<PAGE> 1
Rule 424B1
Reg. No. 333-46027
5,202,664 SHARES
C2, INC.
COMMON STOCK
-------------------------
C2, Inc. (the "Company" or "C2") is hereby offering 5,202,664 shares of
common stock, $0.01 par value per share ("Common Stock") of the Company for
$4.00 per share (the "Subscription Price"). The Company intends to use the
proceeds of this offering (1) to finance its acquisition of 666.667 membership
units ("Membership Units") of Total Logistic Control, LLC ("TLC"), a
wholly-owned subsidiary of Christiana Companies, Inc. ("Christiana"),
representing two-thirds of the issued and outstanding ownership interests in TLC
(the "Acquisition") and (2) to raise additional proceeds for general corporate
purposes, including future acquisitions. Payment for the TLC Membership Units
purchased in the Acquisition will be due no later than thirty (30) days
following completion of the Acquisition and the Merger (as defined below).
Immediately prior to the offering, a wholly-owned subsidiary of EVI Weatherford,
Inc. ("EVI") will merge with and into Christiana (the "Merger"). Holders
("Christiana Shareholders") of common stock, $1.00 par value per share of
Christiana ("Christiana Common Stock") have a right ("Right") to subscribe for
their pro rata share of Common Stock offered hereby. Each Right consists of a
"Basic Subscription Privilege" and an "Additional Subscription Privilege." The
Rights are not represented by a certificate or other evidence of ownership and
are non-transferable. The "Basic Subscription Privilege" entitles each
Christiana Shareholder to purchase one share of Common Stock for each share of
Christiana Common Stock held immediately prior to the effective time of the
Merger (the "Effective Time"). Each Christiana Shareholder may use cash received
as consideration in the Merger to purchase Common Stock. In the event not all
shares of Common Stock are subscribed for pursuant to the Basic Subscription
Privilege, TLC management, Christiana Shareholders who have exercised their
Basic Subscription Privilege in full and the general public, in that order of
allocation preference, will have an "Additional Subscription Privilege" to
subscribe for the remaining shares of Common Stock in the manner described under
"The Offering -- Additional Subscription Privilege." The offering of Common
Stock pursuant to this Prospectus is hereinafter referred to as the "Offering."
Prior to the Offering, there has not been a public market for the Common
Stock. See "Risk Factors -- No Prior Public Market; Possible Stock Price
Volatility" and "The Offering" for factors that were considered in determining
the Subscription Price.
The Basic Subscription Privilege and the Additional Subscription Privilege
will be exercisable only during the period commencing on the date hereof and
ending at 5:00 p.m. Central Standard Time, on August 14, 1998 (the "Expiration
Date"). See "The Offering" for the manner in which the Basic Subscription
Privilege and the Additional Subscription Privilege may be exercised. THE
OFFERING IS CONTINGENT UPON THE CLOSING OF THE MERGER. IN THE EVENT THE CLOSING
OF THE MERGER DOES NOT OCCUR, OR THE MERGER AGREEMENT IS TERMINATED, THIS
OFFERING WILL IMMEDIATELY CEASE AND ANY PAYMENT FOR SHARES OF COMMON STOCK
HEREUNDER WILL PROMPTLY BE REFUNDED, WITHOUT INTEREST.
(continued on next page)
-------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 11 HEREOF.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
PRICE TO PROCEEDS TO
PUBLIC COMPANY(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Amount Per Share.................. $4.00 $4.00
- ------------------------------------------------------------------------------------------------------------------
Maximum Amount.................... $20,810,656 $20,810,656
- ------------------------------------------------------------------------------------------------------------------
Minimum Amount.................... $10,852,000(2) $10,852,000
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses of the offering, payable by the Company, estimated
at $170,000.
(2) Assumes that only 2,718,000 shares of Common Stock are purchased by the
Lubar Family pursuant to the Lubar Commitment (as defined below).
THE DATE OF THIS PROSPECTUS IS JULY 13, 1998.
<PAGE> 2
Sheldon B. Lubar, David J. Lubar and certain members of the Lubar family
(collectively the "Lubar Family") have committed, pursuant to an agreement
between the Company and Sheldon B. Lubar, and certain related agreements, to
exercise their Basic Subscription Privilege in full to ensure that the net
proceeds of the Offering to the Company (after deducting expenses estimated to
be $170,000) will be at least $10,666,667, which will allow the Company to have
sufficient funds to complete the Acquisition (the "Lubar Commitment"). The
exercise of this Basic Subscription Privilege by the Lubar Family will result in
the Lubar Family purchasing a minimum of 2,718,000 shares of Common Stock in the
Offering. In the event all Christiana Shareholders exercise their Basic
Subscription Privilege in full, the Lubar Family, TLC executive officers, and
directors and executive officers of the Company (excluding Lubar Family members,
Sheldon B. Lubar and David J. Lubar) will own approximately 52%, 0.7% and 13% of
the outstanding shares of Common Stock, respectively, and collectively, such
entities will own approximately 66% of the outstanding shares of Common Stock.
Members of the Lubar Family may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") and the
rules and regulations promulgated thereunder. If any such members of the Lubar
Family are deemed to be underwriters, they will not be able to resell their
shares of Common Stock, except pursuant to a registration statement declared
effective under the Securities Act or under an applicable exemption from
registration under the Securities Act.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq SmallCap Market under the symbol "CTOO."
2
<PAGE> 3
THE TLC NETWORK
MAP
K E Y
--------------------------
[ ] Refrigerated
Distribution Center
P Dry Distribution Center
TLC operates through an extensive
network of refrigerated
distribution centers and dry
(non-refrigerated) distribution
centers. TLC uses this network to
provide its warehousing and
logistic services to its customers.
The Company intends to furnish its
shareholders with annual reports
containing consolidated financial
statements audited by its
independent auditors and with
quarterly reports containing
unaudited interim consolidated
financial information for each of
the first three quarters of each
year.
3
<PAGE> 4
PROSPECTUS SUMMARY
Simultaneous with the closing of the Offering, the Company will acquire,
for approximately $10.7 million in cash, 666.667 Membership Units of TLC,
representing two-thirds of the issued and outstanding ownership interests in TLC
(sometimes hereinafter referred to as the "Acquisition"). The following summary
is qualified in its entirety by the more detailed information, and the
consolidated financial statements of the Company and TLC and notes thereto,
appearing elsewhere in this Prospectus.
THE COMPANY
The Company was formed on December 11, 1997 for the purpose of consummating
the Acquisition. The Company intends to utilize any additional funds raised in
the Offering for general corporate purposes, including future acquisitions.
TLC provides refrigerated and dry (non-refrigerated) third-party logistic
services including warehousing, transportation, distribution and international
freight forwarding. The third-party logistics industry is comprised generally of
entities which provide either asset-based or non-asset based services.
Asset-based entities provide services through their warehousing and fleet
operations, while non-asset based entities provide strategic solutions to, and
arrange for, the distribution and warehousing needs of their customers. TLC
believes that its ability to offer customers "one-stop shopping" through its
complement of services which include both asset and non-asset based solutions
provides it with a competitive advantage. The Company's integrated logistic
services generally 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 and allows the Company to capitalize
on the growing trend of corporations toward seeking to reduce costs by
outsourcing large components of their logistics function.
TLC's operations are conducted through a network of 13 distribution
warehouses, comprised of an aggregate of 33 million cubic feet of refrigerated
and frozen storage capacity in eight locations and five dry distribution centers
in key markets, primarily in the upper Midwest. TLC's refrigerated warehousing
operations include temperature sensitive storage services, blast freezing,
individual quick freeze services, vegetable blanching and processing and
automated poly bag and bulk packaging services. TLC's transportation and
distribution services include full service truckload, less-than-truckload and
pooled consolidation in both temperature controlled and dry freight equipment,
dedicated fleet services and specialized store-door delivery formats.
Transportation and logistic services are provided utilizing Company-owned
equipment as well as through carrier management services utilizing third party
common and contract carriers. TLC also provides a full range of international
freight management services, fully computerized inventory management, assembly,
repackaging and just-in-time production supply services.
TLC believes it is the nation's seventh largest provider of public
refrigerated warehouse space. Two of TLC's refrigerated distribution centers are
located in Rochelle, Illinois; and two are located in Kalamazoo, Michigan. Other
TLC 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 South Brunswick, New Jersey. On May
20, 1998, TLC entered into a preliminary agreement to purchase a refrigerated
distribution facility in Hudsonville, Michigan with approximately 4.6 million
cubic feet of storage capacity. The purchase price for this facility is
approximately $12.3 million and the transaction is expected to be completed in
July of 1998, subject to satisfaction of customary conditions. TLC's customers
consist primarily of national, regional and local firms engaged in food
processing, consumer product manufacturing, wholesale distribution and
retailing.
4
<PAGE> 5
Set forth below is certain summary financial data regarding TLC (amounts in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31, YEAR ENDED JUNE 30,
--------------------- ---------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues............................. $68,579 $63,271 $84,208 $ 76,976 $71,029
Income from operations............... 5,085 5,043 6,311 5,689 7,555
Net income........................... 2,444(2) 766 12,181(3) 1,536 2,562
EBITDA(1)............................ 10,013 10,442 13,143 12,552 14,218
Cash flows from operating
activities......................... 8,484 6,600 9,294 11,043 10,180
Cash flows from investing
activities......................... (1,175) (1,056) (1,822) (16,262) (7,116)
Cash flows from financing
activities......................... (7,149) (5,131) (7,277) 4,883 (3,247)
</TABLE>
- -------------------------
(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) Net income for the nine months ended March 31, 1998 does not reflect the
impact of an income tax provision as TLC was a limited liability company
during this period. For comparative purposes, net income for the nine month
period ended March 31, 1997 (during which TLC was a C-Corporation) would
have been $1,232 absent a provision for income taxes of $466.
(3) 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. ("Wiscold") and Total Logistic Control, Inc. ("Total Logistic 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.
The Company 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) 748-0701.
5
<PAGE> 6
THE MERGER AND THE ACQUISITION
The Merger will result in Christiana becoming a wholly-owned subsidiary of
EVI. Pursuant to the Merger, each outstanding share of Christiana Common Stock
will be converted into a right to receive
- approximately .74193 of a share of EVI Common Stock, subject to
certain adjustments based on the number of shares of Christiana Common
Stock outstanding at the Effective Time;
- cash of approximately $4.00 per share of Christiana Common Stock,
subject to adjustment based on the amount of certain Christiana
liabilities existing as of the Effective Time (the "Cash
Consideration"); and
- a contingent cash payment of approximately $1.92 payable to the
shareholders of record following the fifth anniversary of the
Effective Time (or earlier if Christiana receives $20.0 million for
its one-third interest in TLC), subject to any indemnity claims by EVI
under the Merger Agreement (the "Contingent Cash Consideration").
Immediately prior to the Effective Time of the Merger, Christiana will
complete the Acquisition by selling two-thirds of its interest in TLC to the
Company for approximately $10.7 million. The Acquisition will be completed with
the Company obligated to pay the purchase price of $10.7 million to Christiana
no later than thirty (30) days thereafter (the "Payment Date"). The Acquisition
will be effected pursuant to the terms of an Agreement, dated December 12, 1997,
by and among the Company, TLC, Christiana and EVI (the "Purchase Agreement")
which is attached as Annex A and the Agreement and Plan of Merger, dated as of
December 12, 1997, by and among EVI, Christiana Acquisition Co., a wholly-owned
subsidiary of EVI ("Sub"), Christiana and the Company pursuant to which the
Merger will be effected (the "Merger Agreement"). On May 26, the Merger
Agreement and the Purchase Agreement were amended pursuant to Amendment No. 1 to
Agreement and Plan of Merger and Logistic Purchase Agreement ("Amendment No. 1")
which is attached as Annex C. Approximately $10.7 million of the net proceeds
from the Offering will be utilized to fund the Acquisition.
Pursuant to the Merger, TLC is required to pay to Christiana a distribution
in the amount of $20 million (the "TLC Dividend") and to pay to Christiana in
full the entire principal amount of $3,000,000 advanced to Wiscold pursuant to a
note dated September 1, 1992 (the "Wiscold Note"), together with all accrued
interest thereon. See "Risk Factors -- Substantial Leverage; Deficit of Earnings
to Fixed Charges" and "Pro Forma Summary Combined Financial Data." TLC will use
its revolving credit facility, which has a maximum limit of up to $65,000,000,
to pay the TLC Dividend, to repay the Wiscold Note, to refinance existing bank
debt of approximately $36,000,000, to purchase a refrigerated warehouse facility
in Hudsonville, Michigan for approximately $12.3 million and to pay related fees
and expenses. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations -- Description of Credit Agreement." In addition, the
Purchase Agreement provides that the Company will assume, pay and discharge when
due all liabilities known or unknown, fixed or contingent (including all
expenses related to the Merger) ("Liabilities") to which EVI, Christiana or any
of its current and historical subsidiaries, predecessors and affiliates
(collectively "Christiana Affiliates") may become liable in any way as a result
of the business, operations or assets of Christiana or any Christiana Affiliate
(including TLC) on or prior to the Effective Time (such liabilities being
hereinafter referred to as the "Assumed Liabilities") which shall include,
without limitation, Liabilities resulting from, arising out of or relating to
(i) any Christiana Affiliate, (ii) the business, operations or assets of
Christiana or Christiana Affiliate on or prior to the Effective Time, (iii) any
taxes to which Christiana or any Christiana Affiliate may be obligated for
periods ending on or before the Effective Time (except for Christiana taxes
expressly retained by Christiana pursuant to the Merger 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 Affiliate that existed on or prior to the Effective
Time, (v) any product or service provided by Christiana or any Christiana
Affiliate prior to the Effective Time, (vi) the Merger, the Acquisition or any
of the other transactions contemplated thereby, (vii) previously conducted
operations of Christiana or any Christiana Affiliate and (viii) the Company's
ownership interest in TLC. See Annex A. In addition, TLC has agreed to assume,
pay and discharge when due the Assumed
6
<PAGE> 7
Liabilities relating to any historical business operations or assets of TLC
("TLC Historic Business"). See "Risk Factors -- Assumed Liabilities and
Indemnification Obligations of the Company and TLC."
The Purchase Agreement provides that the Company and TLC, jointly and
severally, will indemnify Christiana and any Christiana Affiliates from and
against any and all the Liabilities that are based upon, arise out of, or relate
to, any breach of the Purchase Agreement by the Company or TLC; any acts or
omissions of Christiana and any Christiana Affiliates on or before the Effective
Time; the Assumed Liabilities; any taxes resulting from the transactions
contemplated by the Purchase Agreement other than any tax Liability for income
of EVI attributable to Christiana under the equity method of accounting either
before or after the Effective Time, and any taxes as a result of the Merger
subsequently being determined to be taxable; any environmental Liabilities
arising out of conditions existing on, at or underlying any properties currently
or previously owned or operated by Christiana or any Christiana Affiliates; and
certain other Liabilities.
As soon as possible after the Effective Time, but no later than the Payment
Date, the parties to the Merger Agreement will calculate and agree upon the Cash
Consideration (anticipated to be approximately $4.00 per share of Christiana
Common Stock), and the Contingent Cash Consideration (approximately $1.92 per
share of Christiana Common Stock). On the Payment Date, EVI will pay the Cash
Consideration due each Christiana Shareholder to Firstar Trust Company (the
"Subscription Agent") (which will also act as escrow agent in the Merger), and
the Subscription Agent will promptly distribute such cash to each Christiana
Shareholder, unless the Christiana Shareholder has requested that all or a
portion of the Cash Consideration be applied to the purchase of Common Stock of
the Company, in which case such Cash Consideration will be so applied. Such a
request must be made by a Christiana Shareholder pursuant to the Letter of
Transmittal, provided as part of the Joint Proxy Statement/Prospectus of
Christiana and EVI (the "Merger Proxy Statement") in connection with the Merger
(the "Letter of Transmittal"). See "The Offering." The Contingent Cash
Consideration will be retained by EVI for a period of five years (or a shorter
period if Christiana receives $20.0 million for its one-third interest in TLC).
EVI will pay the Contingent Cash Consideration as determined as of such future
date and issue the payment to the Christiana Shareholders of record as of the
record date fixed by Christiana in connection with its Special Meeting of
Shareholders described in the Merger Proxy Statement.
No fraction of a share of EVI Common Stock will be issued in the Merger. In
lieu thereof, all fractional shares of EVI Common Stock that would otherwise be
issuable in the Merger will be rounded to the nearest whole share of EVI Common
Stock.
Set forth below is a timeline of key events relating to the Offering, the
Merger and the Acquisition.
TIMELINE OF KEY EVENTS
<TABLE>
<CAPTION>
KEY EVENT PROPOSED DATE
--------- -------------
<S> <C> <C>
- - Expiration Date for submission of Letter of Transmittal
and/or Subscription Agreement (for non-Christiana
Shareholders) to purchase Company Common Stock. August 14, 1998
- - Special Meeting of Shareholders of EVI and Christiana to
Vote on Merger. August 17, 1998
- - Complete Acquisition with obligation to pay purchase price
no later than thirty (30) days thereafter. August 17, 1998
- - Complete Merger with distribution of Cash Consideration to
be made no later than thirty (30) days thereafter, except to
the extent applied to purchase Company Common Stock pursuant
to Letter of Transmittal. August 17, 1998
- - Distribution of Cash Consideration and/or application of
Cash Consideration to purchase Company Common Stock, based
on election made in Letter of Transmittal. September 16, 1998
- - Purchase of at least 2,718,000 shares of Company Common
Stock by Lubar Family. September 16, 1998
- - Payment of Purchase Price for Acquisition. September 16, 1998
- - Issuance of Company Common Stock to Subscribers. September 17, 1998
</TABLE>
7
<PAGE> 8
The following diagram sets forth the organizational structure and stock
ownership of the Company, TLC, Christiana and EVI following the Merger and the
Acquisition.
DIAGRAM
8
<PAGE> 9
THE OFFERING
Common Stock offered hereby... 5,202,664 shares
Minimum Number of Shares of
Common Stock to be Outstanding
after the Offering............ 2,718,000 shares(1)
Maximum Number of Shares of
Common Stock to be Outstanding
after the Offering............ 5,202,689 shares
Subscription Price............ $4.00 per share of Common Stock. The
Subscription Price was determined by the
Company's Board of Directors and is not based
on an independent valuation of the Company. The
purchase price was determined based on a number
of factors including the desire to simplify the
process of Christiana Shareholders purchasing
Common Stock by setting a price which would be
proximate to the Cash Consideration per share
to be received in the Merger, while at the same
time, meeting the minimum initial bid price of
$4.00 per share for the Common Stock to qualify
for listing on the Nasdaq SmallCap Market. In
setting the price, the Company also considered
the fairness of 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 Common Stock.
Rights........................ Each Christiana Shareholder has a Right,
consisting of the Basic Subscription Privilege
and the Additional Subscription Privilege.
Basic Subscription
Privilege..................... Each Christiana Shareholder has a Basic
Subscription Privilege to purchase one share of
Common Stock for every one share of Christiana
Common Stock held immediately prior to the
Effective Time. The Basic Subscription
Privilege is nontransferable.
Additional Subscription
Privilege..................... In the event the entire Basic Subscription
Privilege is not exercised in full, TLC
management, Christiana Shareholders who
exercise their Basic Subscription Privilege in
full and the general public, in that order of
allocation preference, will have an Additional
Subscription Privilege to purchase any
remaining shares of Common Stock (subject to
proration as described below). In the event all
allocation preferences ranking prior to the
general public's ability to purchase Common
Stock are exercised in full, there will be no
shares available to the general public. The
Additional Subscription Privilege is
nontransferable.
Subscription Procedure for
Christiana Shareholders....... The Basic Subscription Privilege may be
exercised by delivery of a properly completed
Letter of Transmittal delivered to Christiana
Shareholders in connection with the Merger.
Christiana Shareholders wishing to exercise
their Basic Subscription Privilege will
automatically, upon completion and delivery of
the Letter of Transmittal, have the exercise
price paid directly by the Subscription Agent.
See "Summary of Certain Terms of the Merger"
for a description of the Cash Consideration.
