contracts. Schedule 4.14 hereto lists (or describes in the case
of oral contracts) each contract, note, debt instrument, lease, sublease,
warehouse services agreement, covenant not to compete, supply agreement,
guarantee, licensing agreement, partnership agreement, joint venture agreement,
employment agreement (other than employment agreements set forth on Schedule
4.16 hereto), collective bargaining agreement or other agreement or commitment
of any kind, whether written or oral, to which Americold or any Americold
Subsidiary is a party (other than agreements set forth on Schedule 4.16 hereto)
or by which either of them is bound (each, a "Contract"), provided that such
Schedule need not list (i) any written or oral Contract or related written
Contracts under which the aggregate payments required to be made by or to
Americold or any Americold Subsidiary over the life of the Contract or Contracts
are less than $300,000, (ii) any rate quote or (iii) any warehouse receipt.
Complete copies of every written Contract listed on Schedule 4.14 hereto have
been previously made available to the Parent. Each of Americold and the
Americold Subsidiaries has performed all material obligations required to be
performed by it to date under the Contracts (and every employment contract
listed on Schedule 4.16 hereto), and neither Americold nor any Americold
Subsidiary has received written (or, to the Knowledge of Americold, oral) notice
that it is in material default in the performance of any of its obligations
under any Contract.
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4.15 Labor Matters. Except as described on Schedule 4.15 hereto,
since February 28, 1997 there have been no work stoppages or labor difficulties
relating to employees of Americold or the Americold Subsidiaries. There are no
labor disputes currently subject to any unfair labor practice complaint,
grievance procedure, arbitration or litigation, nor is there any default or any
event which, with notice or the passage of time or both, would become a default,
under any agreement with any labor union or association representing employees
of Americold or any Americold Subsidiary, except for any such dispute,
procedure, arbitration, litigation or default which would not individually or
in the aggregate have a Material Adverse Effect. Except as described on Schedule
4.15 hereto, there are no strikes, picketing, work stoppages or representation
petitions pending or, to Americold's Knowledge, threatened with respect to any
employee of Americold or any Americold Subsidiary.
4.16 Employee Benefit Plans. (a) Schedule 4.16 hereto contains a
true and complete list of each "employee benefit plan," as such term is defined
in Section 3(3) of ERISA, and each bonus, medical, incentive or deferred
compensation, severance, retention, change in control, equity incentive or other
material employee benefit plan, program or policy maintained or contributed to
by Americold or any Americold Subsidiary for the benefit of its respective
employees or former employees or with respect to which Americold or a Americold
Subsidiary is obligated to contribute on behalf of its employees and current or
former Directors (collectively, the "Plans"). Americold has made available to
the Parent true and complete copies of all Plans; all related trust agreements
and insurance contracts forming a part of any Plans; the most recent actuarial
and trust reports prepared for any such Plan; the most recent Form 5500 filed in
respect of each such Plan and all schedules thereto; the most recent
determination letter issued in respect of each such Plan; the current summary
plan descriptions with respect to such Plans for which such
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a description has been distributed; and all amendments to any such document.
(b) Each Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the IRS with respect to
"TRA" (as defined in Section 1 of Rev. Proc. 93-39) as to the qualification
thereof under Section 401(a) of the Code and, to the Knowledge of Americold, no
amendment has been made to any such Plan since the date of such determination
letter that has or would result in the disqualification of such Plan under
Section 401(a) of the Code. Each of the Plans has been operated and administered
in all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code. There are no material pending or, to the
Knowledge of Americold, threatened claims by or on behalf of any of the Plans or
by any employee participating therein (other than routine claims for benefits).
All contributions required to have been made by Americold and the Americold
Subsidiaries to any Plan pursuant to applicable law (including, without
limitation, ERISA and the Code) have been made on a timely basis. Neither
Americold nor any of the Americold Subsidiaries has engaged in a transaction
with respect to any Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject Americold or any of the Americold
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which could be material.
(c) As of the date hereof, no liability under Title IV of ERISA
(other than for the payment of premiums under Section 4007) has been or is
expected to be incurred by Americold or any Americold Subsidiary with respect to
any ongoing, frozen or terminated "single employee plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them.
Americold and any Americold Subsidiary have not incurred and do not expect to
incur any withdrawal liability with respect to a multi-
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employer plan (within the meaning of Section 4063 or 4064 of ERISA).
(d) No Plan is a multiple employer plan within the meaning of
Section 4063 or 4064 of ERISA.
(e) Except for Americold and each Americold Subsidiary, no other
trade or business, whether or not incorporated, is currently or, within the
preceding six years, has been required to be treated as a "single employer"
with Americold pursuant to clause (b), (c) or (m) of Section 414 of the Code.
(f) Neither Americold nor any Americold Subsidiary has any
obligations for retiree health and life benefits under any Plan, except as set
forth on Schedule 4.16(f) hereto.
(g) Except as set forth in Schedule 4.16 hereto, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any
employees of Americold or any Americold Subsidiary to severance pay, (ii)
accelerate the time of payments or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any Plan or (iii) result in any breach or
violation of, or a default under, any of the Plans.
4.17 Actions Pending. Except as set forth in Schedule 4.17 hereto,
there is no civil, criminal or administrative action, suit, hearing, claim,
litigation, proceeding or investigation pending or, to the Knowledge of
Americold, threatened, against or affecting Americold or any Americold
Subsidiary or the business or any of the assets of Americold or any Americold
Subsidiary, or which seeks to enjoin or prohibit, or otherwise questions the
validity of, any action taken or to be taken in connection with this Agreement,
and there is no order, decision, ruling, injunction, judgment, award or decree
or consent of or agreements with any Governmental Authority against or
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affecting Americold or any Americold Subsidiary or the business or assets of
Americold or any Americold Subsidiary, or which enjoins or prohibits, any action
taken or to be taken in connection with this Agreement.
4.18 Affiliate Transactions. Except as set forth on Schedule 4.18
hereto, there are no existing agreements, understandings or arrangements between
Americold or any Americold Subsidiary, on the one hand, and any Affiliate of
Americold or any Americold Subsidiary, on the other hand.
