As filed with the Securities and Exchange Commission on May 27, 1998
Registration No. 333-46027
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________
C2, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1915787
(State of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification No.)
700 North Water Street, Suite 1200
Milwaukee, Wisconsin
(414) 291-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_______________________
William T. Donovan
Chairman
C2, Inc.
700 North Water Street, Suite 1200
Milwaukee, Wisconsin 53202
(414) 291-9000
Facsimile (414) 291-9061
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
______________________________
Copies to:
Marc J. Marotta, Esq.
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
(414) 297-5658
Facsimile: (414) 297-4998
____________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
____________________________
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
____________________________
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum
Class of Amount To Offering Aggregate Amount of
Securities Be Price Per Offering Registration
To Be Registered Registered Unit Price(1) Fee(1)
=========================================================================
Common Stock, $.01
par value . . . 5,202,664 $4.00 $20,810,656 $6,139.14
-------------------------------------------------------------------------
Rights to Purchase
Common Stock -- -- -- --
=========================================================================
(1) Estimated in accordance with Rule 457(o) under the Securities Act of
1933 solely for the purpose of calculating the registration fee
pursuant to Section 6(b) thereunder.
______________________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
5,202,664 SHARES Subject to Completion
May 27, 1998
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, 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
______________, 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.
Price to Public Proceeds to Company(1)
Amount Per Share . $4.00 $4.00
Maximum Amount . . $20,810,656 $20,810,656
Minimum Amount . . $10,852,000(2) $10,852,000
(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.
The date of this Prospectus is May 27, 1998.
<PAGE>
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."
<PAGE>
The TLC Network
[Map with Distribution Centers Identified]
- Refrigerated Distribution Center
<> 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.
<PAGE>
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.
Set forth below is certain summary financial data regarding TLC
(amounts in thousands):
Nine Months Ended
March 31, Year Ended June 30,
1998 1997 1997 1996 1995
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)
_______________
(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.
<PAGE>
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 $3.60 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 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 $3.60
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
Key Event Proposed Date
- Special Meeting of Shareholders of EVI and
Christiana to Vote on Merger. July 14, 1998
- Expiration Date for submission of Letter of
Transmittal and/or Subscription Agreement (for
non-Christiana Shareholders) to purchase Company
Common Stock. July 14, 1998
- Complete Acquisition with obligation to pay
purchase price no later than thirty(30) days
thereafter. July 21, 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. July 21, 1998
- Distribution of Cash Consideration and/or
application of Cash Consideration to purchase
Company Common Stock, based on election made in
Letter of Transmittal. August 21, 1998
- Purchase of at least 2,718,000 shares of Company
Common Stock by Lubar Family. August 21, 1998
- Payment of Purchase Price for Acquisition. August 21, 1998
- Issuance of Company Common Stock to Subscribers. August 22, 1998
The following diagram sets forth the organizational structure
and stock ownership of the Company, TLC, Christiana and EVI following the
Merger and the Acquisition.
[BEFORE AND AFTER DIAGRAM]
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 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 . . . . . . July 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%.
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."
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 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).
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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 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 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."
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.
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 $3.60 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 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 $3.60 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.
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."
March 31, 1998
Pro Forma As Adjusted(4)
(Amounts in thousands,
except per share data)
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
----------
(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:
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
(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.
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 December 31, 1997 and March 31, 1998
March 31,
1998 December 31,
(Unaudited) 1997
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
======== =======
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.
<TABLE>
PRO FORMA SUMMARY COMBINED BALANCE SHEET
<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
(10,667,000)(9)
Other current assets 9,024,000 7,000 (4) 9,031,000 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
=========== =========== =========== =========== ===========
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:
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
===========
(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.
</TABLE>
<PAGE>
<TABLE>
PRO FORMA SUMMARY COMBINED STATEMENTS OF INCOME
<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)
<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 $ -
__________
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:
For the Year Ended For the Nine Months Ended
June 30, 1997 March 31, 1998
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
(2) Represents (i) the additional interest expense on the $20 million of additional debt incurred immediately prior to the
Acquisition and (ii) the increase in interest expense related to higher borrowing rates on the new revolving credit
facility as follows:
For the Year Ended For the Nine Months Ended
June 30, 1997 March 31, 1998
$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
(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.
</TABLE>
<PAGE>
SELECTED HISTORICAL TLC FINANCIAL DATA
The following table sets forth certain selected historical financial
data for TLC as of and for each of the five years ended June 30, 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.
<TABLE>
<CAPTION>
Selected Historical TLC Financial Data
(Amounts in thousands, except per membership unit data)
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 2,444 766 12,181 1,536 2,562 995 585
membership unit(3)
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
<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
_______________
(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.
</TABLE>
<PAGE>
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:
Percentage of Revenues
June 30, Percentage Change
1996 1995
1997 1996 1995 to 1997 to 1996
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)%
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.
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 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.
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:
Maximum Amount of
Time Period Revolving Loans Outstanding
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
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 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
Applicable
Percentage Applicable Applicable
for Percentage Percentage
Consolidated Eurodollar for for
Pricing Funded Debt Revolving Prime Rate Letter of
Level Ratio Loans Loans Credit Fee
7 >4.5:1.0 2.25 0.00 1.25
6 <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5 <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4 <3.5:1.0 but >3.0:1.0 1.50 (0.50) 1.25
3 <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2 <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1 <2.0:1.0 0.75 (1.00) 1.25
The Credit Agreement also contains provisions requiring TLC to reimburse
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 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.
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.
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.
TLC's revenue for each of the basic service lines are detailed below
for fiscal years ended June 30, 1997, 1996, and 1995.
Revenues
(Dollars in Millions)
1997 1996 1995
Amount % Amount % Amount %
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%
=== === === === === ===
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 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:
Function Number of Employees Percentage of Total
Operations 472 64.2%
Transportation 207 28.2%
Administration 46 6.2%
Sales and Marketing 10 1.4%
--- ----
Total 735 100%
No TLC employees are covered by union contracts.
Patents, Licenses and Trademarks
TLC's operations are not dependent on any particular patent, license,
franchises, or trademarks. TLC has registered a trademark and the name
"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.
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
Total Storage
Space
(cubic feet Type of
Facility Location in millions) Facility
Rochelle Logistic Rochelle, Illinois #1 10.6 Distribution
Center I
Rochelle Logistic Rochelle, Illinois #2 3.5 Distribution
Center II
Beaver Dam Beaver Dam, Wisconsin 7.2 Distribution/
Logistic Center Production
Milwaukee Logistic Wauwatosa, Wisconsin 4.3 Distribution
Center
Holland Logistic Holland, Michigan(1) 2.1 Distribution/
Center Production
Kalamazoo Logistic Kalamazoo Logistic 3.3 Distribution
Center I #1(2)
Kalamazoo Logistic Kalamazoo Logistic #2 2.8 Distribution
Center II
Wisconsin Logistic Milwaukee, Wisconsin 1.0 Distribution
Center
TOTAL 34.8
====
DRY WAREHOUSE FACILITIES
Total Storage
Space (sq. ft. Type of
Facility Location in thousands) Facility
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 South 200 Public
Center(1) Brunswick, NJ
TOTAL 835
===
(1) Leased facility
(2) Includes 1.8 million cubic feet of dry storage capacity.
Description of Properties
A brief description of each of the Properties follows, listed
alphabetically by state and city.