However, because the Cash Consideration per
share is expected to be less than the
Subscription Price, any exercise of the Basic
Subscription Privilege in full
9
<PAGE> 10
will require an additional cash payment.
Christiana Shareholders wishing to exercise
their Additional Subscription Privilege shall
also do so pursuant to the Letter of
Transmittal. Payment for shares purchased
pursuant to the Additional Subscription
Privilege shall be made in the form of an
additional cash payment by the subscriber. THE
LETTER OF TRANSMITTAL MUST BE DELIVERED TO THE
SUBSCRIPTION AGENT FOLLOWING THE EFFECTIVE TIME
AND ON OR BEFORE THE EXPIRATION DATE. SEE "THE
OFFERING."
Subscription Procedure for
Others........................ Others wishing to exercise the Additional
Subscription Privilege shall do so pursuant to
the Subscription Agreement provided herewith,
together with full payment for all shares of
Common Stock subscribed for pursuant to the
Additional Subscription Privilege. THE
SUBSCRIPTION AGREEMENT MUST BE DELIVERED TO THE
SUBSCRIPTION AGENT FOLLOWING THE EFFECTIVE TIME
AND ON OR BEFORE THE EXPIRATION DATE.
Proration..................... In the event of a proration of shares of Common
Stock to persons exercising the Additional
Subscription Privilege, the Subscription Agent
will promptly refund, without interest, the
amount of any overpayment.
Expiration Date............... August 14, 1998 at 5:00 p.m., Central Standard
Time.
Proceeds of the Offering...... If fully subscribed, the Offering will result
in proceeds to the Company, net of Offering
expenses, of $20,640,656. Approximately $10.7
million of the proceeds will be used to fund
the Acquisition, with the remainder, if any,
being used for general corporate purposes,
including future acquisitions.
Risk Factors.................. Certain risk factors should be considered in
evaluating an investment in the Common Stock,
including, without limitation, the Company's
dependence on a single line of business and
significant customers; competition in TLC's
industry; TLC's substantial leverage; the
assumed liabilities and indemnification
obligation of the Company and TLC; and other
risks described more fully under "Risk
Factors."
Listing....................... The Company has applied for listing on the
Nasdaq SmallCap Market under the symbol "CTOO."
Further Information........... Any questions or requests for assistance
concerning the method of subscribing for Common
Stock or requests for additional copies of this
Prospectus can be directed to William T.
Donovan (414) 291-9000.
- -------------------------
(1) Represents the Lubar Commitment. The minimum percentage of ownership of
outstanding Common Stock following the Offering by the Lubar Family will be
52% and the maximum percentage of ownership by the Lubar Family following
the Offering (assuming no other Christiana Shareholders exercise their Basic
Subscription Privilege and that TLC management and the general public do not
purchase shares of Common Stock in the Offering) is 100%.
10
<PAGE> 11
RISK FACTORS
Prospective purchasers should carefully consider the following factors,
together with other information in this Prospectus, in evaluating an investment
in the shares of Common Stock. This Prospectus contains certain forward-looking
statements, including statements containing the words "believes," "anticipates,"
"expects" and words of similar import. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: adverse changes in national or local economic
conditions; increased competition; ability to service its debt; changes in
availability, cost and terms of financing; oversupply of warehousing space;
changes in operating expenses; indemnification obligations; and other factors
referenced in this Prospectus. Given these uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors or to publicly
announce the results of any revision to any of the forward-looking statements
contained in this Prospectus to reflect future events or developments.
DEPENDENCE ON SINGLE LINE OF BUSINESS AND SIGNIFICANT CUSTOMERS
While the Company intends to make additional acquisitions of companies that
are within TLC's general industry or unrelated thereto, in the foreseeable
future, the Company's only non-cash asset will be its ownership interest in TLC.
If, for any reason, TLC's business of providing warehousing and logistic
services ceases to be a preferred method of outsourcing these functions, or if
new technological methods of food preservation become available and widely
utilized, TLC's business could be adversely affected. A number of TLC's
facilities depend, to a large extent, upon one or a small number of customers or
commodities. During fiscal 1997, 10 of TLC's customers accounted for 47% of
TLC's total revenues. An interruption or reduction in the business received by
such facilities from such customers or a decline in the demand for such
commodities may result in a decrease in the sales at such facilities and 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 third-party logistic services. See "Business
- -- General; Services, Sales and Customers."
COMPETITION
Each of TLC's individual business segments is highly fragmented and
competitive with significant competition from local and regional companies and
national companies which may seek to expand their presence into local markets in
which TLC competes. Some of these companies have substantially greater financial
and other resources than TLC. Competition generally varies by local market and
is characterized by low barriers to entry since any competitor able to obtain
financing may build a warehouse facility. Companies that compete in the
warehousing market include Americold Corporation, United Refrigerated Services,
Inc., Millard Refrigerated Services, Christian Salvesen, Inc. and KLLM Transfer
Services in the refrigerated warehousing sector and Exel Logistics and many
regional operators and real estate developers in the dry warehousing sector.
Competition in the third-party logistic services sector includes Menlo
Logistics, Schneider Logistics, Inc., Caliber Logistics and Ryder Dedicated
Logistics. In the transportation market, TLC's competitors include Schneider
National, J.B. Hunt, M.S. Carriers, CR England and a substantial number of local
and regional operators. Additionally, TLC's customers, many of which have
substantially greater resources than TLC, may divert business from TLC by
building their own warehouse facilities or establishing their own fleet
operations. To the extent there is a proliferation of competition which leads to
excess warehousing capacity, it will likely have a depressing effect on the
pricing of warehousing, a function which, in fiscal 1997, accounted for
approximately 58% of TLC's business. See "Business -- Competition; Services,
Sales and Customers."
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<PAGE> 12
SUBSTANTIAL LEVERAGE; DEFICIT OF EARNINGS TO FIXED CHARGES
Pursuant to the Merger and prior to the Effective Time, TLC is required to
pay to Christiana the TLC Dividend and to pay to Christiana in full the entire
principal amount of $3,000,000 advanced to Wiscold pursuant to the Wiscold Note,
together with all accrued interest thereon. To finance these obligations TLC
will borrow $23 million under its revolving credit facility. After such
borrowing, and after borrowing an additional $12.3 million to finance the
purchase of a refrigerated warehouse facility in Hudsonville, Michigan (which is
expected to be completed in July of 1998), TLC will have approximately $1
million of available borrowing capacity under its revolving credit facility. As
a result, TLC, as well as the Company on a pro forma basis, will be highly
leveraged. The Company's pro forma total funded debt to total capitalization
including minority interest at March 31, 1998 was 64% assuming the maximum
number of shares are sold. See "Capitalization" and "Pro Forma Summary Combined
Balance Sheet." In addition, TLC may, subject to certain restrictions in its
debt agreements, incur further indebtedness from time to time to finance
expansion, either through acquisitions or capital leases, or for other purposes.
Due to TLC's substantial indebtedness, a significant portion of its cash
flow from operations will be required for debt service. On a pro forma basis,
for the fiscal year ended June 30, 1997, this results in the Company's earnings
being insufficient to cover fixed charges by approximately $79,000, principally
as a result of significant interest charges on the debt to be incurred in
connection with the financing of the TLC Dividend. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." In addition, the
Company's Pro Forma Income Statement reflects a net loss of $738,000 for the
year ended June 30, 1997 and a net loss of $15,000 for the nine months ended
March 31, 1998. See "Pro Forma Summary Combined Financial Data."
The extent to which TLC is leveraged could have consequences to the holders
of Common Stock, including (a) impairment of TLC's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or other purposes; (b) 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; (c) vulnerability of TLC to changes in general
economic conditions; and (d) limitations on TLC's ability to capitalize on
significant business opportunities and to respond to competition. In addition,
if TLC experiences losses, the Company may decide to contribute some or all of
the excess proceeds of this Offering to TLC to fund such operating losses. To
the extent of such a contribution, the proceeds of this Offering in excess of
the amount necessary to finance the Acquisition would be unavailable for future
acquisitions.
TLC will have substantial payment obligations with respect to its
indebtedness. No assurance can be given that TLC will be able to generate
sufficient cash flow from operations to meet its debt service obligations. TLC
anticipates, however, that the level of cash flow from operations will be
sufficient to cover all interest payments, principal payments, working capital
requirements and capital expenditure needs for the foreseeable future.
If for any reason TLC were unable to meet its debt service obligations, it
would be in default under the terms of its indebtedness. In the event of such a
default, the financial institutions holding such indebtedness could elect to
declare all such indebtedness immediately due and payable, including accrued and
unpaid interest, and to terminate their commitments (if any) with respect to
funding obligations under such indebtedness. In addition, such holders could
proceed against their collateral (if any). Any such default would have a
significant adverse effect on the market value and marketability of the Common
Stock.
ASSUMED LIABILITIES AND INDEMNIFICATION OBLIGATIONS OF THE COMPANY AND TLC
Under the Purchase Agreement pursuant to which the Company has agreed to
purchase 666.667 Membership Units of TLC, the Company will assume, pay and
discharge when due the Assumed Liabilities. In addition, TLC has agreed to
assume, pay and discharge when due the Assumed Liabilities to the extent such
Assumed Liabilities relate to any of the TLC Historic Business.
The Purchase Agreement also provides that the Company and TLC, jointly and
severally, will indemnify EVI, Christiana and their affiliates (the "EVI
Indemnified Parties") from and against any and all Liabilities to which any EVI
Indemnified Party becomes subject that are based upon, arise out of, or relate
to, any breach of the Purchase Agreement by the Company or TLC; any acts or
omissions of Christiana or any of its affiliates
12
<PAGE> 13
on or before the Effective Time; the Assumed Liabilities; any taxes resulting
from the transactions contemplated by the Purchase Agreement other than any tax
Liability for income of EVI attributable to Christiana under the equity method
of accounting either before or after the Effective Time, and any taxes as a
result of the Merger subsequently being determined to be taxable (the Merger is
intended to qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code") by
reason of Section 368(a)(2)(E) of the Code); any environmental Liabilities
arising out of conditions existing on, at or underlying any properties currently
or previously owned or operated by Christiana or any Christiana Affiliate; and
certain other Liabilities. If the Liability subject to such indemnification
provisions relates to the TLC Historic Business, TLC, as between the Company and
TLC, will be primarily responsible for the payment of any such Liability and the
defense of any indemnification claim. If TLC does not defend or pay such
obligation, the Company will be responsible for such Liability and the defense
of any such claim. If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, the Company, as between the Company and TLC,
will be primarily responsible, with TLC backing up the Company's indemnity
obligation.
Notwithstanding the foregoing, however, the Purchase Agreement provides
that with respect to a Liability or claim relating to a matter other than the
TLC Historic Business, the costs of defense and payment of the Liability shall
be the obligation of EVI to the extent and only to the extent of the $10 million
of cash (the "Holdback") withheld, pursuant to the Merger Agreement from payment
to Christiana Shareholders for a period from the Effective Time through the
earlier of: (i) the fifth anniversary of the Effective Time or (ii) the date
that Christiana receives at least Twenty Million Dollars ($20,000,000) in cash
or other equivalent consideration for its one-third interest in TLC, to pay for
any items for which any EVI Indemnified Party is entitled to indemnification
under the Purchase Agreement; provided, however, that if there is any pending or
threatened claim, demand or suit or existing matter for which EVI has determined
that it will be subject to indemnification under the Purchase Agreement, such
period shall be extended until such time that such claim, demand, suit or matter
is wholly resolved, paid and not subject to appeal or further claims. Once the
Holdback is exhausted or paid to Christiana Shareholders pursuant to the terms
of the Merger Agreement, EVI shall have no obligation to pay such amounts and
the Company and TLC will continue to be responsible for the indemnity
obligations described herein. In addition, neither the Company nor TLC will be
obligated to indemnify the EVI Indemnified Parties for amounts which are covered
and paid by insurance of the EVI Indemnified Parties (excluding deductibles or
self-insured retentions).
If TLC is obligated to pay any amounts relating to an Assumed Liability or
an indemnification claim, Christiana will be entitled to receive a cash payment
from the Company 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) the Company sells its
Membership Units in TLC; (iii) or if there is a direct or indirect transfer or
sale of Membership Units of TLC held by the Company or of all of the Common
Stock.
The obligations of the Company under the Purchase Agreement are secured by
all of the Company's ownership interest in TLC. Any substantial claims made by
EVI, Christiana or any of their affiliates in connection with the Assumed
Liabilities or the indemnification obligations contained in the Purchase
Agreement which are not covered by the insurance of the EVI Indemnified Parties
or which are in excess of the Holdback may have a material adverse effect on the
Company's financial condition and results of operations and, if the Company were
unable to satisfy its obligations under the Assumed Liabilities and
indemnification provisions of the Purchase Agreement, could result in the loss
of the Company's ownership interest in TLC.
RESTRICTIONS ON ACTIONS OF TLC UNDER OPERATING AGREEMENT; TRANSFER RESTRICTIONS
AND CHRISTIANA PUT AND PARTICIPATION RIGHTS
The Operating Agreement, which is attached as Annex B and as amended by
Amendment No. 1, to be entered into as of the Effective Time between the Company
and Christiana (the "Operating Agreement") restricts the Company's control of
TLC. The Operating Agreement provides that the management of TLC shall be vested
in a Board of Managers which shall consists of six initial members. Each Manager
is elected by the vote or written consent of the members (currently the Company
and Christiana) (the "Members") holding at least a majority of the Membership
Units in TLC; provided, however, that Christiana and the
13
<PAGE> 14
Company will 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
Membership Units held by Christiana and the Company, respectively. Christiana, a
wholly-owned subsidiary of EVI that will be unaffiliated with the Company and
beyond its control (at the Effective Time), shall have the power to appoint two
members of the Board of Managers. Consequently, whenever unanimous action is
required, the Company will not have the means to assure unanimous consent.
The Operating Agreement also provides that the Board of Managers may not
cause TLC to take certain specified actions without the prior approval of the
Members by unanimous consent. As a result of the foregoing, the Company may not
take certain actions relating to TLC without the prior written consent of
Christiana including (i) the authorization or issuance of additional Membership
Units; (ii) the authorization or payment of any distribution with respect to
Membership Units, except for the payment of any distribution that is necessary
for the Company to fulfill its purchase obligation with respect to Christiana's
interest in TLC; (iii) any direct or indirect purchase or acquisition by TLC or
any subsidiary of TLC of Membership Units; (iv) approval of any merger,
consolidation or similar transaction or sale of all or substantially all of the
operating assets of TLC in one or more transactions; (v) the creation of any new
direct or indirect subsidiary of TLC; (vi) the making of any tax election; (vii)
the liquidation or dissolution of TLC or any subsidiary of TLC; (viii) any
transaction between TLC or subsidiary of TLC and any affiliate of a Member
(other than a transaction between TLC and a subsidiary of TLC); (ix) the payment
of any compensation to any Member or any affiliate of a Member or entering into
any employee benefit plan or compensatory arrangement with or for the benefit of
any Member or affiliate of any Member; (x) any amendment to the Operating
Agreement or the Certificate of Organization; and (xi) any other matter for
which approval of Members is required under the Delaware Limited Liability
Company Act. See "The Operating Agreement."
Except as specifically set forth in the Operating Agreement, a Member may
not voluntarily sell, give, assign, bequeath or pledge (each a "Transfer") any
Membership Unit without the prior written consent of the Board of Managers;
provided, however, that the Company may pledge and assign its Membership Units
to Christiana and Christiana may effect a Transfer of the Company's Membership
Units pursuant to any action taken with respect to any security interest granted
to Christiana by the Company. Christiana may also Transfer its Membership Units
if the transferee is an affiliate of Christiana or the Company and the
transferee agrees to be bound by the provisions of the Operating Agreement. At
any time after the fifth anniversary of the date of the Operating Agreement,
Christiana may Transfer any or all of its Membership Units to any person;
provided, however, that the Company shall have a right of first refusal to
purchase such Membership Units for the same price and at the same terms as such
Membership Units were offered to the transferee. See "The Operating Agreement."
In addition, the Purchase Agreement provides that neither the Company nor TLC
may transfer, directly or indirectly, a majority of the Company's or TLC's
assets to any person or entity unless the acquiring person or entity expressly
assumes the obligations of the Company or TLC, as the case may be, under the
Purchase Agreement (See "-- Assumed Liabilities and Indemnification Obligations
of the Company and TLC" above) and has a net worth, on a pro forma basis after
giving effect to the acquisition equal to or greater than the Company or TLC, as
the case may be, on a consolidated basis. See "The Purchase Agreement."
The Purchase Agreement also provides that at any time during the one year
period following the fifth anniversary of the Effective Time, Christiana will
have the option (but not the obligation) to sell to the Company or TLC, at
Christiana's option, and the Company or TLC, as applicable, will be required to
purchase, all (but not less than all) of Christiana's 333.333 Membership Units
in TLC for a price equal to $7 million, payable in cash within 60 days of
Christiana providing notice of its intent to exercise this option.
In the event of a change of control of the Company, Christiana shall have
the right to sell its interest in TLC to the Company or if the Company proposes
to transfer or sell all of its interest in TLC to an unrelated third party
("Third Party") in one or more transactions, Christiana will have the right
("Tag Along Right") to participate in such sale with respect to its Membership
Units in TLC for the same equivalent consideration per equivalent Membership
Unit and otherwise on the same terms as the Company transfers its Membership
Units in TLC. The Company is obligated to provide notice to Christiana of any
circumstances which gives rise to the Tag Along Right and if Christiana
exercises its Tag Along Right in the manner set forth in the Purchase
14
<PAGE> 15
Agreement it will be obligated to sell its Membership Units upon substantially
the same terms and conditions as the Company transfers its Membership Interests
in TLC.
AVAILABILITY AND INTEGRATION OF POTENTIAL FUTURE ACQUISITIONS
The Company's strategy provides that a substantial part of its 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. There can be no
assurance that the Company or TLC will be able to identify suitable acquisition
candidates or, if identified, negotiate successfully their acquisition. If the
Company or TLC is successful in identifying and negotiating suitable
acquisitions, there can be no assurance that any debt or equity financing
necessary to complete such acquisition can be arranged on terms satisfactory to
the Company or TLC, as the case may be, or that such financing will not increase
the Company's leverage or result in additional dilution to existing Company
shareholders. Moreover, there can be no assurance that any acquired warehousing
or logistics business can be integrated successfully into TLC or that TLC or the
Company, as the case may be, will manage or improve the operating or
administrative efficiencies of any acquired business. Failure of the Company or
TLC to implement successfully their acquisition strategies will limit the
Company's growth potential.
TLC'S FLEET; RELATIONSHIP WITH TRUCKLOAD CONTRACT CARRIERS
TLC utilizes both its own fleet of trucks and truckload contract carriers
("Contract Carriers") to conduct its operations. Thus, as TLC expands, it will
likely be required to expand its fleet of trucks and require the services of
additional Contract Carriers. At some TLC locations, only a few Contract
Carriers meet TLC's quality standards. In addition, the trucking industry has
experienced severe shortages of available drivers in recent years, which may
curtail the ability of TLC and Contract Carriers to expand the size of their
fleets. This shortage may also require TLC and Contract Carriers to increase
drivers' compensation, thereby increasing transportation costs to TLC. If TLC
were unable to successfully expand its own fleet and secure additional local
Contract Carrier capacity to handle the transportation needs of its customers or
had to increase the amount paid for transportation services, TLC's results of
operations, and accordingly, the Company's results of operations, could be
adversely affected.
POSSIBLE EFFECT OF ECONOMIC DEVELOPMENTS; GEOGRAPHIC CONCENTRATION
Interest rate fluctuations, economic recession, customers' business cycles,
changes in fuel prices and supply, increases in fuel or energy taxes and the
transportation costs of TLC's internal fleet of trucks and Contract Carriers are
economic factors over which TLC has little or no control. Increased operating
expenses incurred by Contract Carriers, together with any internal increases in
the cost of TLC's fleet of trucks, can be expected to result in higher
transportation operating costs for TLC. TLC's operating margins would be
adversely affected if it were unable to pass through to its customers the full
amount of increased operating costs. Economic recession or a downturn in
customers' business cycles also could have an adverse effect on TLC's results of
operations and TLC's growth by reducing demand for TLC's services.