4.19 Absence of Certain Changes. Except as set forth on Schedule
4.19 hereto, since August 31, 1997, (a) Americold and the Americold Subsidiaries
have conducted their respective businesses only in the ordinary and usual course
of their respective businesses, and (b) there has not been any material adverse
change in the financial condition, assets, owned or leased properties, business
or results of operations of Americold or any Americold Subsidiary that,
individually or in the aggregate, has had a Material Adverse Effect and (c)
neither Americold nor any Americold Subsidiary has taken any action of the type
described in any clause of Section 6.1.
4.20 Insurance. Schedule 4.20 hereto lists all material insurance
policies maintained by, or for the benefit of, Americold or any Americold
Subsidiary, as an insured. All such insurance policies are in full force and
effect, all premiums due thereon have been paid and no notice of termination of
any such policy has been received by the insured thereunder.
4.21 Taxes. Except as set forth on Schedule 4.21 hereto, or as
reflected or reserved against in the February 28, 1997 balance sheet included in
the Financial Statements, (i) Americold and the Americold Subsidiaries have (or
by the Closing Date will have) duly and timely filed or caused to be filed all
Tax Returns that are required to be filed on or before the Closing Date or the
time for filing such returns shall have been validly
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extended to a date after the Closing Date (collectively, the "Returns"), except
to the extent that the failure to so file would not individually or in the
aggregate have a Material Adverse Effect; (ii) Americold and the Americold
Subsidiaries have paid all Taxes shown or required to be shown on such Returns,
and have (or by the Closing will have) withheld to the appropriate Taxing
Authority, all federal and state Taxes that are required to be withheld on or
before the Closing Date, except to the extent that the failure to so pay,
withhold or remit would not individually or in the aggregate have a Material
Adverse Effect; (iii) no claim in writing by the IRS or any other Taxing
Authority for assessment or collection of Taxes, that are or may become payable
by Americold or the Americold Subsidiaries or chargeable as a Lien upon the
assets thereof, has been received by Americold or any Americold Subsidiary; (iv)
taxable years of Americold and the Americold Subsidiaries through the taxable
year ended 1990 have been examined and closed (v) neither Americold nor any
Americold Subsidiary has granted any extension or waiver of the limitation
period applicable to any Returns, which period (after giving effect to such
extension or waiver) has not yet expired; (vi) neither Americold nor any
Americold Subsidiary has received any notice in writing of any claim, audit,
action, suit, proceeding or investigation now pending against or with respect to
Americold or any Americold Subsidiary in respect of any Tax; (vii) there are no
requests for rulings or determinations in respect of any Tax pending between
Americold or any Americold Subsidiary, on the one hand, and any Taxing Authority
on the other; and (viii) neither Americold nor any Americold Subsidiary has (A)
been a member of an affiliated group, or (B) filed or been included in a
combined, consolidated or unitary Return, in each case involving group members
other than Americold and the Americold Subsidiaries and (ix) neither Americold
nor any of its subsidiaries has (a) elected to be treated as a "real estate
investment trust" for federal income tax purposes for any taxable year ending
after December 31, 1993 or (b) acquired, since January 1, 1994, a substantial
portion of the assets of an entity whose election to be
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treated as a "real estate investment trust" has been terminated or revoked.
Schedule 4.21 hereto contains a list of states, territories and jurisdictions
(whether foreign or domestic) with respect to which any income Tax Return has
been filed by Americold or any Americold Subsidiary within the last three
taxable years.
For purposes of this Agreement: (a) "Tax" means any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid to or by Americold or any Americold Subsidiary, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profits tax, custom duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority (domestic or foreign) (a "Taxing Authority"), (b) "Taxes"
shall have a correlative meaning and (c) "Tax Returns" shall mean reports,
returns, information statements relating to Taxes or other documents filed or
maintained or required to be filed or maintained, in connection with any Tax.
4.22 Environmental Matters. Except as set forth on Schedule 4.22
hereto and in the Environmental Reports listed thereon, Americold's and each
Americold Subsidiary's operation and use of its assets and the Real Property are
in compliance in all respects with all Environmental Laws, except to the extent
that any such noncompliance would not individually or in the aggregate have a
Material Adverse Effect. Except as set forth on Schedule 4.22 or in the
Environmental Reports listed thereon, Americold and the Americold Subsidiaries
have obtained all environmental, health and safety permits necessary for the
operation of the business of Americold and the Americold Subsidiaries as
presently conducted, and all such permits are in full force and effect and
Americold and each Americold Subsidiary are in compliance in all respects with
the terms and conditions of each such permit, except, in each case, to the
extent
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that any such failure to obtain or noncompliance would not individually or in
the aggregate have a Material Adverse Effect. Except as disclosed in Schedule
4.22 or in the Environmental Reports listed thereon and except as could not
reasonably be expected to have individually or in the aggregate a Material
Adverse Effect, (i) no property currently owned or operated by Americold or any
Americold Subsidiary, including the Owned and Leased Properties, has been
contaminated in any material respect with any substance regulated under any
Environmental Law such that any removal or remedial action is required under
Applicable Law; (ii) Americold and the Americold Subsidiaries are not subject to
any material liability for any off-site disposal or contamination; and (iii)
there are no other conditions or violations involving Americold or any Americold
Subsidiary (including the presence of asbestos, underground storage tanks,
chlorofluorocarbons, Freon and polychlorinated biphenyls) that are likely to
result in any material claims, liabilities or costs or any restrictions on the
ownership, use or transfer of any Owned or Leased Property in connection with
any Environmental Law. Except as disclosed in Schedule 4.22, to the Knowledge of
Americold, there are not other environmental reports, studies, assessments,
sampling results or other written environmental analyses relating to any Owned
Property ("Environmental Reports") and a copy of each of these Environmental
Reports has been made available to Parent at least five days prior to the date
hereof.
4.23 Brokers, Finders, etc. Except as described on Schedule 4.23,
neither Americold nor any Americold Subsidiary has employed, or is subject to
the valid claim of, any broker, finder or other financial intermediary in
connection with the transactions contemplated by this Agreement or the
transactions contemplated hereby, who might be entitled to a fee or commission
in connection herewith.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF VORNADO, THE PARENT AND ACQUISITION CO.