Illinois Properties
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
Rochelle Cold Storage campus is TLC's newest and largest refrigerated
facility, initially constructed in 1986. TLC believes that Rochelle Cold
Storage is one of the largest and most modern cold storage warehouse
facilities in the United States. Currently this facility is comprised of
14,100,000 cubic feet of capacity after undergoing four capacity
expansions in 1988, 1990, 1993, and 1996. All space is capable of
temperatures of -20 degrees -F to ambient. Rochelle Cold Storage is
strategically located at the intersection of two main line East-West
railroads, the Burlington Northern and the Chicago Northwestern, and the
cross roads of interstate highways I 39 and I 88. Rochelle Cold Storage
serves primarily distribution customers in the Midwest.
Indiana Properties
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with
access to major north-south and east-west highways. The facility has
access to rail through Conrail and is a food grade warehouse. The total
facility has available 125,000 square feet of dry storage. The warehouse
operates as a public warehouse with most of the customer base on short
term contracts.
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.
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
Kalamazoo Logistic Center campus has two distribution centers at this
location. Facility #1 is a 3,300,000 cubic foot facility with 1,100,000
cubic feet of freezer capacity, 400,000 cubic feet of cooler capacity and
1,800,000 cubic feet of dry storage capacity. This location services a
number of distribution customers in the Midwest and is strategically
located at the I 94 and U.S. 31 crossroads in Michigan, equal distance
between Chicago and Detroit.
Facility #2 is located adjacent to Facility #1 and is comprised of
2,800,000 cubic feet of capacity. This facility contains 1,500,000 cubic
feet of cooler capacity and 1,300,000 cubic feet of freezer capacity. Two
large distribution customers utilize 75% of this space. These facilities
are held under long term leases.
Also located at the Kalamazoo Logistic Center is a company owned 10,000
square foot transportation equipment maintenance center. Approximately
50% of TLC's fleet of over-the-road transportation units is domiciled in
Kalamazoo, Michigan.
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
Zeeland Logistic Center campus has two facilities each of which provide
dry warehousing storage as public warehouses. Each of these facilities
are Foreign Trade Zones and food grade warehouses, that provide both
racked and bulk storage. Capacity is utilized by both long term
contractual customers and as short term public warehouses. Zeeland
Logistic Center I has 201,600 square feet of storage and Zeeland Logistic
Center II has 220,000 square feet.
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
degrees 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 degrees F to
+40 degrees F and daily blast freezing capacity of 750,000 pounds. This
location has a 7-car private rail siding. An additional 3,000,000 cubic
feet of company owned refrigerated and processing space adjacent to the
Milwaukee Logistic Center facility is leased on a long term basis to a
third party retail grocery company.
Legal Proceedings
As of the date of this Prospectus, 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.
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 $3.60)
- 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 July 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.
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.
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.
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 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.
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 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." Because
the Cash Consideration per share is expected to be less than the
Subscription Price ($3.60 relative to a $4.00 subscription price), any
exercise of the Basic Subscription Privilege in full will require an
additional cash payment for the difference in the form of a check made
payable to "Firstar Trust Company" as Subscription Agent. For example, if
a Christiana Shareholder holds 1,000 shares of Christiana Common Stock
immediately prior to the Effective Time and wishes to purchase 1,000
shares of Common Stock in this Offering, $3,500 ($3.60 multiplied by
1,000) will be applied automatically by the Subscription Agent from the
anticipated Cash Consideration to be received in the Merger, and the
Christiana Shareholder will be required to pay the difference of $500
($4,000 total Subscription Price less the $3,500 paid automatically by the
Subscription Agent) in the form of a check made payable to "Firstar Trust
Company." 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 $3.60, any excess amount paid by
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 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.
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.
NAME AGE POSITION
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
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 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.
NAME AGE POSITION
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
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 Fullbright & 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.
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.
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 $3.60 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.
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:
SHARES OF CHRISTIANA COMMON
NAME STOCK BENEFICIALLY OWNED
Sheldon B. Lubar 968,615(1)
Albert O. Nicholas 310,700
David J. Lubar 427,403
Nicholas F. Brady 200,000
William T. Donovan 178,532
____________________
(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.
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.
Number of Shares Shares Beneficially
Beneficially Owned Owned After
Prior to Offering Offering
Name Number Percent Number Percent
William T. Donovan - - (1) (1)
David J. Lubar(2) - - (1) (1)
Oyvind Solvang - - (1) (1)
David E. Beckwith - - (1) (1)
Nicholas F. Brady - - (1) (1)
Sheldon B. Lubar 25 100% (1) (1)
Albert O. Nicholas - - (1) (1)
Joan P. Lubar(2) - - (1) (1)
Kristine L. Thomson(2) - - (1) (1)
Susan L. Solvang(2) - - (1) (1)
All directors and
executive officers as a
group (seven persons): 25 100% (1) (1)
_______________
* 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.
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
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 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.
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.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
C2, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants . . . . . . . F-2
Balance Sheet as of December 31, 1997 . . . . . . . . F-3
Notes to Balance Sheet . . . . . . . . . . . . . . . . F-4
Balance Sheet as of March 31, 1998 (unaudited) . . . . F-6
Notes to Balance Sheet (unaudited) . . . . . . . . . . F-7
TLC FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . F-8
Balance Sheets as of June 30, 1997 and 1996 . . . . . F-9
Statements of Income for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . F-10
Statements of Equity for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . F-11
Statements of Cash Flows for the years
ended June 30, 1997, 1996 and 1995 . . . . . . . . . F-12
Notes to Financial Statements . . . . . . . . . . . . F-13
Condensed Balance Sheets as of March 31,
1998 and June 30, 1997 (unaudited) . . . . . . . . . F-18
Condensed Statements of Income for the
three months ended March 31, 1998
(unaudited) . . . . . . . . . . . . . . . . . . . . . F-19
Condensed Statements of Income for the
nine months ended March 31, 1998 and
1997 (unaudited) . . . . . . . . . . . . . . . . . . F-20
Condensed Statements of Cash Flows for the
nine months ended March 31, 1998 and
1997 (unaudited) . . . . . . . . . . . . . . . . . . F-21
Notes to Condensed Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . . F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholder of C2, Inc.
We have audited the accompanying balance sheet of C2, Inc. (a Wisconsin
corporation), as of December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of C2, Inc. as of December
31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 6, 1998
<PAGE>
C2, Inc.
Balance Sheet
As of December 31, 1997
ASSETS:
Due from Shareholder for common stock
subscribed $ 100
------
Total assets $ 100
======
LIABILITIES AND SHAREHOLDER'S EQUITY:
Total liabilities $ -
SHAREHOLDER'S EQUITY:
Preferred stock, $.01 par, 10,000,000 shares
authorized, none issued or outstanding -
Common stock, $.01 par, 50,000,000 shares
authorized, 25 shares issued and outstanding -
Additional paid-in capital 100
-----
Total shareholder's equity 100
-----
Total liabilities and shareholder's equity $ 100
=====
The accompanying notes are an integral part of this balance sheet.
<PAGE>
C2, Inc.
Notes to Balance Sheet
A. Business and Organization:
C2, Inc. (the "Company") was organized in December 1997, for the purposes
of acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"),
a transportation, warehousing and logistics company (the "Acquisition").
The Company intends to complete an initial public offering of up to
5,202,664 shares of its common stock (the "Offering") and utilize the
proceeds to fund the Acquisition and for future operations. There is no
assurance the Acquisition will be completed and that the Company will be
able to generate future operating revenues.
The Company's assets as of December 31, 1997 consist exclusively of an
amount due from the sole shareholder pertaining to the initial
capitalization of the Company. The Company has not conducted any
operations and all activities to date have related to the Acquisition and
the Offering. Accordingly, statements of operations, changes in
shareholder's equity and cash flows would not provide meaningful
information and have been omitted.