TLC's operations and customers are currently located primarily in
Wisconsin, Illinois and Michigan. Therefore, TLC's results of operations, and
accordingly, the Company's results of operations, are susceptible to downturns
in the general economy in this geographic region.
DEPENDENCE ON MANAGEMENT
The Company and TLC are, and for the foreseeable future will be, dependent
on the services of their respective senior management teams including, in the
case of the Company, 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 the Company nor TLC has written
employment agreements with any of its executive officers and does not maintain
insurance on the life of any of its executive officers.
The loss of any of these individuals could adversely affect the operations
of the Company and TLC. See "Management."
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<PAGE> 16
CONFLICTS OF INTEREST
Sheldon B. Lubar, a director of the Company, David J. Lubar, President and
a director of the Company and William T. Donovan, Chairman and a director of the
Company, have, from time to time, participated individually, and as a group, in
acquisitions of, and investments in, other business entities independent from
Christiana. The Company's Board of Directors have adopted guidelines which
generally require that before independently pursuing an acquisition opportunity,
the opportunity will be presented to the Board of Directors. The decision as to
whether to pursue the opportunity will be made by a majority of the members of
the Board who are not otherwise potentially interested in the opportunity.
CONCENTRATION OF OWNERSHIP OF COMMON STOCK
Following the Offering, the Lubar Family and the other officers and
directors of the Company will beneficially own approximately 66% of the
outstanding shares of Common Stock assuming such individuals exercise their
Basic Subscription Privilege in full. In the event the entire Basic Subscription
Privilege is not exercised in full by Christiana Shareholders, it is likely that
the Lubar Family and the other directors and officers of the Company will
beneficially own an even higher percentage of outstanding shares of Common
Stock.
Accordingly, the Lubar Family and the other directors and officers of the
Company will have the ability to influence significantly the election of
directors and most corporate actions. See "Principal Shareholders."
NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY
Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or be sustained following this Offering. The initial
public offering price for the Common Stock has been determined at the discretion
of the Company's Board of Directors and bears no relationship to the price at
which the Common Stock will trade after this Offering. There can be no assurance
that future market prices of the Common Stock will not be lower than the initial
public offering price.
After this Offering, the market price of the Common Stock may be subject to
significant fluctuations in response to such factors as variations in the annual
or quarterly financial results of the Company or its competitors, changes by
financial research analysts in their estimates of the earnings of the Company or
other companies in, or with ownership interests in, the warehousing and
transportation industries, conditions in the economy in general or in the
Company's or TLC's industry in particular, unfavorable publicity or changes in
applicable laws and regulations (or judicial or administrative interpretations
thereof) affecting the Company, TLC or the warehousing and transportation
industry.
DILUTION
Investors will experience substantial dilution as a result of the
Acquisition to the extent of intangible assets purchased in the Acquisition,
which, at March 31, 1998, was $5,475,000, or $1.05 per share assuming the
Offering is fully subscribed.
DIVIDENDS FROM TLC
The Operating Agreement to be entered into at the Closing between
Christiana and the Company (the "Operating Agreement") will govern the
relationship between Christiana and the Company as the two Members of TLC. The
Operating Agreement provides that other than quarterly distributions to cover
the estimated income tax payments on items of income, gain, loss or deduction
allocated to the Members with respect to TLC's taxable income (which will be
passed through to each Member since TLC, as a limited liability company, will be
taxed as a partnership), no distributions from TLC will be made to the Members
without the consent of both Christiana and the Company. For the foreseeable
future, the Company and Christiana do not anticipate causing TLC to pay any cash
distributions (other than to cover the tax liabilities of the Members with
respect to federal, state and local income tax liabilities resulting from the
Members' ownership interest in TLC). TLC will pay to the Company an annual
management fee of $250,000. In addition, the new credit agreement to be entered
into by TLC as of the Effective Time will prohibit TLC from declaring or paying
dividends, subject to limited exceptions. See "Dividend Policy" below.
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<PAGE> 17
RESTRICTIVE COVENANTS IN THE TLC CREDIT AGREEMENT
The Credit Agreement to be entered into by TLC contains affirmative and
negative covenants (including, where appropriate, certain exceptions and baskets
mutually agreed upon), including but not limited to furnishing financial and
other information, payment of obligations, conduct of business, maintenance of
property, insurance, inspection of property, books and records, notices,
environmental laws, additional subsidiary guarantors, bank accounts,
indebtedness, liens, nature of business, consolidation, merger, sale or purchase
of assets, advances, investments and loans guarantee obligations, transactions
with affiliates, ownership of subsidiaries, fiscal year, prepayment of
indebtedness and dividends. The Credit Agreement also contains the following
financial covenants: minimum consolidated tangible net worth; maximum
consolidated funded debt ratio; minimum cash flow coverage ratio; and positive
annual earnings. Failure of TLC to meet any of the covenants described above may
have a material adverse affect on the Company or TLC's future operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Description of Credit Agreement."
USE OF PROCEEDS
The net proceeds to the Company from the sale of 5,202,664 shares of Common
Stock offered hereby, after deducting offering expenses payable by the Company
of $170,000 will be approximately $20,641,000. The Lubar Family has committed to
exercise their Basic Subscription Privilege in full to ensure that the net
proceeds of the Offering to the Company will be at least $10,666,667 after
expenses. The first $10,666,667 of the net proceeds will be used no later than
30 days following the Effective Time to consummate the Acquisition. The
remainder of the net proceeds will be used for 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
The Company was recently formed on December 11, 1997 and has never paid any
cash dividends on its capital stock. The Company's ability to generate cash for
the payment of dividends is restricted by the terms of the Operating Agreement.
See "Risk Factors -- Dividends" and "The Operating Agreement." Moreover, the
Company and its Board of Directors currently intend to retain any earnings for
use in the expansion of the Company's business and do not anticipate paying any
cash dividends on the Common Stock in the foreseeable future.
Upon the Effective Time, TLC will replace its existing revolving credit
facility with a new revolving credit facility. Pursuant to this revolving credit
facility, TLC is prohibited from declaring or paying dividends (other than a
dividend or distribution payable solely in stock or an equity interest);
provided, that TLC may declare and pay distributions to its Members from time to
time in amounts up to the Members' respective federal, state and local income
tax liabilities resulting from such Members' ownership of limited liability
company interests in TLC subject to the limitation that no such distribution
shall be made if there shall exist any default or event of default or if the
making of any such payment would cause a default or event of default to occur
under this revolving credit facility. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Description of Credit
Agreement."
SUMMARY OF CERTAIN TERMS OF THE MERGER
GENERAL
At the Effective Time, EVI will acquire Christiana through the Merger of
Sub with and into Christiana.
Each outstanding share of Christiana Common Stock will be converted in the
Merger into a right to receive (i) approximately .74193 of a share of EVI Common
Stock, subject to certain adjustments based on the number of shares of
Christiana Common Stock outstanding at the Effective Time; (ii) cash of
approximately $4.00 per share of Christiana Common Stock, subject to adjustment
based on the amount of certain Christiana liabilities existing as of the
Effective Time (the "Cash Consideration"); and (iii) a contingent cash payment
of approximately $1.92 payable to the shareholders of record following the fifth
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<PAGE> 18
anniversary of the Effective Time (or earlier if Christiana receives $20.0
million for its one-third interest in TLC), subject to any indemnity claims by
EVI under the Merger Agreement (the "Contingent Cash Consideration").
CASH CONSIDERATION TO BE RECEIVED IN THE MERGER
The exact calculation of Cash Consideration will equal the quotient of the
Christiana Net Cash (as defined below) divided by 5,202,664, the amount of
shares of Christiana Common Stock to be outstanding as of the Effective Time.
The definitive calculation of Cash Consideration will be made by the parties to
the Merger Agreement no later than thirty (30) days following the Effective
Time.
The "Christiana Net Cash" will be equal to (i) the sum of
- $20,000,000 obtained in connection with the TLC Dividend;
- $10,666,667 to be obtained by Christiana in connection with the
Acquisition;
- $3,000,000 obtained in connection with payment in full by TLC of the
entire principal amount of the Wiscold Note;
- the cash received from the exercise of Christiana stock options; and
- all of the cash on hand of Christiana as of the Effective Time,
minus (ii) the sum of
- an amount of cash necessary to pay the Assumed Liabilities (which
include, without limitation, all expenses relating to the Merger) in full
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 (such Assumed
Liabilities are described more fully herein under "Risk
Factors -- Assumed Liabilities and Indemnification Obligations of the
Company and TLC" and "Pro Forma Combined Financial Data"); and
- $10,000,000 (the initial amount of the Contingent Cash Consideration).
Based on the current capitalization of Christiana and the assets and Liabilities
of Christiana as of March 31, 1998, and after giving effect to the estimated
expenses of the Merger payable by Christiana, the Cash Consideration per share
is anticipated to be approximately $4.00 and the Contingent Cash Consideration,
assuming no reductions for indemnity payments during the five year period
following the Effective Time, is anticipated to be $1.92 per share.
Christiana Shareholders purchasing shares of Common Stock pursuant to the
Basic Subscription Privilege, will, upon proper completion and delivery of the
Letter of Transmittal to the Subscription Agent (which will also act as exchange
agent in the Merger), authorize the Subscription Agent to apply the Cash
Consideration to be received in the Merger toward payment for such shares of
Common Stock. See "The Offering -- How to Exercise Basic Subscription Privilege
and Additional Subscription Privilege." However, because the Cash Consideration
per share of Christiana Common Stock is expected to be less than the
Subscription Price per share of Common Stock offered hereby, any exercise of the
Basic Subscription Privilege in full will require an additional cash payment.
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CAPITALIZATION
The following table sets forth the combined capitalization of the Company
as of March 31, 1998 (i) on a pro forma combined basis to give effect to the
Acquisition, the TLC Dividend and repayment of the Wiscold Note; and (ii) as
further adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom, assuming the sale of a minimum 2,718,000
shares of Common Stock pursuant to the Lubar Commitment. This table should be
read in conjunction with the unaudited Pro Forma Combined Financial Data of the
Company and the notes thereto included elsewhere in this Prospectus. See "Pro
Forma Summary Combined Financial Data."
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------
PRO FORMA AS ADJUSTED(4)
--------- --------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Short-term debt:
Short-term obligations(1)................................. $ 159,000 $ 159,000
Current maturities of long-term debt(1)................... 1,245,000 1,245,000
Liability for purchase of 666.667 Membership Units of Total
Logistic Control, LLC..................................... 10,667,000 --
Long-term debt, net of current maturities(1)................ 54,167,000 54,167,000
Minority interest(2)........................................ 7,873,000 7,873,000
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
2,718,000 shares issued and outstanding, as
adjusted(3)............................................ -- 27,000
Additional paid-in capital.................................. -- 10,675,000
Retained earnings........................................... 3,049,000 3,049,000
----------- -----------
Total shareholders' equity................................ 3,049,000 13,751,000
----------- -----------
Total capitalization including minority interest....... $77,160,000 $77,195,000
=========== ===========
</TABLE>
- -------------------------
(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 667 membership units
of TLC ($10,667,000) and the carry over basis of TLC equity as adjusted for
(i) the TLC Dividend; (ii) the drop down of certain Christiana assets and
liabilities; (iii) minority interest: and (iv) deferred income taxes of the
Registrant related to the difference between purchase price and carry over
basis. A calculation of the retained earnings adjustment is as follows:
<TABLE>
<S> <C> <C>
Purchase price of two-third TLC.................. $10,667,000
Net book value of TLC at March 31, 1998.......... 43,579,000
Add: Drop down assets/liabilities................ 43,000
Less: Dividend to Christiana..................... (20,000,000)
Less: Minority interest.......................... (7,873,000)
Less: Deferred income taxes...................... (2,033,000)
-----------
Retained earnings adjustment..................... $ 3,049,000
-----------
</TABLE>
(3) Does not include up to 520,000 additional shares reserved for issuance
pursuant to the 1998 Equity Incentive Plan (the "1998 Plan"), of which
options to purchase 12,000 shares of Common Stock will be granted to
independent directors of the Company concurrently with the Offering at an
exercise price of $4.00 per share. See "Management -- 1998 Equity Incentive
Plan."
(4) The minimum number of shares of Common Stock which will be issued in the
Offering is 2,718,000 pursuant to the Lubar Commitment. The maximum number
of shares to be issued in the Offering is 5,202,664. If the maximum amount
of shares are issued in the Offering, total shareholders equity on a pro
forma basis, as of March 31, 1998, would be $23,690,000.
19
<PAGE> 20
COMPANY FINANCIAL DATA
Set forth below is the audited balance sheet of the Company 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 the Company and notes thereto which
have been audited by Arthur Andersen LLP and which appear elsewhere in this
Prospectus. The balance sheet of the Company as of December 31, 1997 set forth
below reflects only the initial capitalization of the Company pursuant to a $100
investment by Sheldon B. Lubar. Also set forth below is the unaudited balance
sheet of the Company as of March 31, 1998 which reflects the initial
capitalization of the Company in addition to costs deferred in connection with
the public offering and acquisition of a two-thirds interest in TLC. In the
opinion of the Company, the unaudited balance sheet as of March 31, 1998
includes all adjusting entries necessary to present fairly the information set
forth therein. This financial information should be read in conjunction with the
Company's balance sheet as of March 31, 1998 and related notes thereto which
appear elsewhere in this Prospectus.
C2, INC.
(A NEWLY-FORMED HOLDING COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash...................................................... $ 100 $ --
Due from shareholder for Common Stock Subscribed.......... -- 100
Deferred offering and acquisition costs................... 136,000 --
-------- ----
Total Assets...................................... $136,100 $100
======== ====
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses.......................................... $136,000 $ --
-------- ----
Total Liabilities................................. 136,000 --
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........... $136,100 $100
======== ====
</TABLE>
20
<PAGE> 21
PRO FORMA SUMMARY COMBINED FINANCIAL DATA
Set forth below is unaudited pro forma summary combined financial
statements for the year ended June 30, 1997 and for the nine months ended March
31, 1998 and as of March 31, 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 the Company.
See "Index to Financial Statements."
The pro forma summary combined statements of income for the year ended June
30, 1997 and the nine months ended March 31, 1998 reflect the effects on the
historical results of operations of the Company of the following transactions as
if these transactions had occurred on July 1, 1996: (i) the sale of 5,202,664
shares of 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 refinancing of the Wiscold Note; (ii) $20
million of borrowings by TLC and subsequent payment of the TLC Dividend; 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 to be entered into as of
the Effective Time.
The pro forma financial data does not purport to represent what the
Company'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 the
Company's financial position or results of operations for any future period.
21
<PAGE> 22
PRO FORMA SUMMARY COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA OFFERING AS
TLC ADJUSTMENTS(1) C2, INC. ADJUSTMENTS ADJUSTED
---------- -------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 384,000 $ -- $ 384,000 $ 20,641,000 (8) $10,358,000
Other current assets...... 9,024,000 7,000 (4) 9,031,000 (10,667,000)(9) 9,031,000
Total long-term assets.... 78,020,000 2,119,000 (4) 80,139,000 80,139,000
----------- ------------ ----------- ------------ -----------
Total assets.............. $87,428,000 $ 2,126,000 $89,554,000 $ 9,974,000 $99,528,000
=========== ============ =========== ============ ===========
Total current
liabilities............. $ 9,337,000 $ 1,248,000 (4) $10,585,000 $10,585,000
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..... -- 2,033,000 (6) 2,033,000 2,033,000
Long-term debt............ 31,167,000 20,000,000 (3) 54,167,000 54,167,000
3,000,000 (2)
Other liabilities......... 345,000 835,000 (4) 1,180,000 1,180,000
----------- ------------ ----------- ------------ -----------
Total liabilities......... 43,849,000 34,783,000 78,632,000 (10,667,000) 67,965,000
Minority interest......... -- 7,873,000 (5) 7,873,000 7,873,000
Preferred stock........... --
Common Stock.............. -- 52,000 (8) 52,000
Additional paid-in
capital................. -- 20,589,000 (8) 20,589,000
Retained earnings
Members' equity......... 43,579,000 (20,000,000)(3) 3,049,000 3,049,000
(7,873,000)(5)
(2,033,000)(6)
43,000 (4)
(10,667,000)(7)
----------- ------------ ----------- ------------ -----------
Total shareholders'
equity.................. 43,579,000 (40,530,000) 3,049,000 20,641,000 23,690,000
----------- ------------ ----------- ------------ -----------
Total liabilities and
shareholders' equity.... $87,428,000 $ 2,126,000 $89,554,000 $ 9,974,000 $99,528,000
=========== ============ =========== ============ ===========
</TABLE>
22
<PAGE> 23
NOTES TO PRO FORMA SUMMARY COMBINED BALANCE SHEET
(1) The acquisition of 666.667 Membership Units of TLC by the Company represents
a combination of entities under common control because a single group of
shareholders controlled TLC and will control the Company. 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.
(3) Represents a $20 million draw on TLC's revolving credit facility (interest
at LIBOR plus 225 basis points) and the subsequent payment of the TLC
Dividend 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 as follows:
<TABLE>
<S> <C>
ASSETS:
Prepaids and other assets................................... $ 7,000
Other long-term assets...................................... 2,119,000
LIABILITIES:
Accrued liabilities......................................... $(1,248,000)
Other long-term liabilities................................. (835,000)
-----------
Equity adjustment related to asset/liability transfer....... $ 43,000
===========
</TABLE>
(5) Represents the establishment of Minority Interest for the one-third interest
in TLC not owned by the Company. Minority Interest represents one-third of
TLC's Members equity subsequent to the adjustment for the TLC Dividend 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 the Company at $4.00 per share, net of
expenses of $170,000.
(9) Represents the payment of the purchase price due to Christiana in connection
with the Acquisition.
23
<PAGE> 24
PRO FORMA SUMMARY COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1997
------------------------------------------------------
PRO FORMA
HISTORICAL TLC PRO FORMA ADJUSTMENTS C2, INC.
-------------- --------------------- ---------
<S> <C> <C> <C>
Revenues....................................... $84,208,000 $ -- $84,208,000
Operating expenses............................. 77,897,000 1,240,000 (1) 79,137,000
Interest expense............................... 3,216,000 1,934,000 (2) 5,150,000
Other (income) expense, net.................... 1,390,000 -- 1,390,000
Income (loss) before minority interest and
income taxes................................. 1,705,000 (3,174,000) (1,469,000)
Provision for (benefit from) income taxes...... 695,000 (1,187,000)(3) (492,000)
Adjustment of deferred income taxes resulting
from a change in tax status.................. 11,171,000 (11,171,000)(4) --
Minority interest income....................... -- 239,000 (5) 239,000
Net income (loss).............................. 12,181,000 (12,919,000) (738,000)
Basic and diluted net loss per share of common
stock........................................ $ (0.14)
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 31, 1998
------------------------------------------------------
PRO FORMA
HISTORICAL TLC PRO FORMA ADJUSTMENTS C2, INC.
-------------- --------------------- ---------
<S> <C> <C> <C>
Revenues....................................... $68,579,000 $ -- $68,579,000
Operating expenses............................. 63,494,000 750,000 (1) 64,244,000
Interest expense............................... 2,265,000 1,451,000 (2) 3,716,000
Other (income) expense, net.................... 376,000 -- 376,000
Income before minority interest and income
taxes........................................ 2,444,000 (2,201,000) 243,000
Benefit from income taxes...................... -- 10,000 (3) 10,000
Minority interest expense...................... -- (268,000)(5) (268,000)
Net income (loss).............................. 2,444,000 (2,459,000) (15,000)
Basic and diluted net earnings per share of
common stock................................. $ --
</TABLE>
24
<PAGE> 25
NOTES TO PRO FORMA SUMMARY
COMBINED STATEMENTS OF INCOME
(1) Represents (i) additional operating expenses resulting from corporate
expenses, including officers' salaries, occupancy expenses, professional,
legal, public company and other corporate related expenses and (ii) the
elimination of the management fee income paid to TLC by Christiana:
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE YEAR MONTHS ENDED
ENDED JUNE MARCH 31,
30, 1997 1998
------------ ------------
<S> <C> <C>
Officers salaries...................................... $ 390,000 $293,000
Occupancy expenses..................................... 150,000 112,000
Other corporate expenses............................... 460,000 345,000
Elimination of TLC management fee income............... 240,000 --
---------- --------
$1,240,000 $750,000
</TABLE>
(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:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED MONTHS ENDED
JUNE 30, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
$20 million draw on TLC's revolving credit facility,
interest at an average rate of LIBOR + 225 basis
points................................................. $1,572,000 $1,179,000
Additional interest expense on historical outstanding
debt bearing interest at a rate of LIBOR + 225 basis
points (revolving credit facility rate) versus a
historical rate of LIBOR + 125 basis points............ 362,000 272,000
---------- ----------
$1,934,000 $1,451,000
</TABLE>
(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 the elimination of the Adjustment of Deferred Income Taxes
Resulting from a Change in Tax Status. This non-recurring charge to income
incurred during the year ended June 30, 1997, pertains to the elimination of
the net deferred income tax liability resulting from TLC's conversion from a
taxable C-Corporation to a limited liability company.