Vornado, the Parent and Acquisition Co., jointly and severally,
represent and warrant to Americold as follows:
5.1 Organization and Standing. Vornado is a real estate investment
trust duly organized and in good standing under the laws of the State of
Maryland and has the power and authority to carry on its business as presently
conducted, except where the failure to be so qualified would not individually
or in the aggregate have a material adverse effect on its ability to timely
perform its obligations hereunder or consummate the transactions contemplated
hereby. The Parent is a corporation duly organized and in good standing under
the laws of the State of Delaware and has the power and authority to carry on
its business as presently conducted, except where the failure to be so qualified
would not individually or in the aggregate have a material adverse effect on its
ability to timely perform its obligations hereunder or consummate the
transactions contemplated hereby. Acquisition Co. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as presently conducted, except where the failure to be so qualified
would not individually or in the aggregate have a material adverse effect on its
ability to timely perform its obligations hereunder or consummate the
transactions contemplated hereby.
5.2 Authorization and Binding Obligation. Each of Vornado, the
Parent and Acquisition Co. has all necessary partnership, corporate or other
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Vornado, Parent and Acqui-
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sition Co. and the consummation by Vornado, the Parent and Acquisition Co. of
the transactions contemplated hereby have been duly and validly authorized and
approved by all necessary partnership, corporate (or other) action on the part
of each of Vornado, the Parent and Acquisition Co. and no other corporate action
or other proceedings on the part of Vornado, the Parent or Acquisition Co. is
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Vornado, the Parent and Acquisition Co. and constitutes a valid and binding
obligation of Vornado, the Parent and Acquisition Co., enforceable against
Vornado, the Parent and Acquisition Co. in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar rights of creditors generally and by general principles of equity.
5.3 Consents and Approvals; No Conflicts. Except for applicable
requirements of the HSRA and filing and recordation of the Merger Filings as
required by the OBCA and the DGCL, no filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by Vornado, the Parent or Acquisition Co. of the transactions
contemplated by this Agreement, except where the failure to make such filing or
obtain such permit, authorization, consent or approval, would not individually
or in the aggregate have a material adverse effect on such Person's ability to
timely perform its obligations hereunder or consummate the transactions
contemplated hereby. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby, nor compliance by
Vornado, the Parent or Acquisition Co. with any of the provisions hereof will
(a) result in any violation of any provision of the organizational documents of
Vornado, the Parent or Acquisition Co., (b) violate any Applicable Law, or (c)
result in a material violation or breach of, or constitute (with or without due
notice or lapse of time or both) a material default (or give rise to any right
of termination,
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cancellation or acceleration) under, any material contract, agreement, note,
bond, mortgage, indenture, license, lease, franchise, permit, Plan or other
instrument or obligation to which Vornado, the Parent or Acquisition Co. is a
party, or by which any of them or any of their respective properties is bound,
except in the case of clauses (b) and (c) above, where such violation, breach,
default or right of termination would not individually or in the aggregate have
a material adverse effect on such Person's ability to timely perform its
obligations hereunder or to consummate the transactions contemplated hereby.
5.4 Litigation. There is no claim, litigation, proceeding or
investigation pending or, to the best of Vornado's, the Parent's or Acquisition
Co.'s knowledge, threatened, which seeks to enjoin or prohibit, or otherwise
questions the validity of, any action taken or to be taken by Vornado, the
Parent or Acquisition Co. in connection with this Agreement or which would
individually or in the aggregate have a material adverse effect on such person's
ability timely to perform its respective obligations hereunder or to consummate
the transactions contemplated hereby.
5.5 Finders and Investment Bankers. None of Vornado, the Parent or
Acquisition Co. has employed, or is subject to the valid claim of, any broker,
finder or other financial intermediary in connection with the transactions
contemplated by this Agreement or the transactions contemplated hereby, who
might be entitled to a fee or commission in connection herewith or therewith
payable by Americold or any Americold Subsidiary.
5.6 Financing, etc. Vornado has available to it pursuant to existing
credit facilities sufficient cash on hand to allow it to pay the Merger
Consideration, consummate the transactions contemplated hereby and pay related
fees and expenses. Upon consummation of the Closing, Americold will be in
compliance with Section 9.1 of the Amended and Restated Indenture dated as of
March 9, 1993, and Section
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9.01 of the Indenture dated as of April 9, 1996, each of which Indentures is
referred to in the list of Americold Indebtedness set forth on Schedule 1.6
hereto of the Americold Indebtedness.