B. Shareholder's Equity:
In connection with its organization and initial capitalization, the
Company issued 25 shares of common stock for $100.
C. Commitments and Contingencies:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana")
666.667 Membership Units (two-thirds) of TLC for cash consideration of
$10,667,000. The Acquisition is contingent upon the consummation of the
merger between Christiana and 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.
<PAGE>
C2
Balance Sheets (Unaudited)
As of March 31, 1998 and December 31, 1997
March 31, December 31,
1998 1997
ASSETS:
Cash $ 100 $ -
Due from shareholder for common stock - 100
subscribed
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
======= ========
The accompanying notes are an integral part of this balance sheet.
<PAGE>
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.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Total Logistic Control, LLC:
We have audited the accompanying balance sheets of Total Logistic
Control, LLC (a Delaware limited liability company and wholly owned
subsidiary of Christiana Companies, Inc.) as of June 30, 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
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF JUNE 30
ASSETS 1997 1996
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 $90,140,000 $97,923,000
equity ========== ===========
The accompanying notes are an integral part of these balance sheets.
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30
<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 1,000 1,000 1,000
MEMBERSHIP UNITS OUTSTANDING =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
Membership Member's
Units Equity
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
======== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997,1996 AND 1995
<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, 29,000 365,000 548,000
JULY 1 ------------ ---------- -----------
ENDING CASH AND CASH EQUIVALENTS, $ 224,000 $ 29,000 $ 365,000
JUNE 30 ============ ========== ===========
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
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business: Total Logistic Control, LLC ("TLC") is a
wholly owned subsidiary of Christiana Companies, Inc. ("Christiana").
TLC was formed on June 30, 1997 as a result of the combination of
Wiscold, Inc. ("Wiscold") and Total Logistic Control, Inc. ("Total
Logistic"), both former wholly owned subsidiaries of Christiana. The
accompanying financial statements have been restated to reflect this
combination for all periods presented. The June 30, 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.
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:
1997 1996
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 (1,245,000) (1,595,000)
long-term debt
Line of credit - (1,354,000)
----------- -----------
Long-term debt $36,149,000 $41,427,000
=========== ===========
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 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:
Year Ended
June 30 Total
1998 $ 1,245,000
1996 4,078,000
2000 5,193,000
2001 25,150,000
2002 1,728,000
Thereafter -
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 the combined Federal and state income tax provision for
the period during the fiscal year that TLC was a C-Corporation.
Year Ended June 30
1997 1996 1995
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
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:
1997 1996
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
========== ==========
A reconciliation of the statutory Federal income tax rate to TLC's
effective tax rate is as follows:
Year ended June 30
1997 1996 1995
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%
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
and 1995, respectively. At June 30, 1997, future minimum lease
payments under these operating leases are as follows:
Year Ended
June 30 Amount
1998 $5,800,000
1999 4,513,000
2000 3,982,000
2001 2,993,000
2002 2,274,000
Thereafter 11,976,000
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.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF MARCH 31, 1998 AND JUNE 30, 1997
March 31, June 30,
1998 1997
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 $87,428,000 $90,140,000
equity ========== ==========
The accompanying notes are an integral part of these condensed balance
sheets.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997
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
========== ==========
The accompanying notes are an integral part of these condensed statements.
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
1998 1997
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 $2,444 $766
MEMBERSHIP UNIT ========== ==========
The accompanying notes are an integral part of these condensed statements.
<PAGE>
<TABLE>
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
<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 - -
The accompanying notes are an integral part of these condensed statements.
</TABLE>
<PAGE>
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 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.
<PAGE>
ANNEX A
AGREEMENT
By and Among
EVI, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.
and
C2, INC.
December 12, 1997
<PAGE>
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").
W I T N E S S E T H :
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;
(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. Section 9601, et
seq.
1.5 Christiana. Christiana, for purposes of the assumption
indemnification provisions of this Agreement includes Christiana
Companies, Inc. and any and all predecessors thereto, whether by merger,
purchase or acquisition of assets or otherwise, and any and all
predecessors to any such entities.
1.6 Circumstance. Circumstance has the meaning specified in
Section 6.2 hereof.
1.7 Effective Date. Effective Date means the time and date the
Merger is made effective.
1.8 Environmental Conditions. Environmental Conditions means
any pollution, contamination, degradation, damage or injury caused by,
related to, arising form or in connection with the generation, handling,
use, treatment, storage, transportation, disposal, discharge, release or
emission of any Waste Materials.
1.9 Environmental Law or Environmental Laws. Environmental Law
or Environmental Laws means all laws, rules, regulations, statutes,
ordinances, decrees or orders of any governmental entity now or at any
time in the future in effect relating to (i) the control of any potential
pollutant or protection of the air, water or land, (ii) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation, and (iii) exposure to hazardous, toxic or other substances
alleged to be harmful. The term "Environmental Law" or "Environmental
Laws" includes, without limitation, (1) the terms and conditions of any
license, permit, approval or other authorization by any governmental
entity and (2) judicial, administrative or other regulatory decrees,
judgments and orders of any governmental entity. The term "Environmental
Law" or "Environmental Laws" includes, but is not limited to the following
statutes and the regulations promulgated thereunder: the Clean Air Act, 42
U.S.C. Section 7401 et seq., The Clean Water Act, 33 U.S.C. Section 1251
et seq., the Resource Conservation Recovery Act, 42 U.S.C. Section 6901
et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Section 11011 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Water Pollution Control Act, 33 U.S.C. Section
1251, et seq., the Safe Drinking Water Act, 42 U.S.C. Section 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.
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.
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.
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
(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 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. Section
9607(e)(i) and corresponding provisions of state law.
6.6 C2 and TLC Covenants. To assure the performance of the
obligations of C2 and TLC under this Agreement, C2 and TLC each hereby
covenants and agrees that it will not, and will cause its subsidiaries to
not, merge, convert into another entity, engage in a share or interest
exchange for a majority of its units or shares, liquidate or transfer,
assign or otherwise convey or allocate, directly or indirectly, in one or
more transactions, whether or not related, a majority of C2's or TLC's
assets (determined in good faith by a board or similar managing body's
resolution prior to the transaction on a fair value and consolidated
basis) to any Person unless the acquiring Person expressly assumes the
obligations of C2 or TLC, as the case may be, hereunder, (ii) executes and
delivers to Christiana and 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, 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
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.