(5) Represents 33.3% of net income allocable to TLC's minority interest owner.
25
<PAGE> 26
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, 1997 and as of March
31, 1998 and 1997 and for the nine months then ended. The historical financial
data as of and for each of the three years ended June 30, 1997 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 each
of the two years ended June 30, 1994 and as of March 31, 1998 and 1997 and for
the nine months then ended have not been audited. In the opinion of TLC, the
historical financial data as of and for each of the two years ended June 30,
1994 and as of March 31, 1998 and 1997 and for the nine months then ended
include 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.
SELECTED HISTORICAL TLC FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER MEMBERSHIP UNIT DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31 FOR THE YEAR ENDED JUNE 30
-------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994(2) 1993(1)
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $68,579 $63,271 $84,208 $ 76,976 $71,029 $42,355 $15,190
Income from operations.......... 5,085 5,043 6,311 5,689 7,555 4,611 3,273
Interest expense................ 2,265 2,481 3,216 3,176 3,378 3,003 2,356
Net income...................... 2,444(6) 766 12,181(5) 1,536 2,562 995 585
Basic and diluted income per
membership unit(3)............ 2,444 766 12,181 1,536 2,562 995 585
OTHER DATA:
Capital Expenditures............ 1,382 1,965 3,294 17,646 7,552 3,146 8,017
Depreciation and amortization... 5,104 5,623 7,186 6,971 6,684 4,671 2,795
EBITDA(4)....................... 10,013 10,442 13,143 12,552 14,218 9,303 6,097
Cash flows from operating
activities.................... 8,484 6,600 9,294 11,043 10,180 7,121 4,162
Cash flows from investing
activities.................... (1,175) (1,056) (1,822) (16,262) (7,116) (2,858) (7,830)
Cash flows from financing
activities.................... (7,149) (5,131) (7,277) 4,883 (3,247) (3,934) 3,888
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31 AS OF JUNE 30
-------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994(2) 1993
---- ---- ---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets.................... $87,428 $92,957 $90,140 $ 97,923 $88,731 $87,079 $65,417
Total Debt...................... 35,571 42,246 40,394 47,671 42,788 46,035 42,374
Total Member's Equity........... 43,579 37,237 43,461 31,280 29,744 27,182 15,207
</TABLE>
- -------------------------
(1) Effective September 1, 1992, Christiana consummated the acquisition of
Wiscold. The statement of income data and cash flow information for fiscal
1993 reflects only the results of operations subsequent to the date of
acquisition.
(2) 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.
(3) Effective June 30, 1997, Wiscold and Total Logistic Inc. were merged to form
TLC. Income per membership unit for periods presented prior to 1997 are
shown as if the units had been outstanding for all periods presented.
(4) 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
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.
(5) 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.
(6) Net income for the nine months ended March 31, 1998 does not reflect the
impact of an income tax provision as TLC was a limited liability company
during this period. For comparative purposes, net income for the nine month
period ended March 31, 1997 (during which TLC was a C-Corporation) would
have been $1,212 absent a provision for income taxes of $466.
26
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
TLC provides full service public and contract warehousing and logistic
services in all ranges of frozen, refrigerated and ambient temperatures. TLC's
transportation and distribution services include full service truckload,
less-than-truckload and pooled consolidation in both temperature controlled and
dry freight equipment, dedicated fleet services and specialized store-door
delivery formats. Transportation and logistic services are provided utilizing
company-owned equipment, as well as through carrier management services
utilizing third party common and contract carriers. Integrated logistic services
generally combine transportation, warehousing and information services to manage
the distribution channel for a customer's products from the point of
manufacturer to the point of consumption. TLC also provides a full range of
international freight management services, fully computerized inventory
management, kitting, repackaging and just-in-time production supply services.
TLC HISTORICAL INCOME STATEMENT INFORMATION
The following table sets forth, for the fiscal years ended June 30, 1997,
1996 and 1995 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:
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF REVENUES CHANGE
JUNE 30, -----------------
------------------------ 1996 1995
1997 1996 1995 TO 1997 TO 1996
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues.............................................. 100.0% 100.0% 100.0% 9.4% 8.4%
Warehouse and Logistic Expenses....................... 84.3% 84.4% 80.1% 9.3% 14.2%
Selling and Administration............................ 8.2% 8.2% 9.3% 9.4% (3.9)%
Income from operations................................ 7.5% 7.4% 10.6% 10.9% (24.7)%
</TABLE>
COMPARISON OF NINE MONTHS ENDED MARCH 31, 1998 TO THE NINE MONTHS ENDED MARCH
31, 1997 FOR TLC
For the nine months ended March 31, 1998, revenues increased $5,308,000 or
8.4% to $68,579,000 from $63,271,000 for the period ended March 31, 1997.
Transportation operations had strong sales growth of $5,748,000 over the prior
year from the operation of an expanded fleet and continued heavy demand for
freight. Growth in Refrigerated Warehousing operations of $3,460,000 was derived
primarily from improved warehouse occupancy levels from new customers and a
strong vegetable crop. Dry Warehousing operations had a decline in revenue for
the period of $3,123,000, resulting from the closure at the end of fiscal 1997
of two dry warehouses and a substantial volume reduction in the Munster, Indiana
facility. The balance of the change in revenue for the nine months ended March
31, 1998 came from reduced volume in the area of international freight
forwarding.
Gross profit for the nine months increased $515,000 or 5.0% to $10,736,000
compared to the same period for the prior year. Gross profit attributable to
Transportation operations for the first nine months of fiscal 1998 increased
$1,099,000, up 72.5%, primarily as a result of an expanded transportation fleet
and more efficient utilization thereof. Gross profit for Refrigerated
Warehousing operations increased $384,000, up 20.5% due to improved capacity
utilization and higher processing revenue from the Beaver Dam Logistic Center.
Gross profit for Dry Warehousing operations decreased $910,000 or 48.0%, due to
the closure of two facilities and a substantial decline in utilization of the
Munster, Indiana facility. The remaining change in gross profit is attributable
to a decrease in international freight forwarding operations.
Selling, general and administrative expenses, which includes marketing and
advertising expenses, increased $473,000 or 9.1% for the first nine months of
fiscal 1998 compared to the same period for the prior year. The increase was
primarily attributable to sales and marketing activities designed to develop and
grow the logistics business.
27
<PAGE> 28
Earnings from operations for the nine months ended March 31, 1998 increased
$42,000 or 0.8% to $5,085,000 compared to $5,043,000 for the same period in the
prior year. Increased margin from Transportation operations was the primary
reason for this improvement.
Interest expense for the first three quarters of the fiscal year declined
by $216,000 to $2,265,000 compared to $2,481,000 for the same period in the
prior year. The reduction resulted from a combination of lower rates and lower
borrowings outstanding during the period.
Pre-tax income for the first nine months ended March 31, 1998, was
$2,444,000, an increase of $1,232,000 or 98.4%. Stronger capacity utilization
and efficiencies in Refrigerated Warehousing and Transportation operations
contributed to these results. The pre-tax results for the prior year were
reduced by the loss of $1,086,000 for the disposal of special freezing equipment
in connection with securing a long-term contract for vegetable processing, IQF
freezing and warehouse services with a major customer of the Beaver Dam
Logistics Center. No provision for income taxes was recorded for the nine months
ended March 31, 1998, because TLC was a limited liability company for this
period. For the nine months ended March 31, 1997 TLC recorded an income tax
provision of $466,000.
COMPARISON OF FISCAL 1997 TO FISCAL 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 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 logistic
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 logistic 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, IQF 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
28
<PAGE> 29
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.
COMPARISON OF FISCAL 1996 TO FISCAL 1995 FOR TLC
Total revenue for fiscal 1996 increased $5,947,000 or 8.4% to $76,976,000
compared to $71,029,000 for fiscal 1995, primarily as a result of increased
warehouse capacity and growth in logistic services. Logistic services grew in
both Transportation operations by $2,282,000 or 9.0% and International Freight
Forwarding operations by $1,210,000 or 65.2% compared to fiscal 1995.
Gross profit for fiscal year 1996 decreased $2,120,000 or 15.0% to
$12,020,000 compared to $14,140,000 in fiscal 1995, primarily as a result of
reduced vegetable processing and freezing volumes in Refrigerated warehousing,
and start-up costs for high volume distribution accounts. The balance of reduced
gross profit results from higher transportation costs than historical levels and
less than optimal utilization of equipment.
Fiscal 1996 selling, general and administrative expenses declined from
those reported for fiscal 1995 by $254,000 due to improved cost controls.
Selling, general and administrative expense for 1996 was $6,331,000 compared to
$6,585,000 in fiscal 1995.
TLC's income from operations declined by $1,866,000 or 24.7% from
$7,555,000 in fiscal 1995 to $5,689,000 in fiscal 1996. Reduced volume and
profitability attributable to vegetable processing and freezing operations,
along with higher transportation expenses were the principal factors in the
reduction of earnings from operations.
Interest expense for fiscal 1996 was $3,176,000 which was down from
$3,378,000 in fiscal 1995 due to lower borrowing levels in 1996.
Pre-tax income declined in fiscal 1996 to $2,611,000 from $4,286,000 or
39.1%, due primarily to the reduction in gross profit.
TLC's effective tax rate in fiscal 1996 increased to 41% from 40% in fiscal
1995 due to changes in the relative state components of TLC's income. The
provision for taxes for fiscal 1996 was $1,075,000 compared to $1,724,000 in
fiscal 1995.
Net income for TLC in 1996 was $1,536,000, down $1,026,000 or 40.0% from
$2,562,000 in fiscal 1995, primarily as a result of reduced gross profits in
Refrigerated Warehousing, operational inefficiencies in Transportation
operations and the increased effective income tax rate.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES FOR THE COMPANY AND TLC
The Company'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 $9,900,000, assuming the Offering is fully subscribed, and the
income on such investments.
The Company 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 $9,294,000 in fiscal 1997 compared to
$11,043,000 in fiscal 1996, primarily as a result of (i) a decrease in accounts
payable from fiscal 1996 when TLC was engaged in a construction project
generating significant accounts payable compared to fiscal 1997 when no similar
construction project was in process and (ii) lower 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. Net cash provided from operating activities was
$10,180,000 for fiscal 1995.
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<PAGE> 30
Net cash used in investing activities for TLC for the fiscal year ended
June 30, 1997 decreased to $1,822,000 from $16,262,000 in fiscal 1996. The
decrease between years is predominantly the result of a decrease in capital
expenditures, most notably $11,422,000 related to a major expansion of a
refrigerated warehouse facility during fiscal 1996. TLC anticipates capital
expenditures to be approximately $4,000,000 per year over the next two fiscal
years.
Net cash used in financing activities for the fiscal year ended June 30,
1997 was $7,277,000. During fiscal 1996, TLC provided cash from financing
activities of $4,883,000. TLC issued $9,011,000 of long-term debt during fiscal
1996 to fund the capital expansion of a refrigerated warehouse facility. During
fiscal 1997, no additional debt was issued. Additionally, total payments on
TLC's line of credit and long-term debt were $3,149,000 higher in fiscal 1997
than the previous fiscal year.
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.
During fiscal 1997, TLC evaluated and developed a plan to address the
impact of the Year 2000 and beyond on its computer systems. TLC's plan is being
managed by a team of internal staff. The team's activities are designed to
ensure that TLC's transactions with customers, suppliers and financial
institutions are compatible with the Year 2000 and beyond. TLC recently began to
explore the plans of its significant suppliers to determine their ability to
remediate the Year 2000 problems and the effects or TLC'S vulnerability if these
entities fail to become Year 2000 compliant. While TLC believes its plan is
adequate to address its Year 2000 concerns, there can be no guarantee that the
systems of other companies on which TLC's systems rely will be converted on a
timely basis and will not have a material effect on TLC. The cost of the TLC's
plan is not expected to be material to TLC's ongoing results of operations.
TLC will have available to it a revolving credit facility of $65,000,000 at
a floating rate of LIBOR plus 225 basis points to finance its capital needs, the
TLC Dividend, the refinancing of the Wiscold Note and the purchase of a
refrigerated warehouse facility in Hudsonville, Michigan for approximately $12.3
million (which is expected to be completed in July of 1998). After consummation
of the Offering and the purchase of such facility, TLC will have approximately
$1 million of additional available borrowings under its credit facility.
As of March 31, 1998, TLC had no significant capital commitments other than
the purchase of a refrigerated warehouse facility in Hudsonville, Michigan for
approximately $12.3 million.
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.
DESCRIPTION OF CREDIT AGREEMENT
TLC intends to enter into a credit agreement (the "Credit Agreement") with
Firstar Bank Milwaukee, N.A., as agent, and certain other banks which will be
parties thereto (together, the "Banks") on or before the Effective Time of the
Merger. Pursuant to the Credit Agreement, TLC will, subject to the achievement
of certain financial ratios and compliance with certain conditions, have the
right to obtain revolving loans in the following outstanding principal amounts:
<TABLE>
<CAPTION>
MAXIMUM AMOUNT
OF REVOLVING LOANS
TIME PERIOD OUTSTANDING
----------- ------------------
<S> <C>
Closing date through April 15, 1999......................... $ 65 million
April 16, 1999 through April 15, 2000....................... $ 61 million
April 16, 2000 through April 15, 2001....................... $ 56 million
April 16, 2001 through April 15, 2002....................... $50.5 million
April 16, 2002 through April 15, 2003....................... $ 43 million
</TABLE>
The entire unpaid principal balance of loans made under the Credit Agreement
will be due and payable on April 15, 2003.
The proceeds of the initial loans under the Credit Agreement will be used
to refinance existing indebtedness of TLC to the Banks in the amount of
approximately $36,000,000; finance the payment of the
30
<PAGE> 31
TLC Dividend; finance the repayment of the Wiscold Note; and pay related fees
and expenses. The available balance of the facility, estimated to be $1 million
after completion of this Offering and the purchase of a refrigerated warehouse
facility in Hudsonville, Michigan, 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 initial interest rate on borrowings under the Credit Agreement is
expected to be, at the option of TLC, LIBOR plus 225 basis points or the prime
rate. 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 (the "Consolidated Funded Debt Ratio"), all as defined in the Credit
Agreement, in accordance with the following table:
APPLICABLE PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE FOR APPLICABLE APPLICABLE
CONSOLIDATED EURODOLLAR PERCENTAGE FOR PERCENTAGE FOR
PRICING FUNDED DEBT REVOLVING PRIME RATE LETTER OF
LEVEL RATIO LOANS LOANS CREDIT FEE
- ------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
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
</TABLE>
The Credit Agreement also contains provisions requiring TLC to reimburse the
Banks for increases in certain taxes, revenue requirements and other costs
incurred by the Banks.
Loans made under the Credit Agreement may be prepaid in whole or in part
without premium or penalty, except for reimbursement of the Banks for any losses
the Banks suffer as a result of repayment of LIBOR-based loan prices to the last
day of that applicable interest period.
The Credit Agreement contains representations and warranties, including
without limitation those relating to financial statements, ownership of
properties, liens and encumbrances, corporate existence, compliance with law,
legal authorization and enforceability, absence of default, litigation, ERISA,
environmental and tax matters, use of proceeds, solvency, accuracy of
information and the matters set forth in the merger and divestiture documents.
The Credit Agreement also contains conditions precedent (or in certain
instances concurrent) to the initial funding at the Closing, which will include,
without limitation, those relating to the following: (i) satisfactory financing
documentation; (ii) the obtaining of certain approvals and agreements; (iii)
consummation of the Merger; (iv) satisfactory proforma and other financial
statements; (v) environmental reports; (vi) certain appraisals and business
valuations; (vii) the absence of a material adverse change; and (viii) the
delivery of customary closing documents. The conditions to all borrowings
include requirements relating to prior notice of borrowing, the accuracy of
representations and warranties, the absence of any default or potential event of
default and the absence of a material adverse change in TLC's business.
The Credit Agreement also contains affirmative and negative covenants
(including, where appropriate, certain exceptions and baskets mutually agreed
upon), including but not limited to furnishing financial and other information
payment of obligations, conduct of business, maintenance of existence,
maintenance of property, insurance, inspection of property, books and records,
notices, environmental laws, additional subsidiary guarantors, bank accounts,
indebtedness, liens, nature of business, consolidation, merger, sale or purchase
of assets, advances, investments and loans guarantee obligations, transactions
with affiliates, ownership of subsidiaries, fiscal year, prepayment of
indebtedness and dividends. The Credit Agreement also
31
<PAGE> 32
contains the following financial covenants: minimum consolidated tangible net
worth; maximum consolidated funded debt ratio; minimum cash flow coverage ratio;
and positive annual earnings.
Events of default under the Credit Agreement, include without limitation,
those relating to: (i) non-payment of interest, principal or fees payable under
the Credit Agreement; (ii) inaccuracy of representations or warranties in the
loan documents; (iii) non-performance of covenants; (iv) cross-default to other
material debt of the Company and its subsidiaries; (v) bankruptcy or insolvency;
(vi) judgments in excess of specified amounts; (vii) certain ERISA events;
(viii) impairment of security interests in collateral; (ix) invalidity of
guarantees; (x) materially inaccurate or false representations or warranties;
and (xi) a change in control.
32
<PAGE> 33
BUSINESS
GENERAL
The Company was formed on December 11, 1997 and has conducted no operations
to date other than in connection with the Acquisition. Following this Offering
and the Acquisition, the Company's only non-cash asset will be its ownership
interest in TLC. The Company intends to pursue acquisitions of businesses which
may or may not relate to the third-party logistics business of TLC. As of the
date hereof, the Company has not identified any acquisition candidates.
Immediately prior to the Merger, the Company will acquire 666.667
Membership Units of TLC (representing two-thirds of the outstanding ownership
interests of TLC) from Christiana pursuant to the Purchase Agreement. For
additional information concerning the Merger and the Acquisition, see "Summary
of Certain Terms of the Merger" and "The Purchase Agreement."
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 individual quick freeze (IQF) services, automated
vegetable poly bag and bulk 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 third-party logistic services,
which includes warehouse, distribution and transportation services in both
refrigerated and non-refrigerated facilities.
TLC provides third-party logistic services as well as full service public
and contract warehousing in all ranges of frozen refrigerated and ambient
temperatures. Integrated logistic services generally combine transportation,
warehousing and information services to manage the distribution channel for a
customer's products from the point of manufacturer to the point of consumption.
TLC's transportation and distribution services include full service truckload,
less-than-truckload and pooled consolidation in both temperature controlled and
dry freight equipment, dedicated fleet services and specialized store-door
delivery formats. Transportation and logistic services are provided utilizing
company-owned equipment as well as through carrier management services utilizing
third party common and contract carriers. TLC also provides a full range of
international freight management services, fully computerized inventory
management, kitting, repackaging and just-in-time production supply services.
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 1997, TLC's top 10 customers accounted
for approximately 47% of total revenues. TLC serves approximately 1,250
customers.
TLC believes it is the nation's seventh largest provider of public
refrigerated warehouse space. All of TLC's refrigerated facilities are modern
and efficient single story buildings at dock height elevation and fully
insulated.
