As filed with the Securities and Exchange Commission on November __, 1998
Registration No. 333-46027
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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C2, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1915787
(State of incorporation) (I.R.S. Employer Identification No.)
(Primary Standard Industrial
Classification Code Number)
700 North Water Street, Suite 1200
Milwaukee, Wisconsin
(414) 291-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------------
William T. Donovan
Chairman
C2, Inc.
700 North Water Street, Suite 1200
Milwaukee, Wisconsin 53202
(414) 291-9000
Facsimile (414) 291-9061
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies to:
Marc J. Marotta, Esq.
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 297-5658
Facsimile: (414) 297-4998
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
----------------------------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |_|
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<TABLE>
CALCULATION OF REGISTRATION FEE
===============================================================================================================
<CAPTION>
Amount of
Title of Each Class of Securities Proposed Maximum Proposed Maximum Registration
To Be Registered Amount To Be Offering Aggregate Offering Price(1) Fee(1)
Registered Price Per Unit
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value ... 5,202,664 $4.00 $20,810,656 $6,139.14
Rights to Purchase Common Stock -- -- -- --
===============================================================================================================
(1) Estimated in accordance with Rule 457(o) under the Securities Act of 1933
solely for the purpose of calculating the registration fee pursuant to
Section 6(b) thereunder.
</TABLE>
----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
C2, INC.
5,202,664 SHARES OF COMMON STOCK
$4.00 PER SHARE
Each shareholder of Christiana Companies, Inc. has a right to
purchase one share of C2 for each share of Christiana held immediately before
Christiana is acquired by Weatherford International, Inc. These rights ensure
that Christiana shareholders can purchase the same ownership interest in C2 as
they had in Christiana. At the completion of this offering, C2 will purchase a
two-thirds ownership interest in Christiana's only operating business, Total
Logistic Control , LLC, for $10,666,667. Sheldon Lubar, the Chairman of
Christiana, David Lubar, the President of C2, and other members of the Lubar
family have committed to purchase a minimum of 2,750,000 shares of C2 to ensure
that the net proceeds of this offering will be at least enough to complete the
purchase of Total Logistic Control.
This offering and our purchase of Total Logistic Control must occur as
part of the acquisition of Christiana by Weatherford. On July 13, 1998, we
mailed to Christiana shareholders a prospectus offering the same shares of
common stock of C2 as are offered by this Prospectus. The reason Christiana
shareholders are receiving a second prospectus is that Weatherford's acquisition
of Christiana, as originally proposed and approved by the shareholders of both
companies in August of 1998, was not completed. On October 14, 1998, Weatherford
and Christiana amended their transaction. A Joint Proxy Statement/Prospectus
will be mailed to Christiana and Weatherford shareholders in connection with
separate special shareholder meetings to approve the amended transaction. You
should rely strictly on this Prospectus in determining whether or not to
purchase C2 common stock. If you subscribed for C2 common stock after receiving
the earlier C2 prospectus, you must subscribe again. Subscriptions must be made
by completing and submitting the Letter of Transmittal provided with the Joint
Proxy Statement/Prospectus. Subscription instructions are provided beginning on
Page __ of this Prospectus.
Consider carefully the risk factors beginning on page 12 in this
Prospectus.
The Offering Per Share Total
Public Price $4.00 $20,810,656
Estimated Expenses $0.05 $ 275,000
Proceeds to C2 $3.95 $20,535,656
Proposed Trading Symbol: Nasdaq SmallCap Market - CTOO.
Prior to the offering, there has not been a public market for the C2
Common Stock.
The offering is contingent upon the closing of Weatherford's
acquisition of Christiana. If that transaction does not occur, this offering
will immediately cease and any payment for shares of C2 Common Stock will be
refunded promptly, without interest.
Neither the Securities and Exchange Commission nor any state securities
commission approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is __________, 1998
<PAGE>
The Total Logistic Control Network
[MAP WITH DISTRIBUTION CENTERS IDENTIFIED]
* Refrigerated Distribution Center
^ Dry (non-refrigerated) Distribution Center
Total Logistic Control operates through a network of
refrigerated and dry (non- refrigerated) warehousing and
distribution centers. Total Logistic Control uses this network
to provide its warehousing and transportation services to its
customers.
-------------------------
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<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the more detailed
information, and the consolidated financial statements of C2 and Total Logistic
Control and notes to these statements, appearing elsewhere in this Prospectus.
We sometimes refer to Total Logistic Control as "TLC".
C2 was formed on December 11, 1997. We will operate through TLC, our
only non-cash asset. TLC assists companies in managing the physical movement of
products and materials. TLC provides refrigerated and dry (non-refrigerated)
warehousing, transportation, distribution and international freight forwarding
services. TLC's industry is comprised generally of entities that provide only
warehousing or trucking operations and other entities that provide only
management services for the distribution and warehousing needs of their
customers. We believe that TLC's ability to offer customers "one-stop shopping"
through its complement of warehousing, trucking and the provision of management
services for transportation and warehousing needs, provides it with a
competitive advantage. TLC's services combine transportation, warehousing and
information services to manage the distribution channel for a customer's
products from the point of manufacturing to the point of consumption. This
combination allows TLC to capitalize on the growing trend of corporations toward
reducing costs by outsourcing large components of their transportation and
warehousing needs.
TLC's operations are conducted through a network of 12 distribution
warehouses, comprised of an aggregate of 34 million cubic feet of refrigerated
and frozen storage capacity in seven locations and five dry (non-refrigerated)
distribution centers, primarily in the upper Midwest. TLC provides its services
utilizing owned equipment as well as outside carrier management services .
TLC's refrigerated warehousing operations include: temperature
sensitive storage services; freezing services; vegetable processing; and
packaging services. Its transportation and distribution services include:
refrigerated and non- refrigerated transportation; full service truckload;
less-than-truckload ; dedicated transportation services; management of
transportation and other specialized services. TLC also provides: a full range
of international freight forwarding services; fully computerized inventory
management; assembly; and repackaging .
We believe TLC is the nation's sixth largest provider of public
refrigerated warehouse space. Two of its refrigerated distribution centers are
located in Rochelle, Illinois; and two are located in Kalamazoo, Michigan. TLC's
other refrigerated distribution centers are located in Milwaukee, Wisconsin;
Beaver Dam, Wisconsin (located approximately 60 miles northwest of Milwaukee);
Wauwatosa, Wisconsin (a suburb of Milwaukee); and Holland, Michigan (located
approximately 20 miles southwest of Grand Rapids). Two of TLC's dry distribution
centers are located in Zeeland, Michigan and the others are located in
Kalamazoo, Michigan; Munster, Indiana; and Dayton, New Jersey.
-3-
<PAGE>
The following summarizes certain financial data regarding TLC (amounts
in thousands):
Three Months Ended
September 30, Year Ended June 30,
1998 1997 1998 1997
---- ---- ---- -----
Revenues $ 22,370 $23,047 $ 90,179 $ 84,208
Income from operations 1,764 1,947 6,974 6,311
Net income 1,086 923 3,741 12,181(2)
EBITDA(1) 3,367 3,402 13,571 13,143
Cash flows from operating
activities 1,768 2,841 12,305 9,294
Cash flows from investing
activities (430) (839) (1,653) (1,822)
Cash flows from financing
activities (1,459) (1,648) (10,335) (7,277)
- ---------------
(1) EBITDA is defined as income (loss) before taxes plus fixed charges.
Fixed charges consist of interest expense, depreciation and
amortization, and gains or losses on the disposal of assets. EBITDA is
not a measure of financial performance under generally accepted
accounting principles and should not be considered as an alternative to
net income as a measure of performance nor as an alternative to cash
flow as a measure of liquidity. Since all companies do not calculate
EBITDA uniformly, it may not be an accurate measure of comparison.
(2) Includes $11,171 of income related to an adjustment of deferred income
taxes resulting from a change in TLC's tax status from a C-Corporation
to a limited liability company.
TLC was formed on June 30, 1997 as a result of the combination of
Wiscold, Inc. and Total Logistic Control, Inc. (two former wholly-owned
subsidiaries of Christiana) into TLC. Christiana acquired Wiscold in September
of 1992 and Total Logistic Inc. in January of 1994.
C2 is a Wisconsin corporation with its executive offices located at 700
North Water Street, Suite 1200, Milwaukee, Wisconsin 53202, and its telephone
number is (414) 291-9000. TLC is a Delaware limited liability company with is
principal executive offices located at 8300 Logistic Drive, Zeeland, Michigan
49464, and its telephone number is (616) 748- 0700.
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<PAGE>
Acquisition of Two-Thirds of Total Logistic Control
We will purchase from Christiana two-thirds of TLC for approximately
$10.7 million. The purchase price of $10.7 million must be paid no later than
thirty (30) days after Weatherford acquires Christiana.
The TLC purchase is governed by an agreement by and among C2, TLC,
Christiana and Weatherford. That agreement is attached as Annex A. The agreement
generally requires C2 to pay all liabilities to which Weatherford, Christiana or
any affiliates of Christiana may become liable in any way as a result of the
business, operations or assets of Christiana or any affiliate of Christiana
(including TLC) prior to the date on which Weatherford acquires Christiana. TLC
agreed to be primarily responsible for paying the liabilities relating to any
historical business, operations or assets of TLC. The agreement also requires C2
and TLC to indemnify Christiana and any affiliate of Christiana against
liabilities that relate to actions or omissions prior to Weatherford's
acquisition of Christiana.
Weatherford's Acquisition of Christiana
Weatherford will purchase Christiana through a merger resulting in
Christiana becoming a wholly-owned subsidiary of Weatherford. The terms of this
transaction are set forth in an agreement and plan of merger. The merger will
result in Christiana shareholders receiving the amount of shares of Weatherford
common stock held by Christiana immediately prior to the transaction (estimated
to be approximately 0.84 shares of Weatherford common stock per share of
Christiana) and cash equal to the cash of Christiana on the date when the
transaction is completed, less certain liabilities (expected to be approximately
$4.00 per share of Christiana). On August 17, 1998, Christiana shareholders
approved the transaction. However, the transaction did not close because a
significant decrease in the price of Weatherford common stock prevented the
transaction from qualifying as a partially tax-free transaction, as required by
the parties. The agreement and plan of merger was amended on October 14, 1998
to:
* Eliminate the requirement that Christiana hold $10.0 million
of cash for five years to satisfy certain contingent
liabilities and indemnification obligations;
* Require Christiana to use the $10.0 million to purchase Weather-
ford common stock; and
* Require Christiana to purchase up to an additional $5.0
million of Weatherford common stock if necessary to qualify
the transaction as a partially tax-free transaction.
Prior to the date of this Prospectus, Christiana purchased __________
shares of Weatherford common stock for a total price of $10.0 million. This
purchase increased the amount of Weatherford common stock owned by Christiana to
__________. It also increased the amount of Weatherford common stock to be
received by Christiana shareholders in the transaction.
No later than 30 days after Weatherford acquires Christiana,
Weatherford and Christiana will determine the amount of cash to be paid to
Christiana shareholders in the transaction. Weatherford will then pay the cash
consideration due each Christiana shareholder to Firstar Trust Company and
Firstar will promptly distribute such cash according to the elections made by
the Christiana shareholders in their Letters of Transmittal .
-5-
<PAGE>
Timeline of Key Events
Set forth below is a timeline of key events relating to this offering,
Weatherford's acquisition of Christiana and our purchase of two-thirds of TLC.
Key Event Proposed Date
* First special meeting of shareholders of
Weatherford and Christiana August 17, 1998
* Amendment to agreement and plan of merger
by which Weatherford will acquire Christiana October 14, 1998
* Special meeting of shareholders of Weather-
ford and Christiana to vote on amended
transaction _______, 1998
* Expiration date for submission of Letter
of Transmittal to purchase C2 Common Stock. _______, 1998
* Complete acquisition of two-thirds of TLC
with obligation to pay purchase price no later
than thirty (30) days following purchase _______, 1998
* Complete Weatherford acquisition of Christiana
with distribution of cash consideration to be
made no later than thirty (30) days following
acquisition, except to the extent applied to
purchase C2 Common Stock as directed in the
Letter of Transmittal _______, 1998
* Distribution of cash consideration and/or
application of cash consideration to purchase
C2 Common Stock, based on election made
in Letter of Transmittal _______, 1998
* Purchase of at least 2,750,000 shares of
C2 Common Stock by Lubar family, if
necessary _______, 1998
* Payment of purchase price for acquisition
of two-thirds of TLC by C2 _______, 1998
* Issuance of C2 Common Stock to subscribers _______, 1998
-6-
<PAGE>
The following diagram sets forth the organization, structure and stock
ownership of C2, TLC, Christiana and Weatherford before and after the
acquisition of Christiana by Weatherford and the purchase of two-thirds of TLC
by C2.
[BEFORE AND AFTER DIAGRAM]
-7-
<PAGE>
The Offering
* C2 Common Stock offered............. 5,202,664 shares
* Minimum number of shares of C2
Common Stock to be outstanding
after the offering.................. 2,750,000 shares (1)
* Maximum number of shares of C2
Common Stock to be outstanding
after the offering.................. 5,202,689 shares
* Subscription price................. $4.00 per share of C2 Common Stock.
* Subscription agent................. Firstar Bank Milwaukee N.A.
* Rights to purchase C2
Common Stock....................... Each Christiana shareholder has a
right to purchase one share of C2
Common Stock for every one share of
Christiana Common Stock held
immediately before Weatherford's
acquisition of Christiana. The
rights are not transferable. If
shares of C2 Common Stock remain
available because less than all
Christiana shareholders exercised
their rights in full, TLC
management, Christiana shareholders
who wish to purchase additional
shares of C2 Common Stock and the
general public, in that order of
preference, will have the right to
purchase any remaining shares of C2
Common Stock on a pro rata basis.
* Subscription procedure for
Christiana shareholders.............Rights to purchase C2 Common Stock
may be exercised by delivery of a
properly completed Letter of
Transmittal provided to you as part
of the Joint Proxy
Statement/Prospectus of Weatherford
and Christiana. The Letter of
Transmittal must be delivered to
Firstar Trust Company on or before
__________, 1998.
* Subscription procedure for
others............................. Non-Christiana shareholders may
purchase shares of C2 Common Stock,
if available after Christiana
shareholders exercise their rights.
Such purchases may be made by
executing the subscription agreement
provided with this Prospectus,
providing full payment for all
shares of C2 Common Stock subscribed
for and delivering the Subscription
Agreement to Firstar Trust Company
on or before __________, 1998.
* Proceeds of the offering........... If fully subscribed, the offering
will result in proceeds to C2, net
of estimated offering expenses, of
$20,535,656.
- ---------------
(1) Represents the commitment of Sheldon Lubar, Chairman of Christiana, David
Lubar, President of C2 and other members of the Lubar family to purchase
enough shares of C2 to have the net proceeds from this offering be at
least $10,666,667, the amount necessary to fund C2's purchase of
two-thirds of TLC.
-8-
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other
information in this Prospectus before deciding to invest in shares of C2's
Common Stock. Certain statements in this section and elsewhere in this
Prospectus are forward-looking statements. In deciding whether to invest in C2
Common Stock, you should remember that future events could differ dramatically
from those anticipated by any such forward-looking statements as a
result of many factors, including those cited in this section.
C2's Dependence on Single Line of Business
Our ownership interest in TLC will represent our only non-cash asset.
TLC's business could be adversely affected if outside warehousing and
transportation services cease to be a preferred method of distribution or if new
technological methods of food preservation become available and widely utilized.
TLC's Dependence on Significant Customers
A number of TLC's facilities depend on a small number of customers or
commodities. During fiscal 1998, 10 of TLC's customers accounted for 43% of
TLC's total revenues. A reduction in the business received by these customers
will result in a decrease in the sales at such facilities and, possibly, in the
overall net sales of TLC. Moreover, increasing consolidation among TLC's
customers and the resulting ability of such customers to utilize their size to
negotiate lower outsourcing costs has, and may continue in the future, to have a
depressing effect on the pricing of services.
Risk of Excess Warehouse Capacity
Local, regional and national companies may seek to expand their
presence into the local markets in which TLC operates. If there is excess
warehousing capacity in these markets, it may have a depressing effect on the
pricing of warehousing services which, in fiscal 1998, accounted for
approximately 58% of TLC's business.
Substantial Leverage of TLC
Prior to Weatherford's acquisition of Christiana TLC's required to pay
a dividend of $20 million to Christiana and to repay approximately $3 million of
outstanding principal plus accrued interest under a promissory note to
Christiana. TLC will borrow $23 million under its revolving credit facility to
finance these obligations. Following this, TLC will have approximately $17
million of available borrowing capacity under its revolving credit facility. TLC
and C2, on a pro forma basis, will be highly leveraged. Assuming a fully
subscribed offering, C2's pro forma total funded debt to total capitalization
including minority interest at September 30, 1998 was 62%. In addition, TLC may,
subject to certain restrictions in its debt agreements, incur further
indebtedness from time to time to finance expansion.
-9-
<PAGE>
Due to this substantial indebtedness, a significant portion of TLC's
cash flow from operations will be required for debt service. The extent to which
TLC is leveraged could have consequences to the holders of C2 Common Stock,
including:
* impairment of TLC's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or other
purposes;
* dedication of a substantial portion of TLC's cash flow from
operations to the payment of debt service requirements (principal and interest)
on its indebtedness;
* vulnerability of TLC to changes in general economic conditions; and
* limitations on TLC's ability to capitalize on significant business
opportunities and to respond to competition.
Assumed Liabilities and Indemnification Obligations of C2 and TLC
Under the agreement governing C2's purchase of TLC, C2 assumes certain
liabilities and indemnification obligations. Prior to the October 14, 1998
amendment to the terms of Weatherford's acquisition of Christiana , Christiana
was to hold $10.0 million following the transaction to pay for any such
liability or claim. With the elimination of the $10.0 million holdback, C2 is
primarily responsible to indemnify Weatherford for liabilities or claims
relating to a matter other than the TLC's historic business. TLC is primarily
responsible for liabilities or claims relating to TLC's historic business.
If TLC is obligated to pay any amounts relating to an assumed liability
or an indemnification claim, Christiana will receive a cash payment from C2
equal to one-third of any such amount paid when and if TLC or all or
substantially all of its assets are sold; C2 sells its membership units in TLC;
or if there is a transfer of membership units of TLC held by C2 or of all of the
C2 Common Stock.
The obligations of C2 under the agreement to acquire two-thirds of TLC
are secured by all of C2's ownership interest in TLC. Any substantial claims
made by Weatherford, Christiana or any of their affiliates in connection with
the assumed liabilities or the indemnification obligations that are not covered
by the insurance of Weatherford may have a material adverse effect on C2's
financial condition and results of operations. Any failure by C2 to satisfy its
obligations under such indemnification provisions could result in the loss of
C2's ownership interest in TLC.
Restrictions on Actions of TLC Under Operating Agreement
The operating agreement, which is attached as Annex B, will be entered
into by C2 and Christiana when Weatherford acquires Christiana. The operating
agreement restricts C2's control of TLC. The operating agreement vests the
management of TLC in a board of managers consisting of six members. Christiana
and C2
-10-
<PAGE>
will each be entitled to elect a number of managers that is proportionate to
their ownership in TLC. Christiana (which will be controlled by Weatherford)
will have the power to appoint two members of the board of managers. Certain
significant corporate actions, such as issuing additional ownershipv interests,
selling TLC and making certain distributions to members, require unanimous
consent of the board of managers. As a result, C2 will be unable to cause TLC to
take these actions without the consent of Christiana's representative on the
board of managers.
Transfer Restrictions
Generally, neither C2 nor Christina may voluntarily transfer any
ownership interest in TLC without the consent of the board of managers.
In addition, neither C2 nor TLC may transfer a majority of C2's or
TLC's assets to any person or entity unless the acquiring person or entity meets
certain net worth requirements and assumes the obligations of C2 or TLC, as the
case may be. These transfer restrictions may prevent C2 from divesting of its
assets, including its ownership in TLC, even if C2 believes such action is
appropriate.
Availability and Integration of Potential Future Acquisitions by C2 and TLC
A substantial part of C2's future growth will come from acquiring,
either directly or through TLC, other businesses which may or may not be related
to TLC's current business. C2 or TLC may not be able to identify or negotiate
suitable acquisitions. There can be no assurance that any debt or equity
financing necessary to complete acquisitions can be arranged on satisfactory
terms. There can be no assurance that any acquired warehousing or transportation
business can be integrated successfully into TLC or that TLC or C2, as the case
may be, will manage or improve the operating or administrative efficiencies of
any acquired business. Failure of C2 or TLC to implement successfully their
acquisition strategies will limit C2's growth.
Shortage of Contract Carriers and Available Drivers
TLC utilizes both its own fleet of trucks and third-party carriers to
conduct its operations. As TLC expands, it will likely require the services of
additional carriers. At some TLC locations, only a few third-party carriers meet
TLC's quality standards. In addition, the trucking industry has experienced
severe shortages of available drivers in recent years. This may curtail the
ability of TLC to expand and may require TLC and its third-party carriers to
increase drivers' compensation, thereby increasing transportation costs to TLC.
-11-
<PAGE>
Possible Increase in Fuel Costs
Changes in fuel prices and supply or increases in fuel or energy taxes
will increase the operating expenses of TLC's internal fleet of trucks and those
of its third-party carriers. These increases will result in higher
transportation operating costs for TLC. TLC's operating margins would be
adversely affected if it were unable to pass these increases through to its
customers.
Dependence on C2 and TLC Management
We believe that our ability to successfully implement our business
strategy and to operate profitably depends on the continued employment of our
senior management teams including, in the case of C2, William T. Donovan and
David J. Lubar and in the case of TLC, Brian L. Brink, John R. Patterson, Gary
R. Sarner and other members of TLC's senior management group. Neither C2 nor TLC
has written employment agreements with any of its executive officers and no
insurance is maintained on the lives of these individuals.
Conflicts of Interest
Sheldon B. Lubar, a director of C2, David J. Lubar, President and a
director of C2 and William T. Donovan, Chairman and a director of C2, have
participated individually, and as a group, in investments in other business
entities independent from Christiana. We have adopted guidelines which generally
require that before independently pursuing an acquisition opportunity, the
opportunity will be presented to C2's board of directors. A majority of the
members of the C2 board who are not interested in the opportunity will decide
whether C2 should pursue the opportunity.
Concentration of Ownership of C2 Common Stock
Following this offering, the Lubar family and the other officers and
directors of C2 will own at least 66% of the outstanding shares of C2 Common
Stock. Accordingly, the Lubar family and the other directors and officers of C2
will have the ability to influence significantly the election of directors and
most corporate actions.
Dilution
Investors will experience substantial dilution as a result of C2's
acquisition of two-thirds of TLC to the extent of intangible assets purchased ,
which, at September 30, 1998, was $5,396,000, or $1.04 per share assuming this
offering is fully subscribed.
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<PAGE>
USE OF PROCEEDS
The net proceeds to C2 from the sale of 5,202,664 shares of C2 Common
Stock , after deducting offering expenses payable by C2 of $275,000, will be
approximately $20,536,000. The Lubar family has committed to purchase enough
shares of C2 to ensure that the net proceeds of the offering to C2 will be at
least $10,666,667. The first $10,666,667 of the net proceeds will be used to pay
for C2's acquisition of two-thirds of TLC. The remainder of the net proceeds
will be used for offering expenses and general corporate purposes, including
future acquisitions. Proceeds not immediately required for the purposes
described above will be invested principally in United States government
securities or other high-grade, short-term, interest-bearing investments.
DIVIDEND POLICY
C2 was formed on December 11, 1997 and has never paid any cash
dividends on its capital stock. C2's ability to generate cash for the payment of
dividends is restricted by the terms of the operating agreement. C2 and its
board of directors currently intend to retain any earnings for use in the
expansion of C2's business and do not anticipate paying any cash dividends on
the C2 Common Stock in the foreseeable future.
TLC's revolving credit facility prohibits TLC from paying dividends
(other than the $20.0 million dividend to Christiana) except that TLC may pay
dividends to cover members' income tax liabilities resulting from their
ownership of TLC .
SUMMARY OF CERTAIN TERMS OF
WEATHERFORD'S ACQUISITION OF CHRISTIANA
General
Weatherford will acquire Christiana through a merger of a subsidiary of
Weatherford with and into Christiana. Each outstanding share of Christiana
common stock will be converted into a right to receive approximately 0.84 shares
of Weatherford common stock and cash currently estimated to be approximately
$4.00 per share of Christiana. Christiana may purchase up to an additional $5.0
million of Weatherford common stock. Any such purchase by Christiana will
increase the amount of Weatherford common stock received and decrease the amount
of cash received.
Calculation of Cash Consideration to be Received
The exact calculation of cash consideration will equal the quotient of
the Christiana Net Cash (as defined below) divided by 5,149,330. The definitive
calculation of cash consideration will be made by Weatherford and Christiana no
later than thirty (30) days following the completion of Weatherford's
acquisition of Christiana.
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<PAGE>
The "Christiana Net Cash" will be equal to
* the sum of all of the cash on hand of Christiana as of the
completion of Weatherford's acquisition, minus
* the sum of the amount of cash necessary to pay Christiana's
liabilities (without giving effect to the use or application
of any tax deductions relating to the exercise of options or
any tax benefits that may be realized as a result of amended
tax returns of Christiana).
Based on the current capitalization of Christiana and the assets and
liabilities of Christiana as of September 30, 1998, and after giving effect to
the estimated expenses of the transaction payable by Christiana, the cash
consideration per share of Christiana is anticipated to be approximately $4.00.
-14-
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of C2 as of
September 30, 1998 (i) on a pro forma combined basis to give effect to the
acquisition of two-thirds of TLC, the $20.0 million dividend payable by TLC to
Christiana and repayment of $3 million plus accrued interest by TLC to
Christiana and (ii) as further adjusted to give effect to this offering and the
application of the estimated net proceeds from this offering, assuming the sale
of a minimum of 2,750,000 shares of C2 Common Stock to the Lubar family. This
table should be read in conjunction with the unaudited Pro Forma Combined
Financial Data of C2 and the related notes included elsewhere in this
Prospectus. See "Pro Forma Summary Combined Financial Data."
September 30, 1998
--------------------------------
Pro Forma As Adjusted(4)
(Amounts in thousands, except
per share data)
Short-term debt:
Short-term obligations(1) .................... $ -- $ --
Current maturities of
long-term debt(1) ........................... 2,630,000 2,630,000
Liability for purchase of 666.667
Membership Units of TLC ...................... 10,667,000 --
Long-term debt, net of current
maturities(1) ................................ 49,275,000 49,275,000
Minority interest(2) ........................... 8,104,000 8,104,000
Shareholders' equity:
Preferred Stock, par value $0.01
per share, 10,000,000 shares
authorized; none issued
or outstanding ............................... -- --
Common Stock, par value $0.01
per share, 50,000,000 shares
authorized, none issued and
outstanding; pro forma 2,734,250
shares issued and outstanding,
as adjusted(3) ............................... -- 28,000
Additional paid-in capital ..................... -- 10,697,000
Retained earnings(2) ........................... 3,326,000 3,326,000
----------- -----------
Total shareholders' equity ................... 3,326,000 14,051,000
----------- -----------
Total capitalization including
minority interest .................... $74,002,000 $74,060,000
=========== ===========
(1) For a description of TLC's debt, see "Notes to the Financial Statements
of TLC" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Description of Credit Agreement."
(2) The retained earnings amount as included in the capitalization table
represents the difference between the purchase price of two-thirds of
TLC ($10,667,000) and the carry over basis of TLC equity as adjusted
for (i) the dividend; (ii) the drop down of certain Christiana assets
and liabilities; (iii) minority interest: and (iv) deferred income
taxes of C2 related to the difference between purchase price and carry
over basis. A calculation of the retained earnings adjustment is as
follows:
-15-
<PAGE>
Purchase price of two- thirds of TLC $10,667,000
Net book value of TLC at
September 30, 1998 44,983,000
Less: Drop down assets/liabilities
of Christiana (668,000)
Less: Dividend to Christiana (20,000,000)
Less: Minority interest (8,104,000)
Less: Deferred income taxes (2,218,000)
-----------
Retained earnings adjustment $3,326,000
-----------
C2 has recorded this difference as retained earnings in the above
capitalization table since the amount does not reflect cash proceeds of
the offering and the amount does not meet the definition of paid-in
capital.
(3) Does not include up to 520,000 additional shares reserved for issuance
under C2's 1998 Equity Incentive Plan, of which options to purchase
12,000 shares of C2 Common Stock will be granted to independent directors
of C2 concurrently with this offering at an exercise price of $4.00 per
share. See "Management -- 1998 Equity Incentive Plan."
(4) The minimum number of shares of C2 Common Stock which will be issued in
this offering is 2,750,000 pursuant to the commitment of the Lubar
family. The maximum number of shares to be issued in this offering is
5,202,664. If the maximum amount of shares are issued in this offering,
total shareholders equity on a pro forma basis, as of September 30, 1998,
would be $23,862,000.
-16-
<PAGE>
C2 FINANCIAL DATA
Set forth below is the audited balance sheet of C2 as of December 31,
1997 which is derived from and qualified by reference to, and should be read in
conjunction with the balance sheet of C2 and notes thereto which have been
audited by Arthur Andersen LLP and which appear elsewhere in this Prospectus.
The balance sheet of C2 as of December 31, 1997 set forth below reflects only
the initial capitalization of C2 pursuant to a $100 investment by Sheldon B.
Lubar. Also set forth below is the unaudited balance sheet of C2 as of September
30, 1998 which reflects the initial capitalization of C2 in addition to costs
deferred in connection with the public offering and acquisition of a two-thirds
interest in TLC. In the opinion of C2, the unaudited balance sheet as of
September 30, 1998 includes all adjusting entries necessary to present fairly
the information set forth therein. This financial information should be read in
conjunction with C2's balance sheet as of September 30, 1998 and related notes
thereto which appear elsewhere in this Prospectus.
C2, Inc.