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:
<PAGE>
ANNEX B
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
____________, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. FORMATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Formation; Name . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Registered and Principal Offices . . . . . . . . . . . . . 2
1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Foreign Qualification . . . . . . . . . . . . . . . . . . . 2
1.7 No State Law Partnership . . . . . . . . . . . . . . . . . 2
1.8 Partnership Classification . . . . . . . . . . . . . . . . 2
2. MEMBERS
2.1 Members . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Admission of Additional Members . . . . . . . . . . . . . . 2
3. CAPITAL CONTRIBUTIONS
3.1 Capital Contributions by Members . . . . . . . . . . . . . 3
3.2 Purchase of Units by C2, Inc. . . . . . . . . . . . . . . . 3
3.3 Loans to the Company . . . . . . . . . . . . . . . . . . . 3
3.4 Withdrawal and Return of Contributions . . . . . . . . . . 3
3.5 Interest on Contributions . . . . . . . . . . . . . . . . . 3
3.6 Limitation on Member's Deficit Make-up . . . . . . . . . . 3
3.7 Capital Accounts . . . . . . . . . . . . . . . . . . . . . 3
3.8 Units . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. ALLOCATIONS
4.1 Profits and Losses . . . . . . . . . . . . . . . . . . . . 4
4.2 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Construction . . . . . . . . . . . . . . . . . . . . . . . 5
5. DISTRIBUTIONS
5.1 Current Tax Distributions . . . . . . . . . . . . . . . . . 5
5.2 Other Distributions . . . . . . . . . . . . . . . . . . . . 5
5.3 Amounts Withheld . . . . . . . . . . . . . . . . . . . . . 5
5.4 Distribution Restrictions . . . . . . . . . . . . . . . . . 6
6. MANAGEMENT
6.1 Voting and Decisions . . . . . . . . . . . . . . . . . . . 6
6.2 Restriction on Transactions . . . . . . . . . . . . . . . . 6
6.3 Regular Meetings . . . . . . . . . . . . . . . . . . . . . 7
6.4 Special Meetings . . . . . . . . . . . . . . . . . . . . . 7
6.5 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.6 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.7 Manner of Acting . . . . . . . . . . . . . . . . . . . . . 8
6.8 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.9 Presumption of Assent . . . . . . . . . . . . . . . . . . . 8
6.10 Resignation of Manager . . . . . . . . . . . . . . . . . . 8
6.11 Action Without Meeting . . . . . . . . . . . . . . . . . . 8
6.12 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . 8
6.13 Reliance by Third Parties . . . . . . . . . . . . . . . . . 9
6.14 Filing of Documents . . . . . . . . . . . . . . . . . . . . 9
6.15 Limitation on Liability; Indemnification . . . . . . . . . 9
6.16 Delegation to Members or Representatives of Members . . . . 9
6.17 Time Devoted to Business . . . . . . . . . . . . . . . . . 11
6.18 Compensation of Members and Officers . . . . . . . . . . . 11
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND
DISASSOCIATION
7.1 Assignment and Transfer . . . . . . . . . . . . . . . . . . 11
7.2 Disassociation . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Restraining Order . . . . . . . . . . . . . . . . . . . . . 13
8. DISSOLUTION AND WINDING UP
8.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Winding Up and Liquidation . . . . . . . . . . . . . . . . 14
8.3 Compliance With Timing Requirements of Regulations . . . . 14
9. BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.1 Books and Records . . . . . . . . . . . . . . . . . . . . . 14
9.2 Fiscal Year and Method of Accounting . . . . . . . . . . . 15
9.3 Reports and Statements . . . . . . . . . . . . . . . . . . 15
9.4 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . 15
9.5 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . 15
10. MISCELLANEOUS
10.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 16
10.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . . 16
10.4 Rules of Construction . . . . . . . . . . . . . . . . . . . 16
10.5 Choice of Law and Severability . . . . . . . . . . . . . . 16
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 16
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 16
10.8 Last Day for Performance Other Than a Business Day . . . . 16
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.10 Title to Property; No Partition . . . . . . . . . . . 17
11. GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (this
"Operating Agreement") is effective as of the [____] day of _________,
1997, between CHRISTIANA COMPANIES, INC., a Wisconsin corporation, and C2,
INC., a Wisconsin corporation (individually, "Member", and collectively,
the "Members").
W I T N E S S E T H :
WHEREAS, Christiana Companies, Inc. has formed a limited
liability company known as Total Logistic Control, LLC (the "Company"), by
causing the filing of a Certificate of Organization (the "Certificate")
pursuant to the Act;
WHEREAS, C2, Inc. desires to acquire an interest in the Company
and Christiana Companies, Inc. desires to sell a portion of its interest
to C2, Inc. pursuant to the terms and conditions of that certain Purchase
Agreement by and among 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.
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.
(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 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.
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.
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 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 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 (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 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.
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.
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.
"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
(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: ________________________
<PAGE>
EXHIBIT A
Member Units
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
<PAGE>
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:
1. 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
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."
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____________________________________
Name: William T. Donovan
Title: President
C2, INC.
By /s/______________________________
Name: William T. Donovan
Title: Chairman
TOTAL LOGISTIC CONTROL, LLC
By /s/_____________________________
Name: William T. Donovan
Title: Vice President
No person is authorized in
connection with any offering made 5,202,664 Shares
hereby to give any information or
to make any representation other
than as contained in this C2, INC.
Prospectus, and, if given or made,
such information or representation Common Stock
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 PROSPECTUS
to buy any of the securities
offered hereby to any persons in , 1998
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
Page
Prospectus Summary . . . . .
Risk Factors . . . . . . . .
Use of Proceeds . . . . . .
Dividend Policy . . . . . . .
Summary of Certain Terms of the
Merger . . . . . . . . . . . .
Capitalization . . . . . . . .
Company Financial Data . . . .
Pro Forma Summary Combined
Financial Data...............
Selected Historical TLC
Financial Data...............
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................
Business.......................
The Purchase Agreement.........
The Operating Agreement........
The Offering...................
Management.....................
Certain Transactions...........
Principal Shareholders.........
Description of Capital
Stock........................
Shares Eligible for Future
Sale.........................
Legal Matters..................
Experts........................
Available Information..........
Index to Financial
Statements...................F-1
Purchase Agreement.........Annex A
Operating Agreement........Annex B
Amendment No. 1............Annex C
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission filing fee . . . $ 6,140
Nasdaq listing fee . . . . . . . . . . . . . . . . $ 10,000
Blue sky fees and expenses . . . . . . . . . . . . $ 2,000
Transfer agent expenses and fees . . . . . . . . . $ 3,000
Printing and engraving . . . . . . . . . . . . . . $ 30,000
Accountants' fees and expenses . . . . . . . . . . $ 45,000
Legal fees and expenses . . . . . . . . . . . . . . $ 70,000
Miscellaneous . . . . . . . . . . . . . . . . . . . $ 3,860
--------
Total . . . . . . . . . . . . . . . $170,000
========
__________________________
All of the above fees, costs and expenses above will be paid by the
Company. Other than the SEC filing fee, all fees and expenses are
estimated.
Item 14. Indemnification of Directors and Officers.
Pursuant to the WBCL and the Company's By-Laws, directors and
officers of the Company are entitled to mandatory indemnification from the
Company against certain liabilities and expenses (i) to the extent such
officers or directors are successful in the defense of a proceeding and
(ii) in proceedings in which the director or officer is not successful in
defense thereof, unless (in the latter case only) it is determined that
the director or officer breached or failed to perform his duties to the
Company and such breach or failure constituted: (a) a willful failure to
deal fairly with the Company or its Shareholders in connection with a
matter in which the director or officer had a material conflict of
interest; (b) a violation of criminal law unless the director or officer
had reasonable cause to believe his or her conduct was lawful or had no
reasonable cause to believe his or her conduct was unlawful; (c) a
transaction from which the director or officer derived an improper
personal profit; or (d) willful misconduct. The WBCL specifically states
that it is public policy of Wisconsin to require or permit
indemnification, allowance of expenses and insurance in connection with a
proceeding involving securities regulation, as described therein, to the
extent required or permitted as described above. Additionally, under the
WBCL, directors of the Company are not subject to personal liability to
the Company, its Shareholders or any person asserting rights on behalf
thereof for certain breaches or failures to perform any duty resulting
solely from their status as directors, except in circumstances paralleling
those in subparagraphs (a) through (d) outlined above.
The indemnification provided by the WBCL and the Company's By-Laws is
not exclusive of any other rights to which a director or officer may be
entitled. The general effect of the foregoing provisions may be to reduce
the circumstances under which an officer or director may be required to
beach the economic burden of the foregoing liabilities and expense.