Prior to the Merger, Christiana will contribute certain assets and
liabilities to TLC for no consideration. See "Pro Forma Combined Financial
Data." On the asset side, these items consist primarily of mortgage notes
receivable derived from certain condominium sales by Christiana which, as of
March 31, 1998, had an aggregate principal amount outstanding of $1,231,000
(accruing interest at rates ranging from 6.875% to 9%) and approximately
$888,000 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 $2,083,000.
33
<PAGE> 34
STRATEGY
The Company's strategy is to identify and pursue suitable acquisition
candidates in businesses related and unrelated to the third-party logistic
services business of TLC.
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 asset and non-asset based services. Asset-based services are generally
considered to include warehousing and transportation related activities provided
through TLC's owned or leased assets. Non-asset based services utilize
warehouses and transportation equipment owned by others for which TLC contracts
on a one-time or short-term basis. TLC believes that its asset base of
refrigerated and dry warehouses and fleet operations, together with its
expertise in logistics strategy and solutions, provides it with an advantage
over its competitors which generally offer only asset or non-asset based
services. TLC's competitors provide individual services such as warehousing,
transportation and freight forwarding in substantially the same manner as TLC.
Some TLC competitors provide only transportation services and/or warehousing
services. Others provide only logistics management services. TLC, however,
provides all of these services in an integrated fashion, providing 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 focus on its third-party logistic services is based on its belief
that competitive market forces are dictating that corporations focus on core
competencies leading more and more corporations to outsource logistic services
and distribution functions. In addition, TLC believes that corporations are
recognizing, on an increasing basis, that properly provided logistic services
will provide enhanced inventory management, more responsive information systems
and more efficient use of fleet capacity.
Management believes that if TLC continues to market and enhance its
integrated logistics, transportation and warehousing business, it will be able
to capitalize on the trends of its customers toward the use of multi-service
providers and the outsourcing of distribution and warehousing functions and
thereby maximize the utilization and income potential of its assets.
TLC provides both asset-based and non-asset based solutions to its
customers because it believes that long-term success in integrated logistic
services will be dependent on offering a wide array of solutions which entail
both TLC-owned assets and the assets of TLC's established subcontractors. By
offering a complement of both asset and non-asset based solutions, TLC believes
growth will be less capital intensive than a company which offers only
asset-based services, and more intensive in the areas of management, services
and systems.
SERVICES, SALES AND CUSTOMERS
TLC assists companies in managing the logistics of the physical movement of
product and materials. TLC offers refrigerated and frozen warehousing, dry
warehousing, transportation, information systems, and international freight
forwarding services. These services can be applied to customers' needs
individually, as a single service or in combination as a unified set of
services.
TLC provides various solutions that address a wide range of customer needs.
A few examples of the types of services TLC provides to its customers follow:
TLC provides an international food manufacturer a combination of
transportation solutions, which includes the use of TLC's transportation fleet
and carrier-managed equipment and refrigerated storage. TLC provides a national
food manufacturer with a consolidation and distribution center and with outbound
transportation. TLC provides a national food distributor with refrigerated
warehousing, including high volume order selection and shipping to facilitate
rapid inventory turnover. TLC serves as the distributor for the Michigan
Department of Education school lunch program, which involves a combination of
warehousing, order selection, store door delivery and related customer billings.
TLC has a strategic alliance with a furniture manufacturer to provide
warehousing services for the consolidation of products and order selection for
international shipments on a global basis.
34
<PAGE> 35
TLC's revenue for each of the basic service lines are detailed below for
fiscal years ended June 30, 1997, 1996, and 1995.
<TABLE>
<CAPTION>
REVENUES
1997 1996 1995
------------- ------------- -------------
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Refrigerated Warehousing....................... $38 45 $35 45 $34 48
Dry Warehousing................................ 12 14 14 18 11 15
Transportation................................. 33 39 28 36 25 35
International.................................. 3 4 3 4 2 3
Eliminations................................... (2) (2) (3) (3) (1) (1)
Total Revenues....................... $84 100 $77 100 $71 100
=== === === === === ===
</TABLE>
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. Because of its
unique storage and distribution needs, the food industry has launched broad
industry-wide initiatives, such as Efficient Consumer Response (ECR) and
Efficient Foodservice Response (EFR), that are formulated on high quality
logistic services. The basis of ECR is to reduce the cost of delivering products
from the place of manufacture to the point of sale. TLC believes that its one of
only a few companies which have the capabilities and range of service offerings
to sufficiently address these initiatives.
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.
COMPETITION
Competition in the logistic services industry is very fragmented. Leonard's
Guide, a leading industry publication, lists more than 1500 companies competing
in the United States marketplace. TLC believes that competitors can be
characterized as either asset or non-asset based providers and single or
integrated service providers. Asset-based companies, such as Exel, Americold
Corporation, GATX Logistics, Inc., or Ryder Integrated Logistics, Inc. own and
operate warehouses and/or transportation equipment. These companies utilize
their asset-base and the expertise with which to operate them to provide
services. Non-asset based competitors, such as Hub Group Logistics Services,
Menlo Logistics, and C.H. Robinson Logistics offer logistics management
expertise and information systems and sub-contract warehousing and
transportation services to asset-based providers.
TLC experiences competition for logistic services on a national basis and
in its warehousing and transportation business TLC competes generally 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
the transportation, warehousing and non-asset based logistic service markets in
which TLC operates, permitting a relatively large number of smaller competitors
to enter the various markets.
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 and/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
35
<PAGE> 36
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 logistic industry in
general.
Business development supports both sales and operations by providing
logistics engineering capabilities, pricing and costing services, and assists in
the startup of complex logistic projects.
EMPLOYEES
The only employees of the Company are the executive officers described
under "Management-Executive Officers and Directors of the Company." TLC had
approximately 735 employees as of March 31, 1998. A breakdown of the employees
by functional area is set forth below:
<TABLE>
<CAPTION>
FUNCTION NUMBER OF EMPLOYEES PERCENTAGE OF TOTAL
-------- ------------------- -------------------
<S> <C> <C>
Operations................................................ 472 64.2%
Transportation............................................ 207 28.2
Administration............................................ 46 6.2
Sales and Marketing....................................... 10 1.4
--- ----
Total........................................... 735 100%
</TABLE>
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 "Total
Logistic Control" with the United States Patent and Trademark office.
RESEARCH AND PRODUCT DEVELOPMENT
TLC does not operate in an environment which has a strong need or reliance
on research and development. TLC has not made material expenditures with regard
to research or development in the past and does not see it as a material issue
in the future.
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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<PAGE> 37
PROPERTIES
As of March 31, 1998, TLC owned or leased thirteen facilities in five
states. Of this total, eight are refrigerated/frozen with the balance being dry
facilities. The refrigerated facilities are operated through eight public
refrigerated warehouses located in Wisconsin (3), Michigan (3), and Illinois
(2). On May 20, 1998, TLC entered into a preliminary agreement to purchase a
refrigerated warehouse facility in Hudsonville, Michigan, which is comprised of
4.6 million cubic feet of storage capacity. The purchase price for this facility
is approximately $12.3 million and the transaction is expected to close in July
of 1998, subject to the satisfaction of customary conditions. Other than
Wisconsin Cold Storage, located in downtown Milwaukee, 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.
The Wisconsin Cold Storage facility was closed in March 1998. The property
is currently offered for sale.
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
Distribution 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 thirteen facilities by location, size, type,
and if owned or leased. Other than as indicated, all facilities are owned.
REFRIGERATED WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE SPACE
(CUBIC FEET IN TYPE OF
FACILITY LOCATION 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............ Holland, Michigan(1) 2.1 Distribution/
Production
Kalamazoo Logistic Center I........ Kalamazoo Logistic #1(2) 3.3 Distribution
Kalamazoo Logistic Center II....... Kalamazoo Logistic #2 2.8 Distribution
Wisconsin Logistic Center.......... Milwaukee, Wisconsin 1.0 Distribution
----
TOTAL 34.8
====
</TABLE>
DRY WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE
SPACE (SQ. FT. TYPE OF
FACILITY LOCATION 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
South Brunswick Logistic Center(1)............ South Brunswick, NJ 200 Public
----
TOTAL......................................... 835
====
</TABLE>
- -------------------------
(1) Leased facility
(2) Includes 1.8 million cubic feet of dry storage capacity.
37
<PAGE> 38
DESCRIPTION OF PROPERTIES
A brief description of each of the Properties follows, listed
alphabetically by state and city.
ILLINOIS PROPERTIES
<TABLE>
<S> <C>
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
</TABLE>
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 degreesF 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.
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
CSX rail spur with two refrigerated rail docks. This facility is held under a
lease which expires December 31, 2000.
<TABLE>
<S> <C>
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
</TABLE>
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.
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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.
<TABLE>
<S> <C>
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
</TABLE>
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.
Hudsonville Logistic Center
2966 Highland Boulevard
Hudsonville, MI 49426
On May 20, 1998, TLC entered into a preliminary agreement to purchase a
refrigerated warehouse facility in Hudsonville, Michigan. The purchase price for
this facility is approximately $12.3 million and the transaction is expected to
close in July of 1998, subject to the satisfaction of customary conditions. The
Hudsonville Logistic Center, initially constructed in 1987 and then expanded in
1990, has 4.6 million cubic feet of storage capacity and is capable of
maintaining temperatures of -20(degree)F. With blast freezing capabilities and
USDA approved warehouse space, the Hudsonville Logistic Center offers
consolidation and shipment services to the upper Midwest and plains states.
NEW JERSEY PROPERTIES
South Brunswick Logistic Center
308 Herrod Blvd.
South Brunswick, NJ 08852
South Brunswick 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 200,000 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 IQF, blanching, slicing, dicing and food service
and retail poly bag packaging operations. Badger's IQF tunnels have the capacity
to freeze 30,000 pounds of product per hour.
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
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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, the Company 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 PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the Purchase
Agreement which is attached as Annex A and incorporated herein by reference.
Such summary is qualified in its entirety by reference to the Purchase Agreement
and Amendment No. 1 which is attached as Annex C.
PURCHASE PRICE AND ASSUMPTION OF LIABILITIES
The Purchase Agreement provides that, prior to the Effective Time of the
Merger, the Company will complete the Acquisition by purchasing 666.667
Membership Units of TLC for an aggregate purchase price of $10,666,667. The
Purchase Agreement provides that the purchase price is payable no later than
thirty (30) days following the Effective Time of the Merger and the completion
of the Acquisition. Accordingly, the Acquisition will be completed with the
obligation of the Company to pay the purchase price no later than thirty (30)
days thereafter. During this thirty (30) day period, the Christiana Shareholders
will mail to the Subscription Agent (which will also act as exchange agent for
the Merger) Letters of Transmittal electing one of the following:
- To purchase no shares of Common Stock
- To purchase as many shares of Common Stock as possible using the
Cash Consideration to be received in the Merger (estimated to be
$4.00)
- To purchase a stated number of shares of Common Stock using a
portion of the Cash Consideration
- To purchase all shares of Common Stock to which such Christiana
Shareholder is entitled using the Cash Consideration, together with
an additional payment
- To purchase all shares of 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.
All Letters of Transmittal must be received by the Subscription Agent on or
prior to the Expiration Date (expected to be August 14, 1998). Once received,
EVI will pay to the Subscription Agent the Cash Consideration due to such
Christiana Shareholder and the Subscription Agent will apply such Cash
Consideration in the manner directed by the Letter of Transmittal submitted by
such Christiana Shareholder.
In connection with the Merger, the Company and TLC have agreed to assume
the Assumed Liabilities. The term Assumed Liabilities shall include, without
limitation, Liabilities resulting from, arising out of or relating to (i) any
Christiana Affiliate, (ii) the business, operations or assets of Christiana or
Christiana Affiliate on or prior to the Effective Time, (iii) any taxes to which
Christiana or any Christiana Affiliate may be obligated for periods ending on or
before the Effective Time (except for Christiana taxes expressly retained by
Christiana pursuant to the Merger 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
Affiliate that existed on or prior to the Effective Time, (v) any product or
service provided by Christiana or any Christiana Affiliate prior to the
Effective Time, (vi) the Merger, the Acquisition or any of the other
transactions contemplated thereby, (vii) previously conducted operations of
Christiana or any Christiana Affiliate and (viii) the Company's ownership
interest in TLC.
CHRISTIANA "PUT" AND PARTICIPATION RIGHTS
The Purchase Agreement also provides that at any time after the fifth
anniversary of the Effective Time of the Merger, Christiana has the option to
sell to the Company or TLC, and the Company or TLC will be obligated to
purchase, Christiana's 333.333 Membership Unit for $7 million. In addition, if
there shall be proposed a change of control of the Company or the Company
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 333.333 Membership Units by selling its interest in TLC to the
Company in the case of a change of control or to an unrelated third party for
the same equivalent consideration per equivalent unit in TLC in the case of a
sale to a third party.
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INDEMNIFICATION OBLIGATIONS
TLC and the Company have agreed under the Purchase Agreement, to indemnify,
defend and hold Christiana, EVI and the EVI Indemnified Parties harmless from
and against any and all Liabilities (including, without limitation, reasonable
fees and expenses of attorneys, accountants, consultants and experts) that such
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:
- any breach of any covenant or agreement of TLC or the Company
contained in the Purchase Agreement or any other agreement contemplated
thereby;
- the acts or omissions of Christiana or any Christiana Affiliate on
or before the Effective Time;
- the acts or omissions of any Christiana Affiliate, TLC, the Company
or TLC's or the Company's affiliates or the conduct of any business by them
on or after the Effective Time;
- the Assumed Liabilities;
- 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;
- any and all amounts for which Christiana or EVI 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's or any Christiana Affiliate, or the employees of any of the
foregoing, or claims by insurance carriers of Christiana or any Christiana
Affiliate for indemnity arising from or out of claims by or against
Christiana or any Christiana Affiliate for acts or omissions of Christiana
or any Christiana Affiliate, or related to any current or past business of
Christiana or any Christiana Affiliate or any product or service provided
by Christiana or any Christiana Affiliate in whole or in part prior to the
Effective Time;
- any liability under the Consolidated Omnibus Budget Reconciliation
Act of 1986 with respect to any employees of Christiana or any Christiana
Affiliate who become employees of TLC or the Company after the Acquisition;
- any settlements or judgements in any litigation commenced by one or
more insurance carriers against Christiana or EVI on account of claims by
TLC or the Company or any Christiana Affiliate or employees of TLC or the
Company or any Christiana Affiliate;
- any and all liabilities incurred by Christiana or EVI pursuant to
its obligations hereunder in seeking to obtain or obtaining any consent or
approval to assign, transfer or lease any interest in any asset or
instrument, contract, lease, permit or benefit arising thereunder or
resulting therefrom;
- the on-site or off-site handling, storage, treatment or disposal of
any Waste Materials (as hereinafter defined) generated by Christiana or any
Christiana Affiliate on or prior to the Effective Time or any Christiana
Affiliate at any time;
- any and all Environmental Conditions (as hereinafter defined) on or
prior to the Effective Time, known or unknown, existing on, at or
underlying any of the properties owned, leased or operated by Christiana on
or after the Effective Time;
- any acts or omissions on or prior to the Effective Time of
Christiana or any Christiana Affiliate relating to the ownership or
operation of the business of Christiana or any Christiana Affiliate or the
properties currently or previously owned or operated by Christiana or any
Christiana Affiliate;
- any liability relating to any claim or demand by any stockholder of
Christiana or EVI with respect to the Merger, this Acquisition or the
transactions relating thereto; and
- 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 the Effective Time.
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CERTAIN DEFINITIONS
For purposes of the Purchase Agreement, the following terms have the
following meanings:
"Environmental Conditions" means any pollution, contamination, degradation,
damage or injury caused by, related to, arising from or in connection with the
generation, handling, use, treatment, storage, transportation, disposal,
discharge, release or emission of any Waste Materials (as hereinafter defined).
"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 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 Laws" includes,
but is not limited to the following statutes and the regulations promulgated
thereunder: the Clean Air Act, 42 U.S.C. sec. 7401 et seq., The Clean Water Act,
33 U.S.C. sec. 1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C.
sec. 6901 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
sec. 11011 et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et
seq., the Water Pollution Control Act, 33 U.S.C. sec. 1251, et. seq., the Safe
Drinking Water Act, 42 U.S.C. sec. 300f et seq., the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. sec. 9601, et. seq., and
any state, county or local regulations similar thereto.
"Waste Materials" 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.
DISPUTE RESOLUTION
Any disputes, claims or counterclaims connected with or arising out of, or
related to, this Agreement are to be settled by Arbitration to be conducted in
accordance with the Commercial Rules of Arbitration of the American Arbitration
Association, except as otherwise provided in the Purchase Agreement. The
dispute, claim or controversy will be decided by three independent arbitrators,
one to be appointed by TLC and the Company, one to be appointed by EVI and the
third to be appointed by the two so appointed. The place of any such arbitration
will be in Houston, Texas.
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THE OPERATING AGREEMENT
The following is a brief summary of certain provisions of the Operating
Agreement between the Company and Christiana as the two members of TLC. The
Operating Agreement is attached as Annex B and is incorporated herein by
reference. The summary below is qualified in its entirety by reference to the
Operating Agreement and Amendment No. 1 which is attached as Annex C.
GENERAL
The Operating Agreement sets forth the terms and conditions of the
Company's and Christiana's interests in TLC. The Operating Agreement provides
that TLC is a Delaware limited liability company.
MEMBERS
The initial Members of TLC are the Company and Christiana. Additional
members may be admitted to TLC only with the unanimous vote or written consent
of the existing Members.
CAPITAL CONTRIBUTIONS
Christiana made an initial capital contribution to TLC in exchange for
1,000 Membership Units representing 100 percent of the ownership interests in
TLC. Pursuant to the terms of the Purchase Agreement, the Company acquired
666.667 Membership Units in TLC representing a two-thirds interest in TLC from
Christiana. The Membership Units have identical preferences, limitations and
other relative rights. No additional capital contributions are required and no
additional Membership Units may be issued without the vote or consent of the
both the Company and Christiana. No Member may make a loan to TLC without
approval by the Board of Managers. Capital contributions made by the Members
will not earn interest. A separate capital account will be maintained for each
Member on the books and records of TLC in accordance with the requirements of
Section 704(b) of the Code, and the Treasury Regulations promulgated thereunder.
ALLOCATIONS
All items of income, gain, loss or deduction of TLC determined in
accordance with the Code will be allocated among the Members in proportion to
the number of Membership Units held by each Member. The allocation of items of
income, gain, loss or deduction will be interpreted so as to comply with the
Treasury Regulations promulgated under the Code.
DISTRIBUTIONS
In order to permit the Members to make their required estimated income tax
payments on items of income, gain, loss or deduction allocated to the Members,
TLC will make mandatory distributions to the Members in an amount equal to TLC's
estimated federal taxable income for each calendar quarter, multiplied by the
sum of (i) the highest corporate federal and Wisconsin income tax rates minus
(ii) the product of both tax rates. The mandatory distributions will be made to
the Members in proportion to the number of Membership Units held by each Member.
TLC may make additional distributions to the Members in proportion to the number
of Membership Units held by each Member at such times as the Company and
Christiana determine by vote or written consent. See "Risk Factors -- Dividends
from TLC" for additional information regarding distributions from TLC.
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".
Each Manager is elected by the vote or written consent of the Members holding at
least a majority of the Membership Units in TLC; provided, however, that
Christiana and the Company will 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 Membership Units held by Christiana and the Company, respectively.
The Operating Agreement provides that the Board of Managers may not cause TLC to
take certain specified actions without the prior approval of the Members by
unanimous vote or written consent. Such matters include (i) the authorization or
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issuance of additional Membership Units, (ii) the authorization or payment of
any distribution with respect to Membership Units, except for the payment of any
distribution that is necessary for the Company to fulfill its purchase
obligation with respect to Christiana's interest in TLC, (iii) any direct or
indirect purchase or acquisition by TLC or any subsidiary of TLC of Membership
Units, (iv) approval of any merger, consolidation or similar transaction or sale
of all or substantially all of the operating assets of TLC in one or more
transactions, (v) the creation of any new direct or indirect subsidiary of TLC,
(vi) the making of any tax election, (vii) the liquidation or dissolution of TLC
or any subsidiary of TLC, (vii) any transaction between TLC or subsidiary of TLC
and any affiliate of a Member (other than a transaction between TLC and a
subsidiary of TLC), (viii) the payment of any compensation to any Member or any
affiliate of a Member or entering into any employee benefit plan or compensatory
arrangement with or for the benefit of any Member or affiliate of any Member,
(ix) any amendment to the Operating Agreement or the Certificate of Organization
and (x) 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 the Company. TLC will pay the Company an annual management
fee of $250,000.