ARTICLE VI
COVENANTS
6.1 Conduct of Business. During the period from the date hereof to
the Closing Date, Americold covenants and agrees that it will and will cause the
Americold Subsidiaries to carry on their businesses in the ordinary course of
business, in substantially the same manner as heretofore conducted, and will use
its reasonable commercial efforts to preserve intact its and the Americold
Subsidiaries' present business organization, keep available the services of
their respective officers and Employees and preserve their relationships with
customers and suppliers and others having business dealings with them, to the
end that their goodwill and going business shall be maintained following the
Closing. Without limiting the generality of the foregoing, except as expressly
permitted by this Agreement or with the prior written consent of the Parent,
such consent not to be unreasonably withheld or delayed, or as set forth on
Schedule 6.1 hereto, Americold covenants and agrees that it will not, and it
will not permit any Americold Subsidiary to do, or agree to do, on or after the
date hereof, any of the following, on or before the Closing:
(a) amend their respective certificates of incorporation or by-laws
or other organizational documents;
(b) rescind, modify, amend or otherwise change or affect any of the
resolutions of the Board recommending adoption of this Agreement and
authorization of the Merger;
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(c) issue, sell, transfer, assign, pledge, convey or dispose of any
security or equity interest or any security convertible into or
exchangeable or exercisable for any security or equity interest,
including, without limitation, any subscriptions, options, warrants,
calls, conversions or other rights, agreements, commitments, arrangements
or understandings of any kind obligating Americold or any Americold
Subsidiary, contingently or otherwise, to issue or sell, or cause to be
issued or sold, any security or equity interest of Americold or any
Americold Subsidiary or any security convertible into or exchangeable or
exercisable for any security or equity interest;
(d) split, combine or reclassify any shares of any class of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any class of its capital stock, or redeem or
otherwise acquire any shares of such capital stock, except as required
under the agreements listed on Schedule 6.1(d) hereto;
(e) write off any receivables, except in the ordinary course of
business consistent with past practice;
(f) sell, assign, lease or otherwise transfer or dispose of any
material assets except in the ordinary course of business consistent with
past practice in an aggregate amount in excess of $350,000 unless the same
shall be replaced with assets of equal or greater value and utility;
(g) (i) except as set forth on Schedule 6.1(g) hereto and except in
the ordinary course of business consistent with past practice under
existing lines of credit, create, incur or assume any liability, including
obligations in respect of capital leases, or make or commit to make
capital expenditures in excess of
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$250,000 each or $500,000 in the aggregate or create, incur, assume,
maintain or permit to exist any indebtedness in an aggregate amount
greater than $250,000 for Americold and the Americold Subsidiaries
combined; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, except for assumptions, guarantees or
endorsements by Americold of the obligations of any Americold Subsidiary
in the ordinary course of business consistent with past practice; (iii)
make any loans, advances or capital contributions to, or investments in,
any other Person (other than customary loans or advances in the ordinary
course of business consistent with past practice to Employees not to
exceed $100,000 in the aggregate and extensions of credit made to
customers on a trade receivable basis in the ordinary course of business
consistent with past practice); or (iv) create, assume or permit to exist
any Lien upon their assets, except for those in existence on the date of
this Agreement and except for those additional Liens created in the
ordinary course of business consistent with past practice;
(h) except as set forth on Schedule 6.1(h) hereto (i) increase or
modify or agree to increase or modify the compensation, bonuses or other
benefits or perquisites of any Employee of Americold or any Americold
Subsidiary, except for salary increases granted in the ordinary course of
business consistent with past practice, or (ii) pay or commit to pay any
compensation, bonus, pension or other retirement benefit or allowance,
fringe benefit or other benefit not required by the terms of an existing
Plan, or collective bargaining agreement as in effect on the date hereof
or otherwise in the ordinary course of business consistent with past
practice;
(i) make any new elections, or make any changes to current
elections, with respect to Taxes;
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(j) change their auditors, fail to maintain their books and records
in accordance with GAAP or materially change their auditing or bookkeeping
practices;
(k) take or fail to take any action that would cause any of its
representations and warranties not to be true and correct on the Closing
Date in the manner required by Section 7.3(b) hereof;
(l) cancel or materially amend or modify any real or material
personal property leases;
(m) other than in the ordinary course of business, cancel or
materially amend or modify any agreements with customers; or
(n) enter into any new agreements with any customers with a duration
of more than one year.
6.2 Third-Party Consents. Americold covenants and agrees that it
will and will cause each Americold Subsidiary to use reasonable commercial
efforts to obtain, prior to the Closing, the consents of third parties and
Governmental Authorities set forth on Schedule 4.4 hereto.
6.3 Compliance with OBCA; Filings; Information Statement. (a) As
soon as practicable and in any event within ten (10) days after the date of this
Agreement, Americold will prepare and deliver to each shareholder of Americold a
notice (the "Notice"), in accordance with O.R.S. 60.214, 60.487 and 60.561,
regarding (i) the execution of this Agreement, (ii) the Board's authorization of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (iii) the availability of appraisal rights
under O.R.S. 60.551-60.594. As promptly as practicable, Americold will prepare,
and will provide to Vornado for its review and comment, an information statement
(together with the Notice, the "Information Statement"). As promptly as
practicable thereafter, Americold will deliver to each holder of
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Americold Common Stock a copy of the Information Statement, provided that
Americold will not circulate the Information Statement without Vornado's prior
written consent. Americold agrees that none of the information included or
incorporated by reference in the Information Statement will be false or
misleading with respect to any material fact or will omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; provided, that the foregoing shall not apply to information supplied
by or on behalf of the Parent or Acquisition Co. specifically for inclusion or
incorporation by reference in the Information Statement. The Parent agrees that
none of the information supplied by or on behalf of the Parent or Acquisition
Co. specifically for inclusion or incorporation by reference in the Information
Statement will be false or misleading with respect to any material fact or will
omit to state any material fact required to be stated therein or necessary in
order to make the statements in such Information Statement, in light of the
circumstances under which they are made, not misleading.
(b) As promptly as practicable, each of Americold, the Parent and
Acquisition Co. shall properly prepare and file any filings required under any
Federal, state, county, local or municipal law relating to the Merger and the
transactions contemplated herein (such filings, together with the filings
required under the HSRA, are, collectively, the "Filings"). The Parent and
Acquisition Co., on the one hand, and Americold, on the other, shall promptly
notify the other of the receipt of any comments on, or any request for
amendments or supplements to, the Filings by any governmental official, and each
of Americold, the Parent and Acquisition Co. will supply the other with copies
of all correspondence between it and each of its subsidiaries and
representatives, on the one hand, and any appropriate governmental official, on
the other hand, with respect to the Filings.
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6.4 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use (and Americold shall
cause the Americold Subsidiaries to use) their commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and to
cooperate with one another in connection with the foregoing, including using its
commercially reasonable efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under Applicable Law, to defend
all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, to cause to be lifted or
rescinded any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and to effect all necessary registrations and Filings.
6.5 Acquisition Proposals. None of Americold or any of Americold's
employees, representatives or agents (collectively, the "Americold
Representatives") shall, directly or indirectly, solicit or initiate inquiries
or proposals from or enter into any agreement with respect to, or provide any
confidential information to or participate in any discussions or negotiations
with, any Persons or group (other than the Parent, Acquisition Co. and their
respective subsidiaries and their respective directors, officers, employees,
representatives and agents) concerning any sale of assets or shares of Americold
Common Stock, any assets or shares of capital stock of any Americold Subsidiary
or any merger, consolidation or similar transaction involving Americold or any
Americold Subsidiary (except, in all cases, for any sale of immaterial assets in
the ordinary course of business consistent with past practices). Americold will
promptly cease and Americold will cause to be terminated by the Americold
Subsidiaries any existing discussions or negotiations with any third parties
conducted heretofore with respect to any of the foregoing and will use its
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reasonable commercial efforts to retrieve and/or caused to be destroyed any and
all nonpublic information concerning Americold or any Americold Subsidiary that
has been furnished to third parties in connection therewith. Americold will not,
and will cause its controlled Affiliates not to, and will use its best efforts
to cause its noncontrolled affiliates not to, directly or indirectly, make, or
in any way participate, directly or indirectly, in any solicitation of proxies,
or become a participant in a solicitation to vote, or seek to advise or
influence any person to abstain from voting or to vote against the Merger, this
Agreement or any of the transactions contemplated herein, or enter into any
negotiations, discussions or arrangements, or otherwise facilitate, assist or
encourage the efforts of any third party with respect to the foregoing.