(A Newly-Formed Holding Company)
BALANCE SHEET
As of September 30, 1998 and December 31, 1997
September
30, 1998 December 31,
(Unaudited) 1997
------------ ------------
ASSETS:
Cash $ 100 $ --
Due from shareholder for Common Stock
Subscribed -- 100
Deferred offering and acquisition costs 240,000 --
-------- --------
Total Assets $240,100 $ 100
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses $240,000 $ --
-------- --------
Total Liabilities 240,000 --
======== ========
SHAREHOLDER'S EQUITY:
Preferred Stock, $.01 par value, 10,000,000
shares authorized, none issued or
outstanding -- --
Common Stock, $.01 par value, 50,000,000
shares authorized, 25 shares issued and
outstanding -- --
Additional paid-in capital 100 100
-------- --------
Total Shareholder's Equity 100 100
-------- --------
Total Liabilities and Shareholder's Equity $240,100 $ 100
======== ========
-17-
<PAGE>
PRO FORMA SUMMARY COMBINED FINANCIAL DATA
Set forth below is unaudited pro forma summary combined financial
statements for the year ended June 30, 1998 and the three months ended September
30, 1998 and as of September 30, 1998.
These pro forma summary combined financial statements should be read in
conjunction with other information contained elsewhere in this Prospectus,
including "Selected Historical TLC Financial Data," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the historical
financial statements of TLC, and the historical balance sheet of C2. See "Index
to Financial Statements."
The pro forma summary combined statements of income for the year ended
June 30, 1998 and the three months ended September 30, 1998 reflect the effects
on the historical results of operations of C2 of the following transactions as
if these transactions had occurred on July 1, 1997: (i) the sale of 5,202,664
shares of C2 Common Stock; (ii) the application of the proceeds for the purchase
of 666.667 membership units of TLC from Christiana for approximately $10.7
million; (iii) the additional operating expenses associated with corporate
charges including officers salaries, professional, legal, occupancy, public
company and other corporate related expenses; and (iv) the establishment of
deferred income taxes for TLC. In addition, the pro forma financial data
reflects the following pre- acquisition adjustments: (i) the approximately $3
million repayment by TLC of a note to Christiana; (ii) $20 million of borrowings
by TLC and subsequent payment of the dividend to Christiana; and (iii) the
additional interest expense associated with these aforementioned increases in
outstanding debt and the adjustment to interest expense to reflect the costs of
borrowing under TLC's new credit facility . The pro forma summary combined
balance sheet reflects the affects of the aforementioned transactions as if
these transactions had occurred on September 30, 1998.
The pro forma financial data does not purport to represent what C2's
financial position or results of operations would actually have been if such a
transaction in fact had occurred on those dates or to project C2's financial
position or results of operations for any future period.
-18-
<PAGE>
<TABLE>
PRO FORMA SUMMARY COMBINED BALANCE SHEET
<CAPTION>
As of September 30, 1998
-------------------------------------------------------------------------------------------
Historical
TLC Pro Forma Pro Forma Offering As
(unaudited) Adjustments(1) C2, Inc. Adjustments Adjusted
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 420,000 $ - $420,000 $20,536,000 (8) $10,289,000
(10,667,000)(9)
Other current assets 10,331,000 10,331,000 10,331,000
Total long-term assets 75,539,000 1,086,000 (4) 76,625,000 76,625,000
---------- --------- ---------- ---------- ----------
Total assets $86,290,000 $1,086,000 $87,376,000 $9,869,000 $97,245,000
=========== ========== =========== ========== ===========
Total current liabilities $11,697,000 $928,000 (4) $12,625,000 $12,625,000
Due to Parent company 3,000,000 (3,000,000)(2) - -
Liability for purchase of
666.667 Membership
Units of TLC - 10,667,000 (7) 10,667,000 (10,667,000)(9) -
Deferred income taxes - 2,218,000 (6) 2,218,000 2,218,000
Long-term debt 26,275,000 20,000,000 (3) 49,275,00 49,275,000
3,000,000 (2)
Other liabilities 335,000 826,000 (4) 1,161,000 1,161,000
----------- ---------- --------- ---------- ---------
Total liabilities 41,307,000 34,639,000 75,946,000 (10,667,000) 65,279,000
Minority interest - 8,104,000 (5) 8,104,000 8,104,000
Preferred stock -
Common Stock - 52,000 (8) 52,000
Additional paid-in
capital - 20,484,000 (8) 20,484,000
Retained earnings
Members' equity 44,983,000 (20,000,000)(3) 3,326,000 3,326,000
(8,104,000)(5)
(2,218,000)(6)
(668,000)(4)
(10,667,000)(7)
---------- ----------- --------- ---------- ----------
Total shareholders' equity 44,983,000 (41,657,000) 3,326,000 20,536,000 23,862,000
---------- ----------- --------- ---------- ----------
Total liabilities and
shareholders' equity $86,290,000 $1,086,000 $87,376,000 $9,869,000 $97,245,000
=========== ========== =========== ========== ===========
</TABLE>
-19-
<PAGE>
NOTES TO PRO FORMA SUMMARY COMBINED BALANCE SHEET
(1) The acquisition of 666.667 Membership Units of TLC by C2 represents a
combination of entities under common control because a single group of
shareholders controlled TLC and will control C2. Accordingly, no
purchase accounting adjustments have been recorded and the difference
between the acquisition price and the historical cost basis of TLC has
been reflected as an equity adjustment.
(2) Represents a $3 million draw on TLC's revolving credit facility and
subsequent payment of the Wiscold note prior to the acquisition of
two-thirds of TLC.
(3) Represents a $20 million draw on TLC's revolving credit facility
(interest at LIBOR plus 175 basis points) and the subsequent payment of
the $20.0 million dividend to Christiana prior to the Acquisition.
(4) Represents the book value of certain assets and liabilities of
Christiana which were contributed to TLC prior to the acquisition of
two-thirds of TLC by C2 as follows:
ASSETS:
Long-term assets $1,086,000
LIABILITIES:
Accrued liabilities $(928,000)
Other long-term liabilities (826,000)
--------
Reduction to equity related to asset/liability transfer $ (668,000)
========
(5) Represents the establishment of minority interest for the one-third
interest in TLC not owned by C2. Minority interest represents one-third
of TLC's members equity subsequent to the adjustment for the dividend
to Christiana and contribution of certain Christiana assets and
liabilities.
(6) Represents the establishment of a deferred income tax liability
attributed to temporary differences between the purchase price and
carryover basis of TLC assets and liabilities.
(7) Represents the liability for cash consideration to be paid to
Christiana related to the purchase of 666.667 membership units of TLC.
(8) Represents the amount of net proceeds associated with the sale of
5,202,664 shares of Common Stock offered by C2 at $4.00 per share, net
of expenses of $275,000.
(9) Represents the payment of the purchase price due to Christiana in
connection with the acquisition of two-thirds of TLC by C2.
-20-
<PAGE>
<TABLE>
PRO FORMA SUMMARY COMBINED STATEMENTS OF INCOME
<CAPTION>
For the Year Ended June 30, 1998
-------------------------------------------------------------
Pro Forma
Historical TLC Pro Forma Adjustments C2, Inc.
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues $90,179,000 $ - $90,179,000
Operating expenses 83,205,000 1,000,000 (1) 84,205,000
Interest expense 2,854,000 1,615,000 (2) 4,469,000
Other expense, net 379,000 - 379,000
Income (loss) before minority
interest and income taxes 3,741,000 (2,615,000) 1,126,000
Provision for income taxes - 200,000 (3) 200,000
Minority interest expense - 625,000 (4) 625,000
Net income (loss) 3,741,000 (3,440,000) 301,000
Basic and diluted net income per
share of common stock - - $ 0.11 (5)
Weighted average shares outstanding
(basic and diluted) - - 2,750,000 (5)
<CAPTION>
For the three months ended September 30, 1998
-------------------------------------------------------------
Pro Forma
Historical TLC Pro Forma Adjustments C2, Inc.
(unaudited)
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues $22,370,000 $ - $22,370,000
Operating expenses 20,606,000 250,000 (1) 20,856,000
Interest expense 621,000 404,000 (2) 1,025,000
Other expense, net 57,000 - 57,000
Income (loss) before minority
interest and income taxes 1,086,000 (654,000) 432,000
Provision for income taxes - 74,000 (3) 74,000
Minority interest expense - 206,000 (4) 206,000
Net income (loss) 1,086,000 (934,000) 152,000
Basic and diluted net income per
share of common stock $ 0.06 (5)
Weighted average shares outstanding
(basic and diluted) 2,750,000 (5)
</TABLE>
-21-
<PAGE>
NOTES TO PRO FORMA SUMMARY
COMBINED STATEMENTS OF INCOME
(1) Represents additional operating expenses resulting from corporate
expenses, including officers' salaries, occupancy expenses,
professional, legal, public company and other corporate related
expenses.
For the Year For the Three
Ended June Months Ended
30, 1998 September 30, 1998
------------ ------------
Officers salaries $390,000 $ 98,000
Occupancy expenses 150,000 38,000
Other corporate expenses 460,000 114,000
--------- ---------
$1,000,000 $250,000
========= =========
(2) Represents (i) the additional interest expense on the $20 million of
additional debt incurred immediately prior to the Acquisition and (ii)
the increase in interest expense related to higher borrowing rates on
the new revolving credit facility as follows:
For the Year For the Three
Ended Months Ended
June 30, 1998 September 30, 1998
------------------ ----------------------
$20 million draw on TLC's
revolving credit facility,
interest at an average
rate of LIBOR + 175 basis points $1,450,000 $363,000
Additional interest expense on
historical outstanding debt
bearing interest at a rate of
LIBOR + 175 basis points
(revolving credit facility
rate) versus a historical
rate of LIBOR + 125 basis
points 165,000 41,000
---------- --------
$1,615,000 $404,000
(3) Represents the incremental provision for Federal and state income taxes
required on the earnings of TLC, in addition to the required adjustment
for the tax impact of the pro forma adjustments.
(4) Represents 33.3% of net income allocable to TLC's minority interest
owner, calculated as follows:
-22-
<PAGE>
For the Year For the Three
Ended Months Ended
June 30, 1998 September 30, 1998
-------------------- -----------------------
Historical TLC income before
minority interest and income
taxes $3,741,000 $1,086,000
Less: Pro forma interes
expense (1,615,000) (404,000)
Less: C2 management fee
charged to TLC (250,000) (63,000)
------------ -----------
1,876,000 619,000
Minority ownership percentage 33.3% 33.3%
------------ -----------
$625,000 $206,000
============ ===========
(5) Basic and diluted income per share have been calculated using the
number of shares required to complete the TLC acquisition and pay the
expenses of the offering.
-23-
<PAGE>
SELECTED HISTORICAL TLC FINANCIAL DATA
The following table sets forth certain selected historical financial
data for TLC as of and for each of the five years ended June 30, 1998 and as of
June 30, 1998 and as of and for the three months ended September 30, 1998 and
1997. The historical financial data as of and for each of the four years ended
June 30, 1998 was derived from the financial statements of TLC, which were
audited by Arthur Andersen LLP, independent public accountants. The historical
financial data as of and for the year ended June 30, 1994 and as of and for the
three months ended September 30, 1998 and 1997 has not been audited. In the
opinion of TLC, the historical financial data as of and for the year ended June
30, 1994 and as of and for the three months ended September 30, 1998 and 1997
includes all adjusting entries necessary to present fairly the information set
forth therein. The following selected historical financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and TLC's Financial Statements and related notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
Selected Historical TLC Financial Data
(Amounts in thousands, except per membership unit data)
<CAPTION>
Three Months
Ended
September 30 For the Year Ended June 30
-------------------- ----------------------------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994(1)
-------------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Revenues $22,370 $23,047 $90,179 $84,208 $76,976 $71,029 $42,355
Income from operations 1,764 1,947 6,974 6,311 5,689 7,555 4,611
Interest expense 621 773 2,854 3,216 3,176 3,378 3,003
Net income 1,086 923 3,741 12,181(4) 1,536 2,562 995
Basic and diluted income
per membership unit(2) 1,086 923 3,741 12,181 1,536 2,562 995
Other Data:
Capital Expenditures 546 839 2,283 3,294 17,646 7,552 3,146
Depreciation and
amortization 1,721 1,706 6,651 7,186 6,971 6,684 4,671
EBITDA(3) 3,367 3,402 13,571 13,143 12,552 14,218 9,303
Cash flows from operating
activities 1,768 2,841 12,305 9,294 11,043 10,180 7,121
Cash flows from investing
activities (430) (839) (1,653) (1,822) (16,262) (7,116) (2,858)
Cash flows from financing
activities (1,459) (1,648) (10,335) (7,277) 4,883 (3,247) (3,934)
<CAPTION>
As of
September 30, As of June 30
--------------------- ----------------------------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994(1)
--------------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets $86,290 $93,007 $85,611 $90,140 $97,923 $88,731 $87,079
Total Debt 31,905 41,604 33,364 40,394 47,671 42,788 46,035
Total Member's Equity 44,983 42,058 43,897 43,461 31,280 29,744 27,182
- ---------------
(1) Effective January 4, 1994, Christiana consummated the acquisition of
Total Logistic Inc. The statement of income data and cash flow
information for fiscal 1994 reflects the combined operating results of
Wiscold and Total Logistic Inc. subsequent to its date of acquisition.
The balance sheet data reflects the combined results of these
aforementioned entities as of June 30, 1994.
(2) Effective June 30, 1997, Wiscold and Total Logistic Inc. were merged to
form TLC. Basic and diluted income per membership unit for periods
presented prior to 1997 are shown as if the units had been outstanding
for all periods presented.
(3) EBITDA is defined as income (loss) before taxes plus fixed charges.
Fixed charges consist of interest expense, depreciation and
amortization and gains or losses on disposal of assets. EBITDA is not a
measure of financial
-24-
<PAGE>
performance under generally accepted accounting principles and should
not be considered as an alternative to net income as a measure of
performance nor as an alternative to cash flow as a measure of
liquidity. Since all companies do not calculate EBITDA uniformly, it
may not be an accurate measure of comparison.
(4) Includes $11,171 of income related to an adjustment of deferred income
taxes resulting from a change in TLC's tax status from a C-Corporation
to a limited liability company.
</TABLE>
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1998 to the three months
ended September 30, 1997 for TLC
In the quarter ended September 30, 1998 consolidated revenues were
$22,370,000 compared to $23,047,000 for the same period the prior year
reflecting a decrease of $677,000 or 2.9%. Revenues from transportation services
for the quarter showed a slight decline of $107,000 or 1.1%. The decline related
to a softening in some carrier management accounts over the prior year. Revenues
from dry warehousing services declined for the quarter by $572,000 or 24.7% due
to the closure of a contracted facility in Puerto Rico at the end of the quarter
last year and the reduction of public dry warehousing activities at the Zeeland,
Michigan facility as TLC continues to de-emphasize public dry warehousing.
Refrigerated warehousing revenues increased $348,000 or 3.8% in the quarter.
This growth is attributable to new customers in the Rochelle, Illinois facility
and expanded programs with current customers in other facilities resulting in
increased capacity utilization for the balance of the refrigerated facilities.
Distribution services for the Michigan Department of Education were down in
revenue for the quarter by $161,000 or 8% due to changed buying patterns by the
state that reduced the volume of commodity products available for distribution.
The balance of the revenue decline was in international freight forwarding of
$182,000 or 26%, due to reduced shipments by customers to Asian markets.
In the quarter gross profit was $3,737,000 or 16.7% compared to
$3,846,000 or 16.7% for the same quarter ended September 30, 1997. Gross profit
from transportation services were down by $113,000 or 11.5% due to the decline
in revenue and compressed margins from carrier management operations resulting
from higher costs to acquire transportation in a tight freight market. Dry
warehousing services posted an increase in gross profit of $112,000 or 40.6%.
Improved efficiencies in continuing facilities with contracted customers
contributed to the significant improvement. Refrigerated warehousing services
reflected flat performance in gross profit quarter to quarter. Positive gross
profit growth in Milwaukee and Rochelle Logistic Centers were offset by lower
results in the Beaver Dam Logistic Center due to vegetable processing volumes
being down from last year. Distribution services for the Michigan Department of
Education had a gross profit decline of $50,000 or 40.6% related to reduced
revenue and a change in the mix of products being delivered. The balance of the
shortfall in gross profit relates to start up costs for new logistic accounts
that did not generate any significant revenue for the quarter.
-26-
<PAGE>
Selling, general and administrative expenses for the quarter were
$1,973,000 compared to $1,899,000 for the quarter ended September 30, 1997
reflecting an increase of $74,000 or 3.8%. The increase in these expenses is due
primarily to inflation.
Earnings from operations for the quarter ended September 30, 1998 were
$1,764,000 a decrease of $183,000 or 9.4%. The decrease in earnings from
operations is due to a decrease in margins coupled with a slight increase in
selling, general and administrative expenses.
Interest expense for the quarter was $621,000, which was a decrease of
$152,000 over the same quarter last year. Borrowings on bank financing lines
continue to decrease and reduce the interest expense paid to financial
institutions.
Net earnings for the quarter were $1,086,000 compared to $923,000 for
the same period last year for an increase of $163,000 or 17.7%. The decline in
operating profits were offset by a marked reduction in interest expense from
strong cash flow and related reductions in outstanding debt and lower borrowing
rates. No federal taxes were provided, as TLC is a limited liability company.
TLC Historical Income Statement Information
The following table sets forth, for the fiscal years ended June 30,
1998, 1997 and 1996 respectively, certain consolidated financial data for TLC,
expressed as a percentage of net sales, and the percentage changes in the dollar
amounts as compared to the prior period:
Percentage of
Revenues
June 30, Percentage Change
1997 1996
1998 1997 1996 to 1998 to 1997
---- ---- ---- ------- -------
Revenues 100.0% 100.0% 100.0% 7.1% 9.4%
Warehouse and Logistic
Expenses 84.3% 84.3% 84.4% 7.2% 9.3%
Selling and Administration 8.0% 8.2% 8.2% 3.2% 9.4%
Income from operations 7.7% 7.5% 7.4% 10.5% 10.9%
Comparison of Year Ended June 30, 1998 to the Year Ended June 30, 1997 for TLC
TLC's consolidated revenues for fiscal 1998 were $90,179,000 compared
to $84,208,000 reported for fiscal 1997, an increase of $5,971,000 or 7.1%.
Revenue growth at TLC was primarily attributable to volume increases in services
which includes carrier management services, transportation management services
and transportation operations. During fiscal 1998, revenues attributable to
transportation services increased $6,049,000 or 18.1% over the prior year due to
operation of an expanded fleet and strong demand . Revenue growth in
refrigerated warehousing services was $1,686,000 or 5.1% in fiscal 1998 due
primarily to increased utilization of existing facilities from both new and
existing customer relationships. Revenues from dry warehousing operations in
fiscal 1998 declined $3,599,000 or 29.9%, due to the closure of two facilities
at the end of fiscal 1997 consistent with TLC's strategy to deemphasize public
-27-
<PAGE>
dry warehousing activities. The balance of the revenue increase in fiscal 1998
of $1,835,000, is primarily attributable to expanded volume in distribution
services of food products to the State of Michigan Department of Education under
a new 5 year contract.
Gross profit for the year increased $887,000 or 6.7% to $14,122,000
from $13,235,000 in 1997. Each of TLC's service lines with the exception of dry
warehousing had increased gross profit due primarily to better utilization of
TLC's assets, improved productivity and strong cost controls. Transportation
services increased gross profit by $1,009,000 or 38.5%, due to volume growth,
higher utilization of revenue producing assets and an expanded fleet compared to
fiscal 1997. Refrigerated warehousing operations increased gross profit by
$465,000 or 6.0%, through increased capacity utilization of facilities and
strong cost control. Dry warehousing had a decline in gross profit of $494,000
or 26% primarily due to reduced revenues in this area. Distribution services
gross profit increased $240,000 or 49%, due to higher volume attributable to a
new 5-year contract with Michigan Department of Education covering an expanded
region of service.
Selling, general and administrative expenses, which include marketing
and advertising expenses, increased $224,000 or 3.2% for the fiscal year
compared to fiscal year 1997. The increase in these expenses is due primarily to
increases associated with inflation.
Income from operations for the fiscal year ended June 30, 1998
increased $663,000 or 10.5% from $6,311,000 in 1997 to $6,974,000 in 1998.
Revenue growth, especially in Transportation services, was the primary reason
for increased operating income and higher operating margin.
Interest expense for the fiscal year was $2,854,000, a reduction of
$362,000 from the prior year of $3,216,000. Interest expense in fiscal 1998 was
lower due to strong cash flow which enabled over $9,000,000 of debt reduction
during the year.
Pretax income for the fiscal year was $3,741,000, an increase of
$2,036,000 or 119.4% over fiscal year 1997. Strong growth and margins in
transportation and the improved capacity utilization in refrigerated warehousing
were the main operational contributors to these results. The 1998 pretax results
include one-time non-operating expenses totaling $325,000. This amount is made
up of $200,000 associated with the closure and sale of Wisconsin Logistic
Center. The remaining $125,000 in costs were expenses attributable to financing
requirements related to the merger between Christiana and Weatherford. Pretax
results for fiscal 1997 included a loss of $1,086,000 for the disposal of
special freezing equipment in connection with securing a long-term contract for
vegetable processing, freezing and warehousing with a major customer at the
Beaver Dam facility.
No provision for income taxes was recorded for the fiscal year because
TLC was a limited liability company for this period. For the fiscal year 1997,
TLC recorded an income tax provision of $695,000.
Comparison of Year Ended June 30, 1997 to the Year Ended June 30, 1996 for TLC
Total revenue for fiscal 1997 increased $7,232,000 or 9.4% to
$84,208,000 compared to fiscal 1996 due primarily to increased volume in
transportation and refrigerated warehousing services. The most significant
improvement was in revenue from transportation operations which
-28-
<PAGE>
increased 20.6% over the previous year, from $27,677,000 in fiscal 1996 to
$33,392,000 in fiscal 1997. During fiscal 1997, TLC secured a large multi-year
contract to provide transportation services to a major frozen food producer.
This contract, and certain management changes, enabled TLC to improve
significantly the operating performance in transportation- related logistic
services during fiscal 1997. Refrigerated warehousing service revenue increased
5.7% from $35,428,000 to $37,450,000 due primarily to increased utilization of
expanded capacity at the Rochelle Logistic Center and higher utilization at all
the Michigan based refrigerated facilities during fiscal 1997. In late fiscal
1997, TLC closed two dry public warehouses which were leased facilities in
Atlanta, Georgia and Sparks, Nevada. The closure of these facilities resulted
from TLC's strategic focus to provide value-added logistic services on a
contractual and longer term basis in dry warehousing operations. As a result of
these strategic changes, revenue for dry warehousing operations was down for
fiscal year 1997 by $1,600,000 or 11.9%.
Gross profit increased in fiscal 1997 by $1,215,000 or 10.1% compared
to fiscal 1996, primarily as a result of revenue growth combined with aggressive
cost management. An expanded transportation fleet and better utilization of
transportation equipment contributed to an increase of $1,200,000 in gross
profit for the year, compared to 1996. Refrigerated warehousing increased gross
profit by $110,000 for the year, compared to fiscal 1996, mainly through higher
occupancy levels in TLC's Michigan facilities and increased utilization of the
new Rochelle Logistic Center. Dry warehousing and added transportation expenses
had a negative impact on gross profits by $358,000 due to changes related to
warehouse closures and corporate restructuring.
Selling, general and administrative expenses increased $593,000 or 9.4%
in fiscal 1997, due in large part to increased activities in marketing and
sales.
Income from operations increased by $622,000 or 10.9% over fiscal 1996.
Operating income in 1997 was $6,311,000 compared to $5,689,000 in 1996. This
increase was due primarily to volume and productivity gains in transportation
operations.
Interest expense for the year was $3,216,000 compared to $3,176,000 in
fiscal 1996.
Pre-tax income was $1,705,000, a decrease of $906,000 compared to
fiscal 1996, due primarily to a loss of $1,036,000 related to the disposal of
special freezing equipment in connection with securing a longer term contract
for vegetable processing, freezing and warehouse services with a major customer
of the Beaver Dam Logistic Center.
The provision for taxes for fiscal year 1997 was $695,000 compared to
$1,075,000 for 1996. The effective tax rates for the two years were the same. In
1997, an adjustment of $11,171,000 was made to add to income the deferred income
taxes that resulted from a change in TLC's tax status from a C-corporation to a
limited liability company.
Net income for 1997 was $12,181,000, up from $1,536,000 in 1996 based
on the results of operations and the change in the tax status that eliminated
the deferred taxes as of 1997.
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Financial Liquidity and Capital Resources for C2 and TLC
C2's current sources of capital to fund corporate expenses are
management fees of $250,000 payable by TLC, short-term investments which are
expected to be $10,289,000, assuming the Offering is fully subscribed, and the
income on such investments.
C2 will continue to evaluate new acquisitions in areas strategic to
existing operations as well as new lines of business. Future acquisitions may be
funded through the proceeds of this offering, cash from operations, borrowings
under the existing line of credit or other credit facilities, along with
potential future equity issuances.
TLC has historically funded its operations and capital expenditures
with cash flow from operations supplemented by its revolving credit facility.
Net cash provided from operations was $12,305,000 in fiscal 1998 compared to
$9,294,000 in fiscal 1997, primarily as a result of an increase in earnings
after considering the elimination of $11,171,000 of income related to an
adjustment of deferred income taxes resulting from a change in TLC's tax status
from a C-Corporation to a limited liability company during fiscal 1997. Net cash
provided from operations was $1,768,000 in the three months ended September 30,
1998 compared to $2,841,000 in the three months ended September 30, 1997,
primarily as a result of changes in TLC's working capital between years.
Net cash used in investing activities for TLC for the fiscal year ended
June 30, 1998 decreased to $1,653,000 from $1,822,000 in fiscal 1997. The
decrease between years is primarily the result of a decrease in capital
expenditures.
Net cash used in financing activities for the fiscal year ended June
30, 1998 increased to $10,335,000 from $7,277,000 during the fiscal year ended
June 30, 1997. The increase in cash used in financing activities is primarily
due to distributions made to Christiana related to the retirement of a
promissory note and payment of income taxes in the amount of $2,326,000 and
$979,000, respectively.
In January 1997, TLC increased its transportation fleet by assuming the
leases for 60 additional tractors and 75 additional trailers from one of its
customers. The addition of these tractors and trailers represented approximately
a 50% increase in TLC's transportation fleet.
TLC has available to it a revolving credit facility of $70,000,000 at a
floating rate of LIBOR plus 175 basis points to finance its capital needs, the
$20 million dividend to Christiana and the repayment of the note to Christiana
in this amount at $3 million, plus interest. After the offering, TLC will have
approximately $17 million of additional available borrowings under its credit
facility.
As of September 30, 1998, TLC had no significant capital commitments.
TLC believes the future cash generated from operations will be more
than adequate to service its debt requirements and future capital expenditures
for the foreseeable future.
Year 2000
During fiscal 1998, TLC completed a comprehensive assessment of Year
2000 issues for both its financial information systems and other non-financial
systems. In the opinion of management, all hardware and software that could have
a significant Year 2000 impact have been identified and a remediation plan has
been implemented. Year 2000 issues for financial information systems are being
corrected through hardware and software upgrades. Non- financial systems,
primarily telephone and security, will be repaired or replaced in order to
achieve Year 2000 compliance. Based upon TLC's current projections, all Year
2000 compliant systems, both financial and non-financial, will be implemented no
later than January 1, 1999 to allow for sufficient testing. As of September 30,
1998, TLC was approximately 70% complete with the installation of its Year 2000
upgrades. By the time these upgrades are completed, TLC estimates that it will
have expended approximately $950,000 to resolve its Year 2000 problems.
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<PAGE>
TLC believes that its efforts are sufficient to address its Year 2000
problems. However, there can be no assurances that TLC will be successful in its
efforts. Any failure to address the Year 2000 problem may have a material
adverse effect on TLC's ability to provide its transportation and warehousing
services and process vital financial data. This could result in material lost
revenues to TLC in amounts which are not known at this time. TLC currently has
no contingency plans if its efforts to address the Year 2000 problem fail. After
TLC has completed the upgrades described above, contingency plans will be
developed.
TLC has solicited all of its major service providers concerning their
progress in compliance with the Year 2000 problem. TLC has received responses is
not aware of the inability of any service provider to address its Year 2000
problem.
Description of Credit Agreement
TLC entered into a credit agreement, dated November 2, 1998, with
Firstar Bank Milwaukee, N.A., and certain other banks. Subject to the
achievement of certain financial ratios and compliance with certain conditions,
TLC has the right to obtain revolving loans in the following outstanding
principal amounts:
Maximum Amount of
Time Period Revolving Loans Outstanding
Closing date through November 2, 1999 $70 million
November 3, 1999 through November 2, 2000 $68.75 million
November 3, 2000 through November 2, 2001 $64.35 million
November 3, 2001 through November 2, 2002 $59.35 million
November 3, 2002 through November 2, 2003 $53.35 million
The entire unpaid principal balance of loans made under the credit agreement
will be due and payable on November 2, 2003.
The proceeds of the initial loans under the credit agreement were used
to refinance existing indebtedness of TLC in the amount of approximately
$32,000,000. Additional loans will be used to finance the payment of the $20
million dividend from TLC to Christiana and finance the repayment of
approximately $3 million, plus accrued interest under a note to Christiana. The
available balance of the facility, estimated to be approximately $17 million
after completion of this
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offering will be available for working capital and general corporate purposes,
including the issuance of letters of credit of up to $3.5 million outstanding at
any one time.
The credit agreement will be secured by liens or security interests on
all or substantially all of the assets of TLC, other than certain transportation
equipment, and mortgages on its real estate.