ASSIGNMENT, TRANSFER AND REPURCHASE OF A MEMBER'S UNITS
Except as specifically set forth in the Operating Agreement, a Member may
not voluntarily sell, give, assign, bequeath or pledge (each a "Transfer") any
Membership Unit without the prior written consent of the Board of Managers;
provided, however that the Company may pledge and assign its Membership Units to
Christiana. Christiana may effect a Transfer of the Company's Membership Units
pursuant to any action taken with respect to any security interest granted to
Christiana by the Company. Christiana may also Transfer its Membership Units if
the transferee is an affiliate of Christiana or the Company and the transferee
agrees to be bound by the provisions of the Operating Agreement. At any time
after the fifth anniversary of the date of the Operating Agreement, Christiana
may Transfer any or all of its Membership Units to any person provided, however,
that the Company shall have a right of first refusal to purchase such Membership
Units for the same price and at the same terms as such Membership Units were
offered to the transferee. In the event of any attempted involuntary Transfer of
a Unit, TLC shall have the option to purchase the Membership Units subject to
the involuntary Transfer at an amount equal to the book value of such Membership
Units. An involuntary transferee receiving Membership Units will not be
considered a member of TLC unless all of the Members consent in writing to treat
the involuntary transferee as a member.
DISSOLUTION AND WINDING UP
TLC will be dissolved upon (i) the unanimous vote or written consent of the
Members to dissolve TLC; (ii) TLC being adjudicated insolvent or bankrupt; or
(iii) an entry of a decree of judicial dissolution relating to TLC. Upon a
dissolution of TLC, the Members will select a liquidator to liquidate TLC, pay
and discharge all of TLC's debts and liabilities, and distribute all remaining
assets of TLC to the Members in accordance with their respective capital
accounts.
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THE OFFERING
RIGHTS
Each Christiana Shareholder has a Right to subscribe for their pro rata
share of Common Stock in the Offering. This Right consists of the Basic
Subscription Privilege and the Additional Subscription Privilege.
BASIC SUBSCRIPTION PRIVILEGE
The Basic Subscription Privilege entitles each Christiana Shareholder to
purchase one share of Common Stock for $4.00 per share for each share of
Christiana Common Stock held immediately prior to the Effective Time. Christiana
Shareholders are entitled to subscribe for all, or any whole number of, the
shares of Common Stock underlying their Basic Subscription Privilege. Because
the Cash Consideration per share of Christiana Common Stock to be received in
this Merger is expected to be less than the Subscription Price per share of
Common Stock, Christiana shareholders wishing to exercise their Basic
Subscription Privileges in full will be required to make an additional cash
payment, as described below under "-- How to Exercise Basic Subscription
Privilege and Additional Subscription Privilege." The Lubar Commitment ensures
that the net proceeds of the Offering to the Company (after deducting expenses
estimated to be $170,000) will be at least $10,666,667.
ADDITIONAL SUBSCRIPTION PRIVILEGE
Each Christiana Shareholder who subscribes in full for all shares of Common
Stock that the holder is entitled to purchase pursuant to the Basic Subscription
Privilege, as well as the Management of TLC and the general public, will be
entitled to purchase additional shares of Common Stock (the "Remaining Shares")
at the Subscription Price from any unsubscribed shares remaining, if any, after
the exercise or expiration of the Basic Subscription Privilege, (such
entitlement heretofore and hereinafter referred to as the "Additional
Subscription Privilege"); provided that, (i) members of senior management of TLC
shall have the ability to subscribe for up to 100,000 of the Remaining Shares
(the "Management Allocation"); (ii) each Christiana Shareholder shall have a
right to subscribe for the Remaining Shares on a pro rata basis if any shares
are remaining after the Management Allocation (the "Shareholder Allocation");
and (iii) the general public shall have a right to subscribe to the Remaining
Shares on a pro rata basis if any shares are remaining after the Management
Allocation and the Shareholder Allocations.
SUBSCRIPTION PRICE
The Subscription Price was determined by the Company's Board of Directors
and is not based on an independent valuation of the Company. The purchase price
was determined based on a number of factors including the desire to simplify the
process of Christiana Shareholders purchasing Common Stock by setting a price
which would be proximate to the Cash Consideration per share to be received in
the Merger, while at the same time, meeting the minimum initial bid price of
$4.00 per share for the Common Stock to qualify for listing on the Nasdaq
SmallCap Market. In setting the price, the Company also considered the fairness
of 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 Common
Stock.
SUBSCRIPTION EXPIRATION DATE
The ability to subscribe for Common Stock will expire at 5:00 p.m., Central
Standard Time, on the Expiration Date. The Company is not obligated to honor any
subscriptions received by the Subscription Agent after the Expiration Date,
regardless of when such subscriptions were sent.
HOW TO EXERCISE BASIC SUBSCRIPTION PRIVILEGE AND ADDITIONAL SUBSCRIPTION
PRIVILEGE
Christiana Shareholders. Christiana Shareholders may exercise the Basic
Subscription Privilege by delivering to the Subscription Agent at its offices
listed under "Subscription Agent" below, prior to 5:00 p.m., Central Standard
Time, on the Expiration Date, a properly completed and executed Letter of
Transmittal provided pursuant to the Merger Proxy Statement delivered
simultaneously herewith to Christiana Shareholders. Christiana Shareholders
wishing to exercise their Basic Subscription Privilege will automatically upon
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completion and delivery of the Letter of Transmittal, have the Subscription
Price paid on the Effective Time by the Subscription Agent from the Cash
Consideration received from EVI. For a description of the Cash Consideration,
see "Summary of Certain Terms of the Merger -- Cash Consideration to be Received
in the Merger." Christiana Shareholders who exercise their Basic Subscription
Privilege in full, may exercise, pursuant to the Letter of Transmittal, the
Additional Subscription Privilege, together with full payment of the aggregate
Subscription Price, to be paid in the form of check made payable to "Firstar
Trust Company." To the extent the Cash Consideration at the Determination Date
is greater than $4.00, any excess amount paid by a Christiana Shareholder will
be refunded promptly following the Determination Date, without interest.
Others. Others, such as TLC management and the general public wishing to
exercise the Additional Subscription Privilege shall do so by delivery of a
properly completed and executed Subscription Agreement (provided with this
Prospectus) to the Subscription Agent, together with payment in full in the form
of a check made payable to "Firstar Trust Company" as Subscription Agent.
Manner of Purchase. Any cash payment shall be made with the delivery of the
Letter of Transmittal and/or the Subscription Agreement, as the case may be, by
check payable to "Firstar Trust Company", as Subscription Agent at or prior to
5:00 p.m., Central Standard Time, on the Expiration Date.
COMPLETED LETTERS OF TRANSMITTAL, SUBSCRIPTION AGREEMENTS AND THE RELATED
PAYMENT SENT TO THE OFFICE OF THE SUBSCRIPTION AGENT MUST BE RECEIVED BEFORE
5:00 P.M. CENTRAL STANDARD TIME, ON THE EXPIRATION DATE. DO NOT SEND ELECTION
FORMS, SUBSCRIPTION AGREEMENTS OR PAYMENTS TO THE COMPANY, CHRISTIANA, TLC, SUB
OR EVI. SUBSCRIBERS WILL NOT HAVE ANY ALLOCATION PREFERENCE TO REVOKE THE
EXERCISE OF THEIR ALLOCATION PREFERENCES OR THEIR ADDITIONAL SUBSCRIPTION
PRIVILEGE AFTER DELIVERY OF THEIR LETTER OF TRANSMITTAL AND/OR SUBSCRIPTION
AGREEMENTS TO THE SUBSCRIPTION AGENT.
THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL, SUBSCRIPTION AGREEMENTS
AND PAYMENT OF THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE
ELECTION AND RISK OF THE SUBSCRIBER, NOT THE COMPANY, CHRISTIANA, TLC, SUB, EVI,
THE SUBSCRIPTION AGENT, 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 THE SUBSCRIPTION AGENT
PRIOR TO 5:00 P.M., CENTRAL STANDARD TIME, ON THE EXPIRATION DATE.
Proration. In the event of a proration of shares of Common Stock to persons
exercising the Additional Subscription Privilege as described above under "--
Additional Subscription Privilege," the Subscription Agent will promptly refund,
without interest, the amount of any overpayment as described above under "--
Additional Subscription Privilege." The instructions that accompany the Letter
of Transmittal and Subscription Agreement should be read carefully and followed
in detail.
Brokers, Trusts and Depositaries. 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 related Basic Subscription
Privilege and Additional Subscription Privilege. Based upon the instructions
received from the beneficial holders, the record holders should complete the
Letter of Transmittal and/or Subscription Agreements and submit them with the
applicable payment.
Company Discretion with Respect to Offering. All questions regarding the
timeliness, validity, form and eligibility of any exercise of the Basic
Subscription Privilege will be determined by the Company, in its sole
discretion, whose determination will be final and binding. The Company 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 Common
Stock pursuant thereto could be deemed unlawful. The Company, in its sole
discretion may waive any defect or irregularity, permit a defect or irregularity
to be corrected within such time as it may determine
47
<PAGE> 48
or reject the purported exercise of any allocation preferences or the exercise
of any Additional Subscription Privilege. Subscriptions will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as the Company determines in its sole discretion. The
Company and the Subscription Agent will not be under any duty to give
notification of any defect or irregularity in connection with the submission of
Letters of Transmittal, or Subscription Agreements nor will any of them incur
any liability for failure to give such notification.
DELIVERY OF CERTIFICATES
Certificates for shares of Common Stock issuable on exercise of the Basic
Subscription Privilege and/or the Additional Subscription Privilege will be
mailed as soon as practicable after the subscriptions have been accepted by the
Subscription Agent, but not prior to the Expiration Date. Certificates for
shares of Common Stock issued pursuant to the exercise of the Basic Subscription
Privilege and the Additional Subscription Privilege will be registered in the
name of the person exercising such privilege.
SUBSCRIPTION AGENT
The Subscription Agent is Firstar Trust Company. The address to which
Letters of Transmittal and Subscription Agreements should be delivered, whether
by hand, by mail or by overnight courier, is:
Firstar Trust Company
1555 North River Center Drive
Suite 301
Milwaukee, Wisconsin 53212
Any questions or requests for assistance concerning the method of
subscribing for shares of Common Stock should be directed to the Subscription
Agent at (414) 905-5000.
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<PAGE> 49
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table contains the name, age and position with the Company of
each executive officer and director as of January 1, 1998. All executive
officers are full-time employees of the Company. Each person's respective
background is described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William T. Donovan................................ 45 Chairman and Director
David J. Lubar.................................... 43 President and
Director
Oyvind Solvang.................................... 38 Vice President
David E. Beckwith................................. 69 Secretary
Nicholas F. Brady................................. 67 Director
Sheldon B. Lubar.................................. 68 Director
Albert O. Nicholas................................ 66 Director
</TABLE>
William T. Donovan was named Chairman of the Company in December 1997. Mr.
Donovan is also the President, Chief Financial Officer and a director of
Christiana, positions he will vacate on the Effective Time. 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 the Company 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
as of the Effective Time. Mr. Lubar is the son of Sheldon B. Lubar.
Oyvind Solvang has been Vice President of the Company since December 1997.
Mr. Solvang is also the Vice President of Christiana, a position he will vacate
on the Effective Time. 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 the Company since December 1997.
Since May 1995, he served as Secretary of Christiana, a position he will vacate
as of the Effective Time. Mr. Beckwith has been associated with the law firm of
Foley & Lardner since 1952 and has been a Partner at Foley & Lardner since 1960.
Nicholas F. Brady has been a Director of the Company 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 as of the Effective Time.
Sheldon B. Lubar has been a Director of the Company 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, EVI, 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 as of the Effective Time. Mr.
Lubar is the father David J. Lubar.
Albert O. Nicholas has been a Director of the Company 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
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<PAGE> 50
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 as of the Effective Time.
EXECUTIVE OFFICERS AND PROSPECTIVE MANAGERS OF TLC
The following table contains the name, age and position with TLC of each
executive officer as of January 1, 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary R. Sarner............................. 51 Chairman and Manager
John R. Patterson.......................... 50 President, Chief Executive Officer and Manager
Brian L. Brink............................. 37 Vice President and Chief Financial Officer
Sheldon B. Lubar........................... 68 Manager
William T. Donovan......................... 45 Manager
Bernard J. Duroc-Danner.................... 44 Manager
Curtis W. Huff............................. 40 Manager
</TABLE>
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 September 1992. Mr. Sarner is a Director of
Christiana, a position he will vacate as of the Effective Time.
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 as of the Effective Time.
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 EVI in May 1987 to initiate the start-up of
EVI's oilfield service and equipment business. He was elected President of EVI
in January 1990 and Chief Executive Officer in May 1990. In prior years, Mr.
Duroc-Danner was with Arthur D. Little Inc., a management consulting firm in
Cambridge, Massachusetts. Mr. Duroc-Danner is a director of Parker Drilling
Company and Dailey Petroleum Services Corp.
Curtis W. Huff became Senior Vice President, General Counsel and Secretary
of EVI in June 1998. Prior thereto, Mr. Huff served as a Partner of the law firm
of Fulbright & Jaworski L.L.P. for seven years. Mr. Huff is a director of UTI
Energy Corporation.
BOARD COMMITTEES OF THE COMPANY
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. The Company will maintain at least two Independent Directors on
its Board of Directors.
The duties of the Audit Committee will be to select and engage independent
public accountants to audit the books and records of the Company 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 the Company. A majority of the members of the Audit Committee will consist of
Independent Directors.
50
<PAGE> 51
The duties of the Compensation and Nominating Committee will be to (i)
provide a general review of the Company's compensation and benefit plans to
ensure that they meet the Company's objectives; (ii) to administer the 1998 Plan
described below and to grant awards thereunder; (iii) to consider and establish
the compensation of all officers of the Company and adopt major Company
compensation policies and practices; (iv) to consider and make recommendations
to the Board of Directors regarding the selection and retention of all elected
officers of the Company and its subsidiaries; and (v) such other duties assigned
by the Board of Directors or the Bylaws of the Company. 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 (i) reviewing and
approving all investments and capital commitments of the Company not delegated
to management pursuant to resolutions adopted by the majority of the entire
Board of Directors; (ii) development of financial plans and strategies of the
Company; and (iii) such other duties delegated to the Finance Committee by the
Board of Directors.
EXECUTIVE COMPENSATION
The Company was incorporated on December 11, 1997. Since its incorporation,
the Company has conducted no operations (other than in connection with the
Merger and the Acquisition), and has generated no revenue. The Company did not
pay any of its executive officers compensation during 1997. The Company
anticipates that during 1998 its most highly compensated officers will be
William T. Donovan, David J. Lubar and Oyvind Solvang, who will be paid
$150,000, $120,000 and $120,000, respectively.
1998 EQUITY INCENTIVE PLAN
The 1998 Plan authorizes the granting of: (i) stock options, which may be
either incentive stock options meeting the requirements of Section 422 of the
Code or nonqualified stock options; (ii) stock appreciation rights ("SARs");
(iii) restricted stock; (iv) performance shares; and (v) stock option grants to
directors who are not employees of the Company ("Independent Directors"). 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 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, as described under "Director Compensation" below.
DIRECTOR COMPENSATION
The directors of the Company 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 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. Notwithstanding the aforementioned vesting provisions,
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.
51
<PAGE> 52
CERTAIN TRANSACTIONS
Pursuant to the Merger, each share of Christiana Common Stock as of the
Effective Time will be converted into the right to receive (i) approximately
.74193 of a share of EVI Common Stock subject to certain adjustments based on
the number of shares of Christiana Common Stock outstanding at the Effective
Time; (ii) cash of approximately $4.00 per share of Christiana Common Stock,
subject to adjustment based on the amount of certain Christiana liabilities
existing as of the Effective Time; and (iii) a contingent cash payment of
approximately $1.92 payable to the shareholders of record following the fifth
anniversary of the Effective Time (or earlier if Christiana receives $20.0
million for its one-third interest in TLC), subject to any indemnity claims by
EVI under the Merger Agreement. For more information concerning the terms and
conditions of the Merger, potential investors are urged to read carefully the
Merger Proxy Statement.
All future material affiliated transactions and loans will be made and
entered into on terms that are no less favorable to the Company than those that
can be obtained from unaffiliated third parties and shall be approved by a
majority of the Independent Directors who do not have an interest in the
transaction and who have access, at the Company's expense, to Company's counsel
or independent legal counsel.
The directors and officers of the Company beneficially own shares of
Christiana Common Stock (including shares of Common Stock subject to options) in
the following amounts:
<TABLE>
<CAPTION>
SHARES OF CHRISTIANA COMMON
NAME STOCK BENEFICIALLY OWNED
---- ---------------------------
<S> <C>
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
</TABLE>
- -------------------------
(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 the Company),
own 448,551, 430,478 and 442,953 shares of Christiana Common Stock,
respectively.
In connection with the Merger and the Acquisition, Sheldon B. Lubar entered
into a letter agreement with the Company in which the Company and Mr. Lubar
agreed (i) that all Christiana Shareholders would have the right to purchase at
least the same percentage ownership in the Company as such Christiana
Shareholder has in Christiana immediately prior to the Effective Time and at the
same price per share as each of the Lubar Family and (ii) that Mr. Lubar and the
remainder of the Lubar Family would exercise their Basic Subscription Privilege
in full to ensure that the met proceeds of the Offering to the Company 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 1997,
Emmpak Foods, Inc. accounted for approximately $2.1 million in gross revenue for
TLC. David J. Lubar serves on the board of directors of Emmpak Foods, Inc.
52
<PAGE> 53
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company, after giving effect to the
Merger and this Offering, by (i) each of the Company's directors; (ii) each of
the Company's executive officers; (iii) each person who is known by the Company
to own beneficially more than 5% of the Common Stock; and (iv) all Company's
executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING AFTER OFFERING
----------------- -------------------
NAME NUMBER PERCENT NUMBER PERCENT
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
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)
</TABLE>
- -------------------------
* Less than one percent.
(1) To be determined following the amount of shares purchased by Christiana
Shareholders and the above named individuals pursuant to the Basic
Subscription Privilege and the Additional Subscription Privilege. The Lubar
Family (which includes Sheldon B. Lubar, David J. Lubar, Joan P. Lubar,
Kristine L. Thomson and Susan L. Solvang) has committed pursuant to an
agreement between the Company and Sheldon B. Lubar, dated December 24, 1997,
and certain related agreements, to exercise their Basic Subscription
Privileges in full to generate proceeds from the Offering of at least
$10,666,667, after expenses estimated to be $170,000.
(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.
53
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, $.01 par value, and
10,000,000 shares of undesignated preferred stock, $.01 par value. Upon
consummation of the Offering, 5,202,689 shares of Common Stock and no shares of
preferred stock will be issued and outstanding, assuming the maximum number of
shares of Common Stock offered hereby are sold.
The following summary description of the 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.
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 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 the Company to declare dividends, see "Dividend Policy."
Except as may be determined by the Board of Directors of the Company with
respect to any series of preferred stock, only the holders of Common Stock shall
be entitled to vote for the election of directors of the Company and on all
other matters. Upon any such vote the holders of Common Stock will be entitled
to one vote for each share of Common Stock held by them subject to any
applicable law. Cumulative voting is not permitted.
All shares of 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 the Company. There are no conversion rights
or sinking fund or redemption provisions applicable to the Common Stock. The
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 Common Stock is Firstar Trust Company.
PREFERRED STOCK
The Company'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 the Common Stock; provided that
the Company 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 issue preferred stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. Additionally, the issuance of preferred
stock may have the effect of decreasing the market price of the Common Stock,
and may adversely affect the voting and other rights of the holders of Common
Stock. The Company has no present plans to issue any shares of preferred stock.