6.6 Public Announcements. The Parent and Americold will consult with
one another before issuing any press release or otherwise making any public
statement with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation
without the consent of the Parent and Americold, except based on the advice of
counsel for Americold or the Parent, as the case may be, as required by
Applicable Law.
6.7 Consent of the Parent. The Parent, as the sole shareholder of
Acquisition Co., by executing this Agreement hereby consents to the execution,
delivery and performance of this Agreement by Acquisition Co. and such consent
shall be treated for all purposes as a vote duly adopted at a meeting of the
shareholders of Acquisition Co. held for such purpose.
6.8 Transfer Taxes. The Parent shall be responsible for the payment
of all Transfer Taxes arising out of or in connection with or attributable to
the transactions effected pursuant to this Agreement.
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6.9 Officers' and Directors' Insurance; Indemnification of Officers
and Directors. The Parent agrees that for the entire period from the Effective
Time until at least six (6) years after the Effective Time (a) the Articles of
Incorporation and the By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in Americold's Articles of Incorporation and By-Laws as of the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified during such period in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors,
officers, employees or agents of Americold unless such modification is required
by Applicable Law and (b) the Surviving Corporation shall either (x) maintain in
effect Americold's current directors' and officers' liability insurance
covering those persons who are currently covered on the date of this Agreement
by Americold's directors' and officers' liability insurance policy or (y)
purchase a "tail" insurance policy having a policy limit equal to or greater
than the aggregate policy limit of such insurance and covering such persons
against claims made within six (6) years following the Effective Time; provided,
however, that this Section (b) shall not require Vornado or the Parent to pay
annual insurance premiums in excess of 125% of the current annual premium for
Americold's existing directors' and officers' liability insurance.
6.10 Americold Indebtedness. The Parent and Acquisition Co. shall
furnish such information and certificates as Americold shall reasonably request
in order for Americold and its counsel to be able to deliver the certificates,
opinions and other instruments required under the change of control provisions
of the Americold Indebtedness.
6.11 Access. Upon reasonable notice, and except as may otherwise be
required by Applicable Law, Americold shall (and shall cause the Americold
Subsidiaries to) afford the Parent's officers, agents and advisors reasonable
access, during normal business hours throughout the period
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prior to the Effective Time, to its properties, books, contracts and records
and, during such period, Americold shall (and shall cause the Americold
Subsidiaries to) furnish to the Parent and its agents and advisors all
information concerning its business, properties and personnel as they may
reasonably request, provided that no investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by
Americold. All such information shall be governed by the terms of the
Confidentiality Agreement referred to in Section 11.4.
6.12 Management Arrangements. Americold shall enter into bonus
arrangements with Americold management involving payments in the aggregate of
not less than $610,000, and the parties shall negotiate in good faith the
identities of the management recipients of such bonus arrangements, the
respective amounts to be received by each and the respective terms thereof.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions Precedent to the Obligations of All Parties. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) Any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSRA shall have expired or been
terminated.
(b) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or
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enacted by any Governmental Authority shall be in effect which would be
reasonably likely to (i) make the consummation of the Merger by Vornado,
the Parent, Acquisition Co. or Americold illegal or (ii) otherwise prevent
the consummation of the Merger.
7.2 Additional Conditions to the Obligation of Americold. The
obligation of Americold to effect the Merger is also subject to the fulfillment
at or prior to the Effective Time of the following additional conditions:
(a) Vornado, the Parent and Acquisition Co. shall each have
performed in all material respects each of its respective obligations
under this Agreement required to be performed by it on or prior to the
Effective Time pursuant to the terms hereof.
(b) The representations and warranties of Vornado, the Parent and
Acquisition Co. contained in this Agreement shall be true and correct in
all material respects, in each case when made and, unless such
representation or warranty is made as of a specific date (in which case it
shall be true and correct in all material respects as of such date), at
and as of the Effective Time as if made at and as of such time.
(c) Americold shall have received a certificate, dated the Closing
Date, of the President or any Vice President of Vornado, to the effect
that the conditions specified in paragraphs (a) and (b) of this Section
7.2 have been fulfilled.
(d) Americold shall have received the opinion of Sullivan &
Cromwell, special counsel to Vornado, the Parent and Acquisition Co., in
form and substance reasonably satisfactory to Americold, as to the due
authorization, execution and delivery of this Agreement by such parties.
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(e) Each of the Parent and Acquisition Co. shall have reaffirmed all
of Americold's obligations under each of the Employment Agreements listed
on Schedule 4.14 hereto.
(f) Americold shall have paid, or caused to be paid, a fee of
$2,000,000 to Kelso (the "Kelso Fee") in respect of Kelso's services in
connection with the consummation of the transactions provided for hereby.
7.3 Conditions Precedent to Obligations of Vornado, the Parent and
Acquisition Co. The obligations of Vornado, the Parent and Acquisition Co. to
effect the Merger are also subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) Americold shall have performed in all material respects each of
its obligations under this Agreement required to be performed by it on or
prior to the Effective Time pursuant to the terms hereof.
(b) The representations and warranties of Americold set forth in
this Agreement that are qualified by reference to a Material Adverse
Effect shall be true and correct, and all other representations and
warranties of Americold shall be true and correct, except for failures to
be true and correct as would not, individually or in the aggregate, have a
Material Adverse Effect, as of the date of this Agreement and as of the
Effective Time as though made as of the Effective Time (except to the
extent any such representation or warranty expressly speaks as of an
earlier date, in which case it shall have been true and correct in all
material respects as of such date).