The interest rate on borrowings under the credit agreement is expected
to be, at the option of TLC, LIBOR plus 175 basis points or the prime rate, less
25 basis points. These rates will vary over the term of the credit agreement
pursuant to a pricing grid based on the ratio of consolidated funded debt to
consolidated EBITDA, all as defined in the credit agreement, in accordance with
the following table:
APPLICABLE PERCENTAGES
Applicable
Percentage Applicable Applicable
for Percentage Percentage
Consolidated Eurodollar for for
Pricing Funded Debt Revolving Prime Rate Letter of
Level Ratio Loans Loans Credit Fee
- --------------------------------------------------------------------------------
7 >4.5:1.0 2.25 0.00 1.25
6 <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5 <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4 <3.5:1.0 but >3.0:1.0 1.50 (0.50) 1.25
3 <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2 <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1 <2.0:1.0 0.75 (1.00) 1.25
The credit agreement also contains provisions requiring TLC to reimburse its
lenders for increases in certain taxes, revenue requirements and other costs
incurred by such lenders.
Loans made under the credit agreement may be prepaid in whole or in
part without premium or penalty, except for reimbursement of the lenders for any
losses the lenders suffer as a result of repayment of LIBOR-based loan prior to
the last day of that applicable interest period.
Events of default under the credit agreement, include without
limitation, those relating to:
o non-payment of interest, principal or fees payable under the
credit agreement;
o inaccuracy of representations or warranties in the loan
documents;
o non-performance of covenants;
o cross-default to other material debt of TLC and its
subsidiaries;
o bankruptcy or insolvency;
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o judgments in excess of specified amounts;
o certain ERISA events;
o impairment of security interests in collateral;
o invalidity of guarantees;
o materially inaccurate or false representations or warranties;
and
o a change in control.
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BUSINESS
General
C2. C2 was formed on December 11, 1997 and has conducted no operations
to date . Following this offering, C2's only non-cash asset will be its
ownership interest in TLC. C2 intends to pursue acquisitions of businesses which
may or may not relate to the business of TLC.
TLC. TLC was formed on June 30, 1997 through a combination of the
operations of two wholly-owned subsidiaries of Christiana, Wiscold and Total
Logistic Inc. On September 1, 1992, Christiana acquired the assets of Wiscold, a
company formed in 1915, which engaged in providing public refrigerated
warehousing services, vegetable processing and freezing services, automated
vegetable packaging services, and transportation services into and out of its
facilities. On January 4, 1994, Christiana acquired Total Logistic Inc.
(formerly known as The TLC Group, Inc.), a Zeeland, Michigan-based firm engaged
in providing fully integrated warehousing, distribution and transportation
services in both refrigerated and non-refrigerated facilities.
TLC's transportation fleet is comprised of 175 tractors, 97 of which
are 0-3 years old; 78 of which are 4-6 years old; and none of which are older
than 6 years.
TLC's customers consist primarily of national, regional and local firms
engaged in food processing, consumer product manufacturing, wholesale
distribution and retailing. During fiscal 1998, TLC's top 10 customers accounted
for approximately 43% of total revenues. TLC serves approximately 1,450
customers.
Other Assets and Liabilities. Prior to Weatherford's acquisition of
Christiana, Christiana will contribute certain assets and liabilities to TLC for
no consideration. On the asset side, these items consist primarily of mortgage
notes receivable derived from certain condominium sales by Christiana which, as
of September 30, 1998, had an aggregate principal amount outstanding of $187,000
accruing interest at 8.25% and approximately $899,000 of cash surrender value of
life insurance. In addition, Christiana has already contributed to TLC
approximately 1.9 acres of undeveloped, partially submerged land in Huntington
Beach, California with a current book value of $0. This property is currently
subject to an easement granted in favor of the City of Huntington Beach.
Christiana is currently pursuing a change in zoning applicable to the property
in order to conduct residential development on the property. The outcome of
these efforts, and the value of the property if such efforts are successful, are
unable to be predicted at this time. On the liability side, the items
contributed by Christiana consist of accounts payable and accrued liabilities
including compensation, vacation, insurance benefits and taxes in the aggregate
amount of $1,754,000.
Strategy
TLC's strategy is to grow its business by emphasizing and enhancing its
ability to offer "one-stop shopping" to its customers through its wide variety
of services. TLC believes that its asset base of refrigerated and dry warehouses
and trucking operations, together with its expertise in transportation and
inventory management strategy and solutions, provides it with an advantage over
its competitors . TLC's competitors provide individual services such as
warehousing, transportation and freight forwarding in substantially the same
manner as TLC. Some TLC
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competitors provide only transportation services or warehousing services. Others
provide only management services. TLC provides all of these services in an
integrated fashion. This provides more efficient distribution programs and
reduced inventory for its customers. It is the goal of TLC to continue to
enhance the services that it provides to its customers by continuing to develop
solutions involving multiple services throughout the entire supply chain from
the manufacturer to end consumer.
TLC's strategy is based on its belief that competitive market forces
are requiring corporations to focus on core competencies leading more
corporations to outsource transportation services and distribution functions. In
addition, TLC believes that corporations are recognizing, on an increasing
basis, that properly provided transportation services will provide enhanced
inventory management, more responsive information systems and more efficient use
of trucking capacity.
Revenue by Business
TLC's revenue for each of its basic businesses are detailed below for
fiscal years ended June 30, 1998, 1997, and 1996.
Revenues
(Dollars in Millions)
1998 1997 1996
Amount % Amount % Amount %
Refrigerated $ 44 49% $ 38 45% $ 35 45%
Dry Warehousing 8 9% 12 14% 14 18%
Transportation 39 43% 33 39% 28 36%
International 2 2% 3 4% 3 4%
Eliminations (3) (3%) (2) (2%) (3) (3%)
---- ---- ---- ---- ---- ----
Total Revenues $ 90 100% $ 84 100% $ 77 100%
==== ==== ==== ==== ==== ====
Customers
TLC's services target the consumer goods industries; industries in
which logistics performance is important to success. Nearly 75% of TLC's
revenues come from food manufacturers, food wholesalers and food retailers.
While TLC's top 15 customers, all of which participate in the food
industry, account for 60% of revenues, no one customer represents more than 10%
of TLC's business. Beyond the food industry, the balance of TLC's customer base
is spread across a broad base of industries including pharmaceuticals,
automotive suppliers, building supplies and office furniture.
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Competition
Competition in TLC's industry is very fragmented. Leonard's Guide, a
leading industry publication, lists more than 1500 companies competing in the
United States marketplace. Companies, such as Exel, AmeriCold Logistics,
Prologis, Inc., GATX Logistics, Inc., or Ryder Integrated Logistics, Inc. own
and operate warehouses and/or transportation equipment. Others, such as Hub
Group Logistics Services, Menlo Logistics, and C.H. Robinson Logistics offer
transportation management expertise and information systems and subcontract
warehousing and transportation services .
TLC experiences competition for management services on a national
basis. In its warehousing and transportation business, TLC competes on a
regional and local basis. Other than the high capital requirements of building a
refrigerated warehouse facility, there are no significant barriers to entry into
any of the markets in which TLC operates. This permits a large number of smaller
competitors to enter TLC's industry.
In addition, TLC's customers, many of which have substantially greater
resources than TLC, may divert business from TLC's warehousing and
transportation operations by building their own warehouse facilities or
operating their own transportation fleet.
Organization
TLC's operations are headquartered in Zeeland, Michigan, and TLC also
maintains an office in Milwaukee, Wisconsin. TLC is organized into three main
operating units: refrigerated warehousing, dry warehousing and transportation.
Each operating unit is headed up by a group vice president/general manager.
Sales and marketing for TLC are principally performed at the corporate level,
with support from the group vice presidents as well as local warehouse facility
managers. TLC also maintains a business development group which is responsible
for pricing, logistics engineering, and transporting large logistic accounts
over from sales to operations during start up.
Sales and Marketing
Sales and marketing are principally performed at the corporate level,
with support from the group vice presidents and facility managers. The sales
organization is comprised of seven individuals and is divided into the following
teams: refrigerated warehousing team; dry warehousing team; transportation team;
and logistics sales team. Each of these teams has primary responsibility for
selling their specific services. The goal is to develop the sales team to
effectively present the fullest extent of TLC's services suited for each
customer.
Marketing and advertising is done centrally for the entire company and
uses a combination of media advertising and direct mail. The marketing
organization also has responsibility for maintaining and gathering information
on market intelligence related to competition, customers and the transportation
and warehousing industry in general.
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Business development supports both sales and operations by providing
pricing and costing services and assisting in the startup of complex
transportation and distribution projects.
Employees
The only employees of C2 are the executive officers described under
"Management- Executive Officers and Directors of C2." TLC had approximately 737
employees as of September 30, 1998. A breakdown of the employees by functional
area is set forth below:
Function Number of Employees Percentage of Total
-------- ------------------- -------------------
Operations 484 65.7%
Transportation 192 26.1%
Administration 51 6.9%
Sales and Marketing 10 1.3%
-- ---
Total 737 100%
=== ===
No TLC employees are covered by union contracts.
Patents, Licenses and Trademarks
TLC's operations are not dependent on any particular patent, license,
franchises, or trademarks. TLC has registered a trademark and the name "TLC"
with the United States Patent and Trademark office.
Government Regulations
TLC's transportation operations in interstate commerce are regulated by
the Interstate Commerce Commission ("ICC") and the operations of TLC in
intrastate commerce are regulated by various state agencies. These regulatory
authorities have broad authority, including the power to authorize motor carrier
operations, approve rates, charges and accounting systems, require periodic
financial reporting, and approve certain merger, consolidations and
acquisitions. TLC is also subject to safety requirements prescribed by the
United States Department of Transportation ("DOT"). Such matters as weight and
dimension of equipment and load are also subject to federal and state
regulations.
TLC's operations related to refrigerated food storage are subject to
regulations promulgated by the United States Department of Agriculture ("USDA").
TLC believes it is in compliance in all material respects with
applicable regulatory requirements relating to its operations. The failure of
TLC to comply with the regulations of the ICC, DOT, USDA or state agencies could
result in substantial fines or revocation of TLC's operating authority.
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Properties
As of September 30, 1998, TLC owned or leased twelve facilities in five
states. Of this total, seven are refrigerated/frozen with the balance being dry
facilities. The refrigerated facilities are operated through seven public
refrigerated warehouses located in Wisconsin (2), Michigan (3), and Illinois
(2). TLC's refrigerated facilities are large single-story buildings constructed
at dock height with full insulation and vapor barrier protection. The
refrigeration is provided by screw-type compressors in ammonia-based cooling
systems. These facilities are strategically located and well served by rail and
truck.
In addition to the refrigerated facilities discussed above, there are
five public non-refrigerated (or dry) warehouse distribution facilities, three
of which are located in Michigan and one in each of Indiana and New Jersey.
Zeeland Logistic Center II, located in Zeeland, Michigan is a company owned
facility. All other dry facilities are held under lease. Lease terms generally
match the underlying contracts with major customers served at each facility.
These facilities are single-story block or metal construction buildings. All dry
facilities are approved as food grade storage facilities.
The following tables list the twelve facilities by location, size,
type, and if owned or leased. Other than as indicated, all facilities are owned.
<TABLE>
REFRIGERATED WAREHOUSE FACILITIES
<CAPTION>
Total Storage Space Type of
Facility Location (cubic feet in millions) Facility
<S> <C> <C> <C>
Rochelle Logistic Center I Rochelle, Illinois #1 10.6 Distribution
Rochelle Logistic Center II Rochelle, Illinois #2 3.5 Distribution
Beaver Dam Logistic Center Beaver Dam, Wisconsin 7.2 Distribution/
Production
Milwaukee Logistic Center Wauwatosa, Wisconsin 4.3 Distribution
Holland Logistic Center(1) Holland, Michigan 2.1 Distribution/
Production
Kalamazoo Logistic
Center I(2) Kalamazoo, Michigan 3.3 Distribution
Kalamazoo Logistic Center II Kalamazoo, Michigan 2.8 Distribution
----
TOTAL 33.8
====
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<CAPTION>
DRY WAREHOUSE FACILITIES
Total Storage Space Type of
Facility Location (sq. ft. in thousands) Facility
<S> <C> <C> <C>
Zeeland Logistic Center I(1) Zeeland, MI 202 Public
Zeeland Logistic Center II Zeeland, MI 220 Public
Michigan Distr. Center I(1) Kalamazoo, MI 88 Public
Munster Logistic Center(1) Munster, IN 125 Public
Dayton Logistic Center(1) Dayton, NJ 90 Public
----
TOTAL 725
====
(1) Leased facility
(2) Includes 1.8 million cubic feet of dry storage capacity.
</TABLE>
Description of Properties
A brief description of each of the Properties follows, listed alphabetically by
state and city.
Illinois Properties
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
Rochelle Cold Storage campus is TLC's newest and largest refrigerated facility,
initially constructed in 1986. TLC believes that Rochelle Cold Storage is one of
the largest and most modern cold storage warehouse facilities in the United
States. Currently this facility is comprised of 14,100,000 cubic feet of
capacity after undergoing four capacity expansions in 1988, 1990, 1993, and
1996. All space is capable of temperatures of -20(0)F to ambient. Rochelle Cold
Storage is strategically located at the intersection of two main line East-West
railroads, the Burlington Northern and the Chicago Northwestern, and the cross
roads of interstate highways I 39 and I 88. Rochelle Cold Storage serves
primarily distribution customers in the Midwest.
Indiana Properties
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with access
to major north-south and east-west highways. The facility has access to rail
through Conrail and is a food grade warehouse. The total facility has available
125,000 square feet of dry storage. The warehouse operates as a public warehouse
with most of the customer base on short term contracts.
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Michigan Properties
Holland Logistic Center
449 Howard Avenue
Holland, MI 49424
Holland Logistic Center has undergone a number of expansions over the years,
with a major reconstruction in 1983 after a fire destroyed approximately 50% of
the facility. This refrigerated facility comprises 2,100,000 cubic feet of
storage capacity of which 1,300,000 cubic feet is freezer capacity, 400,000
cubic feet is cooler capacity and 400,000 cubic feet is convertible capacity
between freezer and cooler. Holland services both distribution customers as well
as blueberry growers in the West Michigan area. This location is situated on a
rail spur with two refrigerated rail docks. This facility is held under a lease
which expires December 31, 2000.
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
Kalamazoo Logistic Center campus has two distribution centers at this location.
Facility #1 is a 3,300,000 cubic foot facility with 1,100,000 cubic feet of
freezer capacity, 400,000 cubic feet of cooler capacity and 1,800,000 cubic feet
of dry storage capacity. This location services a number of distribution
customers in the Midwest and is strategically located at the I 94 and U.S. 31
crossroads in Michigan, equal distance between Chicago and Detroit.
Facility #2 is located adjacent to Facility #1 and is comprised of 2,800,000
cubic feet of capacity. This facility contains 1,500,000 cubic feet of cooler
capacity and 1,300,000 cubic feet of freezer capacity. Two large distribution
customers utilize 75% of this space. These facilities are held under long term
leases.
Also located at the Kalamazoo Logistic Center is a company owned 10,000 square
foot transportation equipment maintenance center. Approximately 50% of TLC's
fleet of over-the-road transportation units is domiciled in Kalamazoo, Michigan.
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
Zeeland Logistic Center campus has two facilities each of which provide dry
warehousing storage as public warehouses. Each of these facilities are foreign
trade zones and food grade warehouses, that provide both racked and bulk
storage. Capacity is utilized by both long term contractual customers and as
short term public warehouses. Zeeland Logistic Center I has 201,600 square feet
of storage and Zeeland Logistic Center II has 220,000 square feet.
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New Jersey Properties
Dayton Logistic Center
260 Docks Corner Road
Dayton, New Jersey 08810
Dayton Logistic Center provides warehousing and distribution services for
customers to the northeast region of the country. The facility has both
contractual and short term customers and operates as a public warehouse. In
total, the facility has 90,000 square feet of dry storage capacity.
Wisconsin Properties
Beaver Dam Logistic Center
1201 Green Valley Road
Beaver Dam, WI 53916
Beaver Dam Logistic Center was originally constructed in 1975. Since 1975, this
facility has undergone three freezer additions, the most recent in 1991, and is
comprised of 7,200,000 cubic feet of freezer storage space. Beaver Dam Logistic
Center serves distribution related customers as well as vegetable and cranberry
processors. This facility's unique capabilities involve value added services for
vegetable processors including freezing, blanching, slicing, dicing and food
service and retail poly bag packaging operations.
Milwaukee Logistic Center
11400 West Burleigh Street
Milwaukee, WI 53222
Milwaukee Logistic Center was originally constructed in 1954. There have been
six expansions of this facility. The Milwaukee Logistic Center facility
comprises 4,300,000 cubic feet of which 3,754,000 cubic feet is freezer capacity
and 546,000 cubic feet is cooler space. This facility has multi-temperature
refrigerated storage ranging from -20(0)F to +40(0)F and daily blast freezing
capacity of 750,000 pounds. This location has a 7-car private rail siding. An
additional 3,000,000 cubic feet of company owned refrigerated and processing
space adjacent to the Milwaukee Logistic Center facility is leased on a long
term basis to a third party retail grocery company.
Legal Proceedings
As of the date of this Prospectus, C2 has never been a party to any
legal proceeding. From time to time, TLC is named as a defendant in actions
arising out of the normal course of its business. As of the date of this
Prospectus, TLC is not a party to any pending legal proceeding that it believes
to be material.
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THE TLC PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the agreement
by which C2 will acquire two-thirds of TLC. The complete agreement is attached
as Annex A . You are encouraged to read Annex A.
Purchase Price
Immediately before Weatherford's acquisition of Christiana, C2 will
acquire two-thirds of TLC for an aggregate purchase price of $10,666,667. The
purchase price is payable no later than thirty (30) days following Weatherford's
acquisition of Christiana. Accordingly, C2's purchase of TLC will be completed
with the obligation of C2 to pay the purchase price no later than thirty (30)
days later.
Assumption of Liabilities
C2 and TLC agreed to assume certain liabilities of Christiana arising
prior to Weatherford's acquisition of Christiana, including without limitation,
liabilities resulting from:
o the business, operations or assets of Christiana or
any Christiana affiliate;
o any taxes for which Christiana or any Christiana affiliate
may be obligated (except for Christiana taxes expressly retained by
Christiana);
o any obligation, matter, fact, circumstance or action or
omission by any person in any way relating to or arising from the
business, operations or assets of Christiana or a Christiana affiliate;
o any product or service provided by Christiana or any
Christiana affiliate; and
o Weatherford's acquisition of Christiana or C2's acquisition
of TLC or any related transactions.
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Indemnification Obligations
TLC and C2 have agreed to indemnify, defend and hold Christiana,
Weatherford and affiliates of Weatherford harmless against liabilities
(including, without limitation, reasonable fees and expenses of attorneys,
accountants, consultants and experts) that such parties incur as a result of:
o any breach of any covenant or agreement of TLC or C2
contained in the agreement by which C2 will acquire TLC or any other
related agreement ;
o the acts or omissions of Christiana or any Christiana
affiliate on or before the date on which Weatherford acquires
Christiana;
o the Christiana liabilities assumed by C2 and TLC;
o any taxes as a result of Weatherford's acquisition of
Christiana failing to be a partially tax-free reorganization;
o environmental liabilities of Christiana or any Christiana
affiliate arising out of acts or omissions before Weatherford's
acquisition of Christiana;
o any liability relating to Christiana's 401(k) Plan and the
other employee benefit or welfare plans of Christiana or any Christiana
affiliate arising out of circumstances occurring on or prior to
Weatherford's acquisition of Christiana.
Christiana "Put" and Participation Rights
The agreement also provides that at any time after the fifth
anniversary of Weatherford's acquisition of Christiana, Christiana has the
option to sell to C2 or TLC, and C2 or TLC will be obligated to purchase,
Christiana's one-third ownership interest in TLC for $7 million. In addition, if
there is a change of control of C2 or C2 proposes to sell its interest in TLC to
an unrelated third party, Christiana has the right, but not the obligation, to
participate in such transaction with respect to its one-third interest in TLC by
selling its interest to C2 for the same equivalent consideration.
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THE OPERATING AGREEMENT
The following is a brief summary of certain provisions of the Operating
Agreement between C2 and Christiana as the two members of TLC. The complete
Operating Agreement is attached as Annex B. You are encouraged to read Annex B.
General
The Operating Agreement sets forth the terms and conditions of C2's and
Christiana's interests in TLC following Weatherford's acquisition of Christiana.
The Operating Agreement provides that TLC is a Delaware limited liability
company.
Members
The initial members of TLC are C2 and Christiana. Additional members
may be admitted to TLC only with the unanimous vote or written consent of C2 .
Allocations
All items of income, gain, loss or deduction of TLC will be allocated
among C2 and Christiana in proportion to their respective ownership interests.
Distributions
In order to permit the members to make their required estimated income
tax payments as a result of their ownership interests in TLC, TLC will make
mandatory distributions to the members in amounts sufficient to cover the
members' respective tax liabilities. TLC may make additional distributions to
the members in proportion to their respective ownership interests only upon the
agreement of both C2 and Christiana.
Management
The Management of TLC is vested in a board of managers. The initial
board of managers will consist of six managers, including William T. Donovan,
Bernard J. Duroc- Danner, Curtis W. Huff, Sheldon B. Lubar, John R. Patterson
and Gary R. Sarner. See "Management-Executive Officers and Prospective Managers
of TLC". Generally each manager is elected by the vote or written consent of the
members holding at least a majority of ownership in TLC. However, Christiana and
C2 will be entitled to elect, without the consent of any other member, a number
of managers that is proportionate to their respective ownership interests. The
operating agreement provides that the board of managers may not cause TLC to
take certain specified actions without the prior approval of all of the members.
Such matters include:
o the authorization or issuance of additional ownership interests
o the authorization or payment of any distribution , except for the
payment of any distribution that is necessary for C2 to fulfill its purchase
obligation with respect to Christiana's interest in TLC
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o purchase or acquisition by TLC or any subsidiary of TLC of ownership
interests in TLC
o approval of any merger, consolidation or similar transaction or sale
of all or substantially all of the operating assets of TLC
o the creation of any new subsidiary of TLC
o the liquidation or dissolution of TLC or any subsidiary of TLC
o any transaction between TLC or subsidiary of TLC and any affiliate of
a member
o any amendment to the operating agreement and
o any other matter for which approval of members is required under the
Delaware Limited Liability Company Act.
TLC will generally indemnify the managers to the fullest extent
permitted under the Delaware Limited Liability Company Act against any losses
incurred by reason of any act or omission in connection with the business of
TLC. The board of managers may appoint officers of TLC to perform such duties as
are set forth in the operating agreement or as specified by the board of
managers. The board of managers may authorize TLC to pay the officers any
reasonable fees for their services. Neither the members nor the managers are
required to devote their full time and efforts to TLC. TLC will pay C2 an annual
management fee of $250,000.
Assignment, Transfer and Repurchase of a Member's Units
Generally, neither C2 nor Christiana may transfer its interest in TLC
without the prior written consent of all of the board of managers. At any time
after the fifth anniversary of Weatherford's acquisition of Christiana,
Christiana may transfer any or all of interest in TLC to any person . However,
C2 will have a right of first refusal to purchase Christiana's interest for the
same price and at the same terms as such interest has been offered to the
transferee.
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HOW TO PARTICIPATE IN THE OFFERING
Letter of Transmittal
Each Christiana shareholder has a right to subscribe for one share of
C2 Common Stock for each share of Christiana common stock held immediately
before Weatherford's acquisition of Christiana.
Prior to ____________, 1998, each Christiana shareholder should mail to
Firstar Bank Milwaukee N. A. Letters of Transmittal electing one of the
following:
o To reconfirm the prior election pursuant to the Letter of
Transmittal provided on July 13, 1998
o To purchase no shares of C2 Common Stock
o To purchase as many shares of C2 Common Stock as possible
using the cash consideration to be received in Weatherford's
acquisition of Christiana
o To purchase a stated number of shares of C2 Common Stock
using a portion of the cash consideration
o To purchase all shares of C2 Common Stock to which such
Christiana shareholder is entitled using the cash consideration,
together with an additional payment
o To purchase all shares of C2 common stock to which such
Christiana shareholder is entitled, plus a stated number of additional
shares (subject to availability) using the cash consideration and an
additional payment.
Within 30 days of Weatherford's acquisition of Christiana, Weatherford
will pay to Firstar Bank Milwaukee N.A. the cash consideration due to such
Christiana shareholder and Firstar Trust Company will apply such cash
consideration in the manner directed by the Letter of Transmittal submitted by
such Christiana shareholder.
Because the cash consideration may be less than $4.00 per share, an
election to purchase C2 Common Stock may require an additional cash payment. The
amount of the additional cash payment will be set forth in an invoice sent by C2
to the subscriber setting forth the amount owed. This invoice must be paid, in
the form of a check made payable to "Firstar Trust Company" within 15 days of
receipt. If such invoice is not paid on a timely basis, C2 will automatically
reduce the amount of shares of C2 Common Stock purchased by the subscriber by an
amount equal to the amount of the invoice divided by four (4). For example, if a
Christiana shareholder holds 1,000 shares of Christiana common stock and wishes
to purchase 1,000 shares of C2 Common Stock in this offering, $3,600 (assuming
the cash consideration equals $3.60 per share, $3.60 multiplied by 1,000) will
be applied automatically by Firstar Trust Company, and the Christiana
shareholder will be invoiced for the $400 difference ($4,000 total subscription
price less the $3,600 paid automatically by Firstar Bank Milwaukee N.A.). The
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Christiana shareholder will then satisfy such invoice in the form of a check
made payable to "Firstar Trust Company." In the event the invoice is not
satisfied on a timely basis, the subscription will be automatically reduced by
100 shares of Common Stock ($400 divided by four (4)).
The method of delivery of letters of transmittal, subscription
agreements and payment of the subscription price to Firstar Bank Milaukee N.A.
will be at the election and risk of the Subscriber, not C2, Christiana, TLC,
Weatherford, Firstar or any affiliates thereof. If sent by mail, it is
recommended that the letter of transmittal and/or subscription agreement be sent
by registered mail, properly insured, with return receipt requested, and that a
sufficient number of days be allowed to ensure receipt by Firstar Bank Milwaukee
N.A. prior to ____________, 1998.
Record holders of shares of Christiana Common Stock, such as brokers,
trusts or depositaries for securities, who hold the shares for the account of
others, should notify the respective beneficial owners of the shares as soon as
possible to ascertain the beneficial owners' intentions and instructions with
respect to the purchase of C2 Common Stock. Based upon the instructions received
from the beneficial holders, the record holders should complete the Letters of
Transmittal and submit them with the applicable payment.
Subscription Price
The subscription price for the C2 Common Stock was determined by the
board of directors and is not based on an independent valuation . In setting the
price, C2 considered primarily the price to be paid for its two-thirds interest
in TLC and the potential usefulness of the excess funds to be generated from the
offering. These factors, taken together, formed the basis of the $4.00 per share
price for the C2 Common Stock. Other secondary factors were also considered
including the desire to simplify the process of Christiana shareholders
purchasing C2 Common Stock by setting a price which would be proximate to the
cash consideration per share to be received from Weatherford in connection with
its acquisition, while at the same time, meeting the minimum initial bid price
of $4.00 per share for the C2 Common Stock to qualify for listing on the Nasdaq
SmallCap Market.
Non-Christiana Shareholders
If any shares of C2 Common Stock remain after Christiana shareholders
make their elections, TLC management and the general public may purchase shares
of C2 Common Stock by delivery of a properly completed and executed subscription
agreement (provided with this Prospectus) to Firstar Bank Milwaukee N.A.,
together with payment in full in the form of a check made payable to "Firstar
Trust Company."
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Certificates
Certificates for shares of C2 Common Stock will be mailed as soon as
practicable after the subscriptions have been accepted by Firstar Bank Milwaukee
N.A.
Subscription Agent
The subscription agent is Firstar Bank Milwaukee N.A. The address to
which Letters of Transmittal and subscription agreements should be delivered,
whether by hand, by mail or by overnight courier, is:
Firstar Bank Milwaukee N.A.
1555 North River Center Drive
Suite 301
Milwaukee, Wisconsin 53212
Questions
All questions regarding the timeliness, validity, form and eligibility
of any subscription will be determined by C2, in or sole discretion, whose
determination will be final and binding. C2 reserves the absolute right to
reject any subscription if such subscription is not in proper form or if the
acceptance thereof or the issuance of shares of C2 Common Stock pursuant thereto
could be deemed unlawful. C2, in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine . Any questions or requests for assistance concerning
the method of subscribing for shares of C2 Common Stock should be directed to
William T. Donovan (414) 291-9000.
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MANAGEMENT
Executive Officers and Directors of the C2
The following table contains the name, age and position with C2 of each
executive officer and director as of June 30, 1998. Each person's respective
background is described following the table.
NAME AGE POSITION
---- --- --------
William T. Donovan 46 Chairman and Director
David J. Lubar 43 President and Director
Oyvind Solvang 39 Vice President
David E. Beckwith 70 Secretary
Nicholas F. Brady 68 Director
Sheldon B. Lubar 69 Director
Albert O. Nicholas 67 Director
William T. Donovan was named Chairman of C2 in December 1997. Mr.
Donovan is also the President, Chief Financial Officer and a director of
Christiana, positions he will vacate upon completion of Weatherford's
acquisition of Christiana. Mr. Donovan has held various executive positions with
Christiana since June 1988. Mr. Donovan has also been a principal of Lubar &
Co., a venture capital and investments firm located in Milwaukee, Wisconsin
since January 1980. Mr. Donovan is also a Director of Grey Wolf, Inc.
David J. Lubar has been President of C2 since December 1997. Mr. Lubar
also serves as President of Lubar & Co., a position he has held since January
1991. Mr. Lubar is a Director of Christiana, a position he will vacate upon the
completion of Weatherford's acquisition of Christiana. Mr. Lubar is the son of
Sheldon B. Lubar.
Oyvind Solvang has been Vice President of C2 since December 1997. Mr.
Solvang is also the Vice President of Christiana, a position he will vacate upon
the completion of Weatherford's acquisition of Christiana. Mr. Solvang has
served as President of Cleary Gull Reiland & McDevitt, Inc., an investment
banking firm located in Milwaukee, Wisconsin from January 1996 to October 1996
and Chief Operating Officer of Cleary Gull Reiland & McDevitt, Inc., from
October 1995 to January 1996. Prior thereto, from May 1994 to September 1995,
Mr. Solvang served as President of Scinticor, Incorporated, a manufacturer of
cardiac imaging devices, located in Milwaukee, Wisconsin, and from August 1990
to April 1994 as Vice President and General Manager of Applied Power, Inc., a
supplier of hydraulic systems, located in Butler, Wisconsin.