Item 15. Recent Sales of Unregistered Securities.
On December 11, 1997, as part of its initial capitalization, the
Company issued 25 shares of Common Stock to Sheldon B. Lubar in exchange
for total cash consideration of $100.
Other than as set forth in the preceding paragraphs, the Company has
not sold any securities within the past three years.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The exhibits filed herewith are as specified on the
Exhibit Index included herein.
(b) Financial Statement Schedules. All schedules are omitted
because the required information is not present or is not
present in amounts sufficient to require submission of a
schedule or because the information required is included in the
consolidated financial statements of the Registrant or notes
thereto or the schedule is not required or inapplicable under
the related instructions.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Milwaukee, and State of Wisconsin, on this 27th day of May,
1998.
C2, INC.
By: /s/ William T. Donovan
William T. Donovan, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on May 27, 1998.
Signature Title Date
Chairman (Principal
/s/ William T. Donovan Executive Officer and May 27, 1998
William T. Donovan Principal Financial and
Accounting Officer)
/s/ David J. Lubar* President and Director May 27, 1998
David J. Lubar
/s/ Nicholas F. Brady* Director May 27, 1998
Nicholas F. Brady
/s/ Albert O. Nicholas* Director May 27, 1998
Albert O. Nicholas
/s/ Sheldon B. Lubar* Director May 27, 1998
Sheldon B. Lubar
By: /s/ William T. Donovan
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Sequential
Page
Exhibit Number
Number Exhibit Description
2.1 Agreement and Plan of Merger, dated as of
December 12, 1997, by and among EVI, Sub,
Christiana and the Company.*
2.2 Purchase Agreement, dated as of December 12,
1997, by and among EVI, TLC, Christiana and
the Company, Incorporated by reference to
Annex A of this Registration Statement.*
2.3 Amendment No. 1 to the Agreement and
Plan of Merger and Logistic Purchase
Agreement, incorporated by reference to
Annex C of this Registration Statement.
3.1 Amended and Restated Articles of
Incorporation of the Company.*
3.2 Amended and Restated Bylaws of the Company.*
4.1 Specimen Common Stock Certificate.
4.2 See Exhibits 3.1 and 3.2 for provisions of
the Amended and Restated Articles of
Incorporation and Bylaws of the Company
defining the rights of the holders of Common
Stock.*
4.3 Form of Subscription Agreement.*
4.4 Form of Letter of Transmittal.*
5.1 Opinion of Foley & Lardner regarding the
legality of securities being offered.
10.1 Form of Credit Agreement, by and among the
TLC, Firstar Bank Milwaukee, N.A.,
individually and as agent, and the lenders
that are a party thereto. This agreement
will be executed and become effective on the
Effective Date.*
10.2 Form of First Amended and Restated Operating
Agreement, by and among the Company and
Christiana, Incorporated by reference to
Annex B of this Registration Statement. This
agreement will be executed and become
effective on the Effective Date.*
10.3 C2, Inc. 1998 Equity Incentive Plan.
21.1 List of Subsidiaries of the Company.*
23.1 Consent of Arthur Andersen LLP, independent
public accountants.
23.2 Consent of Foley & Lardner (included in
Exhibit 5.1).
24.1 Power of Attorney (included on the signature
page to the Registration Statement).*
27.1 Financial Data Schedule.
_________________________
*Previously filed.
**To be filed by amendment.
<PAGE>
Exhibit 4.1
C2, Inc.
BP
INCORPORATED UNDER THE LAWS OF THE STATE OF WISCONSIN
SEE REVERSE SIDE FOR CUSIP 126948 10 8
C2, Inc.
AUTHORIZED COMMON SHARES OF 50,000,000 PAR VALUE $0.01 EACH
This is to certify that
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF C2, INC.
transferable on the books of the Corporation in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof the Corporation has caused this Certificate to be
signed by its duly authorized officers and sealed with the Seal of the
Corporation.
Dated
Incorporated
/s/ David E. Beckwith SEAL /s/ William T. Donovan
SECRETARY Wisconsin CHAIRMAN
Exhibit 5.1
May 27, 1998
C2, Inc.
700 North Water Street,
Suite 1200
Milwaukee, Wisconsin 53202
Gentlemen:
We have acted as special counsel for C2, Inc., a Wisconsin
corporation (the "Company"), with respect to the preparation of the
Company's Registration Statement on Form S-1 (the "Registration
Statement"), including the prospectus constituting a part thereof (the
"Prospectus"), to be filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the proposed sale by the Company and certain
shareholders of the Company (the "Selling Shareholders") of up to
5,202,664 shares (the "Shares") of the Company's Common Stock, $.01 par
value (the "Common Stock"), having a value upon filing of the Registration
Statement of up to $20,810,656 in the manner set forth in the Registration
Statement and Prospectus.
In connection with our representation, we have examined (i) the
Registration Statement, including the Prospectus; (ii) the Company's
Amended and Restated Articles of Incorporation and the Company's By-laws,
as proposed to be amended upon the consummation of the offering and sale
of the Shares; (iii) the resolutions of the Board of Directors of the
Company relating to the offering and sale of the Shares; and (iv) such
other proceedings, documents and records we deemed necessary to enable us
to render this opinion.
Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that:
1. The Company is a corporation validly existing under the
laws of the State of Wisconsin.
2. The Shares that are to be offered and sold by the Company,
when issued and paid for in the manner contemplated in the Registration
Statement and Prospectus, will be validly issued, fully paid and
nonassessable (except as provided in Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law).
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to our firm therein. In
giving our consent, we do not admit that we are "experts" within the
meaning of Section 11 of the Securities Act or within the category of
persons whose consent is required by Section 7 of the Securities Act.
Very truly yours,
/s/ Foley & Lardner
FOLEY & LARDNER
EXHIBIT 10.3
C2, INC.
1998 EQUITY INCENTIVE PLAN
Section 1. Purpose
The purpose of the C2, Inc. 1998 Equity Incentive Plan (the
"Plan") is to promote the best interests of C2, Inc. (the "Company") and
its shareholders by providing key employees of the Company and its
Affiliates (as defined below) and members of the Company's Board of
Directors who are not employees of the Company with an opportunity to
acquire a, or increase their, proprietary interest in the Company. It is
intended that the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those key
employees who are primarily responsible for shaping and carrying out the
long-range plans of the Company and securing the Company's continued
growth and financial success. Also, by encouraging stock ownership by
non-employee directors, the Company seeks to attract and retain on its
Board of Directors persons of exceptional competence and to furnish an
added incentive for them to continue their association with the Company.
It is intended that certain of the options issued pursuant to the Plan
will constitute incentive stock options within the meaning of Section 422
of the Internal Revenue Code ("Incentive Stock Options") and the remainder
of the options issued under the Plan will constitute non-qualified stock
options.
Section 2. Definitions
As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is under common
control with, the Company, including without limitation, all current or
future subsidiaries of the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock or Performance Share granted under the Plan.
(c) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted
under the Plan.
(d) "Change in Control" will be deemed to have occurred if:
(i) any entity not affiliated with the Company is or becomes the
beneficial owner of securities of the Company representing at least 25% of
the combined voting power of the Company's then outstanding securities;
(ii) there is consummated any business combination of the Company in which
the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company's capital stock would be converted into cash,
securities or other property, other than a merger of the Company in which
the holders of the Company's capital stock immediately prior to the merger
have the same proportionate ownership of capital stock of the surviving
corporation immediately after the merger, or any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the consolidated assets of the Company; or
(iii) the shareholders of the Company approve any plan for the liquidation
or dissolution of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Commission" shall mean the Securities and Exchange
Commission.