(c) Vornado shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer of Americold, to the effect that the
conditions specified in paragraphs (a) and (b) of this Section 7.3 have
been fulfilled.
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(d) Vornado, the Parent and Acquisition Co. shall each have received
the opinion of (i) Debevoise & Plimpton, special counsel to Americold, in
form and substance reasonably satisfactory to Vornado, as to the absence
of any agreements among the shareholders of Americold or with any
potential purchaser of Americold that conflict with the execution,
delivery and performance of this Agreement and (ii) Tonkon, Torp, Galen,
Marmaduke & Booth, special counsel to Americold, in form and substance
reasonably satisfactory to Vornado, as to the due authorization, execution
and delivery of this Agreement and to the effect that the Merger has been
duly authorized under Oregon law.
(e) One or more Americold Principal Shareholders shall not have
revoked or attempted to revoke any of the proxies referred to in Section
4.2(c) with respect to a majority or more of the outstanding shares of
Americold Common Stock.
(f) Americold shall have furnished to Vornado evidence reasonably
satisfactory to Vornado that immediately prior to the Closing, Americold's
principal amount of long-term indebtedness does not exceed $471,200,000.
ARTICLE VIII
CLOSING
8.1 Time and Place. Subject to the satisfaction or waiver of all
applicable conditions in Article VII, the Closing shall take place at the
offices of Debevoise & Plimpton, 875 Third Avenue, New York, N.Y. 10022, at
10:00 a.m., local time, on the third business day following the satisfaction of
the condition set forth in Section 7.1(a), or on such other date as Americold
and the Parent may agree.
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8.2 Filings at the Closing; Other Actions. At the Closing, the
Parent and Americold shall cause the Merger Filings to be filed and recorded in
accordance with the applicable provisions of the OBCA and the DGCL, and shall
take any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
ARTICLE IX
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All of the representations and warranties contained in this
Agreement or any representations and warranties contained in any certificate,
document or instrument delivered pursuant to this Agreement shall terminate as
of the Closing. The covenants set forth in Sections 3.3, 3.5, 6.6, 6.8 and 6.9
herein shall survive the Closing.
ARTICLE X
TERMINATION RIGHTS
10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of the Parent and Americold;
(b) by either the Parent or Americold if the Merger shall not have
been consummated on or before January 15, 1998; provided, however, that
the right to terminate this Agreement shall not be available to any party
whose failure to fulfill any obligation of this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
before the aforesaid date;
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(c) by the Parent, if Americold shall have materially breached any
of its covenants herein or if Americold shall have made a material
misrepresentation and not cured the same within 15 days of notice of such
breach or misrepresentation;
(d) by Americold, if either the Parent or Acquisition Co. shall
have materially breached any of its covenants herein or if either the
Parent or Acquisition Co. shall have made a material misrepresentation
herein and not cured the same within 15 days of notice of such breach or
misrepresentation; or
(e) by either the Parent or Americold, if any court of competent
jurisdiction or other governmental agency of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and
non-appealable.
10.2 Procedure and Effect of Termination. In the event of
termination and abandonment of the Merger by the Parent or Americold pursuant to
Section 10.1 hereof, notice thereof shall forthwith be given to Americold or the
Parent, respectively, and this Agreement shall terminate and the Merger shall be
abandoned, without further action by any of the parties hereto. Each of the
Parent and Acquisition Co. agrees that any termination by Vornado shall be
conclusively binding upon it, whether given expressly on its behalf or not. If
this Agreement is terminated as provided herein, no party hereto shall have any
liability or further obligation to any other party to this Agreement except that
any termination shall be without prejudice to the rights of any party hereto
arising out of a breach by any other party of any covenant or agreement
contained in this Agreement, and except that the provisions of Sections 6.6,
11.4, 11.5 and 11.7 hereof shall survive such termination.
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ARTICLE XI
OTHER PROVISIONS
11.1 Amendment and Modification. Subject to Applicable Law, this
Agreement may be amended, modified or supplemented only by mutual written
agreement of the parties hereto.
11.2 Benefit and Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party to this
Agreement without the prior written consent of the other parties hereto. Any
purported assignment made in contravention of the previous sentence shall be
null and void.
11.3 No Third-Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any Person other than the parties hereto and their
respective heirs, successors and permitted assigns, except for the provisions
of Section 6.10 hereof.
11.4 Entire Agreement. This Agreement and the Confidentiality
Agreement, dated as of July 29, 1997, between Americold and Vornado and the
exhibits and schedules hereto and thereto embody the entire agreement and
understanding of the parties hereto and supersede any and all prior agreements,
arrangements and understandings relating to the matters provided for herein and
therein. Acquisition Co. hereby agrees that any consent or waiver of compliance
given by the Parent hereunder shall be conclusively binding upon it, whether
given expressly on its behalf or not. No party is making any representation or
warranty whatsoever, express or implied, except the representations and
warranties contained in this Agreement and each party acknowledges and agrees
that it has not relied on or been induced to enter into this Agreement by any
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representation or warranty other than those expressly set forth herein.
11.5 Expenses. Except as otherwise provided in this Agreement, each
of Vornado, the Parent and Acquisition Co., on the one hand, and Americold, on
the other hand, shall be responsible for the payment of their respective
expenses, including legal and accounting fees, in connection with the
preparation, negotiation and closing of this Agreement and the transactions
contemplated hereby.
11.6 Headings. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
11.7 Choice of Law. The construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its principles of conflict of laws, except insofar as the laws of the state
of Oregon are mandatorily applicable to the Merger, and the state and federal
courts of New York shall have exclusive jurisdiction over any controversy or
claim arising out of or relating to this Agreement.
11.8 Notices. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by fax, as follows:
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(a) If to Vornado, the Parent or Acquisition Co., to it at:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, NJ 07663
Attention: Mr. Michael D. Fascitelli
Telecopy #: (201) 291-1093
Sullivan & Cromwell
1701 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Janet T. Geldzahler
Telecopy #: (202) 293-6330
(b) If to Americold, to it at:
Americold Corporation
7007 S.W. Cardinal Lane
Suite 135
Portland, OR 97224
Telecopy #: (503) 598-8693
Attention: Ronald H. Dykehouse
Chief Executive Officer
with copies to:
Kelso & Company
320 Park Avenue
24th Floor
New York, NY 10022
Telecopy #: (212) 223-2379
Attention: James J. Connors, II, Esq.