David E. Beckwith has been Secretary of C2 since December 1997. Since
May 1995, he served as Secretary of Christiana, a position he will vacate upon
the completion of Weatherford's acquisition of Christiana. Mr. Beckwith has been
associated with the law firm of Foley & Lardner since 1952 and has been a
Partner at Foley & Lardner since 1960.
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Nicholas F. Brady has been a Director of C2 since December 1997. Since
February 1993, Mr. Brady has been Chairman and President of Darby Advisors,
Inc., a private investment company located in Easton, Maryland. Prior thereto,
Mr. Brady served as Secretary of the United States Department of the Treasury
for over four years, and before that, Chairman of Dillon, Reed & Co., Inc. Mr.
Brady is a Director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a Director (or trustee) of 27 Templeton funds, which are registered
investment companies. Mr. Brady is also a Director of Christiana, a position he
will vacate upon completion of Weatherford's acquisition of Christiana.
Sheldon B. Lubar has been a Director of C2 since December 1997. Mr.
Lubar has also been a principal of Lubar & Co. since its inception in 1977. Mr.
Lubar is a Director of Ameritech Corporation, Weatherford, Firstar Corporation,
Massachusetts Mutual Life Insurance Co. and MGIC Investment Corporation. Mr.
Lubar currently serves as Chairman, Chief Executive Officer and a Director of
Christiana, all of which positions he will vacate upon completion of
Weatherford's acquisition of Christiana. Mr. Lubar is the father David J. Lubar.
Albert O. Nicholas has been a Director of C2 since December 1997. Mr.
Nicholas has been owner and President of Nicholas Company, Inc., a registered
investment advisor located in Milwaukee, Wisconsin since December, 1967.
Nicholas Company, Inc. is the advisor to six registered investment companies:
Nicholas Fund, Inc., Nicholas Two, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Addition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Income Fund. Mr. Nicholas is the President and a Director of each of these
investment companies. Mr. Nicholas is also a Director of Bando McGlocklin
Capital Corporation. In addition, Mr. Nicholas serves as a Director of
Christiana, a position he will vacate upon completion of Weatherford's
acquisition of Christiana.
Executive Officers and Prospective Managers of TLC
The following table contains the name, age and position with TLC of
each executive officer as of June 30, 1998 and the persons who will serve on the
board of managers upon completion of the offering. Each person's respective
background is described following the table.
NAME AGE POSITION
Gary R. Sarner 52 Chairman and Manager
John R. Patterson 51 President, Chief Executive Officer
and Manager
Brian L. Brink 38 Vice President and Chief Financial
Officer
Sheldon B. Lubar 69 Manager
William T. Donovan 46 Manager
Bernard J. Duroc-Danner 44 Manager
Curtis W. Huff 40 Manager
Gary R. Sarner was named Chairman of TLC in January 1994. Prior
thereto, Mr. Sarner was the President of Wiscold, Inc., the business of which
was acquired by Christiana in
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September 1992. Mr. Sarner is a Director of Christiana, a position he will
vacate upon completion of Weatherford's acquisition of Christiana.
John R. Patterson has served as President and Chief Executive Officer
of TLC since February 1996. Prior thereto, from June 1993 to February 1996, Mr.
Patterson served as Vice President-Operations for Schneider Logistics, Inc., a
provider of transportation and logistics services located in Green Bay,
Wisconsin. For the six prior years, Mr. Patterson was the President and
principal owner of Pro Drive, Inc., a truck driver recruiting and training firm
in Green Bay, Wisconsin. Mr. Patterson is a director of Christiana, a position
he will vacate upon completion of Weatherford's acquisition of Christiana.
Brian L. Brink has been Vice President and Chief Financial Officer of
TLC since May 1997. Prior thereto from December 1993 to May 1997, Mr. Brink
served as Chief Financial Officer for the Van Eerden Company, a national
refrigerated transportation and wholesale food distribution company. From May
1988 to December 1993, Mr. Brink served as Controller of Bil Mar Foods, a
division of Sara Lee Company, an international food processor.
Bernard J. Duroc-Danner joined Weatherford in May 1987 to initiate the
start-up of Weatherford's oilfield service and equipment business. He was
elected President of Weatherford in January 1990 and Chief Executive Officer in
May 1990. In connection with the Weatherford Merger, Mr. Duroc-Danner was
elected to the additional position of Chairman of the Board. Mr. Duroc-Danner
holds a Ph.D. in economics from Wharton (University of Philadelphia). Mr.
Duroc-Danner is a director of Parker Drilling Company.
Curtis W. Huff became Senior Vice President, General Counsel and
Secretary of Weatherford in June 1998. Prior thereto, Mr. Huff served as a
Partner of the law firm of Fullbright & Jaworski L.L.P. for seven years. Mr.
Huff is a director of UTI Energy Corporation.
Board Committees of C2
The board of directors has established an audit committee, a
compensation and nominating committee and a finance committee, each consisting
of three or more directors. C2 will maintain at least two independent directors
on its board of directors.
The duties of the audit dommittee will be to select and engage
independent public accountants to audit the books and records of C2 annually, to
review the activities and the reports of the independent public accountants and
authorize appropriate action. The audit committee will also approve any other
services to be performed by and approve the audit fee and other fees payable to
the independent public accountants and monitor the internal accounting controls
of C2. A majority of the members of the audit committee will consist of
independent directors.
The duties of the compensation and nominating committee will be to:
o provide a general review of the C2's compensation and benefit plans
to ensure that they meet C2's objectives;
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o to administer the 1998 Plan described below and to grant awards
thereunder;
o to consider and establish the compensation of all officers of C2 and
adopt major C2 compensation policies and practices;
o to consider and make recommendations to the board of directors
regarding the selection and retention of all elected officers of C2 and its
subsidiaries; and
o such other duties assigned by the board of directors or the bylaws
of C2.
A majority of the members of the compensation and nominating committee will
consist of independent directors.
The duties of the finance committee will be to assist the board of
directors in making financial decisions, which shall include:
o reviewing and approving all investments and capital commitments of
C2 not delegated to management pursuant to resolutions adopted by the majority
of the entire board of directors;
o development of financial plans and strategies of C2; and
o such other duties delegated to the finance committee by the board of
directors.
Executive Compensation
C2 was incorporated on December 11, 1997. Since its incorporation, C2
has conducted no operations, and has generated no revenue. C2 has never paid any
of its executive officers compensation. C2 anticipates that during fiscal 1999
its most highly compensated officers will be William T. Donovan, David J. Lubar
and Oyvind Solvang, who will be paid $175,000, $120,000 and $120,000,
respectively.
1998 Equity Incentive Plan
The 1998 Plan authorizes the granting of:
o stock options, which may be either incentive stock options or
nonqualified stock options;
o stock appreciation rights;
o restricted stock;
o performance shares; and
o stock option grants to directors who are not employees of C2
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The 1998 Plan is designed to provide the compensation and nominating
committee with broad flexibility and discretion to deal with the ever changing
executive compensation environment. In general, the terms and conditions of key
employee awards under the 1998 Plan will be left to the discretion of the
compensation and nominating committee. This will allow the Compensation and
nominating committee to structure varying incentive compensation awards from
time to time in order to best achieve the purposes of the 1998 Plan. The 1998
Plan provides that up to a total of 520,000 shares of C2 Common Stock will be
available for issuance pursuant to the granting of awards thereunder, with no
more than 50,000 shares issuable as restricted stock.
As of the date of the Prospectus, no awards have been granted under the
1998 Plan, except automatic grants to independent directors on the effective
date of this offering.
Director Compensation
The directors of C2 will receive no compensation for service as members
of either the board of directors or committees thereof other than option grants
pursuant to 1998 Plan. Effective after this offering, independent directors will
be entitled to reimbursement of out-of-pocket expenses.
In addition, under the 1998 Plan, on the effective date of this
offering, each then serving independent director will be granted non-qualified
stock options under the 1998 Plan to purchase 12,000 shares of C2 Common Stock
at a per share exercise price equal to the $4.00 per share. Each independent
director's initial option grant will vest ratably over an approximate five-year
period, provided that the independent director continues to serve as a member of
the board of directors at the end of each vesting period with respect to the
increment then vesting. All outstanding options granted to independent Directors
under the 1998 Plan will vest immediately upon a "change in control," or the
director's death or disability. All options granted to independent directors
under the 1998 Plan will expire upon the earlier to occur of five years from the
grant date or one year from the independent director ceasing to hold such
position.
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CERTAIN TRANSACTIONS
Pursuant to Weatherford's acquisition of Christiana, each share of
Christiana Common Stock will be converted into the right to receive Weatherford
common stock and cash.
The directors and officers of C2 beneficially own shares of Christiana
common stock (including shares of Christiana common stock subject to options) in
the following amounts:
SHARES OF CHRISTIANA COMMON
NAME STOCK BENEFICIALLY OWNED
Sheldon B. Lubar 968,615(1)
Albert O. Nicholas 310,700
David J. Lubar 427,403
Nicholas F. Brady 200,000
William T. Donovan 178,532
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(1) Includes 433,705 shares owned by Mr. Lubar's wife and 91,205 shares held in
trusts for the benefit of Mr. Lubar's grandchildren for which Mr. Lubar serves
as trustee.
Sheldon B. Lubar's three daughters, Joan P. Lubar, Kristine L. Thomson
and Susan L. Solvang (the wife of Oyvind Solvang, a Vice President of C2), own
448,551, 430,478 and 442,953 shares of Christiana Common Stock, respectively.
Sheldon B. Lubar entered into a letter agreement with C2 in which C2
and Mr. Lubar agreed that all Christiana shareholders would have the right to
purchase at least the same percentage ownership in C2 as such Christiana
shareholder has in Christiana immediately prior to Weatherford's acquisition and
at the same price per share as each of the Lubar family and that Mr. Lubar and
the remainder of the Lubar family would purchase enough C2 Common Stock in this
offering to ensure that the net proceeds of the offering to C2 will be at least
$10,666,667.
The Lubar family, Lubar & Co. and Venture Capital Fund, L.P., a fund
managed by Lubar & Co., and William T. Donovan own 5.3%, 0.8%, 6.0% and 0.7%,
respectively, of Emmpak Foods, Inc., a customer of TLC. During fiscal 1998,
Emmpak Foods, Inc. accounted for approximately $2.2 million in gross revenue for
TLC. David J. Lubar serves on the board of directors of Emmpak Foods, Inc.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of C2 Common Stock , after giving effect to Weatherford's
acquisition of Christiana and this offering, by each of C2's directors; each of
C2's executive officers; each person who is known by C2 to own beneficially more
than 5% of C2 Common Stock; and all C2's executive officers and directors as a
group.
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Number of Shares Beneficially Shares Beneficially Owned
Owned Prior to Offering After Offering
Name Number Percent Number Percent
William T. Donovan -- -- (1) (1)
David J. Lubar(2) -- -- (1) (1)
Oyvind Solvang -- -- (1) (1)
David E. Beckwith -- -- (1) (1)
Nicholas F. Brady -- -- (1) (1)
Sheldon B. Lubar 25 100% (1) (1)
Albert O. Nicholas -- -- (1) (1)
Joan P. Lubar(2) -- -- (1) (1)
Kristine L. Thomson(2) -- -- (1) (1)
Susan L. Solvang(2) -- -- (1) (1)
All directors and
executive officers as a
group (seven persons): 25 100% (1) (1)
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* Less than one percent.
(1) To be determined following the amount of shares purchased by Christiana
shareholders and the above named individuals . The Lubar family (which
includes Sheldon B. Lubar, David J. Lubar, Joan P. Lubar, Kristine L.
Thomson and Susan L. Solvang) has committed to purchase such amount of
C2 Common Stock to generate net proceeds from the offering of at least
$10,666,667.
(2) David J. Lubar is the son of Sheldon B. Lubar and Joan P. Lubar,
Kristine L. Thomson and Susan L. Solvang are daughters of Sheldon B.
Lubar.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of C2 will consist of 50,000,000 shares of
C2 Common Stock, $.01 par value, and 10,000,000 shares of undesignated preferred
stock, $.01 par value. Upon completion of the offering, 5,202,689 shares of C2
Common Stock and no shares of preferred stock will be issued and outstanding,
assuming the maximum number of shares of C2 Common Stock offered hereby are
sold.
The following summary description of the C2 Common Stock and preferred
stock is subject to, and qualified in its entirety by, the provisions of the
amended and restated articles of incorporation and amended and restated by-laws
which are included as exhibits to the Registration Statement of which this
Prospectus is a part and by the provisions of applicable law.
C2 Common Stock
After all cumulative dividends have been paid or declared and set apart
for payment on any shares of preferred stock that are outstanding, the C2 Common
Stock is entitled to such dividends as may be declared from time to time by the
board of directors in accordance with applicable law. For certain restrictions
on the ability of C2 to declare dividends, see "Dividend Policy."
Except as may be determined by the board of directors of C2 with
respect to any series of preferred stock, only the holders of C2 Common Stock
shall be entitled to vote for the election of directors of C2 and on all other
matters. Upon any such vote the holders of C2 Common Stock will be entitled to
one vote for each share of C2 Common Stock held by them subject to any
applicable law. Cumulative voting is not permitted.
All shares of C2 Common Stock are entitled to participate equally in
distributions in liquidation, subject to the prior rights of any preferred stock
that may be outstanding. Except as the board of directors may in its discretion
otherwise determine, holders of Common Stock have no preemptive rights to
subscribe for or purchase shares of C2. There are no conversion rights or
sinking fund or redemption provisions applicable to the C2 Common Stock. The C2
Common Stock to be outstanding upon completion of the Offering will be fully
paid and nonassessable (subject to Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law ("WBCL")).
The transfer agent for the C2 Common Stock is Firstar Bank Milwaukee
N.A.
Preferred Stock
C2's amended and restated articles of incorporation will provide that
the board of directors has the authority, without further action by the
shareholders, to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the designations, powers, preferences, privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of C2 Common Stock; provided that C2
will not offer preferred stock to any officer, director, 5% shareholder or other
affiliate except on the same terms as it is offered to all other existing
shareholders or new shareholders. The board of directors, without shareholder
approval, can
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issue preferred stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of C2 Common
Stock. Preferred stock could thus be issued quickly with terms calculated to
delay or prevent a change in control of C2 or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of C2 Common Stock, and may adversely affect the
voting and other rights of the holders of C2 Common Stock. C2 has no present
plans to issue any shares of preferred stock.
Certain Anti-Takeover and Indemnification Provisions
By-law Provisions. C2's amended and restated by-laws provide that a
special meeting may be called only by the Chairman of the board, the President,
or the board of directors and shall be called by the Chairman of the board or
the President upon the demand of the holders of record of shares representing at
least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the special meeting.
The amended and restated by-laws provide that the directors and
executive officers of C2 shall be indemnified to the fullest extent permitted by
the Wisconsin Business Corporation Law ("WBCL") against expenses (including
attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred by them in connection with any proceeding arising out of
their status as directors and executive officers.
Statutory Provisions. Section 180.1150 of the WBCL provides that the
voting power of shares of public Wisconsin corporations, such as C2, held by any
person or persons acting as a group that hold in excess of 20% of the voting
power for the election of directors is limited to 10% of the full voting power
of those shares. This restriction does not apply to shares acquired directly
from C2 or in certain specified transactions or shares for which full voting
power has been restored pursuant to a vote of shareholders.
Sections 180.1140 to 180.1144 (the "Wisconsin Business Combination
Statute") of the WBCL contain certain limitations and special voting provisions
applicable to "business combinations" between a Wisconsin corporation and an
"interested shareholder." The term "business combination" is defined for
purposes of the Wisconsin Business Combination Statute to include a merger or
share exchange, sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets equal to at least 5% of the market value of the stock or
assets of a corporation or 10% of its earning power, issuance of stock or rights
to purchase stock with a market value equal to at least 5% of the outstanding
stock, adoption of a plan of liquidation and certain other transactions
involving an "interested shareholder." An "interested shareholder" is defined as
a person who beneficially owns, directly or indirectly, 10% of the voting power
of the outstanding voting stock of a corporation or who is an affiliate or
associate of the corporation and
-57-
<PAGE>
beneficially owned 10% of the voting power of the then outstanding voting stock
within the last three years. The Wisconsin Business Combination Statute
prohibits a corporation from engaging in a business combination (other than a
business combination of a type specifically excluded from the coverage of the
statute) with an interested shareholder for a period of three years following
the date such person becomes an interested shareholder, unless the board of
directors approved the business combination or the acquisition of the stock that
resulted in a person becoming an interested shareholder before such acquisition.
Business combinations after the three-year period following the stock
acquisition date are permitted only if
* the board of directors approved the acquisition of the stock
prior to the acquisition date;
* the business combination is approved by a majority of the
outstanding voting stock not beneficially owned by the
interested shareholder;
* or the consideration to be received by shareholders meets
certain requirements of the Wisconsin Business Combination
Statute with respect to form and amount.
Sections 180.1130 to 180.1133 of the WBCL provide that certain
"business combinations" not meeting certain fair price standards must be
approved by a vote of at least 80% of the votes entitled to be cast by all
shareholders and by two-thirds of the votes entitled to be cast by shareholders
other than a "significant shareholder" who is a party to the transaction. The
term "business combination" is defined, for purposes of Sections 180.1130 to
180.1133 of the WBCL, to include, subject to certain exceptions, a merger or
consolidation of the corporation (or any subsidiary thereof) with, or the sale
or other disposition of substantially all of the assets of the corporation to,
any significant shareholder or affiliate thereof. "Significant shareholder" is
defined generally to include a person that is the beneficial owner of 10% or
more of the voting power of the corporation.
Section 180.1134 of the WBCL (the "Wisconsin Defensive Action
Restrictions") provides that, in addition to the vote otherwise required by law
or the articles of incorporation of an issuing public corporation, the approval
of the holders of a majority of the shares entitled to vote is required before
such corporation can take certain action while a takeover offer is being made or
after a takeover offer has been publicly announced and before it is concluded.
Under the Wisconsin Defensive Action Restrictions, shareholder approval is
required for the corporation to
* acquire more than 5% of its outstanding voting shares at a
price above the market price from any individual or
organization that owns more than 3% of the outstanding voting
shares and has held such shares for less than two years,
unless a similar offer is made to acquire all voting shares;
or
* sell or option assets of the corporation that amount to at
least 10% of the market value of the corporation, unless the
corporation has at least three independent directors or a
majority of the independent directors vote not to have the
provision apply to the corporation.
The restrictions described in clause (i) above may have the effect of deterring
a shareholder from acquiring shares of C2 with the goal of seeking to have C2
repurchase such shares at a premium over the market price.
SHARES ELIGIBLE FOR FUTURE SALE
After the offering, assuming the issuance of 5,202,664 shares of C2
Common Stock, C2 will have outstanding 5,202,689 shares of C2 Common Stock. The
5,202,664 shares of C2 Common Stock to be sold in this offering will be freely
tradeable without restriction unless acquired by affiliates of C2. All but the
25 shares of Common Stock issued to Sheldon B. Lubar in connection with C2's
initial capitalization were registered in the offering. The registered
-58-
<PAGE>
shares held by affiliates are hereinafter referred to as "control shares" and
the 25 unregistered shares held by Sheldon B. Lubar are hereinafter referred to
as "restricted shares." The restricted shares may be resold only upon
registration under the Securities Act or in compliance with an exemption from
the registration requirements of the Securities Act.
With respect to restricted shares, under Rule 144 as currently in
effect, if one year has elapsed since the later of the date of the acquisition
of restricted shares from either C2 or any affiliate of C2, the acquiror or
subsequent holder thereof may sell, within any three-month period commencing 90
days after consummation of the offering, a number of shares that does not exceed
the greater of one percent of the then outstanding shares of C2 Common Stock, or
the average weekly trading volume of the Common Stock on the Nasdaq SmallCap
Market during the four calendar weeks preceding the date on which notice of the
proposed sale is sent to the Commission. Sales under Rule 144 are also subject
to certain manner of sale provisions, notice requirements and the availability
of current public information about C2. If two years have elapsed since the
later of the date of the acquisition of restricted shares of Common Stock from
C2 or any affiliate of C2, a person who is not deemed to have been an affiliate
of C2 at any time for 90 days preceding a sale would be entitled to sell such
shares under Rule 144 without regard to the volume limitations, manner of sale
provisions or notice requirements. Affiliates, will also be able to sell their
control shares pursuant to the Rule 144 exemption, except that the one year
period will not apply.
LEGAL MATTERS
The validity of the issuance of C2 Common Stock offered hereby will be
passed upon for C2 by Foley & Lardner, Milwaukee, Wisconsin.
EXPERTS
The audited financial statements of C2 and TLC appearing in this
Prospectus and elsewhere in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports, and are included in this Prospectus in reliance upon the authority of
Arthur Andersen as experts in giving such reports.
AVAILABLE INFORMATION
C2 has filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act with respect to the C2 Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made.
After the offering, C2 will be file reports, proxy and information
statements and other information with the
-59-
<PAGE>
Commission. The Registration Statement, as well as any such reports, proxy and
information statements and other information filed by C2 with the Commission,
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York, 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
C2 intends to furnish its shareholders with annual reports containing
audited financial statements certified by its independent auditors.
Christiana and Weatherford have filed a Joint Proxy
Statement/Prospectus with the Commission relating to Weatherford's proposed
acquisition of Christiana and related matters. Christiana and Weatherford have
filed reports and information with the Commission in accordance with the
Commission's rules. Such reports and information may be obtained as described
above.
The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
web site is http://www.sec.gov.
-60-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
C2, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants................ F-2
Balance Sheet as of December 31, 1997................... F-3
Notes to Balance Sheet.................................. F-4
Balance Sheets as of September 30, 1998
and December 31, 1997 (unaudited)....................... F-6
Notes to Balance Sheets (unaudited)..................... F-7
TLC FINANCIAL STATEMENTS
Report of Independent Public Accountants................ F-8
Balance Sheets as of June 30, 1998 and 1997............. F-9
Statements of Income for the years
ended June 30, 1998, 1997 and 1996..................... F-10
Statements of Equity for the years
ended June 30, 1998, 1997 and 1996..................... F-11
Statements of Cash Flows for the years
ended June 30, 1998, 1997 and 1996..................... F-12
Notes to Financial Statements........................... F-13
Condensed Balance Sheets as of September 30,
1998 and June 30, 1998 (unaudited)..................... F-18
Condensed Statements of Income for the three months
ended September 30, 1998 and 1997 (unaudited).......... F-19
Condensed Statements of Cash Flows for the three
months ended September 30, 1998 and 1997 (unaudited)... F-20
Notes to Condensed Financial Statements (unaudited)..... F-21
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholder of C2, Inc.
We have audited the accompanying balance sheet of C2, Inc. (a Wisconsin
corporation), as of December 31, 1997. 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of C2, Inc. as of December 31, 1997,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 6, 1998
F-2
<PAGE>
C2, Inc.
Balance Sheet
As of December 31, 1997
ASSETS:
Due from Shareholder for common stock
subscribed $ 100
--------
Total assets $ 100
========
LIABILITIES AND SHAREHOLDER'S
EQUITY:
Total liabilities $ -
SHAREHOLDER'S EQUITY:
Preferred stock, $.01 par, 10,000,000 shares
authorized, none issued or outstanding -
Common stock, $.01 par, 50,000,000 shares
authorized, 25 shares issued and outstanding -
Additional paid-in capital 100
--------
Total shareholder's equity 100
--------
Total liabilities and shareholder's equity $ 100
========
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
C2, Inc.
Notes to Balance Sheet
A. Business and Organization:
C2, Inc. (the "Company") was organized in December 1997, for the purposes of
acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"), a
transportation, warehousing and logistics company (the "Acquisition"). The
Company intends to complete an initial public offering of up to 5,202,664 shares
of its common stock (the "Offering") and utilize the proceeds to fund the
Acquisition and for future operations. There is no assurance the Acquisition
will be completed and that the Company will be able to generate future operating
revenues.
The Company's assets as of December 31, 1997 consist exclusively of an amount
due from the sole shareholder pertaining to the initial capitalization of the
Company. The Company has not conducted any operations and all activities to date
have related to the Acquisition and the Offering. Accordingly, statements of
operations, changes in shareholder's equity and cash flows would not provide
meaningful information and have been omitted.
B. Shareholder's Equity:
In connection with its organization and initial capitalization, the Company
issued 25 shares of common stock for $100.
C. Commitments and Contingencies:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana") 666.667
Membership Units (two-thirds) of TLC for cash consideration of $10,667,000. The
Acquisition is contingent upon the consummation of the merger between Christiana
and Weatherford, discussed elsewhere in this Prospectus.
Under the Agreement, the company agreed to indemnify Christiana for certain
liabilities of Christiana. Christiana further has the right to require the
Company to purchase all of Christiana's 333.333 Membership Units in TLC for a
price equal to $7 million. See "The Purchase Agreement" included elsewhere in
the Prospectus.
D. Stock Options
The Company's shareholder has approved the 1998 Equity Incentive Plan (the "1998
Plan") under which a total of 520,000 shares of Common Stock are reserved for
awards to officers, directors and key employees as stock options, stock
appreciation rights, restricted stock and performance shares. As of December 31,
1997, no awards have been granted under the 1998 Plan.
F-4
<PAGE>
E. Events Subsequent to Date of Report of Independent Public Accountants
(Unaudited):
(1) Subsequent to December 31, 1997, the Company has incurred various legal
and professional fees associated with the Acquisition and the Offering.
On February 10, 1998, the Company filed a Registration Statement on
Form S-1 for the sale of its common stock. See "Risk Factors" included
elsewhere in this Prospectus.
(2) Subsequent to December 31, 1997, the Company amended its Articles of
Incorporation to change the par value of its Common Stock from $1.00 to
$.01, increase the number of common shares authorized from 9,000 to
50,000,000 and authorize 10,000,000 shares of $.01 par value preferred
stock. The impact of this amendment resulted only in a reclassification
of amounts within the Company's shareholder equity accounts. The
balance sheet as of December 31, 1997 has been restated to reflect the
impact of this amendment.
F-5
<PAGE>
C2
Balance Sheets (Unaudited)
As of September 30, 1998 and December 31, 1997
September 30, December 31,
1998 1997
ASSETS:
Cash $ 100 $ -
Due from shareholder for common
stock subscribed - 100
Deferred offering and acquisition costs 240,000 -
------- -------
Total assets $ 240,100 $ 100
======= ========
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses $ 240,000 $ -
------- -------
Total liabilities 240,000 -
SHAREHOLDERS EQUITY:
Preferred stock, $.01 par, 10,000,000 shares
authorized, none issues or outstanding - -
Common stock, $.01 par, 50,000,000 shares
authorized, 25 shares issued and outstanding - -
Additional paid-in capital 100 100
------- -------
Total shareholder's equity 100 100
------- -------
Total liabilities and shareholder's
equity $ 240,100 $ 100
======= =======
The accompanying notes are an integral part of this balance sheets.
F-6
<PAGE>
C2, Inc.
Notes to Balance Sheets (Unaudited)
June 30, 1998
A. Business and Organization:
C2, Inc. (the "Company") was organized in December 1997, for the purposes of
acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"), a
transportation, warehousing and logistics company (the "Acquisition"). The
Company intends to complete an initial public offering of up to 5,202,664 shares
of its common stock (the "Offering") and utilize the proceeds to fund the
Acquisition and for future operations. There is no assurance the Acquisition
will be completed and that the Company will be able to generate future operating
revenues.
The Company's assets as of June 30, 1998, consist of cash and costs incurred in
connection with the Offering and Acquisition which have been deferred in the
accompanying balance sheet. These offering and acquisition costs have been
deferred as they will be included either as a reduction to the amount raised in
the Offering or as an expense of the Acquisition. As of December 31, 1997, the
Company's assets consisted exclusively of an amount due from the sole
shareholder pertaining to the initial capitalization of the Company. Other than
activities related to the Offering and Acquisition, the Company has not
conducted any operations. Accordingly, statements of operation, changes in
shareholder's equity and cash flows would not provide meaningful information and
have been omitted for all periods presented.
B. Shareholder's Equity:
In connection with its organization and initial capitalization, the Company
issued 25 shares of common stock for $100.
C. Commitments and Contingencies:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana") 666.667
Membership Units (two-thirds) of TLC for cash consideration of $10,667,000. The
Acquisition is contingent upon the consummation of the merger between Christiana
and Weatherford, discussed elsewhere in this Prospectus.
Under the Agreement, the Company agreed to indemnify Christiana for certain
liabilities of Christiana. Christiana further has the right to require the
Company to purchase all of Christiana's 333.333 Membership Units in TLC for a
price equal to $7 million. See "The Purchase Agreement" included elsewhere in
the Prospectus.
D. Stock Options:
The Company's shareholder has approved the 1998 Equity Incentive Plan (the "1998
Plan") under which a total of 520,000 shares of common stock are reserved for
awards to officers, directors and key employees as stock options, stock
appreciation rights, restricted stock and performance shares. As of March 31,
1998, no awards have been granted under the 1998 Plan.