(g) "Committee" shall mean the Compensation and Nominating
Committee of the Board of Directors of the Company (or any other committee
thereof designated by such Board to administer the Plan); provided that the
Committee shall be composed of not less than two directors, each of whom
is a "non-employee director" within the meaning of Rule 16b-3 and who are
"outside directors" within the meaning of Section 162(m) of the Code.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(i) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.
(j) "IPO Effective Date" shall mean the date on which the
registration statement relating to the Company's initial public offering
of common stock under the Securities Act of 1933, as amended, is declared
effective by the Commission.
(k) "Incentive Stock Option" shall mean an option granted under
Section 5(b) of the Plan that is intended to meet the requirements of
Section 422 of the Code (or any successor provision thereto).
(l) "Independent Directors" shall mean then serving, elected or
appointed directors of the Company who are not employees of the Company.
(m) "Initial Director" shall mean the Independent Directors
serving immediately after the IPO Effective Date.
(n) "Key Employee" shall mean any officer or other key employee
of the Company or of any Affiliate who is responsible for or contributes
to the management, growth or profitability of the business of the Company
or any Affiliate as determined by the Committee in its discretion.
(o) "Non-Qualified Stock Option" shall mean an option granted
under Section 5(b) and Section 6(b) of the Plan that is not intended to be
an Incentive Stock Option.
(p) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(q) "Participating Key Employee" shall mean a Key Employee
designated to be granted an Award under the Plan.
(r) "Performance Period" shall mean, in relation to Performance
Shares, any period for which a performance goal or goals have been
established.
(s) "Performance Share" shall mean any right granted under
Section 5(e) of the Plan that will be paid out as a Share (which, in
specified circumstances, may be a Share of Restricted Stock).
(t) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.
(u) "Released Securities" shall mean Shares of Restricted Stock
with respect to which all applicable restrictions have expired, lapsed or
been waived.
(v) "Restricted Securities" shall mean Awards of Restricted
Stock or other Awards under which issued and outstanding Shares are held
subject to certain restrictions.
(w) "Restricted Stock" shall mean any Share granted under
Section 5(d) of the Plan or, in specified circumstances, a Share paid in
connection with a Performance Share under Section 5(e) of the Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.
(y) "Shares" shall mean shares of common stock of the Company,
$.01 par value, and such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(b) of the
Plan.
(z) "Stock Appreciation Right" shall mean any right granted
under Section 5(c) of the Plan.
Section 3. Administration
The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by
those members of the Board of Directors of the Company who qualify as
"non-employee directors" under Rule 16b-3 and who are "outside directors"
within the meaning of Section 162(m) of the Code. Subject to the terms of
the Plan and applicable laws and without limitation by reason of
enumeration, the Committee shall have full discretionary power and
authority to: (i) designate Participating Key Employees; (ii) determine
the type or types of Awards to be granted to each Participating Key
Employee under the Plan; (iii) determine the number of Shares to be
covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with) Awards granted to Participating Key
Employees; (iv) determine the terms and conditions of any Award granted to
a Participating Key Employee; (v) determine whether, to what extent and
under what circumstances Awards granted to Participating Key Employees may
be settled or exercised in cash, Shares, other securities, other Awards or
other property, and the method or methods by which Awards may be settled,
exercised, canceled, forfeited or suspended; (vi) determine whether, to
what extent and under what circumstances cash, Shares, other Awards and
other amounts payable with respect to an Award granted to Participating
Key Employees under the Plan shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret
and administer the Plan and any instrument or agreement relating to, or
Award made under, the Plan (including, without limitation, any Award
Agreement); (viii) establish, amend, suspend or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination
and take any other action that the Committee deems necessary or desirable
for the administration of the Plan. Grants of options to Independent
Directors under the Plan shall be automatic and the amount and the terms
of such awards shall be determined in accordance with Section 6 hereof.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect
to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time or from time to time, and shall be
final, conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participating Key Employee, any Independent Director, any
holder or beneficiary of any Award, any shareholder and any employee of
the Company or of any Affiliate.
Section 4. Shares Available for Award
(a) Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Number of Shares Available. The number of Shares with
respect to which Awards may be granted under the Plan shall be
520,000 subject to the limitations set forth in Section 5(d)(i).
(ii) Accounting for Awards. The number of Shares covered
by an Award under the Plan, or to which such Award relates, shall be
counted on the date of grant of such Award against the number of
Shares available for granting Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any
Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee may, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares subject to the Plan and which thereafter may be made the subject of
Awards under the Plan; (ii) the number and type of Shares subject to
outstanding Awards; and (iii) the grant, purchase or exercise price with
respect to any Award, or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, in each
case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b) of the Code (or any successor
provision thereto); and provided further that the number of Shares subject
to any Award payable or denominated in Shares shall always be a whole
number.
Section 5. Awards to Key Employees
(a) Eligibility. Any Key Employee, including any executive
officer or employee-director of the Company or of any Affiliate, who is
not a member of the Committee shall be eligible to be designated a
Participating Key Employee.
(b) Option Awards to Key Employees. The Committee is hereby
authorized to grant Options to Key Employees with the terms and conditions
as set forth below and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the
Committee shall determine in its discretion.
(i) Exercise Price. The exercise price per Share of an
Option granted pursuant to this Section 5 shall be determined by the
Committee; provided, however, that such exercise price shall not be
less than 100% of the Fair Market Value of a Share on the date of
grant of such Option.
(ii) Option Term. The term of each Option shall be fixed
by the Committee; provided, however, that in no event shall the term
of any Option exceed a period of ten years from the date of its
grant.
(iii) Exercisability and Method of Exercise. An Option
shall become exercisable in such manner and within such period or
periods and in such installments or otherwise as shall be determined
by the Committee. The Committee also shall determine the method or
methods by which, and the form or forms, including, without
limitation, cash, Shares, other securities, other Awards, other
property or any combination thereof, having a Fair Market Value on
the exercise date equal to the relevant exercise price, in which
payment of the exercise price with respect to any Option may be made
or deemed to have been made.
(iv) Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Notwithstanding
any provision in the Plan to the contrary, no Incentive Stock Option
may be granted hereunder after the tenth anniversary of the adoption
of the Plan by the Board of Directors of the Company.
(c) Stock Appreciation Right Awards. The Committee is hereby
authorized to grant Stock Appreciation Rights to Key Employees. Subject
to the terms of the Plan and any applicable Award Agreement, a Stock
Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the
Fair Market Value of one Share on the date of exercise over (ii) the grant
price of the Stock Appreciation Right as specified by the Committee, which
shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of
the Plan, the grant price, term, methods of exercise, methods of
settlement (including whether the Participating Key Employee will be paid
in cash, Shares, other securities, other Awards, or other property or any
combination thereof), and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee in its
discretion. The Committee may impose such conditions or restrictions on
the exercise of any Stock Appreciation Right as it may deem appropriate,
including, without limitation, restricting the time of exercise of the
Stock Appreciation Right to specified periods as may be necessary to
satisfy the requirements of Rule 16b-3.
(d) Restricted Stock Awards.
(i) Issuance. The Committee is hereby authorized to grant
Awards of Restricted Stock to Key Employees; provided, however, that
the aggregate number of Shares of Restricted Stock granted under the
Plan to all Participating Key Employees as a group shall not exceed
50,000 Shares (provided that such number of Shares subject to
adjustment in accordance with the terms of Section 4(b) hereof) of
the total number of Shares available for Awards under Section
4(a)(i).