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<PAGE> 61
and:
Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, OR 97204
Telecopy #: (503) 274-8779
Attention: Brian G. Booth, Esq.
or to such other Person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(w) if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth Business Day after the mailing thereof, (y) if
by next-day or overnight mail or delivery, on the day delivered or (z) if by
fax, on the next day following the day on which such fax was sent, provided that
a copy is also sent by certified or registered mail.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
VORNADO REALTY TRUST
By: /s/ Michael D. Fascitelli
___________________________
Name:
Title:
PORTLAND PARENT, INC.
By: /s/ Michael D. Fascitelli
__________________________
Name:
Title:
PORTLAND STORAGE ACQUISITION CO.
By: /s/ Michael D. Fascitelli
__________________________
Name:
Title:
AMERICOLD CORPORATION
By:/s/ Ronald H. Dykehouse
__________________________
Name: Ronald H. Dykehouse
Title: Chairman, CEO and President
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Exhibit A
Americold Principal Shareholders
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C>
KIA III-Americold, Inc. L.P. 2,000,000
Kelso Investment Associates II, L.P. 500,000
Kelso Equity Partners, L.P. 70,000
</TABLE>
213
<PAGE> 1
EXHIBIT 99.6
September 28, 1997
Crescent Real Estate Equities Limited Partnership
777 Main Street
Fort Worth, TX 76102
Dear Sirs:
Vornado Realty Trust ("VRT") and Vornado, as defined below, have
entered into definitive merger agreements (the "Merger Agreements") to acquire
URS Logistics, Inc. and Americold Corporation (the "Companies"), copies of
which are attached hereto as Exhibit A. Crescent Real Estate Equities Limited
Partnership ("Crescent"), a Delaware limited partnership managed by Crescent
Real Estate Equities Company, a Texas real estate investment trust ("CEI") and
Portland Parent Incorporated and Atlanta Parent Incorporated, both Delaware
corporations (collectively, "Vornado") have agreed to Crescent becoming
Vornado's partner in those investments (the "Investments"), and hereby form a
partnership on the following terms. You acknowledge that you have completed all
due diligence with respect to both Companies and the Merger Agreements and are
satisfied with the results thereof and have all necessary board approvals to
enter into this transaction.
The agreed upon terms are as follows:
1. Partnership. As promptly as practicable after the date hereof, the
parties (a) shall commence the negotiation of a definitive partnership
agreement evidencing the partnership created hereby and such other terms
as the parties shall mutually agree and (b) shall execute and deliver,
or cause to be executed and delivered, as applicable, the partnership
agreement.
2. Interim Decisions. From and after the date hereof until the later of
execution and delivery of the partnership agreement and the closings
under the Merger Agreements, but subject to the provisions of Section 9
hereof, all decisions with respect to the acquisition of the
Investments, including, without limitation, the interpretation and
performance of Vornado's rights and obligations under the Merger
Agreements and all operational decisions with respect to the Companies
shall be made by Vornado.
3. Structure. As promptly as practicable, we will meet to determine the
structure of the partnership's investment, taking into account the
individual REIT structures of VRT and CEI and any structural
reconfigurations contemplated by either of us, in order to achieve the
optimal tax vehicle for Vornado. Depending on the structure chosen and
any potential delay your investment might cause in closing the mergers,
the timing of your capital contribution to consummate the investment
could occur either prior to or promptly following the closing of the
above mergers, at Vornado's option. Prior to the closing of the
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<PAGE> 2
Crescent Real Estate Equities Limited Partnership
September 28, 1997
Page 2
Merger Agreements, it is anticipated that the rights under this agreement
will be assigned to affiliates or related entities of Crescent and Vornado
in such manner and to such extent as may be required to achieve the
structure determined pursuant to this paragraph.
4. Ownership. Crescent will hold 40% and Vornado will hold 60% of the
ownership, capital and financial interest in the partnership. Vornado will
contribute 60% and Crescent will contribute 40% of all costs required to
make the Investments (including all transaction costs and prepayment of all
debt, including prepayment fees).
5. Management.
a. Each partner will be required to approve the following actions: (i)
approval of the annual capital and operating budgets of each Company,
any deviations in any such budget by 10% or more in the aggregate per
budget, the hiring or firing of a chief executive officer of either
Company or a combined entity and any required capital contributions by
the partners in excess of $50 million per year, and (ii) other than
transactions necessary to effect the tax structuring contemplated by
paragraph 2 or to preserve either VRT's or CEI's REIT status, any
transactions with an affiliate of any partner, the sale or acquisition
of any asset (including, without limitation, equity interests in any
entity) with a value of more than $25 million, the creation of any
security interest, lien or other encumbrance on any of the
partnership's assets which treats one partner differently from another,
the making of any loan, advance or extension of credit to any partner,
any guarantee of any direct or indirect obligation of any partner, and
any sale, liquidation or merger of either Company (other than a
combination of the two Companies) or a combined entity.
b. Vornado will serve as operating manager of the Companies and the
day-to-day liaison to the management. While it is our intention that
the Companies or a combined entity would operate relatively
autonomously, any required decisions which would not fall within
subparagraph (a) of this agreement would be made by Vornado. For such
services, Vornado shall receive a fee per annum equal to 1% of the cost
(including for such purposes the amount of indebtedness on the acquired
entity or assets at the time of acquisition and all expenses (including
prepayment penalties) incurred in such acquisition) paid to acquire the
Companies and any entities or assets hereafter acquired.
6. Term. Except as otherwise agreed by the partners, the partnership shall
continue for a term of 30 years from the date hereof, except that it shall
terminate if the Merger Agreements terminate or if Crescent or any
affiliate thereof takes any action in violation of Section 9 hereof. The
partnership shall preserve and maintain its existence and all its rights,
privileges and franchises. Neither partner shall have the right to withdraw
from the partnership, except as provided herein, nor shall either partner
have the right to cause the dissolution, termination, liquidation or
winding-up of the partnership without the consent of the remaining partner.