F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Total Logistic Control, LLC:
We have audited the accompanying balance sheets of Total Logistic Control, LLC
(a Delaware limited liability company and wholly owned subsidiary of Christiana
Companies, Inc.) as of June 30, 1998 and 1997, and the related statements of
income, equity and cash flows for each of the three years in the period ended
June 30, 1998. 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, evidencing
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Total Logistic Control, LLC as
of June 30, 1998 and 1997, and the results of its operations and its cash flows
for each of the years in the three year period ended June 30, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 12, 1998
F-8
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF JUNE 30
ASSETS 1998 1997
---------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents $ 541,000 $ 224,000
Accounts receivable, less
allowance for uncollectable
accounts 7,739,000 7,552,000
Inventories 233,000 273,000
Prepaids and other assets 311,000 259,000
------------- ---------------
Total current assets 8,824,000 8,308,000
LONG-TERM ASSETS:
Fixed assets, net 70,601,000 75,501,000
Goodwill 5,435,000 5,592,000
Other assets 751,000 739,000
------------- ---------------
Total long-term assets 76,787,000 81,832,000
------------- ---------------
Total assets $85,611,000 $ 90,140,000
============= ===============
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt $ 239,000 -
Current maturities of long-term debt 3,003,000 1,245,000
Accounts payable 3,774,000 2,868,000
Accrued liabilities 4,236,000 3,056,000
------------- ---------------
Total current liabilities 11,252,000 7,169,000
DUE TO PARENT COMPANY 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt 27,122,000 36,149,000
Other liabilities 340,000 361,000
------------- ---------------
Total long-term liabilities 27,462,000 36,510,000
------------- ---------------
Total liabilities 41,714,000 46,679,000
------------- ---------------
TOTAL MEMBER'S EQUITY 43,897,000 43,461,000
------------- ---------------
Total liabilities and
member's equity $85,611,000 $90,140,000
============= ===============
The accompanying notes are an integral part of these balance sheets.
F-9
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
REVENUES:
Warehousing and logistic
services $ 90,179,000 $ 84,208,000 $ 76,976,000
OPERATING EXPENSES:
Warehousing and logistic expenses 76,057,000 70,973,000 64,956,000
Selling, general and
administrative expenses 7,148,000 6,924,000 6,331,000
------------ ------------ ------------
83,205,000 77,897,000 71,287,000
------------ ------------ ------------
Income from operations 6,974,000 6,311,000 5,689,000
OTHER INCOME (EXPENSES):
Interest expense (2,854,000) (3,216,000) (3,176,000)
Gain (Loss) on disposal of assets (159,000) (1,036,000) 206,000
Other expense, net (220,000) (354,000) (108,000)
------------ ------------ ------------
(3,233,000) (4,606,000) (3,078,000)
------------ ------------ ------------
NET INCOME BEFORE INCOME TAXES 3,741,000 1,705,000 2,611,000
PROVISION FOR INCOME TAXES -- 695,000 1,075,000
ADJUSTMENT OF DEFERRED INCOME
TAXES RESULTING FROM A CHANGE IN
TAX STATUS -- 11,171,000 --
------------ ------------ ------------
NET INCOME $ 3,741,000 $ 12,181,000 $ 1,536,000
============ ============ ============
BASIC AND DILUTED INCOME PER MEMBERSHIP
UNIT $ 3,741 $ 12,181 $ 1,536
============ ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE
MEMBERSHIP UNITS OUTSTANDING 1,000 1,000 1,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
Membership Member's
Units Equity
Balance, June 30, 1995 1,000 $ 29,744,000
Net income -- 1,536,000
------------ ------------
Balance, June 30, 1996 1,000 $ 31,280,000
Net income -- 12,181,000
------------ ------------
Balance, June 30, 1997 1,000 $ 43,461,000
Net income -- 3,741,000
Distribution to Christiana for
promissory note retirement -- (2,326,000)
Distribution to Christiana for income
taxes -- (979,000)
------------ ------------
Balance, June 30, 1998 1,000 $ 43,897,000
============ ============
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
<CAPTION>
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 3,741,000 $ 12,181,000 $ 1,536,000
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 6,651,000 7,186,000 6,971,000
(Gain) loss on disposal of assets 159,000 1,036,000 (206,000)
Deferred income tax provision -- 1,023,000 746,000
Adjustment of deferred income taxes resulting
from a change in tax status -- (11,171,000) --
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable (187,000) 465,000 (404,000)
(Increase) decrease in inventories 40,000 166,000 (191,000)
(Increase) decrease of prepaids and other assets (164,000) 668,000 564,000
Increase (decrease) in accounts payable and
accrued liabilities 2,065,000 (2,260,000) 2,027,000
------------ ------------ ------------
Net cash provided by operating activities 12,305,000 9,294,000 11,043,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,283,000) (3,294,000) (17,646,000)
Proceeds from sale of fixed assets 630,000 1,472,000 1,384,000
------------ ------------ ------------
Net cash used in investing activities (1,653,000) (1,822,000) (16,262,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net 239,000 (1,354,000) (490,000)
Proceeds from issuance of long-term debt -- -- 9,011,000
Payment of amounts due to Christiana -- (295,000) --
Payment of long-term debt (7,269,000) (5,628,000) (3,638,000)
Distribution to Christiana for promissory note retirement (2,326,000) -- --
Distribution to Christiana for income taxes (979,000) -- --
------------ ------------ ------------
Net cash provided by (used in) financing activities (10,335,000) (7,277,000) 4,883,000
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 317,000 195,000 (336,000)
BEGINNING CASH AND CASH EQUIVALENTS,
JULY 1 224,000 29,000 365,000
------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS,
JUNE 30 $ 541,000 $ 224,000 $ 29,000
============ ============ ============
Supplemental Disclosures of Cash Flow Information
Interest paid $ 2,683,000 $ 3,000,000 $ 3,046,000
Amounts paid to Parent for income taxes -- 300,000 279,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business: Total Logistic Control, LLC ("TLC") is a wholly
owned subsidiary of Christiana Companies, Inc. ("Christiana"). TLC was
formed on June 30, 1997 as a result of the combination of Wiscold, Inc.
("Wiscold") and Total Logistic Control, Inc. ("Total Logistic"), both
former wholly owned subsidiaries of Christiana. The accompanying
financial statements have been restated to reflect this combination for
all periods presented. The June 30, 1998 and 1997 balance sheets reflect
the consolidated results of TLC. The fiscal 1998 statements of earnings,
equity and cash flows reflect the consolidated results of TLC. The fiscal
1997 and 1996 statements of earnings, equity and cash flows reflect the
combined operations of Wiscold and Total Logistic. All material
intercompany transactions have been eliminated. TLC operates in one
industry segment providing fully integrated third-party logistic
services, including warehousing, distribution and transportation services
in both refrigerated and non-refrigerated facilities predominantly in the
Midwest United States.
Revenue Recognition: Transportation revenue is recognized when the goods
are delivered to the customer. Warehousing revenue is recognized as
services are provided. Costs and related expenses are recorded as
incurred.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Accounts Receivable: Accounts receivable are presented net of an
allowance for uncollectable accounts of $222,000 and $223,000 at June 30,
1998 and 1997, respectively. The provision for bad debts was $119,000,
$123,000 and $227,000 for the years ended June 30, 1998, 1997 and 1996,
respectively.
Inventories: Inventories consist predominately of transportation
equipment repair parts. These items are carried at their lower of FIFO
(first-in, first-out) cost or market value.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated
methods for financial reporting purposes. The cost of major renewals and
improvements are capitalized; repair and maintenance costs are expensed
as incurred. Tires related to new equipment are included in the
capitalized equipment cost and depreciated using the same methods as
equipment. Replacement tires are expensed when placed in service. A
summary of the cost of fixed assets, accumulated depreciation and the
estimated useful lives for financial reporting purposes is as follows:
Estimated
1998 1997 Useful Lives
---- ---- ------------
Land $ 3,331,000 $ 3,380,000 --
Machinery and
equipment 52,859,000 52,816,000 5-7 years
Buildings and
improvements 41,488,000 41,534,000 30-32 years
Construction
in progress 616,000 451,000 --
Less: Accumulated
depreciation (27,693,000) (22,680,000)
------------ -----------
$ 70,601,000 $75,501,000
============ ===========
Goodwill: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1998, 1997 and 1996). The accumulated amortization at June
30, 1998 and 1997 was $723,000 and $566,000, respectively. TLC
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life may warrant revision or that
the remaining balance of goodwill may not be recoverable. When factors
indicate that goodwill should be evaluated for possible impairment, TLC
uses an estimate of the undiscounted cash flows over the remaining life
F-13
<PAGE>
of the goodwill measuring whether the goodwill is impaired. If impaired,
a loss is recognized for the amount the carrying value exceeds the fair
value.
Cash and Cash Equivalents: TLC considers all highly liquid investments
with original maturities of less than ninety days to be cash equivalents.
Income Per Membership Unit: Basic and Diluted Income per Membership Unit
have been restated in accordance with SFAS 128, "Earnings per Share" and
have been computed based on the weighted number of units as if the units
had been outstanding for all periods presented. As TLC does not have
dilutive financial instruments, basic and diluted income per membership
unit are the same for all periods presented.
Long-lived assets: During fiscal 1997, TLC adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." Adoption of this
standard did not have a material impact on TLC's financial position or
results of operations. TLC continually evaluates whether events and
circumstances have occurred that may indicate the remaining estimated
useful life may warrant revision or that the remaining balance of
long-lived assets may not be recoverable. When factors indicate that
long-lived assets should be evaluated for possible impairment, TLC uses
an estimate of the undiscounted cash flows over the remaining life of the
long-lived assets measuring whether the long-lived assets are impaired.
If impaired, a loss is recognized for the amount the carrying value
exceeds the fair value.
B. RELATED PARTY TRANSACTIONS:
As of June 30, 1998 and 1997, TLC had amounts due to Christiana of
$3,000,000 which represented a note payable to Christiana that bears
interest at a rate of 8.0% per annum. Related party interest expense was
$240,000 for fiscal 1998, 1997 and 1996. Prior to the combination of
Wiscold and Total Logistic, Total Logistic charged Christiana a
management fee related to certain administrative services rendered by TLC
on behalf of Christiana. The amount of this management fee was $240,000
for fiscal 1997 and 1996 and is reflected as a reduction to selling,
general and administrative expenses in the statement of earnings. The
amount of services rendered by Christiana on behalf of TLC for fiscal
1998, 1997 and 1996 is not material.
During fiscal 1998, TLC made a payment on behalf of Christiana to retire
a promissory note and accrued interest thereon in the amount of
$2,326,000. TLC will make distributions for current taxes payable
attributable to TLC's income. During fiscal 1998, TLC recorded
distributions to Christiana of $979,000. These distributions to
Christiana are reflected as a reduction to Member's Equity in the period
then ended.
C. INDEBTEDNESS:
The following is a summary of indebtedness as of June 30, 1997 and 1996:
1998 1997
-------------- -------------
Revolving credit agreement $27,273,000 $31,248,000
Line of credit 239,000 -
Notes payable 1,088,000 4,382,000
Subordinated Note 1,764,000 1,764,000
---------------- ------------
30,364,000 37,394,000
---------------- ------------
Less: Current portion of
long-term debt (3,003,000) (1,245,000)
Line of credit (239,000) -
---------------- ------------
Long-term debt $27,122,000 $36,149,000
================ ============
TLC has a revolving credit agreement that provides for borrowings at June
30, 1998 of up to $35,000,000. Borrowings under this agreement mature on
March 31, 2001 and bear interest, payable monthly at either LIBOR plus
125 basis points, or a floating rate at the bank's prime rate (6.9% at
June 30, 1998) and are unsecured. The revolving credit agreement
requires, among other things, that defined levels of net worth and debt
service coverage be maintained
F-14
<PAGE>
and restricts certain activities including limitation on new indebtedness
and the disposition of assets. As of June 30, 1998, TLC was in compliance
with all covenants. No compensating balances are required under the terms
of this credit facility.
TLC has a bank line of credit which permits borrowings up to $5,000,000.
As of June 30, 1998 and 1997, borrowings outstanding under this line of
credit were $239,000 and $-0-, respectively. Borrowings bear interest at
either LIBOR plus 200 basis points, or the bank's prime rate, at TLC's
option (7.65% and 7.69% at June 30, 1998 and 1997, respectively), and are
secured by certain accounts receivable. This line of credit was
terminated on August 5, 1998. Notes payable relate to specific equipment
purchases, primarily transportation and material handling equipment and a
new distribution facility, and are secured by certain assets of TLC.
These notes bear interest on both fixed and floating terms ranging from
6.375% to 9.37%. No compensating balances are required under the terms of
these credit arrangements. TLC's subordinated note bears interest at 8%
and is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
Year Ended
June 30 Total
------- -----
1999 $ 3,003,000
2000 5,008,000
2001 22,114,000
The weighted average interest rate paid on short-term borrowings was
7.73% and 7.46% for fiscal 1998 and 1997, respectively. The carrying
value of TLC's debt approximates fair value. The carrying amount of TLC's
floating rate debt was assumed to approximate its fair value. The fair
value of TLC's fixed-rate, long-term notes payable was based on the
market value of debt with similar maturities and interest rates. The
fixed-rate subordinated note that was given to a former owner of TLC was
negotiated in the overall context of the acquisition. TLC believes it is
impracticable to obtain the current fair value of this note because of
the excessive costs that would have to be incurred to obtain this
information.
D. INCOME TAXES:
Prior to July 1, 1997, TLC was included in the consolidated income tax
return of Christiana. The amounts reflected in the financial statements
are as if TLC was filing on a stand-alone basis. Income taxes paid as
shown in the statement of cash flows represents combined cash payments
made to Christiana by TLC.
Effective June 30, 1997, TLC converted from a C-Corporation to a Limited
Liability Company. For purposes of taxation, all earnings of TLC are
"passed through" to its members and taxed at the member level. As TLC is
no longer a taxable entity at June 30, 1997, all deferred taxes of TLC
have been removed from the balance sheet. The removal of these deferred
taxes due to TLC's change in tax status resulted in an increase to
earnings of $11,171,000 during fiscal 1997. The $695,000 provision for
income taxes for fiscal 1997 represents the combined Federal and state
income tax provision for the period during the fiscal year that TLC was a
C-Corporation.
Year Ended June 30
1997 1996
---- ----
Current:
Federal $(279,000) $280,000
State (49,000) 49,000
Deferred 1,023,000 746,000
--------- -------
$ 695,000 $1,075,000
========== ==========
F-15
<PAGE>
In the event that TLC was a taxable entity, a net deferred tax liability of
$11,227,000 and $11,171,000 as of June 30, 1998 and 1997 would have been
recorded on the balance sheet. The components are as follows:
1997 1998
---- ----
Deferred Tax assets:
Accrued expenses $978,000 $ 596,000
Book over tax amortization 424,000 584,000
Deferred revenue
---------- -----------
Total deferred tax asset $1,402,000 $1,180,000
========== ==========
Deferred tax liabilities:
Tax over book depreciation $12,629,000 $12,351,000
----------- -----------
Total deferred tax liability $12,629,000 $12,351,000
=========== ===========
A reconciliation of the statutory Federal income tax rate to TLC's
effective tax rate is as follows:
Year ended June 30
1997 1996
-------------- -----------------
Statutory Federal income tax rate 34% 34%
Increase in taxes resulting from
State income tax, net 5 5
Other, net 2 2
----------- -----------------
41% 41%
=========== =================
E. EMPLOYEE BENEFIT PLANS:
TLC has two 401(k) plans covering substantially all employees. The
expense incurred by TLC related to these plans is not material. TLC does
not provide post employment medical or insurance benefits.
F. COMMITMENTS:
TLC has operating leases for warehousing and office facilities along with
certain transportation equipment. Rental expense under these leases was
$6,812,000, $7,213,000 and $5,479,000 in fiscal 1998, 1997 and 1996,
respectively. At June 30, 1998, future minimum lease payments under these
operating leases are as follows:
Year Ended
June 30 Amount
----------------------------------------------------------------
1999 $4,226,000
2000 3,765,000
2001 3,304,000
2002 2,630,000
2003 1,825,000
Thereafter 8,456,000
G. Accounting Pronouncements:
Effective July 1, 1998, TLC adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components. Components of comprehensive income are net income and all other
non-shareholder changes in equity. For the quarter ended September 30, 1998, TLC
will be required to show components of comprehensive income in a separate
financial statement, if any other comprehensive income exists.
F-16
<PAGE>
Effective July 1, 1998, TLC adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." This statement establishes
standards for the way a public company reports information about operating
segments in its annual financial statements. It also requires TLC to report
selected information about operating segments in its interim financial reports.
This statement requires that a public company report financial and descriptive
information about its operating segments based on the way that the chief
operating decision maker organizes segments within TLC for making operating
decisions and assessing performance. TLC believes that it operates in a single
segment as of June 30, 1998.
H. Weatherford International, Inc. Merger Agreement:
On December 12, 1997, Christiana entered in an agreement with
Weatherford International, Inc. ("Weatherford") whereby Weatherford will
purchase all of the outstanding shares of Christiana. The terms of the merger
provide that each Christiana common share will be converted into (i) .7453
shares of Weatherford International, Inc. common stock, (ii) cash in the
approximate amount of $4.00, depending upon the balance of certain assets and
liabilities at the time of closing and (iii) a contingent cash payment of
approximately $1.92 after 5 years, subject to the incurrence of any indemnity
claims by Weatherford during this period.
On August 17, 1998, the shareholders of both Weatherford and Christiana
overwhelmingly approved the Merger agreement and sale of TLC to C2, Inc.
However, due to the recent decline in the value of Weatherford's common stock
price, the merger transaction was postponed until the conditions are met for
Christiana's shareholders to not recognize any taxable gain or loss on their
exchange of Christiana shares for Weatherford common stock in the merger. To
meet this requirement, Weatherford's stock price must be approximately $30.00
per share.
On October 14, 1998, Weatherford and Christiana amended the merger
agreement in order to complete the merger on a partially tax-yfree basis. The
revised merger agreement eliminates the requirement for a contingent cash
payment after five years. This cash payment will be used by Christiana to
purchase additional Weatherford common stock in the open market. Additionally,
Christiana agreed to spend up to $5 million of available cash to by Weatherford
Stock, if necessary. The share price of Weatherford stock needed to consummate
the merger was reduced from $30 to approximately $13 per share.
By its terms, the Merger Agreement may be terminated by either party
after January 31, 1999. At or prior to the completion of the merger:
(1) TLC will declare and pay a $20,000,000 dividend to Christiana
which will be financed by a new $65,000,000 revolving credit
facility which will bear interest at a floating rate of LIBOR
plus 225 basis points, mature on April 15, 2003, and be
secured by substantially all of the assets of TLC.
(2) Christiana will sell 666.667 Membership Units (two-thirds) of
TLC to C2, Inc. (a newly formed corporation) for $10,667,000.
(3) TLC will agree to indemnify Christiana for certain liabilities
of Christiana. See "The Purchase Agreement" included elsewhere
in this prospectus.
F-17
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 1998 AND JUNE 30, 1998
September 30, 1998 June 30, 1998
------------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................. $ 420,000 $ 541,000
Accounts receivable, net ................... 9,170,000 7,739,000
Inventories, prepaids and other assets ..... 1,161,000 544,000
----------- -----------
Total current assets ..................... 10,751,000 8,824,000
LONG-TERM ASSETS:
Fixed assets, net .......................... 69,410,000 70,601,000
Goodwill ................................... 5,396,000 5,435,000
Other assets ............................... 733,000 751,000
----------- -----------
Total long-term assets ................... 75,539,000 76,787,000
----------- -----------
Total assets ............................. $86,290,000 $85,611,000
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt ............................ $ -- $ 239,000
Current maturities of long-term debt ....... 2,630,000 3,003,000
Accounts payable ........................... 5,551,000 3,774,000
Accrued liablities ......................... 3,516,000 4,236,000
----------- -----------
Total current liabilities ................ 11,697,000 11,252,000
DUE TO PARENT COMPANY ...................... 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt ............................. 26,275,000 27,122,000
Other liabilities .......................... 335,000 340,000
----------- -----------
Total long-term liabilities .............. 26,610,000 27,462,000
----------- -----------
Total liabilities ........................ 41,307,000 41,714,000
----------- -----------
MEMBER'S EQUITY ............................... 44,983,000 43,897,000
----------- -----------
Total liabilities and member's equity .... $86,290,000 $85,611,000
=========== ===========
The accompanying notes are an integral part of these condensed balance sheets.
F-18
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---- ----
REVENUES:
Warehousing and logistic services .......... $ 22,370,000 $ 23,047,000
OPERATING EXPENSES:
Warehousing and logistic expenses .......... 18,633,000 19,201,000
Selling, general and administrative expenses 1,973,000 1,899,000
------------ ------------
20,606,000 21,100,000
------------ ------------
Income from operations ..................... 1,764,000 1,947,000
OTHER INCOME (EXPENSES):
Interest expense ........................... (621,000) (773,000)
Gain on sale of assets ..................... 61,000 --
Other expense, net ......................... (118,000) (251,000)
------------ ------------
(678,000) (1,024,000)
------------ ------------
INCOME BEFORE INCOME TAXES ................. 1,086,000 923,000
PROVISION FOR INCOME TAXES ................. -- --
------------ ------------
NET INCOME ................................. $ 1,086,000 $ 923,000
============ ============
BASIC AND DILUTED NET INCOME PER MEMBERSHIP
UNIT ....................................... $ 1,086 $ 923
============ ============
The accompanying notes are an integral part of these condensed statements.
F-19
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 1,086,000 $ 923,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating
Activities:
Depreciation and amortization ................................ 1,721,000 1,706,000
Gain on sale of assets ....................................... (61,000) --
Changes in Assets and Liabilities:
Increase in accounts receivable .............................. (1,431,000) (3,202,000)
(Increase) decrease in inventories, prepaids and other assets (599,000) 349,000
Increase in accounts payable and accrued liabilities ......... 1,052,000 3,065,000
----------- -----------
Net cash provided by operating activities ........... 1,768,000 2,841,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets .............................................. (546,000) (839,000)
Proceeds from sale of fixed assets .................................... 116,000 --
----------- -----------
Net cash used in investing activities ........................ (430,000) (839,000)
CASH FLOWS FORM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net .......................... (239,000) 944,000
Payment of long-term debt ............................................. (1,220,000) (266,000)
Dividend distribution to Parent Company ............................... (2,326,000)
----------- -----------
Net cash used in financing activities ........................ (1,459,000) (1,648,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ........................................................... (121,000) 354,000
BEGINNING CASH AND CASH EQUIVALENTS ................................... 541,000 224,000
----------- -----------
ENDING CASH AND CASH EQUIVALENTS ...................................... $ 420,000 $ 578,000
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid ................................................ $ 573,000 $ 765,000
Amounts paid to Parent for income taxes ...................... -- --
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-20
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1998
1. Basis of Presentation:
TLC is a wholly owned subsidiary of Christiana Companies, Inc.
("Christiana"). The condensed financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods presented. These financial statements should be
read in conjunction with the TLC's audited financial staements for the year
ended June 30, 1997 found elsewhere in this Prospectus.
2. Earnings per Membership Unit:
Earnings per Membership Unit have been computed based on the weighted
number of units outstanding as if outstanding for all periods presented.
Effective December 1997, TLC adopted Statement of Financial Accounting Standards
No. 128. "Earnings Per Share" ("SFAS No. 128"). Under SFAS No. 128 presentation
of both basic and diluted earnings per membership unit is required. As TLC does
not have any outstanding dilutive financial instruments, there is no difference
between basic and diluted earnings per membership unit as presented.
3. Income Taxes:
TLC is a Limited Liability Company ("LLC"). For purposes of taxation,
all earnings of the LLC are "passed through" to its members and taxed at the
member level. Accordingly, the financial statements do not show a provision for
income taxes or deferred income taxes.
4. Distribution to Parent Company:
During the three month period ended September 30, 1997, TLC made a
payment on behalf of Christiana to pay down a promissory note payable and
accrued interest thereon in the amount of $2,326,000. This payment has been
deemed a dividend distribution to Christiana and is reflected as a reduction to
member's equity in the period then ended.
5. Comprehensive Income:
Effective January 1, 1998, TLC adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This
statement established standards for reporting and display of comprehensive
income and its components. Components of comprehensive income are net income and
all other non-owner changes in equity. Because TLC has no comprehensive income
components other than net income, comprehensive income and net income are
identical for all periods presented.
6. Accounting Pronouncements:
Effective January 1, 1998, TLC adopted Statement of Position ("SOP")
No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." TLC's accounting for costs of computer software developed or
obtained for internal use is consistent with the guidance established in the
SOP. As a result, adoption of this statement did not have a material impact on
TLC's financial position or results of operations.
Effective January 1, 1998, TLC adopted SOP 98-5, "Reporting on the
Costs of Start-up Activities." This SOP provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
of this statement did not have a material impact on TLC's financial position or
results of operations.
TLC is currently researching SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement shall be effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. Earlier application of all provisions of this
statement is permitted. This statement shall not be applied retroactively to
financial statements of prior periods. This statement is expected not to impact
TLC's operating results or financial position as TLC does not currently use
derivative financial instruments.
F-21
<PAGE>
ANNEX A
AGREEMENT*
By and Among
WEATHERFORD INTERNATIONAL, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.
AND
C2, INC.
December 12, 1997
*As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998 and Amendment No. 2 to Logistic Purchase
Agreement dated October 14, 1998.
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 12th day of December,
1997, as amended by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated
October 14, 1998, by and among Weatherford International, Inc., a Delaware
corporation ("Weatherford"), Total Logistic Control, LLC, a Delaware limited
liability company ("TLC"), Christiana Companies, Inc., a Wisconsin corporation
("Christiana") and C2, Inc., a Wisconsin corporation ("C2").
W I T N E S S E T H :
WHEREAS, Weatherford, Christiana Acquisition, Inc., a
Wisconsin corporation ("Sub"), Christiana and C2 have entered into an Amended
and Restated Agreement and Plan of Merger dated December 12, 1997 (the "Merger
Agreement") pursuant to which Sub, a wholly owned subsidiary of Weatherford,
will merge with and into Christiana and thereby Christiana will become a wholly
owned subsidiary of Weatherford (the "Merger")
WHEREAS, as a condition to the Merger, Christiana will sell
666.667 Membership Units (as defined in Section 1.16 hereof) of TLC to C2
pursuant to the terms and conditions hereinafter set forth (the "Logistic
Sale").
NOW, THEREFORE, in consideration of the mutual covenants of
the parties herein and the mutual benefits derived from this Agreement
("Agreement"), the parties, intending to be legally bound, hereby agree as
follows:
1. Definitions.
1.1 Affiliate. Affiliate means, as to the person specified,
any person controlling, controlled by or under common control with such person,
with the concept of control in such context meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract or otherwise.
1.2 Assumed Liabilities. Assumed Liabilities means any and all
Liabilities and Environmental Liabilities (except for the Retained Liabilities)
to which Christiana, Weatherford or a Christiana Company may now or at any time
in the future become subject (whether directly or indirectly, including by
reason of Christiana or a Christiana Company owning, controlling or operating
any business or assets of any Person (including any current or past Affiliate)),
resulting from, arising out of or relating to (i) any Christiana Company (other
than TLC), (ii) the business, operations or assets of Christiana or any
Christiana Company on or prior to the Effective Date, (iii) any Christiana Taxes
for periods ending on or before the Effective Date (except Christiana Taxes to
be expressly retained by Christiana pursuant to the Merger
-2-
<PAGE>
Agreement), (iv) any obligation, matter, fact, circumstance or action or
omission by any Person in any way relating to or arising from the business,
operations or assets of Christiana or a Christiana Company that existed on or
prior to the Effective Date; (v) any product or service provided by Christiana
or any Christiana Company prior to the Effective Date, (vi) the Merger, the
Logistic Sale or any of the other transactions contemplated hereby, (vii)
previously conducted operations of Christiana or any Christiana Company and
(viii) C2's interest in TLC. The term "Assumed Liabilities" shall include,
without limitation, the following Liabilities (other than Retained Liabilities):
(a) Any and all Liabilities and Environmental Liabilities
resulting from, arising out of or relating to (i) the assets,
activities, operations, current or former facilities, actions or
omissions of Christiana or any of its officers, directors, employees,
independent contractors or agents occurring on or before the Effective
Date, (ii) the assets, activities, operations, current or former
facilities, actions or omissions of any Christiana Company or any of
its officers, directors, employees, independent contractors or agents,
(iii) any product liability claim, recall, replacement, returns or
customer allowances of or relating to Christiana or any Christiana
Company, or (iv) any contract or permit of Christiana or any Christiana
Company;
(b) Any and all accounts and notes payable of Christiana or
any Christiana Company, excluding accounts payable which have been
accounted for in the calculation of Christiana Net Cash set forth in
the Merger Agreement;
(c) Any and all Liabilities relating to Christiana or any
Christiana Company employee benefit plans;
(d) Any and all Liabilities and Environmental Liabilities on
behalf of or which arise from or relate to active employees, or retired
and inactive employees, of Christiana or any Christiana Company,
including, without limitation, (i) liability for any salaries, wages,
tax equalization payments, vacation pay, sick leave, personal leave,
severance pay, wrongful dismissal or discrimination claims; (ii)
liability for or under any employee benefit plan, policy or
arrangement, including, without limitation, retirement, pension,
medical, dental, profit sharing, unemployment, supplemental
unemployment or disability plan policy or arrangement; (iii) liability
for any payroll taxes, social security or similar taxes or withholding;
(iv) liability arising from claims or litigation; and (v) liability
arising from any injury, death, loss, disability, occupational disease
or claims under any worker's compensation laws;
(e) Any and all Liabilities and Environmental Liabilities
resulting from, arising out, relating to or occurring on the
Properties, including those properties listed on Schedule 1.2 hereof,
the operations on any of the foregoing, and any off-site Environmental
Liabilities related to any of the foregoing, including without
limitation, those under any indemnification agreement or obligation of
Christiana or any Christiana Company and any documents relating
thereto;
-3-
<PAGE>
(f) Any and all Liabilities of TLC or any of its subsidiaries
with respect to transactions or events occurring or existing on or
prior to the Effective Date;
(g) Any and all litigation and claims for Liabilities of
Christiana or any Christiana Company existing as of the Effective Date;
(h )Any and all Liabilities for Christiana Taxes, arising out
of, or related to, Christiana for taxable periods on or before the
Effective Date (except such Christiana Taxes expressly retained by
Christiana pursuant to the Merger Agreement);
(i) Any misrepresentation or incorrect representation or
warranty of Christiana under the Merger Agreement without regard to any
materiality or knowledge qualification; and
(j) Any and all legal, accounting, consulting and expert fees
and expenses incurred after the date hereof in investigating,
preparing, defending, settling or discharging any claim or action
arising under, out of or in connection with any of the Assumed
Liabilities other than those associated with Weatherford's counsel's
evaluation of the Merger and the Logistic sale.