CERTAIN ANTI-TAKEOVER AND INDEMNIFICATION PROVISIONS
By-law Provisions
The Company's Amended and Restated By-laws provide that a Special Meeting
may be called only by (i) the Chairman of the Board, (ii) the President, or
(iii) the Board of Directors and shall be called by the
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<PAGE> 55
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 the Company shall be indemnified to the fullest extent permitted by
the 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.
The foregoing provisions and the prohibitions set forth in the WBCL could
have the effect of delaying, deferring or preventing a change in control or the
removal of existing management of the Company.
Statutory Provisions
Section 180.1150 of the WBCL provides that the voting power of shares of
public Wisconsin corporations, such as the Company, 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 the
Company 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 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 (i) the Board
of Directors approved the acquisition of the stock prior to the acquisition
date; (ii) the business combination is approved by a majority of the outstanding
voting stock not beneficially owned by the interested shareholder; or (iii) 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 (i) acquire more than 5% of its outstanding
voting shares at a price above the
55
<PAGE> 56
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 (ii) 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
the Company with the goal of seeking to have the Company 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 Common
Stock, the Company will have outstanding 5,202,689 shares of Common Stock. The
5,202,664 shares of Common Stock to be sold in this Offering will be freely
tradeable without restriction unless acquired by affiliates of the Company. All
but the 25 shares of Common Stock issued to Sheldon B. Lubar in connection with
the Company's initial capitalization were registered in the Offering. The
registered 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 (the "Waiting Period") since the later of the date of
the acquisition of Restricted Shares from either the Company or any affiliate of
the Company, 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 the 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 the Company. If two years have elapsed since the later of the
date of the acquisition of Restricted Shares of Common Stock from the Company or
any affiliate of the Company, a person who is not deemed to have been an
affiliate of the Company 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 Waiting Period will not apply.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Foley & Lardner, Milwaukee, Wisconsin.
EXPERTS
The audited financial statements of the Company 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 with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the 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. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete; with respect to each such contract,
agreement or other document are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved.
56
<PAGE> 57
After the consummation of the Offering, the Company will be subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended, and, in accordance therewith, will file reports, proxy and information
statements and other information with the Commission. The Registration
Statement, as well as any such reports, proxy and information statements and
other information filed by the Company with the Commission, may be inspected and
copies 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.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by its independent auditors.
Christiana and EVI have filed the Merger Proxy Statement under Section
14(a) of the Exchange Act, with respect to the Merger and certain other matters.
Christiana and EVI are subject to the information requirements of the Exchange
Act and in accordance therewith, have filed reports and information with the
Commission in accordance with the Commission's rules, which 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.
57
<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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 Sheet as of March 31, 1998 (unaudited)............ F-5
Notes to Balance Sheet (unaudited)........................ F-6
TLC FINANCIAL STATEMENTS
Report of Independent Public Accountants.................. F-7
Balance Sheets as of June 30, 1997 and 1996............... F-8
Statements of Income for the years ended June 30, 1997,
1996 and 1995.......................................... F-9
Statements of Equity for the years ended June 30, 1997,
1996 and 1995.......................................... F-10
Statements of Cash Flows for the years ended June 30,
1997, 1996 and 1995.................................... F-11
Notes to Financial Statements............................. F-12
Condensed Balance Sheets as of March 31, 1998 and June 30,
1997 (unaudited)....................................... F-17
Condensed Statements of Income for the three months ended
March 31, 1998 (unaudited)............................. F-18
Condensed Statements of Income for the nine months ended
March 31, 1998 and 1997 (unaudited).................... F-19
Condensed Statements of Cash Flows for the nine months
ended March 31, 1998 and 1997 (unaudited).............. F-20
Notes to Condensed Financial Statements (unaudited)....... F-21
</TABLE>
F-1
<PAGE> 59
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> 60
C2, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
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
====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE> 61
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 EVI, Inc. 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.
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-4
<PAGE> 62
C2
BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS:
Cash........................................................ $ 100 $ --
Due from shareholder for common stock subscribed............ -- 100
Deferred offering and acquisition costs..................... 136,000 --
-------- ----
Total assets.............................................. $136,100 $100
======== ====
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses............................................ $136,000 $ --
-------- ----
Total liabilities......................................... 136,000 --
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................ $136,100 $100
======== ====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-5
<PAGE> 63
C2, INC.
NOTES TO BALANCE SHEETS (UNAUDITED)
MARCH 31, 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 March 31, 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 EVI, Inc. 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 Inventive 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-6
<PAGE> 64
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, 1997 and 1996, and the related
statements of income, equity and cash flows for each of the three years in the
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three year period ended June 30, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 1, 1997
F-7
<PAGE> 65
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF JUNE 30
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 224,000 $ 29,000
Accounts receivable, less allowance for uncollectable
accounts.............................................. 7,552,000 8,017,000
Inventories............................................ 273,000 439,000
Prepaids and other assets.............................. 259,000 1,202,000
----------- -----------
Total current assets.............................. 8,308,000 9,687,000
LONG-TERM ASSETS:
Fixed assets, net...................................... 75,501,000 81,272,000
Goodwill............................................... 5,592,000 5,749,000
Other assets........................................... 739,000 1,215,000
----------- -----------
Total long-term assets............................ 81,832,000 88,236,000
----------- -----------
Total assets...................................... $90,140,000 $97,923,000
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt........................................ -- $ 1,354,000
Current maturities of long-term debt................... $ 1,245,000 1,595,000
Accounts payable....................................... 2,868,000 5,298,000
Accrued liabilities.................................... 3,056,000 2,768,000
----------- -----------
Total current liabilities......................... 7,169,000 11,015,000
DUE TO PARENT COMPANY..................................... 3,000,000 3,295,000
LONG-TERM LIABILITIES:
Long-term debt......................................... 36,149,000 41,427,000
Deferred income taxes.................................. -- 10,528,000
Other liabilities...................................... 361,000 378,000
----------- -----------
Total long-term liabilities....................... 36,510,000 52,333,000
----------- -----------
Total liabilities................................. 46,679,000 66,643,000
----------- -----------
TOTAL MEMBER'S EQUITY..................................... 43,461,000 31,280,000
----------- -----------
Total liabilities and member's equity............. $90,140,000 $97,923,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-8
<PAGE> 66
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Warehousing and logistic services................ $84,208,000 $76,976,000 $71,029,000
OPERATING EXPENSES:
Warehousing and logistic expenses................ 70,973,000 64,956,000 56,889,000
Selling, general and administrative expenses..... 6,924,000 6,331,000 6,585,000
----------- ----------- -----------
77,897,000 71,287,000 63,474,000
----------- ----------- -----------
Income from operations................................ 6,311,000 5,689,000 7,555,000
OTHER INCOME (EXPENSES):
Interest expense................................. (3,216,000) (3,176,000) (3,378,000)
Gain (Loss) on disposal of assets................ (1,036,000) 206,000 130,000
Other expense, net............................... (354,000) (108,000) (21,000)
----------- ----------- -----------
(4,606,000) (3,078,000) (3,269,000)
----------- ----------- -----------
NET INCOME BEFORE INCOME TAXES........................ 1,705,000 2,611,000 4,286,000
PROVISION FOR INCOME TAXES............................ 695,000 1,075,000 1,724,000
ADJUSTMENT OF DEFERRED INCOME
TAXES RESULTING FROM A CHANGE IN
TAX STATUS....................................... 11,171,000 -- --
----------- ----------- -----------
NET INCOME............................................ $12,181,000 $ 1,536,000 $ 2,562,000
=========== =========== ===========
BASIC AND DILUTED INCOME PER MEMBERSHIP
UNIT.................................................. $ 12,181 $ 1,536 $ 2,562
=========== =========== ===========
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-9
<PAGE> 67
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
MEMBERSHIP MEMBER'S
UNITS EQUITY
---------- --------
<S> <C> <C>
Balance, June 30, 1994...................................... 1,000 $27,182,000
Net income.................................................. -- 2,562,000
----- -----------
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
===== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 68
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997,1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $12,181,000 $ 1,536,000 $ 2,562,000
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization...................... 7,186,000 6,971,000 6,684,000
(Gain) loss on disposal of assets.................. 1,036,000 (206,000) (130,000)
Deferred income tax provision...................... 1,023,000 746,000 1,400,000
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......... 465,000 (404,000) (401,000)
(Increase) decrease in inventories................. 166,000 (191,000) 163,000
(Increase) decrease of prepaids and other assets... 668,000 564,000 (998,000)
Increase (decrease) in accounts payable and accrued
liabilities..................................... (2,260,000) 2,027,000 900,000
----------- ------------ -----------
Net cash provided by operating activities.......... 9,294,000 11,043,000 10,180,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets........................... (3,294,000) (17,646,000) (7,522,000)
Proceeds from sale of fixed assets................. 1,472,000 1,384,000 406,000
----------- ------------ -----------
Net cash used in investing activities.............. (1,822,000) (16,262,000) (7,116,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net....... (1,354,000) (490,000) 501,000
Proceeds from issuance of long-term debt........... -- 9,011,000 4,125,000
Payment of amounts due to parent................... (295,000) -- --
Payment of long-term debt.......................... (5,628,000) (3,638,000) (7,873,000)
----------- ------------ -----------
Net cash provided by (used in) financing
activities.................................... (7,277,000) 4,883,000 (3,247,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 195,000 (336,000) (183,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1.......... 29,000 365,000 548,000
----------- ------------ -----------
ENDING CASH AND CASH EQUIVALENTS,
JUNE 30............................................ $ 224,000 $ 29,000 $ 365,000
=========== ============ ===========
Supplemental Disclosures of Cash Flow Information
Interest paid...................................... $ 3,000,000 $ 3,046,000 $ 3,148,000
Amounts paid to Parent for income taxes............ 300,000 279,000 201,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 69
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,
1997 and 1996 balance sheets reflect the consolidated results of TLC and
combined results of Wiscold and Total Logistic, respectively. The fiscal 1997,
1996 and 1995 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 $223,000 and $253,000 at June 30, 1997 and 1996,
respectively. The provision for bad debts was $123,000 and $227,000 for the
years ended June 30, 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:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1997 1996 LIVES
---- ---- ---------
<S> <C> <C> <C>
Land................................................... $ 3,380,000 $ 3,416,000 --
Machinery and equipment................................ 52,816,000 54,047,000 5-7 years
Buildings and improvements............................. 41,534,000 41,394,000 30-32 years
Construction in progress............................... 451,000 12,000 --
Less: Accumulated depreciation......................... (22,680,000) (17,597,000)
----------- -----------
$75,501,000 $81,272,000
=========== ===========
</TABLE>
GOODWILL: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in both 1997 and 1996). The accumulated amortization at June 30, 1997
and 1996 was $566,000 and $409,000, 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 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.
F-12
<PAGE> 70
TOTAL LOGISTIC CONTROL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
DERIVATIVES: Derivative financial instruments have been used by TLC to
manage its interest rate exposure on certain debt instruments. Amounts to be
received or paid under interest rate swap agreements are recognized as interest
income or expense in the periods which they accrue. If interest rate swap
agreements are terminated due to the underlying debt being extinguished, any
resulting gain or loss is recognized as interest income or expense at the time
of termination.
LONG-LIVED ASSETS: During fiscal 1997, TLC adopted statement of 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, 1997 and 1996, TLC had amounts due to Christiana of
$3,000,000 and $3,295,000, respectively. As of June 30, 1997 and 1996,
$3,000,000 of the outstanding balance was 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 1997, 1996 and 1995. TLC charges 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, 1996
and 1995 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 1997, 1996 and 1995 are not material.
C. INDEBTEDNESS:
The following is a summary of indebtedness as of June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revolving credit agreement.................................. $31,248,000 $35,248,000
Line of credit.............................................. -- 1,354,000
Notes payable............................................... 4,382,000 6,010,000
Subordinated Note........................................... 1,764,000 1,764,000
----------- -----------
37,394,000 44,376,000
----------- -----------
Less: Current portion of long-term debt..................... (1,245,000) (1,595,000)
Line of credit........................................ -- (1,354,000)
----------- -----------
Long-term debt.............................................. $36,149,000 $41,427,000
=========== ===========
</TABLE>
TLC has a revolving credit agreement that provides for borrowings at June
30, 1997 up to $40,000,000. 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 (6.7% at June 30, 1997) and are
unsecured. At June 30, 1996, TLC's borrowings under the original revolving
credit agreement were priced at
F-13
<PAGE> 71
TOTAL LOGISTIC CONTROL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LIBOR plus 175 basis points or prime (7.1% at June 30, 1996) and were secured by
TLC's assets. The revolving credit agreement requires, among other things, that
defined levels of net worth and debt service coverage be maintained and
restricts certain activities including limitation on new indebtedness and the
disposition of assets. No compensating balances are required under the terms of
this credit facility.
On September 15, 1992, TLC entered into an interest rate swap agreement
with three commercial banks which expires on December 15, 1997. As of June 30,
1997, $12,650,000 of outstanding debt was subject to the swap agreement. The
agreement effectively fixes the interest rate payable by TLC on this portion of
the debt at 5.3% plus an interest rate spread determined by TLC's leverage
ratio. As of June 30, 1997, the effective rate of this outstanding debt was
6.55%. Under the swap agreement, TLC is exposed to credit risk only in the event
of non-performance by the commercial banks, which is not anticipated.
TLC has a bank line of credit which permits borrowings up to $5,000,000.
Borrowings bear interest at either LIBOR plus 200 basis points, or the bank's
prime rate, at TLC's option (7.69% and 7.48% at June 30, 1997 and 1996,
respectively), and are secured by certain accounts receivable. 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 the Parent.
Future maturities of consolidated indebtedness are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30 TOTAL
---------- -----
<S> <C>
1998................................................... $ 1,245,000
1999................................................... 4,078,000
2000................................................... 5,193,000
2001................................................... 25,150,000
2002................................................... 1,728,000
Thereafter............................................. --
</TABLE>
The weighted average interest rate paid on short-term borrowings was 7.46%
and 8.21% for fiscal 1997 and 1996, 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:
TLC is 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
F-14
<PAGE> 72
TOTAL LOGISTIC CONTROL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the combined Federal and state income tax provision for the period during the
fiscal year that TLC was a C-Corporation.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal.................................. $ (279,000) $ 280,000 $ 275,000
State.................................... (49,000) 49,000 49,000
Deferred................................... 1,023,000 746,000 1,400,000
---------- ---------- ----------
$ 695,000 $1,075,000 $1,724,000
========== ========== ==========
</TABLE>
In the event that TLC was a taxable entity, a net deferred tax liability of
$11,171,000 as of June 30, 1997 would have been recorded on the balance sheet.
The components are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax........................... -- $ 1,255,000
Accrued expenses.................................. $ 399,000 358,000
Book over tax amortization........................ 584,000 480,000
Deferred revenue.................................. 197,000 201,000
----------- -----------
Total deferred tax asset.................. $ 1,180,000 $ 2,294,000
=========== ===========
Deferred tax liabilities:
Tax over book depreciation........................ $ 7,838,000 $ 7,183,000
Condemnation proceeds............................. 4,513,000 5,259,000
----------- -----------
Total deferred tax liability.............. $12,351,000 $12,442,000
=========== ===========
</TABLE>
A reconciliation of the statutory Federal income tax rate to TLC's
effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate........................... 34% 34% 34%
Increase in taxes resulting from State income tax, net.... 5 5 6
Other, net................................................ 2 2 --
-- -- --
41% 41% 40%
== == ==
</TABLE>
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
$7,213,000, $5,479,000 and $5,100,000 in fiscal 1997, 1996
F-15
<PAGE> 73
TOTAL LOGISTIC CONTROL
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and 1995, respectively. At June 30, 1997, future minimum lease payments under
these operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30 AMOUNT
---------- ------
<S> <C>
1998................................................... $ 5,800,000
1999................................................... 4,513,000
2000................................................... 3,982,000
2001................................................... 2,993,000
2002................................................... 2,274,000
Thereafter............................................. 11,976,000
</TABLE>
G. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On December 12, 1997, Christiana, the parent of TLC, entered into an
agreement and plan of merger with EVI, Inc. 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-16
<PAGE> 74
TOTAL LOGISTIC CONTROL, LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
MARCH 31, 1998 JUNE 30, 1997
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 384,000 $ 224,000
Accounts receivable, net.................................. 8,148,000 7,552,000
Inventories, prepaids and other assets.................... 876,000 532,000
----------- -----------
Total current assets.............................. 9,408,000 8,308,000
LONG-TERM ASSETS:
Fixed assets, net......................................... 71,789,000 75,501,000
Goodwill.................................................. 5,475,000 5,592,000
Other assets.............................................. 756,000 739,000
----------- -----------
Total long-term assets............................ 78,020,000 81,832,000
----------- -----------
Total assets...................................... $87,428,000 $90,140,000
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt........................................... $ 159,000 $ --
Current maturities of long-term debt...................... 1,245,000 1,245,000
Accounts payable.......................................... 4,266,000 2,868,000
Accrued liabilities....................................... 3,667,000 3,056,000
----------- -----------
Total current liabilities......................... 9,337,000 7,169,000
DUE TO PARENT COMPANY..................................... 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt............................................ 31,167,000 36,149,000
Other liabilities......................................... 345,000 361,000
----------- -----------
Total long-term liabilities....................... 31,512,000 36,510,000
----------- -----------
Total liabilities................................. 43,849,000 46,679,000
----------- -----------
MEMBER'S EQUITY........................................... 43,579,000 43,461,000
----------- -----------
Total liabilities and member's equity............. $87,428,000 $90,140,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
F-17
<PAGE> 75
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Warehousing and logistic services......................... $21,865,000 $22,450,000
OPERATING EXPENSES:
Warehousing and logistic expenses......................... 18,527,000 19,137,000
Selling, general and administrative expenses.............. 1,901,000 1,906,000
----------- -----------
20,428,000 21,043,000
----------- -----------
Income from operations.................................... 1,437,000 1,407,000
OTHER INCOME (EXPENSES):
Interest expense.......................................... (705,000) (778,000)
Other expense, net........................................ 8,000 106,000
----------- -----------
(697,000) (672,000)
----------- -----------
NET INCOME BEFORE INCOME TAXES.............................. 740,000 735,000
PROVISION FOR INCOME TAXES.................................. -- 285,000
----------- -----------
NET INCOME.................................................. $ 740,000 $ 450,000
=========== ===========
BASIC AND DILUTED NET INCOME PER MEMBERSHIP UNIT............ $ 740 $ 450
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-18
<PAGE> 76
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Warehousing and logistic services......................... $68,579,000 $63,271,000
OPERATING EXPENSES:
Warehousing and logistic expenses......................... 57,843,000 53,050,000
Selling, general and administrative expenses.............. 5,651,000 5,178,000
----------- -----------
63,494,000 58,228,000
----------- -----------
Income from operations.................................... 5,085,000 5,043,000
OTHER INCOME (EXPENSES):
Interest expense.......................................... (2,265,000) (2,481,000)
Loss on disposal of assets................................ -- (1,086,000)
Other expense, net........................................ (376,000) (244,000)
----------- -----------
(2,641,000) (3,811,000)
----------- -----------
NET INCOME BEFORE INCOME TAXES.............................. 2,444,000 1,232,000
PROVISION FOR INCOME TAXES.................................. -- 466,000
----------- -----------
NET INCOME.................................................. $ 2,444,000 $ 766,000
=========== ===========
BASIC AND DILUTED NET INCOME PER MEMBERSHIP UNIT............ $ 2,444 $ 766
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-19
<PAGE> 77
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,444,000 $ 766,000
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.......................... 5,104,000 5,623,000
Loss on sale of assets................................. -- 1,086,000
Deferred income tax provision.......................... -- 223,000
Changes in Assets and Liabilities:
Increase in accounts receivable........................... (596,000) (908,000)
(Increase) decrease in inventories, prepaids and other
assets................................................. (461,000) 305,000
Increase (decrease) in accounts payable and accrued
liabilities............................................ 1,993,000 (495,000)
----------- -----------
Net cash provided by operating activities............ 8,484,000 6,600,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... (1,382,000) (1,965,000)
Proceeds from sale of fixed assets.......................... 207,000 909,000
----------- -----------
Net cash used in investing activities..................... (1,175,000) (1,056,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net................ 159,000 (1,684,000)
Payment of long-term debt................................... (4,982,000) (3,447,000)
Dividend distribution to Parent Company..................... (2,326,000) --
----------- -----------
Net cash used in financing activities..................... (7,149,000) (5,131,000)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 160,000 413,000
BEGINNING CASH AND CASH EQUIVALENTS......................... 224,000 29,000
----------- -----------
ENDING CASH AND CASH EQUIVALENTS............................ $ 384,000 $ 442,000
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid............................................. $ 2,150,000 $ 2,398,000
Amounts paid to Parent for income taxes................... -- --
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-20
<PAGE> 78
TOTAL LOGISTIC CONTROL, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION:
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 statements for the year ended June
30, 1997 found elsewhere in this Prospectus.