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<PAGE> 3
Crescent Real Estate Equities Limited Partnership
September 28, 1997
Page 3
7. Agreement to Act in Good Faith. The partnership agreement shall
require each partner to cooperate with the other partner thereto to
carry out the purpose and intent of the partnership, including without
limitation the execution and delivery to the appropriate party of all
such further documents as may reasonably be required in order to carry
out the terms of the partnership. The parties shall act in a
commercially reasonable manner in good faith with one another in
negotiating the terms of the partnership agreement and all of required
contracts, agreements or documents, in operating the partnership, and in
carrying out the terms of this agreement.
8. Buy/Sell. In the event the partners fail in good faith to reach an
agreement with respect to any matters set forth in paragraph 5(a) on a
timely basis during the first three years after the date hereof, Vornado
shall be entitled to buy Crescent's interest at cost plus a 10% per
annum return (taking into account all distributions). Thereafter, for
the next seven years, upon such failure, Vornado may set a price at
which it commits to either buy Crescent's investment, or sell its own,
which decision to buy or sell shall be made by Crescent. Thereafter,
upon such failure, either party may set a price at which its commits to
either buy the other party's investment, or sell it own, which decision
to buy or sell shall be made by the other party. In addition, each side
shall have the right of first refusal with respect to the sale of the
other party's investment in the partnership, except that during the
first three years Vornado's purchase price with respect to Crescent's
shares under such right of first refusal shall be cost plus a 10% return
(taking into account all distributions).
9. Exclusivity; Non-Solicitation. Prior to the closings under the Merger
Agreements, Crescent shall not, and shall not permit any of its
employees, agents, representatives or affiliates to, (i) without Vornado
being fully informed thereof and consenting thereto, contact Kelso or
any officer, director, employee, agent or customer of either Company
with respect to the Investments, (ii) offer, negotiate, consummate or
solicit any offer or proposal for a "Sales Transaction" (as hereinafter
defined), including without limitation holding any discussions or
engaging in any communications, or entering into any agreement or
understanding whatsoever with Kelso or the Companies without Vornado
being fully informed thereof and consenting thereto, or (iii) take any
action to disrupt the closings under the Merger Agreements. Crescent's
obligations under the preceding sentence shall survive any termination
of the partnership and shall terminate only upon the termination of both
Merger Agreements. For the purposes of this agreement, the term "Sales
Transaction" means (A) any merger, consolidation, reorganization or
other business combination pursuant to which the business of either of
the Companies would be combined with that of Crescent (or an affiliate
thereof) or (B) the acquisition, directly or indirectly, by a third
party of any equity interest, debt, or any assets (other than in the
ordinary course of business) of either of the Companies. Prior to the
closings under the Merger Agreements, Vorando agrees that neither it
nor any of its affiliates will enter into any agreements with the
Companies that would require approval as an affiliate transaction under
paragraph 5(a).
10. Expenses. The parties shall each pay their own fees and expenses,
and those of their agents, advisors, attorneys and accountants, with
respect to the negotiation of this
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Crescent Real Estate Equities Limited Partnership
September 28, 1997
Page 4
agreement and the formation of the partnership, and shall evenly split the
expenses incurred on account of the partnership after the date hereof or by
Vornado prior to the date hereof in connection with the negotiation and
execution of the Merger Agreements (including, without limitation, due
diligence).
11. Assignment. The terms and provisions of this agreement shall not be
assignable by either party without the other party's consent, except as
contemplated by the structure determined pursuant to paragraph 3.
12. Public Announcement. The parties intend to make a public announcement
regarding the execution of this agreement promptly following the execution
hereof. Vornado will act as spokesperson for the partnership and will provide
notice to Crescent of any proposed press release or other public announcement,
and will work with Crescent on the content of any such press release or public
announcement.
13. Agreement Not to Compete. The parties agree that so long as the
partnership continues in existence, no partner thereto shall engage in the cold
storage businesses of the type conducted by the Companies except through the
partnership.
14. Miscellaneous.
a. This agreement and all transactions hereunder shall be governed by the
laws of the State of Delaware, without regard to the application of conflict
of law principles. The parties hereby irrevocably submit to the jurisdiction
of the courts of the State of Delaware and to the U.S. District Court for the
Southern District of New York solely in respect of the interpretation and
enforcement of the provisions of this agreement, and hereby waive, and agree
not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit of proceeding may not be brought or
is not maintainable in said courts or that the venue thereof may not be
appropriate or that this agreement may not be enforced in or by such courts,
and the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a Delaware State
court or Federal District Court for the Southern District of New York. The
parties hereby consent to and grant any such court jurisdiction over the
person of such parties and over the subject matter of such dispute.
b. This agreement constitutes the entire agreement between the parties with
respect to the subject matter herein; provided, however, that this agreement
contemplates the negotiation and execution of definitive agreements after the
execution of this agreement as provided herein, which definitive agreements
also shall be binding on the parties thereto following execution thereof.
c. No amendment or waiver of any provision of this agreement shall be
effective unless in writing and signed by the party or parties against whom
enforcement is sought. No failure or delay by any party in exercising any
right, power or privilege
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Crescent Real Estate Equities Limited Partnership
September 28, 1997
Page 5
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
d. The rule that an agreement should be construed against the party
drafting it shall not apply to this agreement because both parties have
played a significant role in negotiating and drafting this agreement.
e. This agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
f. Signatures may be transmitted by facsimile and will be accepted and
considered delivered as if an original.
Atlanta Parent Incorporated
By: /s/ Michael Fascitelli
-----------------------
Name: Michael Fascitelli
Title: Vice President,
Chief Financial Officer
and Treasurer
Portland Parent Incorporated
By: /s/ Michael Fascitelli
-----------------------
Name: Michael Fascitelli
Title: Vice President,
Chief Financial Officer
and Treasurer
Agreed to and accepted as of September 28, 1997 by
Crescent Real Estate Equities Limited Partnership
By: Crescent Real Estate Equities, Ltd.,
its general partner
By: /s/ Gerald Haddock
-----------------------
Name: Gerald Haddock
Title: President and
Chief Executive
Officer
218