1.3 Business Day. Business Day means a day on which national
banks are generally open for the transaction of business in Houston, Texas.
1.4 CERCLA. CERCLA means the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601, et seq.
1.5 Christiana. Christiana, for purposes of the assumption
indemnification provisions of this Agreement includes Christiana Companies, Inc.
and any and all predecessors thereto, whether by merger, purchase or acquisition
of assets or otherwise, and any and all predecessors to any such entities.
1.6 Circumstance. Circumstance has the meaning specified in
Section 6.2 hereof.
1.7 Effective Date. Effective Date means the time and date the
Merger is made effective.
1.8 Environmental Conditions. Environmental Conditions means
any pollution, contamination, degradation, damage or injury caused by, related
to, arising form or in connection with the generation, handling, use, treatment,
storage, transportation, disposal, discharge, release or emission of any Waste
Materials.
-4-
<PAGE>
1.9 Environmental Law or Environmental Laws. Environmental Law
or Environmental Laws means all laws, rules, regulations, statutes, ordinances,
decrees or orders of any governmental entity now or at any time in the future in
effect relating to (i) the control of any potential pollutant or protection of
the air, water or land, (ii) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation, and (iii) exposure to
hazardous, toxic or other substances alleged to be harmful. The term
"Environmental Law" or "Environmental Laws" includes, without limitation, (1)
the terms and conditions of any license, permit, approval or other authorization
by any governmental entity and (2) judicial, administrative or other regulatory
decrees, judgments and orders of any governmental entity. The term
"Environmental Law" or "Environmental Laws" includes, but is not limited to the
following statutes and the regulations promulgated thereunder: the Clean Air
Act, 42 U.S.C. ss. 7401 et seq., The Clean Water Act, 33 U.S.C. ss. 1251 et
seq., the Resource Conservation Recovery Act, 42 U.S.C. ss. 6901 et seq., the
Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 11011 et seq., the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Water Pollution
Control Act, 33 U.S.C. ss. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C.
ss. 300f et seq., CERCLA and any state, county or local regulations similar
thereto.
1.10 Environmental Liabilities. Environmental Liabilities
means any and all liabilities, responsibilities, claims, suits, losses, costs
(including remediation, removal, response, abatement, clean-up, investigative or
monitoring costs and any other related costs and expenses), other causes of
action recognized now or at any later time, damages, settlements, expenses,
charges, assessments, liens, penalties, fines, pre-judgment and post-judgment
interest, attorney fees and other legal fees (i) pursuant to any agreement,
order, notice, requirement, responsibility or directive (including directives
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements) arising out of or in connection with any Environmental
Laws, or (ii) pursuant to any claim by a governmental entity or other person or
entity for personal injury, property damage, damage to natural resources,
remediation or similar costs or expenses incurred or asserted by such entity or
person pursuant to common law or statute.
1.11 Weatherford Indemnified Parties. Weatherford Indemnified
Parties shall have the meaning set forth in Section 6.1(a) hereof.
1.12 Christiana Company. Christiana Company means any
corporation, partnership, limited liability company, association or other
entity, of which Christiana or any Christiana Company now or at any time in the
past owned, directly or indirectly, an ownership interest in (whether or not
such ownership interest constituted control of the entity and whether or not
such interest represented a passive or active investment), including those
companies named on Schedule 1.12 hereto.
1.13 Christiana Taxes. Christiana Taxes means any and all
taxes (other than Weatherford Related Taxes as defined in the Merger Agreement)
to which Christiana or any Christiana Company may be obligated relating to or
arising from (i) the current or past operations or assets of Christiana or any
Christiana Company through the Effective Date, (ii) the Logistic Sale, (iii) the
Merger, (iv) any tax return filed by any current or past member of
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Christiana's consolidated group, (v) any Tax to which Christiana may be alleged
to be liable by reason of being affiliated with any other Person for all periods
prior to the Effective Date, (vi) property taxes with respect to the assets of
Christiana or any Christiana Company for all periods prior to the Effective Date
and (vii) any transfer taxes or value added taxes in connection with the
transactions contemplated by the Logistic Sale and the Merger.
1.14 Liability. Liability means any and all claims, demands,
liabilities, responsibilities, disputes, causes of action and obligations of
every nature whatsoever, liquidated or unliquidated, known or unknown, matured
or unmatured, or fixed or contingent.
1.15 Member. Member means each person who has been admitted to
TLC as a member as provided in the Delaware Limited Liability Company Act (the
"DLLCA") and the Operating Agreement.
1.16 Membership Units. Membership Units means the basis by
which a Member's ownership interest in TLC issued pursuant to the Operating
Agreement is measured.
1.17 Merger. Merger means the merger of Christiana
Acquisition, Inc. with and into Christiana Companies, Inc. as contemplated by
the Merger Agreement.
1.18 Merger Agreement. Merger Agreement means the Amended and
Restated Agreement and Plan of Merger dated December 12, 1997, by and among
Weatherford, Christiana Acquisition, Inc., Christiana Companies, Inc. and C2,
Inc.
1.19 Operating Agreement. Operating Agreement shall mean the
form of Operating Agreement attached hereto as Exhibit A.
1.20 Person. Person means an individual, corporation, limited
liability company, partnership, governmental authority or any other entity.
1.21 Properties. Properties means the properties currently or
previously owned or operated by Christiana or any Christiana Company.
1.22 Retained Liabilities. Retained Liabilities shall mean and
be limited solely to (i) those accounts payable relating to Christiana that are
reflected on the Effective Date balance sheet of Christiana, (ii) those accounts
payable reflected on the Effective Date balance sheet of Christiana and agreed
to by Weatherford prior to the Effective Date, (iii) the obligations of
Christiana that arise after the Effective Date (other than obligations relating
to matters existing or occurring on or prior to the Effective Date and
indemnification, warranty and product liability, wrongful death or property
claims associated with actions or omissions prior to the Effective Date or any
business conducted prior to the Effective Date) and (iv) Weatherford Related
Taxes (as defined in the Merger Agreement).
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1.23 Taxes. Taxes means all federal, state, local, foreign and
other taxes, charges, fees, duties, levies, imposts, customs or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, profit share,
license, lease, service, service use, value added, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation, premium, property,
windfall profits or other taxes, fees, assessments, customs, duties, levies,
imposts, or charges of any kind whatsoever with any interest, penalties,
additions to tax, fines or other additional amounts imposed thereon or related
thereto, and the term Tax means any one of the foregoing Taxes.
1.24 Waste Materials. Waste Material means any (i) toxic or
hazardous materials or substances; (ii) solid wastes, including asbestos,
polychlorinated biphenyls, mercury, buried contaminants, chemicals, flammable or
explosive materials; (iii) radioactive materials; (iv) petroleum wastes and
spills or releases of petroleum products; and (v) any other chemical, pollutant,
contaminant, substance or waste that is regulated by any governmental entity
under any Environmental Law.
2. Purchase and Sale of Membership Units; Purchase Price.
2.1. Purchase and Sale of Membership Units.
(a) Effective as of the closing, Christiana shall sell,
transfer, assign, convey and deliver, and C2 shall purchase and accept,
666.667 Membership Units.
(b) CHRISTIANA MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE MEMBERSHIP UNITS OR THE ASSETS (CURRENT,
FIXED, PERSONAL, REAL, TANGIBLE OR INTANGIBLE) OF TLC AND ITS
SUBSIDIARIES, INCLUDING, BUT NOT LIMITED TO, CONDITION OR WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT, CAPACITY, SUITABILITY, UTILITY, SALABILITY, AVAILABILITY,
COLLECTIBILITY, OPERATIONS, CONDITIONS, MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, IT BEING THE EXPRESS AGREEMENT OF C2, TLC AND
CHRISTIANA THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, C2
WILL ACQUIRE THE MEMBERSHIP UNITS AND INTEREST IN THE ASSETS OF TLC
THROUGH SUCH OWNERSHIP INTEREST IN THEIR PRESENT CONDITION AND STATE OF
REPAIR, ON AN "AS IS AND WHERE IS, WITH ALL FAULTS" BASIS.
2.2 Assumption. Effective as of the closing, as an inducement
to Sub to merge with Christiana, C2 hereby unconditionally assumes and
undertakes to pay, satisfy and discharge when due the Assumed Liabilities.
Notwithstanding the foregoing, Christiana hereby retains and C2 will have no
liability with respect to the Retained Liabilities. In addition, effective as of
the Closing, as a further inducement to Sub to merge with Christiana, TLC hereby
unconditionally
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assumes and undertakes to pay, satisfy and discharge when due the Assumed
Liabilities to the extent such Assumed Liabilities relate to any of the
historical businesses, operations or assets of TLC and its subsidiaries. The
closing shall occur on or prior to the closing of the Merger.
2.3. Purchase Price. The aggregate purchase price ("Purchase
Price") for the 666.667 Membership Units shall be (i) $10,666,667, payable on
the same date that funds are paid by Weatherford to the Exchange Agent (as
defined in the Merger Agreement) pursuant to Section 1.8(c) of the Merger
Agreement by C2 to Christiana in the form of a certified or cashier's check, or,
at the option of Christiana, by wire transfer of immediately available funds to
an account designated by Christiana and (ii) the assumption by C2 at the closing
of the Assumed Liabilities.
2.4 Absolute Assumption. It is the intent of the parties that
the Liabilities and Environmental Liabilities assumed by C2 and TLC under this
Agreement shall be without regard to the cause thereof or the negligence of any
Person, whether such negligence be sole, joint or concurrent, active or passive,
and whether such Liability or Environmental Liability is based on strict
liability, absolute liability or arising as an obligation of contribution. C2
and TLC each hereby waives and releases for itself and on behalf of Affiliates
(other than Christiana, Weatherford and their respective Affiliates) any claims,
defenses or claims for contribution that it has or may have against Christiana,
Weatherford or any of their respective Affiliates with respect to the Assumed
Liabilities.
3. Representations of Christiana.
3.1. Organization. Christiana is a corporation duly organized
and validly existing under the laws of the state of Wisconsin. TLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the state of Delaware.
3.2. Title. The 666.667 Membership Units being transferred
pursuant to this Agreement without any representation or warranty of any kind,
including any implied representations of the title.
4. Representations of C2 and TLC.
4.1. Organization. TLC is a limited liability company duly
organized and validly existing under the laws of the state of Delaware. C2 is a
corporation duly organized and validly existing under the laws of the state of
Wisconsin.
4.2. Corporate Power. Each of C2 and TLC has full power, legal
right and authority to enter into this Agreement, and to carry out the
transactions contemplated hereby. The execution of this Agreement, and full
performance hereunder, has been duly authorized by C2's Board of Directors and
TLC's Members.
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4.3. Validity. This Agreement has been duly and validly
executed and delivered by C2 and TLC and is the legal, valid and binding
obligation of each of C2 and TLC, enforceable in accordance with its terms.
5. Operating Agreement; Put and Participation Rights.
5.1 Operating Agreement. At the Closing, C2 and Christiana
shall enter into the Operating Agreement.
5.2 Put.At any time after the fifth anniversary date of the
Effective Date, Christiana shall have the option (but shall not be required) to
sell to C2 or TLC, at Christiana's option, and C2 and TLC, as applicable, shall
be required to purchase, all (but not less than all) of Christiana's Membership
Units for a price equal to $7 million. To exercise this option, Christiana shall
provide notice in writing to C2 or TLC, as applicable, of such election. The
closing of any purchase pursuant to this Section 5.2 shall occur within 60 days
of notice to C2 or TLC, as applicable. The price required to be paid by C2 or
TLC, as applicable pursuant to this Section 5.2 shall be paid in cash. The
rights contained in this Section 5.2 shall expire on the date one year after the
fifth anniversary of the Effective Date.
5.3 Participation Rights.If there is a proposed merger,
consolidation or share exchange involving C2 or TLC or if C2 shall propose to
transfer or sell all its interest in TLC to an unrelated third party (a "Third
Party") in one or more transactions, Christiana shall have the right to
participate (a "Tag Along Right") in such sale with respect to the Membership
Units held by it for the same equivalent consideration per equivalent unit in
TLC and otherwise on the same terms as such member sells or transfers their
interests in C2. If circumstances occur which give rise to the Tag Along Right,
then C2 shall give written notice ("Tag Along Notice") to Christiana providing a
summary of the terms of the proposed sale to the Third Party and advising
Christiana of its Tag Along Right. Christiana may exercise its Tag Along Right
by delivery of written notice to C2 within fifteen (15) days of its receipt of
the Tag Along Right. If Christiana gives written notice indicating that it
wishes to sell, it shall be obligated to sell its Membership Units upon the
substantially same terms and conditions as the members of C2 are selling to the
Third Party conditioned upon and contemporaneous with completion of the
transaction of purchase and sale with the Third Party.
6. Indemnification.
6.1 Indemnification Matters.
(a) Indemnification. Each of C2 and TLC, jointly and
severally, hereby agree to indemnify, defend and hold Christiana,
Weatherford and their respective officers, directors, employees, agents
and assigns (collectively, the "Weatherford Indemnified Parties")
harmless from and against any and all Liabilities or Environmental
Liabilities (including, without limitation, reasonable fees and
expenses of attorneys, accountants, consultants and experts) that the
Weatherford Indemnified Parties incur, are subject to a claim for, or
are subject to, that are based upon, arising out of, relating to or
otherwise in respect of:
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(i) Any breach of any covenant or agreement of C2 or
TLC contained in this Agreement or in any other agreement
contemplated hereby;
(ii) The acts or omissions of Christiana or any
Christiana Company on or before the Effective Date;
(iii) The acts or omissions of TLC, any Christiana
Company or any of its Affiliates (other than Christiana or
Weatherford) or the conduct of any business by them on or
after the Effective Date (it being understood that this
indemnification shall not apply to acts or omissions by
Christiana or Weatherford after the Effective Date);
(iv) The Assumed Liabilities;
(v) Any and all amounts for which Christiana or
Weatherford may be liable on account of any claims,
administrative charges, self-insured retentions, deductibles,
retrospective premiums or fronting provisions in insurance
policies, including as the result of any uninsured period,
insolvent insurance carriers or exhausted policies, arising
from claims by Christiana or any Christiana Company, or the
employees of any of the foregoing, or claims by insurance
carriers of Christiana or any Christiana Company for indemnity
arising from or out of claims by or against Christiana or any
Christiana Company for acts or omissions of Christiana or any
Christiana Company, or related to any current or past business
of Christiana or any Christiana Company or any product or
service provided by Christiana or any Christiana Company in
whole or part prior to the Effective Date;
(vi) Any settlements or judgments in any litigation
commenced by one or more insurance carriers against Christiana
or Weatherford on account of claims by any Christiana Company
or employees of any Christiana Company and, if filed prior to
the Effective Date, by Christiana or any employee of
Christiana;
(vii) Any Taxes (other than Weatherford Related
Taxes) as a result of the Logistic Sale and any Taxes as a
result of the Merger subsequently being determined to be a
taxable transaction for foreign, federal, state or local law
purposes regardless of the theory or reason for the
transactions being subject to Tax;
(viii) The on-site or off-site handling, storage,
treatment or disposal of any Waste Materials generated by
Christiana or any Christiana Company on or prior to the
Effective Date or any Christiana Company at any time;
(ix) Any COBRA Liability with respect to any
employees of Christiana or any Christiana Company prior to the
Closing;
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(x) Any and all Environmental Conditions, known or
unknown, existing on, at or underlying any of the Properties
on or prior to the Effective Date;
(xi) Any and all Liabilities incurred by Christiana
or Weatherford pursuant to its obligations hereunder in
seeking to obtain or obtaining any consent or approval to
assign and transfer any interest in TLC;
(xii) Any acts or omissions of Christiana or any
Christiana Company relating to the ownership or operation of
the business of Christiana or any Christiana Company or the
Properties on or prior to the Effective Date;
(xiii) Any Liability relating to any claim or demand
by any stockholder of Christiana or Weatherford with respect
to the Merger, the Logistic Sale or the transactions relating
thereto; and
(xiv) Any Liability relating to any Christiana or any
Christiana Company employee benefit or welfare plans arising
out of circumstances occurring on or prior to the Effective
Date.
(b) Allocation of Liability Payment Obligations. To the extent
a Liability exists or a claim for indemnification is made by an
Weatherford Indemnified Party hereunder, such Liability shall be paid
and such claim shall be defended and paid as follows:
(i) If the Liability or claim relates primarily to
the historic assets, liability operations of business TLC
(excluding [describe non TLC historic subs] (the "TLC Historic
Business"), TLC shall, as between C2 and TLC, be primarily
responsible for the payment of such Liability and the defense
and payment of such claim. If TLC does not defend or pay such
claim, C2 shall be responsible for the defense and payment of
such claim.
(ii) If the Liability or claim relates primarily to a
matter other than the TLC Historic Business, C2 shall, as
between C2 and TLC and subject to the provisions of clause
(iii) below, be primarily responsible for the payment of such
Liability and the defense and payment of such claim. If C2
does not defend or pay such claim, TLC shall be responsible
for the defense and payment of such claim.
(iii) If the Liability or claim relates primarily to
a matter other than the TLC Historic Business, the costs of
defense and payment of the Liability shall be paid by
Weatherford to the extent and only to the extent of the
Christiana Retained Cash (as defined in the Merger Agreement);
provided that once such Christiana Retained Cash is paid
pursuant to the Merger Agreement, Weatherford shall have no
obligation to pay such amounts. Any such payments shall be
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subject to Weatherford being provided with reasonable
documentation regarding the payment obligations.
(iv) If TLC pays any amounts relating to an Assumed
Liability or an indemnification claim hereunder, Christiana
shall be entitled to receive a cash payment equal to one-third
of any such amount paid when and if (i) TLC or all or
substantially all of its assets are sold, (ii) there is a sale
of Membership Units by C2 or (iii) there is a direct or
indirect transfer or sale of the membership units of TLC held
by C2 or of the membership units of C2. The obligation to pay
such amounts shall be payable by C2.
(v) To secure the obligations of C2 hereunder, C2
shall pledge to Christiana all of C2's interest in TLC,
including all rights to distributions in respect thereof,
pursuant to a pledge agreement in such form and having such
terms as Christiana may reasonably request.
(vi) Notwithstanding the foregoing, nothing contained
in this Agreement shall be construed to be an assumption of
any obligation or responsibility by Weatherford of any Assumed
Liabilities and its obligations hereunder shall be personal to
TLC and C2 to the extent and only to the extent Weatherford
has agreed to fund the payment of indemnity claims by it with
the Christiana Retained Cash as expressly provided herein. No
third party shall be deemed to have any rights against
Weatherford as result of this Agreement.
(c) Absolute Indemnity. NONE OF THE WEATHERFORD INDEMNIFIED
PARTIES WILL BE OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN
CONNECTION WITH THE COLLECTION OR PURSUIT OF ANY INSURANCE IN ORDER TO
EXERCISE AN INDEMNIFICATION REMEDY UNDER THIS SECTION VI. UNLESS
OTHERWISE SPECIFICALLY EXPRESSED, THIS INDEMNITY OBLIGATION SHALL APPLY
WITHOUT REGARD TO WHETHER THE LIABILITY OR ENVIRONMENTAL LIABILITY WAS
CAUSED BY THE ORDINARY OR GROSS NEGLIGENCE OF ANY OF THE WEATHERFORD
INDEMNIFIED PARTIES (WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT OR ACTIVE OR PASSIVE), OR WHETHER THE LIABILITY OR
ENVIRONMENTAL LIABILITY IS BASED ON STRICT LIABILITY, ABSOLUTE
LIABILITY OR ARISES AS AN OBLIGATION OF CONTRIBUTION OR INDEMNITY. EACH
OF C2 AND TLC ACKNOWLEDGES THAT IT IS AWARE OF VARIOUS THEORIES KNOWN
AS THE "EXPRESS NEGLIGENCE" DOCTRINE AND OTHER SIMILAR DOCTRINES AND
THEORIES THAT MAY LIMIT INDEMNIFICATION AND AGREES AND STIPULATES THAT
THE PROVISIONS OF THIS AGREEMENT REFLECT THE EXPRESS INTENT OF THE
PARTIES THAT THE INDEMNIFICATION TO BE PROVIDED BY TLC AND C2 APPLY
NOTWITHSTANDING THE FACT THAT THE LIABILITY OR ENVIRONMENTAL LIABILITY
(I) MAY NOT CURRENTLY BE KNOWN BY IT OR MANIFEST ITSELF IN ANY REGARD,
(II) MAY ARISE UNDER A STATUTE OR THEORY THAT MAY NOT CURRENTLY EXIST
OR BE KNOWN
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TO TLC, (III) MAY ARISE AS A RESULT OF A NEGLIGENT ACT OR OMISSION BY
ANY OF THE WEATHERFORD INDEMNIFIED PARTIES (WHETHER SUCH CONDUCT BE
SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR (IV) MAY CONSTITUTE
A VIOLATION OF ANY APPLICABLE CIVIL OR CRIMINAL LAW OR REGULATION.
6.2 Notice of Circumstance. After receipt by an Weatherford
Indemnified Party of notice, or an Weatherford Indemnified Party's actual
discovery, of any action, proceeding, claim, demand or potential claim which
could give rise to a right to indemnification pursuant to any provision of this
Agreement (any of which is individually referred to a as a "Circumstance"), the
Weatherford Indemnified Party shall give TLC and C2 (collectively the "TLC
Parties") written notice describing the Circumstances in reasonable detail;
provided, however, that no delay by an Weatherford Indemnified Party in
notifying the TLC Parties shall relieve the TLC Parties from any Liability or
Environmental Liability hereunder unless (and then solely to the extent) the TLC
Parties' position is actually adversely prejudiced. In the event the TLC Parties
notifies the Weatherford Indemnified Party within 15 days after such notice that
the TLC Parties is assuming the defense thereof, (i) the TLC Parties will defend
the Weatherford Indemnified Parties against the Circumstances with counsel of
its choice, provided such counsel is reasonably satisfactory to Weatherford,
(ii) the Weatherford Indemnified Parties may retain separate co-counsel at its
or their sole cost or expense (except that the TLC Parties will be responsible
for the fees and expenses for the separate co-counsel to the extent Weatherford
concludes reasonably that the counsel the TLC Parties has selected has a
conflict of interest), (iii) the Weatherford Indemnified Parties will not
consent to the entry of any judgment or enter into any settlement with respect
to the Circumstances without the written consent of the TLC Parties, and (iv)
the TLC Parties will not consent to the entry of any judgment with respect to
the Circumstances, or enter into any settlement which (x) requires any payments
by or continuing obligations of an Weatherford Indemnified Party, (y) requires
an Weatherford Indemnified Party to admit any facts or liability that could
reasonably be expected to adversely affect an Weatherford Indemnified Party in
any other matter or (z) does not include a provision whereby the plaintiff or
claimant in the matter released the Weatherford Indemnified Parties from all
Liability with respect thereto, without the written consent of Weatherford. In
the event the TLC Parties does not notify Weatherford within 15 days after
Weatherford has given notice of the Circumstance that the TLC Parties is
assuming the defense thereof, the Weatherford Indemnified Parties may defend
against, or enter into any settlement with respect to, the Circumstance in any
manner the Weatherford Indemnified Parties reasonably may deem appropriate, at
the TLC Parties' sole cost. The foregoing provisions shall be subject to the
provisions of Section 6.1(b).
6.3 Insurance. the TLC Parties shall not be obligated to
indemnify the Weatherford Indemnified Parties for amounts which shall have been
covered and paid by insurance of the Weatherford Indemnified Parties, provided,
however, insurance shall not include deductibles or self-insured retentions.
6.4 Scope of Indemnification. INDEMNIFICATION UNDER THIS
SECTION VI SHALL BE IN ADDITION TO ANY REMEDIES CHRISTIANA,
WEATHERFORD OR ANY WEATHERFORD INDEMNIFIED PARTY MAY HAVE AT
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LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO C2'S OF TLC'S
INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.5 Indemnity for Certain Environmental Liabilities. It is the
intention of the parties that the indemnity provided herein with respect to
Environmental Liabilities under CERCLA and corresponding provisions of state law
is an agreement expressly not barred by 42 U.S.C. ss. 9607(e)(i) and
corresponding provisions of state law.
6.6 C2 and TLC Covenants. To assure the performance of the
obligations of C2 and TLC under this Agreement, C2 and TLC each hereby covenants
and agrees that it will not, and will cause its subsidiaries to not, merge,
convert into another entity, engage in a share or interest exchange for a
majority of its units or shares, liquidate or transfer, assign or otherwise
convey or allocate, directly or indirectly, in one or more transactions, whether
or not related, a majority of C2's or TLC's assets (determined in good faith by
a board or similar managing body's resolution prior to the transaction on a fair
value and consolidated basis) to any Person unless the acquiring Person
expressly assumes the obligations of C2 or TLC, as the case may be, hereunder,
(ii) executes and delivers to Christiana and Weatherford an agreement agreeing
to be bound by each and every provision of this Agreement as if it were C2 or
TLC, as the case may be,and (iii) has a net worth on a pro forma basis after
giving effect to the acquisition or business combination equal to or greater
than that of C2 or TLC, as the case may be, on a consolidated basis.
7. Miscellaneous.
7.1. Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits thereof.
This Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto, provided that this
Agreement may be amended only as may be permitted by the laws that govern
Weatherford, TLC, Christiana and C2. The waiver by any party hereto of any
condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party hereto of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
7.2 Arbitration. Any disputes, claims or controversies
connected with, arising out of, or related to, this Agreement and the rights and
obligations created herein, or the breach, validity, existence or termination
hereof, shall be settled by Arbitration to be conducted in accordance with the
Commercial Rules of Arbitration of the American Arbitration Association, except
as such Commercial Rules may be changed by this Section 7.2. The disputes,
claims or controversies shall be decided by three independent arbitrators (that
is, arbitrators having no substantial economic or other material relationship
with the parties), one to be appointed by TLC and C2 and one to be appointed by
Weatherford within fourteen days following the submission of the claim to the
parties hereto and the third to be appointed by the two so appointed within five
days. Should either party refuse or neglect to join in the timely appointment of
the arbitrators, the other party shall be entitled to select both arbitrators.
Should the two arbitrators
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fail timely to appoint a third arbitrator, either party may apply to the Chief
Judge of the United States District Court for the Southern District of Texas to
make such appointment. The arbitrators shall have ninety days after the
selection of the third arbitrator within which to allow discovery, hear evidence
and issue their decision or award and shall in good faith attempt to comply with
such time limits; provided, however, if two of the three arbitrators believe
additional time is necessary to reach a decision, they may notify the parties
and extend the time to reach a decision in thirty day increments, but in no
event to exceed an additional ninety days. Discovery of evidence shall be
conducted expeditiously by the Parties, bearing in mind the parties desire to
limit discovery and to expedite the decision or award of the arbitrators at the
most reasonable cost and expense of the parties. Judgment upon an award rendered
pursuant to such Arbitration may be entered in any court having jurisdiction, or
application may be made to such court for a judicial acceptance of the award,
and an order of enforcement, as the case may be. The place of Arbitration shall
be Houston, Texas. The decision of the arbitrators, or a majority thereof, made
in writing, shall be final and binding upon the parties hereto as to the
questions submitted, and each party shall abide by such decision.
Notwithstanding the provisions of this Section 7.2, neither party shall be
prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of
arbitration and entry of the arbitrator's award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern
District of Texas in any suit, action or proceeding seeking injunctive
relief, arising out of or relating to this Agreement or any of the
other agreements contemplated hereby and any other court in which a
matter that may result in a claim for indemnification hereunder by an
Weatherford Indemnified Party may be brought with respect to any claim
for indemnification by an Weatherford Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to
the laying of venue of any suit, action or proceeding seeking
injunctive relief, orders in aid of arbitration or entry of an
arbitration arising out of or relating to this Agreement or any of the
other agreements contemplated hereby brought in any state court located
in Harris County, Texas or any federal court sitting in the Southern
District of Texas or any other court in which a matter that may result
in a claim for indemnification hereunder by an Weatherford Indemnified
Party may be brought with respect to any claim for indemnification by
an Weatherford Indemnified Party, and further irrevocably waive any
claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum; and
(c) each of the parties hereto irrevocably designates,
appoints and empowers CT Corporation System, Inc. and any successor
thereto as its designee, appointee and
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<PAGE>
agent to receive, accept and acknowledge for and on its behalf, and in
respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any suit, action or
proceeding arising out of or relating to this Agreement or any of the
other agreements contemplated hereby.
7.3. Assignment. This Agreement shall inure to the benefit of
and will be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any person other than
TLC, C2, Christiana, Weatherford, and the Weatherford Indemnified Parties any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
7.4. Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Weatherford:
Weatherford, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Stauss
Facsimile: (713) 651-5246
if to TLC:
Total Logistic Control, LLC
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
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<PAGE>
if to Christiana:
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Strauss
Facsimile: (713) 651-5246
if to C2:
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.4. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
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<PAGE>
7.5. Governing Law. All questions arising out of this
Agreement and the rights and obligations created herein, or its validity,
existence, interpretation, performance or breach shall by governed by the laws
of the State of Texas without regard to conflict of laws principles.
7.6. Severability. If any provision of this Agreement is held
to be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
7.7. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.8. Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
7.9. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
oral and written, among the parties or any of them, with respect to the subject
matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
WEATHERFORD INTERNATIONAL, INC.
("Weatherford")
By /s/BERNARD J. DUROC-DANNER
Name: Bernard J. Duroc-Danner
Title: President
TOTAL LOGISTIC CONTROL, LLC
("TLC")
By /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: Vice President
CHRISTIANA COMPANIES, INC.
("Christiana")
By /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: President
C2, INC.