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. ("TLC"), both
former wholly owned subsidiaries of Christiana. The accompanying financial
statements have been restated to reflect this combination for all periods
presented.
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 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 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
represent cash payments made to the Parent.
Effective June 30, 1997, TLC converted from a C-Corporation to 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. As the LLC is no
longer a taxable entity, deferred income taxes are not reflected on the balance
sheets. Additionally, provisions for income taxes for the three and nine months
ended March 31, 1998 are not required. The provisions for income taxes for the
three and nine month periods ended March 31, 1997 represent the combined Federal
and state income tax provisions for the periods during the fiscal year that TLC
was a C-Corporation.
4. DISTRIBUTION TO PARENT COMPANY:
During the nine month period ended March 31, 1998, 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. ACCOUNTING PRONOUNCEMENTS:
Effective January 1, 1998, TLC adopted Statement of 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.
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
F-21
<PAGE> 79
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.
F-22
<PAGE> 80
ANNEX A
AGREEMENT
BY AND AMONG
EVI, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.
AND
C2, INC.
DECEMBER 12, 1997
A-1
<PAGE> 81
AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 12th day of December, 1997 by
and among EVI, INC., a Delaware corporation ("EVI"), TOTAL LOGISTIC CONTROL,
LLC, a Delaware limited liability company ("TLC"), CHRISTIANA COMPANIES, INC., a
Wisconsin corporation ("Christiana") and C2, INC., a Wisconsin corporation
("C2").
WITNESSETH:
WHEREAS, EVI, Christiana Acquisition, Inc., a Wisconsin corporation
("Sub"), Christiana and C2 have entered into an Agreement and Plan of Merger
dated December 12, 1997 (the "Merger Agreement") pursuant to which Sub, a wholly
owned subsidiary of EVI, will merge with and into Christiana and thereby
Christiana will become a wholly owned subsidiary of EVI (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, EVI 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 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;
A-2
<PAGE> 82
(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;
(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 EVI'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. sec. 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 from
or in connection with the generation, handling, use, treatment, storage,
transportation, disposal, discharge, release or emission of any Waste Materials.
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
A-3
<PAGE> 83
Clean Air Act, 42 U.S.C. sec. 7401 et seq., The Clean Water Act, 33 U.S.C. sec.
1251 et seq., the Resource Conservation Recovery Act, 42 U.S.C. sec. 6901 et
seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. sec. 11011 et
seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., the Water
Pollution Control Act, 33 U.S.C. sec. 1251, et seq., the Safe Drinking Water
Act, 42 U.S.C. sec. 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 EVI Indemnified Parties. EVI 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
EVI 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 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 Agreement and Plan of
Merger dated December 12, 1997, by and among EVI, 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.
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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 EVI
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) EVI Related Taxes (as defined in the Merger Agreement).
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
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 EVI 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.
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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, EVI and their respective Affiliates) any claims,
defenses or claims for contribution that it has or may have against Christiana,
EVI 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.
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.
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6. Indemnification.
6.1 Indemnification Matters.
(a) Indemnification. Each of C2 and TLC, jointly and severally, hereby
agree to indemnify, defend and hold Christiana, EVI and their respective
officers, directors, employees, agents and assigns (collectively, the "EVI
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
EVI 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:
(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 EVI) 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 EVI after the Effective Date);
(iv) The Assumed Liabilities;
(v) Any and all amounts for which Christiana or EVI 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 EVI 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 EVI 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;
(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 EVI 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 EVI with respect to the Merger, the
Logistic Sale or the transactions relating thereto; and
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(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 EVI
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 EVI 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, EVI shall have no obligation to pay such amounts. Any
such payments shall be subject to EVI 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 EVI of any Assumed Liabilities and its obligations
hereunder shall be personal to TLC and C2 to the extent and only to the
extent EVI 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 EVI as result of this
Agreement.
(c) Absolute Indemnity. NONE OF THE EVI 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 EVI 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
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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 TO TLC, (III) MAY ARISE AS A RESULT OF A
NEGLIGENT ACT OR OMISSION BY ANY OF THE EVI 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 EVI Indemnified Party of
notice, or an EVI 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 EVI 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 EVI
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 EVI Indemnified Party within 15 days
after such notice that the TLC Parties is assuming the defense thereof, (i) the
TLC Parties will defend the EVI Indemnified Parties against the Circumstances
with counsel of its choice, provided such counsel is reasonably satisfactory to
EVI, (ii) the EVI 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 EVI concludes
reasonably that the counsel the TLC Parties has selected has a conflict of
interest), (iii) the EVI 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 EVI Indemnified Party, (y) requires an EVI Indemnified Party
to admit any facts or liability that could reasonably be expected to adversely
affect an EVI Indemnified Party in any other matter or (z) does not include a
provision whereby the plaintiff or claimant in the matter released the EVI
Indemnified Parties from all Liability with respect thereto, without the written
consent of EVI. In the event the TLC Parties does not notify EVI within 15 days
after EVI has given notice of the Circumstance that the TLC Parties is assuming
the defense thereof, the EVI Indemnified Parties may defend against, or enter
into any settlement with respect to, the Circumstance in any manner the EVI
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 EVI
Indemnified Parties for amounts which shall have been covered and paid by
insurance of the EVI 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, EVI OR ANY EVI INDEMNIFIED PARTY MAY
HAVE AT 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. sec. 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,
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hereunder, (ii) executes and delivers to Christiana and EVI 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 EVI, 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 EVI
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 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 EVI Indemnified Party may be
brought with respect to any claim for indemnification by an EVI 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,
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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 EVI Indemnified Party may be brought with
respect to any claim for indemnification by an EVI 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 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,
EVI, and the EVI 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 EVI:
EVI, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Bernard J. Duroc-Danner
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
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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if to Christiana:
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: James G. Kiley
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Curtis W. Huff
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.
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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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
EVI, INC.
("EVI")
By: /s/
Title:
TOTAL LOGISTIC CONTROL, LLC
("TLC")
By: /s/
Title:
CHRISTIANA COMPANIES, INC.
("Christiana")
By: /s/
Title:
C2, INC.
("C2")
By: /s/
Title:
A-13
<PAGE> 93
ANNEX B
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
, 1998
B-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
1. FORMATION
1.1 Definitions................................................. B-4
1.2 Formation; Name............................................. B-4
1.3 Purposes.................................................... B-4
1.4 Registered and Principal Offices............................ B-4
1.5 Term........................................................ B-4
1.6 Foreign Qualification....................................... B-4
1.7 No State Law Partnership.................................... B-4
1.8 Partnership Classification.................................. B-5
2. MEMBERS
2.1 Members..................................................... B-5
2.2 Admission of Additional Members............................. B-5
3. CAPITAL CONTRIBUTIONS
3.1 Capital Contributions by Members............................ B-5
3.2 Purchase of Units by C2, Inc................................ B-5
3.3 Loans to the Company........................................ B-5
3.4 Withdrawal and Return of Contributions...................... B-5
3.5 Interest on Contributions................................... B-5
3.6 Limitation on Member's Deficit Make-up...................... B-5
3.7 Capital Accounts............................................ B-5
3.8 Units....................................................... B-6
4. ALLOCATIONS
4.1 Profits and Losses.......................................... B-6
4.2 Tax Allocations............................................. B-6
4.3 Construction................................................ B-6
5. DISTRIBUTIONS
5.1 Current Tax Distributions................................... B-6
5.2 Other Distributions......................................... B-7
5.3 Amounts Withheld............................................ B-7
5.4 Distribution Restrictions................................... B-7
6. MANAGEMENT
6.1 Voting and Decisions........................................ B-7
6.2 Restriction on Transactions................................. B-7
6.3 Regular Meetings............................................ B-8
6.4 Special Meetings............................................ B-8
6.5 Quorum...................................................... B-8
6.6 Notice...................................................... B-8
6.7 Manner of Acting............................................ B-8
6.8 Vacancies................................................... B-8
6.9 Presumption of Assent....................................... B-8
6.10 Resignation of Manager...................................... B-8
6.11 Action Without Meeting...................................... B-8
6.12 Telephonic Meetings......................................... B-9
6.13 Reliance by Third Parties................................... B-9
6.14 Filing of Documents......................................... B-9
6.15 Limitation on Liability; Indemnification.................... B-9
6.16 Delegation to Members or Representatives of Members......... B-9
6.17 Time Devoted to Business.................................... B-10
</TABLE>
B-2
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
6.18 Compensation of Members and Officers........................ B-10
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND DISASSOCIATION
7.1 Assignment and Transfer..................................... B-10
7.2 Disassociation.............................................. B-12
7.3 Restraining Order........................................... B-12
8. DISSOLUTION AND WINDING UP
8.1 Dissolution................................................. B-12
8.2 Winding Up and Liquidation.................................. B-12
8.3 Compliance With Timing Requirements of Regulations.......... B-12
9. BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.1 Books and Records........................................... B-13
9.2 Fiscal Year and Method of Accounting........................ B-13
9.3 Reports and Statements...................................... B-13
9.4 Tax Elections............................................... B-13
9.5 Tax Matters Partner......................................... B-13
10. MISCELLANEOUS
10.1 Amendments.................................................. B-13
10.2 Bank Accounts............................................... B-14
10.3 Binding Effect.............................................. B-14
10.4 Rules of Construction....................................... B-14
10.5 Choice of Law and Severability.............................. B-14
10.6 Counterparts................................................ B-14
10.7 Entire Agreement............................................ B-14
10.8 Last Day for Performance Other Than a Business Day.......... B-14
10.9 Notices..................................................... B-14
10.10 Title to Property; No Partition............................. B-15
11. GLOSSARY............................................................ B-15
</TABLE>
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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 EVI, Inc., a Delaware corporation, Christiana Acquisition Co., a Wisconsin
corporation, Christiana Companies, Inc., a Wisconsin corporation, and C2, Inc.,
a Wisconsin corporation, dated , 1997 (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.
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.
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<PAGE> 97
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.
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.
(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.
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<PAGE> 98
(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 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
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Agreement among EVI, Inc., Total Logistic Control, LLC, Christiana and C2, Inc.
dated , 1997) 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.
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 ( ) 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 agreement
among EVI, Inc., Total Logistic Control, LLC, Christiana and C2, Inc. dated
, 1997;
(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);
(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.
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6.3 REGULAR MEETINGS. A regular meeting of the Managers shall be held
without other notice other than this Operating Agreement [INSERT TIME AND
PLACE]. 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 [INSERT
TIME AND PLACE].
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 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.
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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 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. 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
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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.
(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. Lubar & Co., Incorporated 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
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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.
(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 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
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(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.
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
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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 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.
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.
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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 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.
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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.
"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.
"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.
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"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.
"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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<PAGE> 109
(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
<TABLE>
<CAPTION>
MEMBER UNITS
------ -----
<S> <C>
C2, Inc.
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202.................................. 666.667
Christiana Companies, Inc.
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202.................................. 333.333
</TABLE>
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<PAGE> 111
ANNEX C
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AND LOGISTIC PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (the "Amendment") is made and entered into as of May
26, 1998, by and among the undersigned parties.
WHEREAS, EVI, Inc., a Delaware corporation ("EVI"), Christiana Acquisition,
Inc., a Wisconsin corporation and wholly owned subsidiary of EVI ("Sub"),
Christiana Companies, Inc., a Wisconsin corporation ("Christiana"), and C2,
Inc., a Wisconsin corporation ("C2"), entered into an Agreement and Plan of
Merger dated as of December 12, 1997 (the "Merger Agreement");
WHEREAS, EVI, Christiana, C2 and Total Logistic Control, LLC, a Delaware
limited liability company ("TLC"), entered in an Agreement, dated December 12,
1997 (the "Logistic Purchase Agreement"); and
WHEREAS, the parties now desire to amend the Merger Agreement and the
Logistic Purchase Agreement as provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereby
agree as follows:
I. Amendment to the Merger Agreement.
(a) The third sentence of Section 1.7(f) shall be and hereby is
amended to read as follows:
"The Contingent Liability Period shall mean the period from the
Effective Date through the earlier of: (a) fifth anniversary of Effective
Date or (b) the date that Christiana receives consideration with a fair
market value of $20,000,000 or more for its one-third interest in TLC;
provided, however, that if there is any pending or threatened claim, demand
or suit or existing matter for which EVI has reasonably determined that an
EVI Indemnified Party (as defined in the Logistic Purchase Agreement) will
be entitled to indemnification under Section 6.1(a) of the Logistic
Purchase Agreement, the Contingent Liability Period shall be extended until
such time that such claim, demand, suit or matter is wholly resolved, paid
and not subject to appeal or further claims."
(b) The following phrase in the first sentence of Section 1.8(d)
"provided, however, that if on the fifth anniversary of the Effective Date
there is any pending or threatened claim, demand or suit," shall be amended
to read as follows: "provided, however, that if on the date the Contingent
Liability Period would otherwise terminate, there is any pending or
threatened claim, demand or suit"
(c) Section 7.1(b) shall be and hereby is amended by changing the date
"June 30, 1998" to "October 31, 1998."
(d) The following shall be and hereby is added to Article IV:
"4.4 Publication of Financial Results. In the event that the proposed
merger (the "Weatherford Merger") between EVI and Weatherford Enterra, Inc., a
Delaware corporation, does not close prior to June 1, 1998, EVI shall publish,
as soon as reasonably practicable following the closing of the Weatherford
Merger, financial results covering 30 days of post-Weatherford Merger combined
operations of EVI and Weatherford; provided, however, that EVI shall not be
required to publish financial results covering any period other than a period
ending on the last business day of a calendar month."
2. Amendment to the Logistic Purchase Agreement.
(a) Section 5.3 shall be and hereby is replaced in its entirety with
the following:
"5.3 Participation Rights.
(a) If (x) there shall be proposed a C2 Change of Control or (y) C2
shall propose to transfer or sell all of its interest in TLC to an
unrelated third party (a "Third Party") in one or more
C-1
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transactions (a "TLC Disposition"), Christiana shall have the right, but
not the obligation, to participate (a "Tag Along Right") in such
transaction as follows:
(i) In the case of a C2 Change of Control, Christiana shall have
a right to sell its Membership Units to C2 and Logistic as determined
as set forth below for cash at the fair market value of such
Membership Units as may be agreed to by Christiana and C2 or, in the
absence of such agreement, as determined by appraisal, as set forth
below; and
(ii) In the case of a TLC Disposition, Christiana shall have the
right to sell its Membership Units to the proposed purchaser of C2's
Membership Units for the same equivalent consideration per equivalent
unit in TLC, in cash, and otherwise on the same terms as C2 sells or
transfers its interests in TLC.
The purchasing entity in the case of a C2 Change of Control shall
be determined by C2 and Logistic; provided, however, that each shall be
responsible for the purchase in the event of a default by the selected
purchasing entity.
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 transaction and
advising Christiana of its Tag Along Right. The Tag Along Notice shall
be required to be accompanied by the offer to purchase required by this
Section 5.3 by (x) the proposed purchasing entity in the case of a C2
Change of Control and (y) the proposed purchaser in the case of a
proposed TLC Disposition. 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 Notice. If Christiana gives written notice indicating
that it wishes to exercise its Tag Along Right,
(1) In the case of a C2 Change of Control, Christiana shall be
obligated to sell its Membership Units to C2 or TLC, as the case may
be, and C2 and TLC shall be obligated to purchase for cash at the
fair market value of such Membership Units as may be agreed to by
Christiana and C2 or, in the absence of such agreement, as determined
by a mutually acceptable Third Party appraiser contemporaneous with
the closing of the C2 Change of Control; provided that if the parties
cannot agree on an appraiser, each shall appoint its own appraiser
and those appraisers will appoint the Third Party appraiser; and,
provided, further, that the final decision of the appraisers shall be
as agreed by two of the three appraisers; and
(2) In the case of a TLC Disposition, Christiana shall be
obligated to sell its Membership Units, and the proposed purchaser
shall be obligated to purchase, for the same equivalent consideration
per equivalent unit in TLC and otherwise on the same terms as C2
sells or transfers its interests in TLC with the sale to occur on or
prior to the closing of the TLC Disposition; provided, however, that
Christiana shall receive its equivalent consideration per equivalent
unit in TLC in cash.
No transaction which would result in a C2 Change of Control may be
effected unless such transaction is effected in full compliance with the
terms of this Section 5.3.
(b) For the purposes of this Section 5.3, a "C2 Change of Control"
shall be defined to be (x) a transfer, conveyance or other disposition
of shares of C2 stock by a member of the Lubar Family, (y) the issuance
by C2 of any additional shares of C2 stock or (z) a merger,
consolidation, conversion or share exchange or other similar transaction
involving C2, if, after giving effect to such transaction described in
(x), (y) or (z), the Lubar Family shall cease to beneficially own
(defined to mean both the right to vote and dispose of the full economic
interests in the shares) at least 25% of all of the voting and ownership
interests in C2 or the resulting entity.
(c) For the purposes of this Section 5.3, the "Lubar Family" shall
be defined to be Sheldon B. Lubar, Joan P. Lubar, David J. Lubar,
Kristine L. Thomson, Susan L. Solvang, their spouses, their children,
trusts for the benefit of any of the foregoing and the Lubar Family
Foundation."
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<PAGE> 113
(b) The second sentence of Section 6(a) of the First Amended and
Restated Operating Agreement attached to the Logistic Purchase Agreement
shall be amended to read as follows: "The initial Board of Managers shall
consist of six (6) Managers."
(c) The second sentence of Section 6(r) of the First Amended and
Restated Operating Agreement shall be and hereby is amended to change
"Lubar & Co. Incorporated" to "C2, Inc."
3. All other terms and conditions of the aforementioned agreement shall
remain in full force and effect.
Dated this 26th day of May, 1998.
EVI, INC.
By /s/
------------------------------------
Name
------------------------------------
Title
------------------------------------
CHRISTIANA ACQUISITION, INC.
By /s/
------------------------------------
Name
------------------------------------
Title
------------------------------------
CHRISTIANA COMPANIES, INC.
By /s/ WILLIAM T. DONOVAN
------------------------------------
Name: William T. Donovan
Title: President
C2, INC.
By /s/ WILLIAM T. DONOVAN
------------------------------------
Name: William T. Donovan
Title: Chairman
TOTAL LOGISTIC CONTROL, LLC
By /s/ WILLIAM T. DONOVAN
------------------------------------
Name: William T. Donovan
Title: Vice President
C-3
<PAGE> 114
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 4
Risk Factors...................... 11
Use of Proceeds................... 17
Dividend Policy................... 17
Summary of Certain Terms of the
Merger.......................... 17
Capitalization.................... 19
Company Financial Data............ 20
Pro Forma Summary Combined
Financial Data.................. 21
Selected Historical TLC Financial
Data............................ 26
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 27
Business.......................... 33
The Purchase Agreement............ 41
The Operating Agreement........... 44
The Offering...................... 46
Management........................ 49
Certain Transactions.............. 52
Principal Shareholders............ 53
Description of Capital Stock...... 54
Shares Eligible for Future Sale... 56
Legal Matters..................... 56
Experts........................... 56
Available Information............. 56
Index to Financial Statements..... F-1
Purchase Agreement................ Annex A
Operating Agreement............... Annex B
Amendment No. 1................... Annex C
</TABLE>
UNTIL OCTOBER 12, 1998 (25 DAYS AFTER THE ISSUANCE OF COMMON STOCK), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
5,202,664 SHARES
C2, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JULY 13, 1998
- ------------------------------------------------------
- ------------------------------------------------------