(ii) Restrictions. Shares of Restricted Stock granted to
Participating Key Employees shall be subject to such restrictions as
the Committee may impose in its discretion (including, without
limitation, any limitation on the right to vote a Share of Restricted
Stock or the right to receive any dividend or other right or
property), which restrictions may lapse separately or in combination
at such time or times, in such installments or otherwise, as the
Committee may deem appropriate in its discretion.
(iii) Registration. Any Restricted Stock granted under
the Plan to a Participating Key Employee may be evidenced in such
manner as the Committee may deem appropriate in its discretion,
including, without limitation, book-entry registration or issuance of
a stock certificate or certificates. In the event any stock
certificate is issued in respect of Shares of Restricted Stock
granted under the Plan to a Participating Key Employee, such
certificate shall be registered in the name of the Participating Key
Employee and shall bear an appropriate legend (as determined by the
Committee) referring to the terms, conditions and restrictions
applicable to such Restricted Stock.
(iv) Payment of Restricted Stock. At the end of the
applicable restriction period relating to Restricted Stock granted to
a Participating Key Employee, one or more stock certificates for the
appropriate number of Shares, free of restrictions imposed under the
Plan, shall be delivered to the Participating Key Employee or, if the
Participating Key Employee received stock certificates representing
the Restricted Stock at the time of grant, the legends placed on such
certificates shall be removed.
(v) Forfeiture. Except as otherwise determined by the
Committee in its discretion, upon termination of employment of a
Participating Key Employee (as determined under criteria established
by the Committee in its discretion) for any reason during the
applicable restriction period, all Shares of Restricted Stock still
subject to restriction shall be forfeited by the Participating Key
Employee; provided, however, that the Committee may, when it finds
that a waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect to
Shares of Restricted Stock held by a Participating Key Employee.
(e) Performance Share Awards.
(i) Issuance. The Committee is hereby authorized to grant
Awards of Performance Shares to Key Employees.
(ii) Performance Goals and Other Terms. The Committee
shall determine in its discretion, the Performance Period, the
performance goal or goals (and the performance level or levels
related thereto) to be achieved during any performance period, the
proportion of payments, if any, to be made for performance between
the minimum and full performance levels for any performance goal and,
if applicable, the relative percentage weight given to each of the
selected performance goals, the restrictions applicable to shares of
restricted stock received upon payment of performance shares if
payment is made in such manner, and any other terms, conditions and
rights relating to the grant of performance shares. The Committee
may select from various performance goals, including return on
equity, return on investment, return on net assets, economic value
added, earnings from operations, pre-tax profits, net earnings, net
earnings per share, working capital as a percent of net sales, net
cash provided by operating activities, market price for the Common
Stock and total shareholder return. In conjunction with selecting
the applicable performance goal or goals, the Committee will also fix
the relevant performance level or levels (e.g., a 15% return on
equity) which must be achieved with respect to the goal or goals in
order for the performance shares to be earned by the key employee.
(iii) Rights and Benefits During the Performance
Period. The Committee may provide that, during a Performance Period,
a Participating Key Employee shall be paid cash amounts, with respect
to each Performance Share held by such Participating Key Employee, in
the same manner, at the same time, and in the same amount paid, as a
cash dividend on a Share. Participating Key Employees shall have no
voting rights with respect to Performance Shares held by them.
(iv) Adjustments with Respect to Performance Shares. Any
other provision of the Plan to the contrary notwithstanding, the
Committee may in its discretion at any time or from time to time
adjust performance goals (up or down) and minimum or full performance
levels (and any intermediate levels and proportion of payments
related thereto), adjust the manner in which performance goals are
measured, or shorten any Performance Period or waive in whole or in
part any or all remaining restrictions with respect to Shares of
Restricted Stock issued in payment of Performance Shares, if the
Committee determines that conditions, including but not limited to,
changes in the economy, changes in competitive conditions, changes in
laws or governmental regulations, changes in generally accepted
accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions by the Company or its Affiliates, or the
occurrence of other unusual, unforeseen or extraordinary events, so
warrant.
(v) Payment of Performance Shares. As soon as is
reasonably practicable following the end of the applicable
Performance Period, one or more certificates representing the number
of Shares equal to the number of Performance Shares payable shall be
registered in the name of and delivered to the Participating Key
Employee; provided, however, that any Shares of Restricted Stock
payable in connection with Performance Shares shall, pending the
expiration, lapse, or waiver of the applicable restrictions, be
evidenced in the manner as set forth in Section 5(d)(iii) hereof.
(f) General.
(i) No Consideration for Awards. Awards shall be granted
to Participating Key Employees for no cash consideration unless
otherwise determined by the Committee.
(ii) Award Agreements. Each Award granted under the Plan
shall be evidenced by an Award Agreement in such form (consistent
with the terms of the Plan) as shall have been approved by the
Committee.
(iii) Awards May Be Granted Separately or Together.
Awards to Participating Key Employees under the Plan may be granted
either alone or in addition to, in tandem with, or in substitution
for, any other Award or any award granted under any other plan of the
Company or any Affiliate. Awards granted in addition to, or in
tandem with, other Awards, or in addition to, or in tandem with,
awards granted under any other plan of the Company or any Affiliate,
may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.
(iv) Forms of Payment Under Awards. Subject to the terms
of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise or payment of an Award to a Participating Key Employee may
be made in such form or forms as the Committee shall determine, and
may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee in its discretion. Such rules and
procedures may include, without limitation, provisions for the
payment or crediting of interest on installment or deferred payments.
(v) Limits on Transfer of Awards. No Award (other than
Released Securities), and no right under any such Award, shall be
assignable, alienable, saleable or transferable by a Participating
Key Employee otherwise than by will or by the laws of descent and
distribution (or, in the case of an Award of Restricted Securities,
to the Company); provided, however, that a Participating Key Employee
at the discretion of the Committee may be entitled, in the manner
established by the Committee, to designate a beneficiary or
beneficiaries to exercise his or her rights, and to receive any
property distributable, with respect to any Award upon the death of
the Participating Key Employee. Each Award, and each right under any
Award, shall be exercisable, during the lifetime of the Participating
Key Employee, only by such individual or, if permissible under
applicable law, by such individual's guardian or legal
representative. No Award (other than Released Securities), and no
right under any such Award, may be pledged, alienated, attached or
otherwise encumbered, and any purported pledge, alienation,
attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(vi) Term of Awards. Except as otherwise provided in the
Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vii) Rule 16b-3 Six-Month Limitations. To the extent
required in order to comply with Rule 16b-3 only, any equity security
offered pursuant to the Plan may not be sold for at least six months
after acquisition, except in the case of death or disability, and any
derivative security issued pursuant to the Plan shall not be
exercisable for at least six months, except in case of death or
disability of the holder thereof. Terms used in the preceding
sentence shall, for the purposes of such sentence only, have the
meanings, if any, assigned or attributed to them under Rule 16b-3.
(viii) Share Certificates; Representation. In addition
to the restrictions imposed pursuant to Section 5(c) and Section 5(d)
hereof, all certificates for Shares delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other
requirements of the Commission, the Nasdaq SmallCap Market or any
other stock exchange or other market upon which such Shares are then
listed or traded, and any applicable federal or state securities
laws, and the Committee may cause a legend or legends to be put on
any such certificates to make appropriate reference to such
restrictions. The Committee may require each Participating Key
Employee or other Person who acquires Shares under the Plan by means
of an Award originally made to a Participating Key Employee to
represent to the Company in writing that such Participating Key
Employee or other Person is acquiring the Shares without a view to
the distribution thereof.