("C2")
By /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: President
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<PAGE>
ANNEX B
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
____________, 1998
<PAGE>
TABLE OF CONTENTS
Page
1. FORMATION
1.1 Definitions..................................................1
1.2 Formation; Name..............................................1
1.3 Purposes.....................................................1
1.4 Registered and Principal Offices.............................2
1.5 Term.........................................................2
1.6 Foreign Qualification........................................2
1.7 No State Law Partnership.....................................2
1.8 Partnership Classification...................................2
2. MEMBERS
2.1 Members......................................................2
2.2 Admission of Additional Members..............................2
3. CAPITAL CONTRIBUTIONS
3.1 Capital Contributions by Members.............................3
3.2 Purchase of Units by C2, Inc.................................3
3.3 Loans to the Company.........................................3
3.4 Withdrawal and Return of Contributions.......................3
3.5 Interest on Contributions....................................3
3.6 Limitation on Member's Deficit Make-up.......................3
3.7 Capital Accounts.............................................3
3.8 Units........................................................4
4. ALLOCATIONS
4.1 Profits and Losses...........................................4
4.2 Tax Allocations..............................................4
4.3 Construction.................................................5
5. DISTRIBUTIONS
5.1 Current Tax Distributions....................................5
5.2 Other Distributions..........................................5
5.3 Amounts Withheld.............................................5
5.4 Distribution Restrictions....................................6
(i)
<PAGE>
6. MANAGEMENT
6.1 Voting and Decisions........................................ 6
6.2 Restriction on Transactions................................. 6
6.3 Regular Meetings............................................ 7
6.4 Special Meetings............................................ 7
6.5 Quorum...................................................... 7
6.6 Notice...................................................... 7
6.7 Manner of Acting............................................ 8
6.8 Vacancies................................................... 8
6.9 Presumption of Assent....................................... 8
6.10 Resignation of Manager...................................... 8
6.11 Action Without Meeting...................................... 8
6.12 Telephonic Meetings......................................... 8
6.13 Reliance by Third Parties................................... 9
6.14 Filing of Documents......................................... 9
6.15 Limitation on Liability; Indemnification.................... 9
6.16 Delegation to Members or Representatives of Members......... 9
6.17 Time Devoted to Business....................................11
6.18 Compensation of Members and Officers........................11
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS
AND DISASSOCIATION
7.1 Assignment and Transfer.....................................11
7.2 Disassociation..............................................13
7.3 Restraining Order...........................................13
8. DISSOLUTION AND WINDING UP
8.1 Dissolution.................................................13
8.2 Winding Up and Liquidation..................................14
8.3 Compliance With Timing Requirements of Regulations..........14
9. BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.1 Books and Records...........................................14
9.2 Fiscal Year and Method of Accounting........................15
9.3 Reports and Statements......................................15
9.4 Tax Elections...............................................15
9.5 Tax Matters Partner.........................................15
(ii)
<PAGE>
10. MISCELLANEOUS
10.1 Amendments..................................................16
10.2 Bank Accounts...............................................16
10.3 Binding Effect..............................................16
10.4 Rules of Construction.......................................16
10.5 Choice of Law and Severability..............................16
10.6 Counterparts................................................16
10.7 Entire Agreement............................................16
10.8 Last Day for Performance Other Than a Business Day..........16
10.9 Notices.....................................................17
10.10 Title to Property; No Partition.............................17
11. GLOSSARY.............................................................17
(iii)
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (this "Operating
Agreement") is effective as of the [____] day of _________, 1997, between
CHRISTIANA COMPANIES, INC., a Wisconsin corporation, and C2, INC., a Wisconsin
corporation (individually, "Member", and collectively, the "Members").
W I T N E S S E T H :
WHEREAS, Christiana Companies, Inc. has formed a limited liability
company known as Total Logistic Control, LLC (the "Company"), by causing the
filing of a Certificate of Organization (the "Certificate") pursuant to the Act;
WHEREAS, C2, Inc. desires to acquire an interest in the Company and
Christiana Companies, Inc. desires to sell a portion of its interest to C2, Inc.
pursuant to the terms and conditions of that certain Purchase Agreement by and
among Weatherford International, Inc., a Delaware corporation, Christiana
Acquisition Co., a Wisconsin corporation, Christiana Companies, Inc., a
Wisconsin corporation, and C2, Inc., a Wisconsin corporation, dated December 12,
1997 as amended by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated
October __, 1998 (the "Purchase Agreement").
WHEREAS, the parties hereto desire to set forth in full all of the
terms and conditions of their agreements and understandings in this Operating
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. FORMATION
1.1 Definitions. Capitalized terms used in this Operating Agreement
shall have the meanings set forth in the text of this Operating Agreement in the
Glossary contained in Article XI.
1.2 Formation; Name. Christiana Companies, Inc. formed the Company as
a limited liability company pursuant to the Act by causing, on June 13, 1997,
the Certificate to be filed with the Delaware Secretary of State, which shall
constitute notice that the Company is a limited liability company. The Company's
name shall be Total Logistic Control, LLC.
1.3 Purposes. The purposes of the Company shall be to engage in any
and all general business activities permissible under the Act.
<PAGE>
1.4 Registered and Principal Offices. The registered office of the
Company shall initially be located at 1209 Orange Street, Wilmington (County of
New Castle), Delaware, 19801. The registered agent of the Company shall be the
Corporation Trust Company, whose address is the same as that of the registered
office. The principal office of the Company shall be located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Board of Managers may
establish additional offices or may relocate the principal or registered
offices.
1.5 Term. The Company's term officially began on June 13, 1997, and
shall continue until terminated by operation of law or by some provision of this
Operating Agreement.
1.6 Foreign Qualification. Prior to the Company's conducting business
in any jurisdiction other than Delaware, the Board of Managers shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Managers, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. Each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Operating Agreement that
are necessary or appropriate to qualify, continue, and terminate the Company as
a foreign limited liability company in all such jurisdictions in which the
Company may conduct business.
1.7 No State Law Partnership. The Members intend that the Company be
operated in a manner consistent with its treatment as a partnership for federal
and state income tax purposes and not be operated or treated as a "partnership"
(including, without limitation, a limited partnership or joint venture) for any
other purpose, including, but not limited to, Section 303 of the Federal
Bankruptcy Code, and this Operating Agreement shall not be construed to suggest
otherwise. No Member shall take any action inconsistent with the express intent
of the parties hereto as set forth herein.
1.8 Partnership Classification. The Members hereby agree that the
Company shall not be operated or treated as an "association" taxed as a
corporation under the Code and that no election shall be made under the Treasury
Regulations by the Members, the Members or any officer to treat the Company as
an "association" taxable as a corporation without the prior unanimous written
consent of the Members.
2. MEMBERS
2.1 Members. The names and business addresses of the Members of the
Company are set forth on Exhibit A hereto.
2.2 Admission of Additional Members. Additional members may be
admitted to the Company only with Member Approval.
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3. CAPITAL CONTRIBUTIONS
3.1 Capital Contributions by Members.
(i) Initial Capital Contributions. The initial capital
contribution made by Christiana Companies, Inc. to the Company in exchange for
its 100% percentage interest in the Company is set forth on Exhibit C to this
Operating Agreement of Total Logistic Control, LLC dated June 13, 1997.
Christiana Companies, Inc.'s 100% percentage interest is hereby restated as
1,000 Units in the Company.
(ii) Additional Capital Contributions. No additional capital
contributions to the Company shall be required. Additional capital contributions
to the Company may be made with Manager Approval. No additional Units in the
Company may be issued without prior Member Approval.
3.2 Purchase of Units by C2, Inc. Pursuant to the terms and conditions
of the Purchase Agreement, C2, Inc. purchased 666.667 of the Units in the
Company held by Christiana Companies, Inc. Immediately following such purchase,
each Member holds the number of Units in the Company set forth on Exhibit A
hereto.
3.3 Loans to the Company. Except as set forth in this Operating
Agreement, no Member shall make a loan to the Company without Manager Approval.
3.4 Withdrawal and Return of Contributions. No Member shall be entitled
to withdraw or to the return of its capital contributions. No Member shall have
the right to demand and receive property other than cash in return for its
contributions, except that upon dissolution, the Members shall be entitled to
share in the distribution of the remaining assets of the Company in accordance
with Article VIII of this Operating Agreement.
3.5 Interest on Contributions. Capital contributions to the Company
shall not earn interest.
3.6 Limitation on Member's Deficit Make-up. The Members shall have no
obligation to restore any deficit in their Capital Accounts.
3.7 Capital Accounts.
(i) Maintenance of Capital Accounts. A separate Capital Account
shall be maintained and adjusted for each Member on the books and records of the
Company in accordance with the Code and the Treasury Regulations. The initial
balance of each Member's Capital Account shall be the amount of its initial
contribution to the Company.
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<PAGE>
(a) Transfers. In the event any interest in the Company is
transferred in accordance with the terms of this Operating Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred interest.
(b) Revaluation. In the event the Values of Company assets
are adjusted pursuant to the definition of the term "Value" in Article XI
hereof, the Capital Accounts of all Members shall be adjusted simultaneously to
reflect the aggregate net adjustment as if the Company recognized gain or loss
equal to the amount of such aggregate net adjustment, and such adjustment shall
be allocated to the Members in accordance with Article IV hereof.
(c) Interpretation. The manner in which Capital Accounts are
to be maintained pursuant to this Section 3.07 is intended to and shall be
construed so as to comply with the requirements of Section 704(b) of the Code
and the Treasury Regulations promulgated thereunder.
3.8 Units. The membership interests in the Company shall be divided
into Units. Except as set forth herein, each Unit shall have identical
preferences, limitations, and other relative rights.
4. ALLOCATIONS
4.1 Profits and Losses. Except as otherwise provided in Section 4.02
hereof, Profits and Losses shall be allocated among the Members in proportion to
the number of Units held by such Members.
4.2 Tax Allocations.
(i) Capital Contributions. In accordance with section 704(c) of
the Code and the Treasury Regulations under that section, income, gain, loss,
and deduction with respect to any capital contribution shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of the capital contribution for federal income tax
purposes and its initial Value.
(ii) Adjustment of Value. If the Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to the asset shall take account of any variation between the asset's
adjusted basis for federal income tax purposes and its Value as so adjusted in
the same manner as under section 704(c) of the Code and the Treasury Regulations
under that section.
(iii) Elections. Any elections or other decisions relating to the
allocations shall be made by the Board of Managers in any manner that reasonably
reflects the purpose and intent of this Operating Agreement. Allocations
pursuant to this Section 4.02 are solely for purposes of national, state and
local taxes and shall not affect, or in any way be taken into account in
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<PAGE>
computing, any Capital Account or share of Profits and Losses, other items, or
Distributions pursuant to any provision of this Operating Agreement.
(iv) Determination of Allocable Amounts. For purposes of
determining the Profits and Losses, or any other items of income, gain, loss, or
deduction allocable to any fiscal period, Profits and Losses, and any other such
items shall be determined on a daily, monthly, or other basis, as determined by
the Board of Managers using any permissible method under section 706 of the Code
and the Treasury Regulations under that section.
(v) Income Tax Consequences. The Members are aware of the income
tax consequences of the allocations made by this Article IV and agree to be
bound by the provisions of this Article IV in reporting their shares of income,
gain, loss, and deductions for income tax purposes.
4.3 Construction. The provisions of this Article IV (and other related
provisions in this Operating Agreement) pertaining to the allocation of items of
Company income, gain, loss, deductions, and credits shall be interpreted
consistently with the Treasury Regulations, and to the extent unintentionally
inconsistent with such Treasury Regulations, shall be deemed to be modified to
the extent necessary to make such provisions consistent with the Treasury
Regulations.
5. DISTRIBUTIONS
5.1 Current Tax Distributions. To the extent permitted by law and
consistent with the Company's obligations to its creditors, the Company shall
make distributions ("Tax Distributions") in accordance with this Section 5.01 on
or before April 15, June 15, September 15 and December 15 of each year. The
aggregate amount of the Tax Distribution made with respect to a given date shall
be the product of (1) the Company's estimated federal taxable income (computed
without taking into account any asset change in value due to the Purchase
Agreement for the calendar quarter that includes such date, multiplied by (2)
the sum of (i) the highest corporate federal income tax rate as stated in the
Internal Revenue Code, plus (ii) the highest corporate Wisconsin income tax rate
as stated in Wisconsin law, minus (iii) the product of (i) and (ii). The
aggregate amount of each Tax Distribution shall be distributed to the Members in
proportion to the number of Units held by such Members.
5.2 Other Distributions. At such times and in such form as may be
determined by Member Approval, distributions (in addition to the distributions
described in Sections 5.01 and 5.03) shall be made to the Members in proportion
to the number of Units held by each such Member.
5.3 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Article V for all purposes under this Operating
Agreement.
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<PAGE>
5.4 Distribution Restrictions. The Company shall make no distribution
if, and to the extent, that after such distribution, the Company would not be
able to pay its debts as they become due in the usual course of business, or the
fair value of the Company's total assets would be less than the sum of its total
liabilities.
6. MANAGEMENT
6.1 Voting and Decisions. Subject to the provisions of Section 6.02,
the management of the Company shall be vested in a Board of Managers. The
initial Board of Managers shall consist of six Managers. Each Manager shall be
elected by the vote or written consent of the Members owning at least a majority
of the Units in the Company provided, however, that Christiana Companies, Inc.
and C2, Inc. shall at all times each be entitled to elect, without the consent
of any other Member, a number of Managers that is proportionate to the number of
Units in the Company held by Christiana Companies, Inc. and C2, Inc.,
respectively.
6.2 Restriction on Transactions. The following actions shall require
Member Approval:
(i) The authorization or issuance of additional Units except for
the issuance of up to 101 Units to Company management for management incentive
options with five year cliff vesting;
(ii) The authorization or payment of any distribution with
respect to Units, except for payment of any distribution that is necessary for
C2, Inc. to fulfill its obligation with respect to Section 5.2 of the Purchase
Agreement;
(iii) The direct or indirect purchase or acquisition by the
Company or any Subsidiary of the Company of Units;
(iv) The approval of any merger, consolidation or other similar
transaction involving the Company or any subsidiary of the Company or sale of
all or substantially all of the operating assets of the Company or any
subsidiary of the Company in one or more transactions;
(v) The creation of any new direct or indirect Subsidiary of the
Company;
(vi) The making of any tax election;
(vii) The liquidation or dissolution of the Company or any
Subsidiary of the Company;
(viii) Any transaction between the Company or any Subsidiary of
the Company and any affiliate of a Member (other than a transaction between the
Company and a Subsidiary of the Company);
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<PAGE>
(ix) The payment of any compensation to any Member or any
affiliate of a Member or the entering into any employee benefit plan or
compensatory arrangement with or for the benefit of any Member or affiliate of
any Member except as permitted under Section 6.18;
(x) Any amendment to this Operating Agreement or the Certificate;
and
(xi) Any other matter for which Member Approval is required under
the Act.
6.3 Regular Meetings. A regular meeting of the Managers shall be held
without other notice other than this Operating Agreement at such time and place
as the Board of Managers shall determine. The Board of Managers may provide, by
resolution, the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings without other notice than such
resolution. An annual meeting of Members shall be held without notice other than
this Operating Agreement immediately following the annual meetings of Managers.
6.4 Special Meetings. Special meetings of the Board of Managers or
Members may be called at the request of any two Managers or any Member. The
person or persons authorized to call special meetings of the Board of Managers
may fix any place, either within our without the State of Delaware, as the place
for holding any special meeting of the Board of Managers called by them.
6.5 Quorum.
(i) Managers. A majority of the number of Managers shall
constitute a quorum for the transaction of business at any meeting of the Board
of Managers, but if less than such majority is present at a meeting, a majority
of the Board of Managers or Members present may adjourn the meeting from time to
time without further notice.
(ii) Members. All Members shall be required to be present to
constitute a quorum for the transaction of business of a meeting of the Members.
A Member may not unreasonably fail to attend a meeting of Members where such
failure would cause irreparable damage to the Company, its business or its
assets.
6.6 Notice. Notice of any special meeting shall be given at least five
business days prior thereto by written notice delivered personally or mailed to
each Manager at his business address, or by telegram; provided, however,
telephonic meetings may be called on only two business days' notice. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Manager or Member may waive notice of
any meeting. The attendance of a Manager or Member at a meeting shall constitute
a waiver of notice of such meeting, except where a Manager or Member attends a
meeting for the express purpose of
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<PAGE>
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Managers need be specified in the
notice or waiver of notice of such meeting.
6.7 Manner of Acting. The act of the majority of the Managers present
at a meeting at which a quorum is present shall be the act of the Board of
Managers ("Manager Approval").
6.8 Vacancies. Subject to the provisions of Section 6.01 hereof, any
vacancy occurring in the Board of Managers shall be filled by the affirmative
vote of a majority of the remaining Managers through less than a quorum of the
Board of Managers. A Manager elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
6.9 Presumption of Assent. A Manager of the Company who is present at a
meeting of the Board of Managers at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless such
Manager's dissent shall be entered into the minutes of the meeting or unless
such Manager shall file his or her written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the Company
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Manager who voted in favor of such action.
6.10 Resignation of Manager. A Manager may resign from his or her
position as a Manager at any time by notice to the Board of Managers. Such
resignation shall become effective as set forth in such notice.
6.11 Action Without Meeting. Any action required or permitted by this
Operating Agreement or by law to be taken at a meeting of the Board of Managers
or by the Members may be taken without a meeting if a written consent or
consents, describing the action so taken, is signed by all of the Managers or
Members, respectively, entitled to vote with respect to the subject matter
thereof and delivered to the Company for inclusion in the Company's records.
6.12 Telephonic Meetings. Except as herein provided and notwithstanding
any place set forth in the notice of the meeting or this Operating Agreement,
Members, Board of Managers and any committees thereof may participate in regular
or special meetings by, or through the use of, any means of communication by
which (a) all participants may simultaneously hear each other, such as by
conference telephone, or (b) all communication is immediately transmitted to
each participant, and each participant can immediately send messages to all
other participants. If a meeting is conducted by such means, then at the
commencement of such meeting, the presiding person shall inform the
participating Managers and Members that a meeting is taking place at which
official business may be transacted. Any participants in a meeting by such means
shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter, which the presiding person determines, in his or her sole
discretion, to be inappropriate under the circumstances for
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<PAGE>
action at a meeting held by such means. Such determination shall be made and
announced in advance of such meeting.
6.13 Reliance by Third Parties. Any person dealing with the Company,
other than a Member, may rely on the authority of the Board of Managers and any
officer of the Company in taking any action that is in the name of the Company
without inquiry into the provisions of this Operating Agreement or compliance
therewith. Every instrument purporting to be the action of the Company and
executed by the Board of Managers or any officer of the Company shall be
conclusive evidence in favor of any person relying thereon or claiming
thereunder that, at the time of delivery thereof, this Operating Agreement was
in full force and effect and that the execution and delivery of that instrument
is duly authorized by the Company.
6.14 Filing of Documents. The Board of Managers shall file or cause to
be filed all certificates or documents as may be determined by the Board of
Managers to be necessary or appropriate for the formation, continuation,
qualification, and operation of a limited liability company in the State of
Delaware and any other state in which the Company may elect to do business. To
the extent that the Board of Managers determines the action to be necessary or
appropriate, the Board of Managers shall do all things to maintain the Company
as a limited liability company under the laws of the State of Delaware and any
other state in which the Company may elect to do business.
6.15 Limitation on Liability; Indemnification. No Manager, Member or
officer of the Company shall be liable, responsible, or accountable in damages
or otherwise to the Members or the Company for any act or omission in connection
with the business of the Company if the officer acted (i) in good faith and in a
manner he or she reasonably believed to be within the scope of the authority
granted to him or her by this Operating Agreement and (ii) in the best
interests, or not opposed to the best interests, of the Company; provided that
the Manager or officer shall not be relieved from liability for any claim, issue
or matter as to which the officer shall have been finally adjudicated to have
committed fraud or willful misconduct. Subject to this limitation in the case of
such adjudication of liability, the Company shall indemnify the Managers, to the
fullest extent permitted under the Act, against any losses, judgements,
liabilities, and expenses (including, without limitation, reasonable attorney's
fees) incurred by reason of any act or omission in connection with the business
of the Company.
6.16 Delegation to Members or Representatives of Members. The Board of
Managers may, from time to time, fill the offices of president, vice president,
secretary and treasurer. The Board of Managers may appoint such other officers
and assistant officers as they deem necessary. Unless the Board of Managers
decide otherwise, if the title is one commonly used for officers of a business
corporation, the assignment of such title shall constitute the delegation of the
authority and duties that are normally associated with that office, as set forth
below, subject to any specific delegation of authority and duties made pursuant
to the first sentence of this Section 6.16. Any number of titles may be held by
the same person. Any delegation pursuant to this Section 6.16 may be revoked at
any time by the Board of Managers.
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Any person so delegated under this Section 6.16 shall not be considered a
"manager" as defined in Section 18.101(10) of the Act.
(i) President. The President shall be the principal executive
officer of the Company and, subject to the direction of the Board of Managers,
shall in general supervise and control the day-to-day operations of the Company.
The President shall preside at all meetings of the Board of Managers. He or she
shall have authority, subject to the terms of this Operating Agreement and such
rules as may be prescribed by the Board of Managers, to appoint such agents and
employees of the Company as he or she shall deem necessary, to prescribe their
powers, duties and compensation, and to delegate authority to them. Such agents
and employees shall hold office at the discretion of the President. He or she
shall have authority to sign, execute, and acknowledge, on behalf of the
Company, all deeds, mortgages, bonds, stock certificates, contracts, leases,
reports, and all other documents or instruments necessary or proper to be
executed in the course of the Company's regular business, or which shall be
authorized by resolution of the Board of Managers or Members; and except as
otherwise provided by the Board of Managers, he or she may authorize any Vice
President or other officer or agent of the Corporation to sign, execute, and
acknowledge such documents or instruments in his or her place and stead. In
general, he or she shall perform all duties incident to the office of the
President and such other duties as may be prescribed by the Board of Managers
from time to time.
(ii) The Vice President. In the absence of the President or in
the event of the President's death, inability or refusal to act, or in the event
for any reason it shall be impracticable for the President to act personally,
the Vice President (or in the event there be more than one vice President, the
Vice Presidents in the order designated by the Board of Managers, or in the
absence of any designation, then in the order of their election or appointment)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Any
Vice President shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or by
the Board of Managers. The execution of any instrument of the Company by any
Vice President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the President.
(iii) The Secretary. The Secretary shall (i) keep minutes of the
meetings of the Members and the Board of Managers (and of committees thereof) in
one or more books provided for that purpose (including records of actions taken
by the Members and the Board of Managers); (ii) see that all notices are duly
given in accordance with the provisions of this Operating Agreement or as
required by the Act; (iii) be custodian of the corporate records; (iv) maintain
a record of the Members of the Company, in a form that conforms to the
requirements of the Act; and (v) in general perform all duties incidental to the
office of Secretary and have such other duties and exercise such other authority
as from time to time may be delegated or assigned by the President.
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(iv) The Treasurer. The Treasurer shall (i) have charge and
custody of and be responsible for all funds and securities of the Company; (ii)
maintain appropriate accounting records; (iii) receive and give receipt for
monies due and payable to the Company from any source whatsoever, and deposit
all such monies in the name of the Company in such banks, trust companies, or
other depositories as shall be selected in accordance with the provisions of
this Operating Agreement; and (iv) in general perform all of the duties incident
to the office of Treasurer and have such other duties and exercise such other
authority as from time to time may be delegated or assigned by the President.
6.17 Time Devoted to Business. The Members and the Managers shall not
be required to devote their full time and efforts to the Company, but only so
much of their time and efforts as is reasonably necessary to perform their
duties and responsibilities to the Company.
6.18 Compensation of Members and Officers. The Board of Managers may
authorize the Company to pay the officers (other than those affiliated with
Lubar & Co., Incorporated) any reasonable fees or other compensation for their
services. C2 shall be paid an annual management fee of $250,000.
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND
DISASSOCIATION
7.1 Assignment and Transfer.
(i) General Restrictions on Transfers. Except as otherwise
provided herein, a Member may not Transfer any Unit without the prior written
consent of the Board of Managers. Any Transfer, attempted Transfer, or purported
Transfer in violation of this Operating Agreement's terms and conditions shall
be null and void. Notwithstanding the foregoing, C2, Inc. may pledge and assign
its interest to Christiana and Christiana may effect a Transfer of C2, Inc.'s
Units pursuant to any action taken with respect to any security interest granted
to it by C2, Inc. Christiana may also transfer its Units without consent of the
Board of Managers if the transferee is an affiliate of Christiana or C2, Inc.
and such party agrees in writing to be bound by the provisions of this Operating
Agreement. At any time after the fifth anniversary of the date of this Operating
Agreement, Christiana may transfer any or all of its Units in the Company to any
person without the prior consent of the Board of Managers, provided, however,
that in order to effect any such Transfer, Christiana must provide C2, Inc. with
a copy of the terms of the proposed transfer (the "Transfer Notice"). C2, Inc.
shall have a right of first refusal to purchase such Units for the same price
and on the same terms set forth in the Transfer Notice. Such right shall be
exercised by C2, Inc. sending an appropriate notice to Christiana within 60 days
after receipt of the Transfer Notice. The closing shall then be held 30 days
after C2, Inc. sends its notice to Christiana.
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(ii) Involuntary Transfer.
(a) Notice of Involuntary Transfer. In the event of an
Involuntary Transfer of a Unit, the Transferor or the Involuntary Transferee
shall immediately deliver a Notice of Involuntary Transfer to the Company.
During the 90-day period beginning on the earlier of (i) the date of receipt by
the Company of the Notice of Involuntary Transfer or (ii) the date that the
Company provides a notice to the Involuntary Transferee and the Members that the
Company is aware of the Involuntary Transfer, the Company shall have the option
to purchase the Units that are subject to the Involuntary Transfer. The purchase
price shall be an amount equal to the book value attributable to those Units, as
determined by the Company's accountants, calculated as of the last day of the
calendar quarter immediately preceding the date of the Involuntary Transfer. The
purchase price shall be payable pursuant to the terms of payment set forth in
the applicable provisions of Section 7.01(e) below. Notwithstanding the
foregoing, in the case of a Member that is an entity, the option described above
in this Section 7.01(b) shall not apply with respect to an Involuntary Transfer
of Units resulting from a merger of such Member into another entity if the
proportionate interest owned by each person who owns, directly or indirectly, an
ownership interest in such other entity immediately after the merger is
substantially the same as the proportionate interest owned, directly or
indirectly, by such person in the Member immediately before the merger.
(b) Acceptance of Offer. The Company shall exercise any such
option by delivering a written notice to the Transferor (if the Transferor is
still in existence) and the Involuntary Transferee within such 90-day period,
which notice shall specify a closing date, occurring within 30 days after the
end of such 90-day period, for the purchase by the Company.
(c) Status of Involuntary Transferee. Regardless of whether
the Company exercises such option or closes such purchase, the Involuntary
Transferee shall not be considered to be a Member, for any period of time, as a
result of the Involuntary Transfer (and the rights of the Involuntary Transferee
shall be as described in Section 7.01(c)), unless all the Nontransferring
Members have delivered (within such 90-day period) their written consent, which
consent may be withheld in the sole and absolute discretion of the
Nontransferring Members, to treating the Involuntary Transferee as a Member.
(iii) Effect of Transfers. Until an Involuntary Transferee is
considered a Member, if ever, pursuant to the applicable provisions of this
Article VII, the Units transferred to an Involuntary Transferee shall be
considered in all respects as Units held by the Transferor for purposes of this
Operating Agreement except for those provisions relating to the economic rights
associated with such Units, the nonmanagement provisions of which will apply to
the Involuntary Transferee as though the Involuntary Transferee held the Units.
Except as otherwise provided in this Operating Agreement, any actions that a
Member takes or would be entitled to take with respect to Units, including,
without limitation, votes, consents, offers, sales, purchases, options, or other
deeds taken pursuant to this Operating Agreement, shall be taken by the Member
for its Involuntary Transferees with respect to the Units held by those
Involuntary Transferees. This Section 7.01(c) shall constitute an irrevocable
and absolute proxy
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and power of attorney granted by each Involuntary Transferee to its Transferor
to (1) take such actions on behalf of the Involuntary Transferee without any
further deed than the taking of the action by the Member, and (2) sign any
document or instrument evidencing such action for or on behalf of the
Involuntary Transferee relating to the Units held by the Involuntary Transferee.
(iv) Time and Place of Closing. Except as otherwise agreed by the
Company, the closing of any Involuntary Transfer (or purchase by the Company)
pursuant to this Article VII shall occur at the Company's principal office on
such day as the Company shall select pursuant to the provisions of this Article
VII. The Company shall notify the Transferor and the Involuntary Transferee in
writing of the exact date and time of closing at least 10 days before the
closing date.
(v) Transfer and Payment of Purchase Price. At the closing, the
Transferor shall deliver the Units that are subject to the Involuntary Transfer
(or purchase or redemption by the Company) free and clear of any liens, security
interests, encumbrances, charges, or other restrictions (other than those
created pursuant to this Operating Agreement), together with all such
instruments or documents of conveyance as shall be reasonably required. If not
otherwise provided pursuant to this Section 7.01 and the Notice of Involuntary
Transfer, or otherwise agreed, the price for any Units to be purchased or
redeemed by the Company shall be paid by certified or bank cashier's check.
7.2 Disassociation. A person ceases to be a Member of the Company upon
the occurrence of, and at the time of, any event of disassociation defined under
the Act.
7.3 Restraining Order. In the event that any Member shall at any time
Transfer or attempt to Transfer its Units in violation of the provisions of this
Operating Agreement and any rights hereby granted, then the other Members and
the Company shall, in addition to all rights and remedies at law and in equity,
be entitled to a decree or order restraining and enjoining such Transfer, and
the offending Member shall not plead in defense thereto that there would be an
adequate remedy at law; it being hereby expressly acknowledged and agreed that
damages at law will be an inadequate remedy for a breach or threatened breach of
the violation of the provisions concerning transfer set forth in this Operating
Agreement.
8. DISSOLUTION AND WINDING UP
8.1 Dissolution. The Company shall be dissolved upon the happening of
any of the following:
(i) By Member Approval to dissolve the Company;
(ii) The Company being adjudicated insolvent or bankrupt; or
(iii) Entry of a decree of judicial dissolution.
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8.2 Winding Up and Liquidation. Upon a dissolution of the Company, the
Members shall by Member Approval select a liquidator (the "Liquidator"). The
Liquidator shall liquidate as much of the Company's assets in its discretion,
and shall do so as promptly as is consistent with obtaining fair value for them,
and shall apply and distribute the assets of the Company in accordance with the
following:
(i) First, to the payment and discharge of all of the Company's
debts and liabilities to creditors of the Company regardless of whether they are
Members, including, without limitation, the unpaid principal balance (and any
interest thereon) of any loan made by a Member; and
(ii) Second, to the Members in accordance with their Capital
Accounts, after giving effect to all contributions, distributions and
allocations for all periods.
8.3 Compliance With Timing Requirements of Regulations. In the event
the Company is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Treasury Regulations, distributions shall be made pursuant to this
Article IX by the end of the fiscal year in which such liquidation occurs, or if
later, within ninety (90) days of such liquidation. Distributions pursuant to
the preceding sentence may be distributed to a trust established for the benefit
of the Members for the purposes of liquidating Company assets, collecting
amounts owed to the Company, and paying any contingent or unforeseen liabilities
or obligations of the Company or of the Members arising out of or in connection
with the Company. The assets of any such trust shall be distributed to the
Members from time to time, in the reasonable discretion of the Members in the
same proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to this Operating
Agreement; provided, however, such trust may only be created if the Company has
received an opinion from counsel, which is generally recognized as being capable
and qualified in the area of federal income taxation, that such trust will not
be classified as an association which would be taxed as a corporation for
federal income tax purposes.
9. BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.1 Books and Records. The Company shall maintain or cause to be
maintained at the Company's principal place of business, complete and accurate
books and records with respect to all Company business and transactions. Such
books and records shall be at all times during normal business hours open to
inspection by any Member. At a minimum, the Company shall keep the following
books and records at the principal place of business of the Company: (a) a list
of the full name(s) and last known business address(es) of each current and
former Member in alphabetical order, setting forth the date on which such person
became a Member and the date, if applicable, on which the person ceased to be a
Member; (b) a copy of the Articles of Organization and all certificates of
amendment, together with executed copies of any powers of attorney pursuant to
which any certificate has been executed; (c) a copy of this Operating Agreement
and all amendments thereto, including any prior Operating Agreements no longer
in effect; (d) copies of the Company's federal, state, and local income tax
returns and reports for
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the seven (7) most recent years; (e) copies of any effective written Company
agreements and of any financial statements of the Company for the seven (7) most
recent years; (f) all such other records as may be required by law; and (g) full
and true books of account.
9.2 Fiscal Year and Method of Accounting. The Company's fiscal year for
both tax and financial reporting purposes shall be the calendar year. The method
of accounting for both tax and financial reporting purposes shall be the cash
method, unless otherwise required for tax purposes or if the Board of Managers
determine that there would be a significant advantage to the Company if
different methods were followed.
9.3 Reports and Statements.
(i) Annual Tax Reports. Within ninety (90) days of the end of
each fiscal year of the Company, the Company shall deliver to the Members such
information as shall be necessary for the preparation by the Members of their
federal, state, and local income and other tax returns.
(ii) Annual Financial Reports. Within ninety (90) days after the
end of each fiscal year of the Company, the Company shall deliver to the Members
unaudited financial statements of the Company for the just completed fiscal
year, prepared at the expense of the Company, which financial statements shall
set forth, as of the end of and for the preceding fiscal year, the following:
(a) A profit and loss statement and a balance sheet of the
Company;
(b) Members' equity and changes in financial position; and
(c) The balances in the Capital Accounts of each Member.
9.4 Tax Elections.
(i) General. The Members shall have the sole authority through
Member Approval to make or revoke any elections on behalf of the Company for tax
purposes.
(ii) Section 754 Election. In the event of a transfer of all or
part of the interest of a Member in the Company, at the request of the
transferee, the Board of Managers may, in its sole discretion, cause the Company
to elect, pursuant to Code Section 754, or the corresponding provision of
subsequent law, to adjust the basis of the Company property as provided by Code
Sections 734 and 743 provided, however, such election shall be made effective as
of the Closing of the transactions contemplated by the Purchase Agreement.
9.5 Tax Matters Partner. ___________________ is designated as the "tax
matters partner" of the Company, as provided in regulations pursuant to Code
Section 6231 and to perform such duties as are required or appropriate
thereunder.
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10. MISCELLANEOUS
10.1 Amendments. Except as provided in Section 10.05 hereof, amendments
to this Operating Agreement shall be undertaken and effective only with Member
Approval.
10.2 Bank Accounts. Company funds shall be deposited in the name of the
Company in accounts designated by the Board of Managers and withdrawals shall be
made only by persons duly authorized by the Board of Managers.
10.3 Binding Effect. Except as provided to the contrary, the terms and
provisions of this Operating Agreement shall be binding upon and shall inure to
the benefit of all the Members, their personal representatives, heirs,
successors, and assigns.
10.4 Rules of Construction. The captions in this Operating Agreement
are inserted only as a matter of convenience and in no way affect the terms or
intent of any provision of this Operating Agreement. All defined phrases,
pronouns, and other variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular, or plural, as the actual identity of the
organization, person, or persons may require. No provision of this Operating
Agreement shall be construed against any party hereto by reason of the extent to
which such party or its counsel participated in the drafting hereof.
10.5 Choice of Law and Severability. This Operating Agreement shall be
construed in accordance with the internal laws of Delaware. If any provision of
this Operating Agreement shall be contrary to the internal laws of Delaware or
any other applicable law, at the present time or in the future, such provision
shall be deemed null and void, but shall not affect the legality of the
remaining provisions of this Operating Agreement. This Operating Agreement shall
be deemed to be modified and amended so as to be in compliance with applicable
law and this Operating Agreement shall then be construed in such a way as will
best serve the intention of the parties at the time of the execution of this
Operating Agreement.
10.6 Counterparts. This Operating Agreement may be executed in one or
more counterparts. Each such counterpart shall be considered an original and all
of such counterparts shall constitute a single agreement binding all the parties
as if all had signed a single document.
10.7 Entire Agreement. This Operating Agreement constitutes the entire
agreement among the Members regarding the terms and operations of the Company,
except for any amendments to this Operating Agreement adopted in accordance with
Section 10.01 hereof. This Operating Agreement and the other agreements referred
to in the preceding sentence supersede all prior and contemporaneous agreements,
statements, understandings, and representations of the parties regarding the
terms and operations of the Company, except as provided in the preceding
sentence.
10.8 Last Day for Performance Other Than a Business Day. In the event
that the last day for performance of an act or the exercise of a right hereunder
falls on a day other than
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a Business Day, then the last day for such performance or exercise shall be the
first Business Day immediately following the otherwise last day for such
performance or such exercise.
10.9 Notices. All notices, requests, consents, or other communications
provided for in or to be given under this Operating Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (i) upon receipt if delivered in person or by fax,
(ii) one day after having been delivered to an overnight air courier, or (iii)
three days after having been deposited in the mails as certified or registered
matter, all fees prepaid, directed to the parties or their assignees at the
following addresses (or at such other address as shall be given in writing by a
party hereto):
If to the Company, to the Board of Managers at:
Total Logistic Control, LLC
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attention: William T. Donovan
(414) 291-9000
If to a Member, to the intended recipient at the Member's most
recent address as reflected in the Company's records.
10.10 Title to Property; No Partition. All real and personal property
owned by the Company shall be owned by it as an entity and no Member shall have
any ownership interest in such property in its individual right or name, and
each Member's Units represented thereby shall be personal property.
11. GLOSSARY
In this Operating Agreement, the following terms shall have the
meanings indicated below, and any derivations of these terms shall have
correlative meanings:
"Act" means the Delaware Limited Liability Company Act in its form as
of the date of this Operating Agreement.
"Affiliate" means any of the following persons or entities: (i) any
person directly or indirectly controlling, controlled by, or under common
control with the person in question; (ii) any person owning any interest in the
person in question; (iii) any officer, director, employee, or partner of the
person in question; and (iv) if the person in question or any partner of the
person in question is an officer, director, or partner, any company for which
such person in question or any partner of the person in question acts in any
such capacity.
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"Board of Managers" means the management body of the Company acting on
behalf of the Members pursuant to Section 6.01.
"Business Day" means a day other than a Saturday, Sunday, or a legal
holiday on which federally chartered banks in the United States of America are
generally closed for business.
"Capital Account" means the separate account maintained for each Member
pursuant to Section 3.06 hereof.
"Christiana" means Christiana Companies, Inc. and its permitted
successors and assigns.
"Code" means the Internal Revenue Code of 1986, and any successor
provisions or codes thereto.
"Company" means Total Logistic Control, LLC.
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Value as the federal income
tax depreciation, amortization, or other cost recovery deduction for such year
or other period bears to such beginning adjusted tax basis.
"Involuntary Transfer" means a Transfer of a Unit due to the bankruptcy
of a Member under applicable federal law.
"Involuntary Transferee" means any person receiving an interest in
Units due to the bankruptcy of a Member under applicable federal law pursuant to
Section 7.01(b).
"Liquidator" means the person selected as such by the Member pursuant
to Section 8.02
hereof.
"Manager" means an individual serving on the Board of Managers.
"Manager Approval" means an act of a majority of the Board of Managers
pursuant to
Section 6.07.
"Member" means the parties executing this Operating Agreement or any
Member admitted pursuant to Section 2.02 or any Transferee permitted to become a
Member pursuant to Section 7.01.
"Member Approval" means the unanimous vote or written consent of the
Members.
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"Nontransferring Members" means, with respect to a Transfer of Units,
all persons (other than the Transferor) who are Members immediately prior to
such Transfer.
"Notice of Involuntary Transfer" means the written notice to be sent by
a Transferor or an Involuntary Transferee to the Company pursuant to Article VII
describing the event giving rise to the Involuntary Transfer; the date upon
which the Transfer occurred; the reason or reasons for the Transfer; the name,
address and capacity of the Involuntary Transferee; and the number of Units
involved.
"Profits and Losses" means, for each fiscal year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise
taken into account in computing Profits or Losses pursuant to this definition,
shall be subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Value;
(iv) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period hereof; and
(v) Notwithstanding any other provision of this definition, any
items, which are specially allocated pursuant to Section 4.02 hereof shall not
be taken into account in computing Profits or Losses.
"Sale" (or "Sell") means a sale, transfer, financing, refinancing,
condemnation, or other disposition by the Company of all or any portion of its
assets.
"Subsidiary" means any corporation, partnership, limited partnership,
association, limited liability company or other business entity.
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"Tax Matters Partner" means the person designated in Section 9.05 as
provided in regulations pursuant to Code Section 6231.
"Transfer" means, with respect to a Unit, to voluntarily sell, give,
assign, bequeath, pledge or otherwise encumber, divest, dispose of, or transfer
direct ownership of all, any part of, or any interest in the Unit, but does not
include a change in control of any Member or any affiliate thereof.
"Transferor" means a Member who Transfers, or proposes to Transfer, any
of its Units pursuant to the terms of Article VII.
"Treasury Regulations" means the Federal Income Tax Regulations
promulgated under the Code, as such Regulations may be amended from time to
time. All references herein to specific sections of the Treasury Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Treasury Regulations, and any References to Temporary Regulations shall be
deemed also to refer to any corresponding provisions of final Treasury
Regulations.
"Unit" or "Units" means the basis by which a Member's ownership
interest in the Company issued pursuant to Section 3.01(a) or (b) is measured.
"Value" means, with respect to any asset, the assets adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Value of any asset
contributed by a Member to the Company shall be the gross
fair market value of such asset, as determined by the
Members;
(b) The Values of all Company assets shall
be adjusted to equal their respective gross fair market
values, as determined by the Members as of the following
times: (A) the acquisition of any additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis capital contribution; (B) the distribution
by the Company to a Member of more than a de minimis amount
of Company property, unless all Members receive simultaneous
distributions of undivided interests in the distributed
property in proportion to their interests in the Company; and
(C) the termination of the Company for federal income tax
purposes pursuant to Code Section 708(b)(1)(B); and
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(c) If the Value of an asset has been
determined or adjusted pursuant to (i) or (ii) above, such
Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of
computing Profits and Losses.
IN WITNESS WHEREOF, the undersigned have caused this Operating
Agreement to be executed as of the day and year first above written.
CHRISTIANA COMPANIES, INC.
By: _________________________________
William T. Donovan, President
C2, INC.
By: _________________________________
Name: _____________________
Title: ___________________________
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EXHIBIT A
Member Units
C2, Inc.
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202 666.667
Christiana Companies, Inc.
5 Post Oak Park
Suite 1760
Houston, TX 77027 333.333
<PAGE>
======================================== =====================================
Prospective investors may rely only
on the information contained in this
Prospectus. C2 has not authorized anyone
to provide prospective investors with 5,202,664 Shares
information different from that
contained in this Prospectus. This C2, INC.
Prospectus is not an offer to sell nor
is it seeking an offer to buy these Common Stock
securities in any jurisdiction where the
offer or sale is not permitted. The
information contained in this Prospectus
is correct only as of the date of this
Prospectus, regardless of the time of
the delivery of this Prospectus or any
sale of these securities.
---------------------------------
TABLE OF CONTENTS
Page _________________________
Prospectus Summary ................ PROSPECTUS
Risk Factors.......................
Use of Proceeds ................... , 1998
Dividend Policy .................. _________________________
Summary of Certain
Terms of Weatherford's
Acquisition of Christiana.........
Capitalization.....................
C2 Financial Data..................
Pro Forma Summary Combined
Financial Data....................
Selected Historical TLC
Financial Data....................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations ......................
Business..........................
The TLC Purchase Agreement........
The Operating Agreement...........
How to Participate in the
Offering ........................
Management........................
Certain Transactions .............
Principal Shareholders ...........
Description of Capital
Stock............................
Shares Eligible for Future
Sale.............................
Legal Matters.....................
Experts...........................
Available Information.............
Index to Financial
Statements...................... F-1
Purchase Agreement.............Annex A
Operating Agreement............Annex B
------------------------------
Until , 1998 (25 days after the
date of this Prospectus), all dealers
effecting transactions in the Common
Stock, whether or not participating in
this distribution, may be required to
deliver a Prospectus.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission filing fee .. $ 6,140
Nasdaq listing fee ............................. 10,000
Blue sky fees and expenses ..................... 2,000
Transfer agent expenses and fees ............... 3,000
Printing and engraving ......................... 30,000
Accountants' fees and expenses ................. 75,000
Legal fees and expenses ........................ 140,000
Miscellaneous .................................. 8,860
--------
Total ............... $275,000
========
- ------------------------
All of the above fees, costs and expenses above will be paid by the
Company. Other than the SEC filing fee, all fees and expenses are estimated.
Item 14. Indemnification of Directors and Officers.
Pursuant to the WBCL and the Company's By-Laws, directors and officers
of the Company are entitled to mandatory indemnification from the Company
against certain liabilities and expenses (i) to the extent such officers or
directors are successful in the defense of a proceeding and (ii) in proceedings
in which the director or officer is not successful in defense thereof, unless
(in the latter case only) it is determined that the director or officer breached
or failed to perform his duties to the Company and such breach or failure
constituted: (a) a willful failure to deal fairly with the Company or its
Shareholders in connection with a matter in which the director or officer had a
material conflict of interest; (b) a violation of criminal law unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(c) a transaction from which the director or officer derived an improper
personal profit; or (d) willful misconduct. The WBCL specifically states that it
is public policy of Wisconsin to require or permit indemnification, allowance of
expenses and insurance in connection with a proceeding involving securities
regulation, as described therein, to the extent required or permitted as
described above. Additionally, under the WBCL, directors of the Company are not
subject to personal liability to the Company, its Shareholders or any person
asserting rights on behalf thereof for certain breaches or failures to perform
any duty resulting solely from their status as directors, except in
circumstances paralleling those in subparagraphs (a) through (d) outlined above.
The indemnification provided by the WBCL and the Company's By-Laws is
not exclusive of any other rights to which a director or officer may be
entitled. The general effect of the foregoing provisions may be to reduce the
circumstances under which an officer or director may be required to beach the
economic burden of the foregoing liabilities and expense.
Item 15. Recent Sales of Unregistered Securities.
On December 11, 1997, as part of its initial capitalization, the
Company issued 25 shares of Common Stock to Sheldon B. Lubar in exchange for
total cash consideration of $100.
Other than as set forth in the preceding paragraphs, the Company has
not sold any securities within the past three years.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The exhibits filed herewith are as specified on the
Exhibit Index included herein.
(b) Financial Statement Schedules. All schedules are omitted because
the required information is not present or is not present in
amounts sufficient to require submission of a schedule or because
the information required is included in the consolidated
financial statements of the Registrant or notes thereto or the
schedule is not required or inapplicable under the related
instructions.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Milwaukee, and State of Wisconsin, on this 19th day of November, 1998.
C2, INC.
By: /s/ William T. Donovan
William T. Donovan, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on November __, 1998.
Signature Title Date
Chairman (Principal Executive
/s/ William T. Donovan Officer and Principal Financial November __, 1998
William T. Donovan and Accounting Officer)
/s/ David J. Lubar* President and Director November __, 1998
- --------------------------
David J. Lubar
/s/ Nicholas F. Brady* Director November __, 1998
- --------------------------
Nicholas F. Brady
/s/ Albert O. Nicholas* Director November __, 1998
- --------------------------
Albert O. Nicholas
/s/ Sheldon B. Lubar* Director November __, 1998
- --------------------------
Sheldon B. Lubar
By: /s/ William T. Donovan
*Attorney-in-Fact
II-3
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Exhibit Description Number
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
December 12, 1997, by and among Weatherford, Sub, Christiana
and the Company.*
2.2 Purchase Agreement, dated as of December 12, 1997, as amended
by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated
October 12, 1998, by and among Weatherford, TLC, Christiana and
the Company, Incorporated by reference to Annex A of this
Registration
Statement.*
3.1 Amended and Restated Articles of Incorporation of the Company.*
3.2 Amended and Restated Bylaws of the Company.*
4.1 Specimen Common Stock Certificate.*
4.2 See Exhibits 3.1 and 3.2 for provisions of the Amended and
Restated Articles of Incorporation and Bylaws of the Company
defining the rights of the holders of Common Stock.*
4.3 Form of Subscription Agreement.*
4.4 Form of Letter of Transmittal.*
5.1 Opinion of Foley & Lardner regarding the legality of securities
being offered.*
10.1 Credit Agreement, by and among the TLC, Firstar Bank Milwaukee,
N.A., individually and as agent, and the lenders that are a
party thereto.*
10.2 Form of First Amended and Restated Operating Agreement, by and
among the Company and Christiana, Incorporated by reference to
Annex B of this Registration Statement. This agreement will be
executed and become effective on the Effective Date.*
10.3 C2, Inc. 1998 Equity Incentive Plan.*
10.4 First Amendment to Credit Agreement and Escrow Release
Agreement, dated as of November 2, 1998, by and among TLC,
Firstar Bank Milwaukee, N.A., individually and as agent, and
the lenders that are a party thereto.
10.5 Second Amendment to Credit Agreement, dated as of November 17,
1998, by and among TLC, Firstar Bank Milwaukee, N.A.,
individually and as agent, and the lenders that are a party
thereto.
21.1 List of Subsidiaries of the Company.*
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Foley & Lardner (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page to the Registration
Statement).*
27.1 Financial Data Schedule.
- -------------------------
*Previously filed.
II-4
EXHIBIT 10.4
FIRST AMENDMENT TO CREDIT AGREEMENT
and
ESCROW RELEASE AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT and ESCROW RELEASE AGREEMENT, dated as
of November 1, 1998 (the "First Amendment"), is by and among TOTAL LOGISTIC
CONTROL, LLC, a Delaware limited liability company (the "Borrower"), the several
lenders identified on the signature pages hereto and such other lenders as may
from time to time become a party hereto (the "Lenders"), and FIRSTAR BANK
MILWAUKEE, N.A., as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement by and among the Borrower, certain Subsidiaries of the
Borrower from time to tome parties thereto, the Lenders and the Agent pursuant
to which the Lenders have agreed to provide a $70,000,000 reducing revolving
credit facility to the Borrower on the terms and conditions set forth therein
(as amended by this First Amendment, the "Credit Agreement");
WHEREAS, the Borrower has advised the Lenders and the Agent that the
Merger Transactions and the Divestiture have been restructured and postponed;
WHEREAS, the Borrower, the Lenders and the Agent wish to permit
consummation of the restructured and postponed Merger Transactions and
Divestiture;
WHEREAS, the Borrower, the Lenders, the Agent and Quarles & Brady LLP
(the "Escrow Agent") are parties to that certain Escrow Agreement dated as of
August 14, 1998 (the "Escrow Agreement");
WHEREAS, the Borrower, the Lenders, and the Agent wish to direct the
Escrow Agent to release the Loan Documents (as defined in the Escrow Agreement)
from escrow as hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agreed as follows:
1 . Definitions. Capitalized terms not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.
2. Amendment of Credit Agreement. The Credit Agreement is amended as
follows:
<PAGE>
2.1 Section 1.1. Section 1.l of the Credit Agreement is amended as
follows:
(a) The definition of EVI is deleted in its entirety and replaced
by the following new definition:
"EVI" means Weatherford International, Inc., a Delaware
corporation.
(b) The definition of Permitted CST Distribution is deleted in its
entirety and replaced by the following new definition:
"Permitted CST Distribution" means one or more distributions paid
by the Borrower to CST on or before January 31, 1999 in respect of
CST's ownership interest in the Borrower in an aggregate amount
not to exceed $20,000,000 for the purposes of consummating the
Merger Transactions and the Divestiture, provided that no Default
or Event of Default exists as of the date of any such distribution
or would result as a consequence of any such distribution.
2.2 Section 7.14. Section 7.l4 of the Credit Agreement is amended
by deleting the phrase "October 31, 1998" therein and substituting the
phrase "January 31, 1999" in lieu thereof.
2.3 Section 8.12. Section 8.12 of the Credit Agreement is amended
by deleting the phase "October 31, 1998" therein and substituting the
phrase "January 31, 1999" in lieu thereof.
2.4 Section 5.1(c). Schedule 5.1(c) of the Credit Agreement is
deleted in its entirety and replaced by new Schedule 5.1(c) in the form
attached hereto.
3. Escrow Agreement. The Escrow Agent is authorized and directed to take
the following actions pursuant to Section 2(b)(I) of the Escrow Agreement:
3.1 Closing Date. The Escrow Agent is authorized and directed to
insert "November 2, 1998" as the Closing Date on each of the Loan
Documents to the extent necessary to effect the consummation of the
financing transactions contemplated by the Credit Agreement.
3.2 Escrow Release. Upon insertion of the Closing Date in the Loan
Documents as set forth herein, the Escrow Agent is authorized and
directed to release promptly the Loan Documents (together with
appropriate execution versions and copies thereof) to the Borrower, the
Lenders and the Agent.
-2-
<PAGE>
4. Conditions Precedent. This First Amendment shall become effective on
the date that the Agent shall have received this First Amendment, duly executed
by the Borrower and the Lenders.
5. Representations and Warranties. To induce the lenders to enter into
this First Amendment, the Borrower hereby represents and warrants to the Agent
and to each Lender that as of the date hereof, after giving effect to this First
Amendment:
(a) the representations and warranties contained in the Credit
Agreement are true and correct;
(b) no Default or Event of Default has occurred and is continuing;
and
(c) each of the conditions set forth in Sections 5.1 and 5.2 of
the Credit Agreement has been fully satisfied; and
(d) the Borrower had delivered to the Agent a pro forma balance
sheet dated as of September 30, 1998 which reflects compliance with the
Consolidated Tangible Net Worth requirement set forth in Section 5.1(d)
of the Credit Agreement.
6. Full Force and Effect. Except as provided herein, all of the terms and
conditions set forth in the Credit Agreement, and all additional documents
entered into in connection with the Credit Agreement, shall remain unchanged and
shall continue in full force and effect as originally set forth, and each of the
foregoing is hereby ratified and confirmed in all respects.
7. Binding Effect. This First Amendment shall be binding upon the parties
hereto and their respective successors and assigned.
8. Entire Agreement. This First Agreement constitutes the entire
agreement among the Borrower, the Lenders and the Agent with respect to the
subject matter hereof.
9. Counterparts. This First Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same First Agreement.
10. Governing Law. This First Agreement shall be construed and
interpreted according to the internal laws of the State of Wisconsin without
giving effect to its conflict of laws provisions.
-3-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this First Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: TOTAL LOGISTIC CONTROL, LLC
By:
Title:
LENDERS: FIRSTAR BANK MILWAUKEE, N.A.,
In its capacity as Agent and as a Lenders
By:
Title:
BANK ONE, WISCONSIN
as a Lender
By:
Title:
HARRIS TRUST AND SAVINGS BANK
as a Lenders
By:
Title:
EXHIBIT 10.5
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of November 17, 1998
(the "Second Amendment"), is by and among TOTAL LOGISTIC CONTROL, LLC, a
Delaware limited liability company (the "Borrower"), the several lenders
identified on the signature pages hereto and such other lenders as may from time
to time become a party hereto (the "Lenders"), and FIRSTAR BANK MILWAUKEE, N.A.,
as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of November 2, 1998 by and among the Borrower,
certain Subsidiaries of the Borrower from time to time parties thereto, the
Lenders and the Agent (as amended by the First Amendment dated as of November 2,
1998 and this Second Amendment, the "Credit Agreement");
WHEREAS, the Borrower, the Lenders and the Agent wish to amend the Credit
Agreement as set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement.
2. Amendment of Credit Agreement. The Credit Agreement is amended as
follows:
2.1 Section 1.1. The definition of Revolving Termination Date in
Section 1.1 of the Credit Agreement is amended by deleting the phrase
"July 31, 2003" therein and substituting the phrase "November 2, 2003" in
lieu thereof.
2.2 Section 6.18. Section 6.18 of the Credit Agreement is amended
by deleting the phrase "July 31, 2003" therein and substituting the
phrase "November 2, 2003" in lieu thereof.
2.3 Schedule 2.1(a). Schedule 2.1(a) of the Credit Agreement is
deleted in its entirety and replaced by new Schedule 2.1(a) in the form
attached hereto.
<PAGE>
3. Conditions Precedent. This Second Amendment shall become effective on
the date that the Agent shall have received this Second Amendment, duly executed
by the Borrower and the Lenders.
4. Representations and Warranties. To induce the Lenders to enter into
this Second Amendment, the Borrower hereby represents and warrants to the Agent
and to each Lender that as of the date hereof, after giving effect to this
Second Amendment:
(a) the representations and warranties contained in the Credit
Agreement are true and correct; and
(b) no Default or Event of Default has occurred and is continuing.
5. Full Force and Effect. Except as provided herein, all of the terms and
conditions set forth in the Credit Agreement, and all additional documents
entered into in connection with the Credit Agreement, shall remain unchanged and
shall continue in full force and effect as originally set forth, and each of the
foregoing is hereby ratified and confirmed in all respects.
6. Binding Effect. This Second Amendment shall be binding upon the
parties hereto and their respective successors and assigns.
7. Entire Agreement. This Second Amendment constitutes the entire
agreement among the Borrower, the Lenders and the Agent with respect to the
subject matter hereof.
8. Counterparts. This Second Amendment may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Second Agreement.
9. Governing Law. This Second Amendment shall be construed and
interpreted according to the internal laws of the State of Wisconsin without
giving effect to its conflict of laws provisions.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Second Amendment to be duly executed and delivered as of the date first
above written.
BORROWER:
TOTAL LOGISTIC CONTROL, LLC
By:
Title:
LENDERS:
FIRSTAR BANK MILWAUKEE, N.A.,
In its capacity as Agent and as a Lender
By:
Title:
BANK ONE, WISCONSIN
As a Lender
By:
Title:
HARRIS TRUST AND SAVINGS BANK,
As a Lender
By:
Title:
-3-
<PAGE>
SCHEDULE 2.1(a)
REVOLVING COMMITMENTS
<TABLE>
<CAPTION>
Revolving Commitment Revolving Commitment
Amount Percentage
<S> <C> <C>
Firstar Bank Milwaukee, N.A.
Closing Date through November 2, 1999 $30,000,000 0.4285714285714%
November 3, 1999 through November 2, 2000 29,464,286 0.4285714285714%
November 3, 2000 through November 2, 2001 27,578,571 0.4285714285714%
November 3, 2001 through November 2, 2002 25,435,714 0.4285714285714%
November 3, 2002 through November 2, 2003 22,864,286
Bank One, Wisconsin
Closing Date through November 2, 1999 $20,000,000 0.2857142857143%
November 3, 1999 through November 2, 2000 19,642,857 0.2857142857143%
November 3, 2000 through November 2, 2001 18,385,714 0.2857142857143%
November 3, 2001 through November 2, 2002 16,957,143 0.2857142857143%
November 3, 2002 through November 2, 2003 15,242,857 0.2857142857143%
Harris Trust and Savings Bank
Closing Date through November 2, 1999 $20,000,000 0.2857142857143%
November 3, 1999 through November 2, 2000 19,642,857 0.2857142857143%
November 3, 2000 through November 2, 2001 18,385,714 0.2857142857143%
November 3, 2001 through November 2, 2002 16,957,143 0.2857142857143%
November 3, 2002 through November 2, 2003 15,242,857 0.2857142857143%
<CAPTION>
LOC COMMITMENTS
LOC Commitment
LOC Commitment Amount Percentage
<S> <C> <C>
Firstar Bank Milwaukee, N.A.
Closing Date through November 2, 2003 $1,500,000 0.4285714285714%
Bank One, Wisconsin
Closing Date through November 2, 2003 $1,000,000 0.2857142857143%
Harris Trust and Savings Bank
Closing Date through November 2, 2003 $1,000,000 0.2857142857143%
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
November 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 240,100
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 240,100
<CURRENT-LIABILITIES> 240,100
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 100
<TOTAL-LIABILITY-AND-EQUITY> 240,100
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