Section 6. Automatic Option Grants to Independent Directors
(a) Options to Independent Directors. The Company shall grant
automatically Non-Qualified Stock Options to Independent Directors on the
terms and conditions as set forth below:
(i) Grant of Options. On the IPO Effective Date, each
Initial Director shall be granted automatically Non-Qualified Stock
Options to purchase 12,000 Shares.
(ii) Exercise Price. The exercise price per Share of an
Option granted pursuant to this Section 6(b) shall be equal to (i) in
the case of grants to Initial Directors, the initial public offering
price per Share (without deduction for underwriting discounts or
commissions) and (ii) in all other cases, the closing sale price per
Share of the Shares on the Nasdaq SmallCap Market (or such other
exchange or system on which the Shares are then trading) of the
Common Stock on the date of grant.
(iii) Option Term. The term of each Option shall end
on the sooner to occur of five years from the date of its grant or
one year from the date the Independent Director ceases to be an
Independent Director for any reason.
(iv) Vesting. Each initial grant of Non-Qualified Stock
Options to Independent Directors hereunder will vest ratably over an
approximate five-year period (i.e., one-fifth on the Company's first
annual shareholders meeting date occurring at least 12 months after
the initial grant and one-fifth on each of the next four succeeding
annual shareholders meetings); 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
Non-Qualified Stock Options granted to an Independent Director under
the Plan will vest immediately and in full upon a Change in Control,
the death or disability of such Independent Director, provided,
that the Independent Director continues to serve as a member of the
Board of Directors on the date of such occurrence.
(v) Exercisability and Method of Exercise. Non-Qualified
Stock Options granted to Independent Directors shall be exercisable
during their term subject only to the vesting provisions above and
the termination provisions below. The Committee may determine the
method or methods by which, and the form or forms, including, without
limitation, cash, Shares, other securities, other property or any
combination thereof, having a Fair Market Value on the exercise date
equal to the relevant exercise price, in which payment of the
exercise price with respect to any Non-Qualified Stock Option granted
to an Independent Director may be made or deemed to have been made.
(vi) Termination of Options. Unexercised Non-Qualified
Stock Options granted to Independent Directors shall terminate on the
earlier of: (i) five years after the date of grant or (ii) one year
after the Independent Director ceases to be an Independent Director
for any reason.
(b) General.
(i) No Consideration for Granting Options. Non-Qualified
Stock Options shall be granted to Independent Directors for no cash
consideration unless otherwise determined by the Committee.
(ii) Option Agreements. Options granted under Section 6(a)
of the Plan shall be evidenced by an Option Agreement in such form
(consistent with the terms of the Plan) as shall have been approved
by the Committee.
(iii) Limits on Transfer of Options. No Non-Qualified
Stock Options granted under Section 6(a) and no right under any such
Option shall be assignable, alienable, saleable or transferable by an
Independent Director otherwise than by will or by the laws of descent
and distribution; provided, however, that an Independent Director at
the discretion of the Committee may be entitled, in the manner
established by the Committee, to designate a beneficiary or
beneficiaries to exercise his or her rights, and to receive any
property distributable, with respect to any Option upon the death of
the Independent Director. Failing any designation, the Independent
Director's personal representative may exercise such rights and
receive such property. Each Non-Qualified Stock Option granted under
Section 6(a) hereof, and each right under any such Option, shall be
exercisable, during the lifetime of the Independent Director, only by
such individual or, if permissible under applicable law, by such
individual's guardian or legal representative. No Non-Qualified
Stock Option granted under Section 6(a) hereof, and no right under
any such Option, may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the
Company or any Affiliate.
(iv) Rule 16b-3 Six-Month Limitations. To the extent
required in order to comply with Rule 16b-3 only, any Shares issued
to an Independent Director pursuant to the Plan may not be sold for
at least six months after acquisition, except in the case of death or
disability, and any Option issued to an Independent Director pursuant
to the Plan shall not be exercisable for at least six months, except
in case of death or disability of the holder thereof. Terms used in
the preceding sentence shall, for the purposes of such sentence only,
have the meanings, if any, assigned or attributed to them under Rule
16b-3.
(v) Share Certificates; Representation. All certificates
for Shares delivered to an Independent Director under the Plan
pursuant to the exercise of an Option granted thereto shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations
and other requirements of the Commission, the Nasdaq SmallCap Market
or any other stock exchange or other market upon which such Shares
are then listed or traded, and any applicable federal or state
securities laws, and the Committee may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions. The Committee may require any Independent Director who
acquires Shares by exercising an Option granted under the Plan to
represent to the Company in writing that such Independent Director is
acquiring the Shares without a view to the distribution thereof.
Section 7. Amendment and Termination of the Plan; Correction of
Defects and Omissions
(a) Amendments to and Termination of the Plan. The Board of
Directors of the Company may at any time amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that shareholder
approval of any amendment of the Plan shall also be obtained if otherwise
required by: (i) the rules and/or regulations promulgated under Section 16
of the Exchange Act (in order for the Plan to remain qualified under Rule
16b-3); (ii) the Code or any rules promulgated thereunder (in order to
allow for Incentive Stock Options to be granted under the Plan); or (iii)
the listing requirements of the Nasdaq SmallCap Market or any other
principal securities exchange or market on which the Shares are then
traded (in order to maintain the listing of the Shares thereon).
Termination of the Plan shall not affect the rights of Participating Key
Employees or Independent Directors with respect to Awards previously
granted to them, and all unexpired Awards shall continue in force and
effect after termination of the Plan except as they may lapse or be
terminated by their own terms and conditions.
(b) Correction of Defects, Omissions and Inconsistencies. The
Committee may in its discretion correct any defect, supply any omission or
reconcile any inconsistency in any Award or Award Agreement in the manner
and to the extent it shall deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No Key Employee, Participating Key
Employee, Independent Director or other Person shall have any claim to be
granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Key Employees, Participating Key Employees or
holders or beneficiaries of Awards under the Plan. The terms and
conditions of Awards need not be the same with respect to each
Participating Key Employee.
(b) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of a Participating Key
Employee for federal income tax purposes with respect to any Award under
the Plan, the Participating Key Employee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to Awards to
Participating Key Employees under the Plan may be settled with Shares
previously owned by the Participating Key Employee; provided, however,
that the Participating Key Employee may not settle such obligations with
Shares that are part of, or are received upon exercise of, the Award that
gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participating Key Employee. The Committee may establish such procedures
as it deems appropriate for the settling of withholding obligations with
Shares, including, without limitation, the establishment of such
procedures as may be necessary to satisfy the requirements of Rule 16b-3.
(c) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) Rights and Status of Recipients of Awards. The grant of an
Award shall not be construed as giving a Participating Key Employee the
right to be retained in the employ of the Company or any Affiliate.
Further, the Company or any Affiliate may at any time dismiss a
Participating Key Employee from employment, free from any liability, or
any claim under the Plan, unless otherwise expressly provided in the Plan
or in any Award Agreement. Except for rights accorded under the Plan and
under any applicable Award Agreement, Participating Key Employees shall
have no rights as holders of Shares as a result of the granting of Awards
hereunder.
(e) Unfunded Status of the Plan. Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall
not establish any fiduciary relationship between the Company or the
Committee and any Participating Key Employee, Independent Director or
other Person. To the extent any Person holds any right by virtue of a
grant under the Plan, such right (unless otherwise determined by the
Committee) shall be no greater than the right of an unsecured general
creditor of the Company.
(f) Governing Law. The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the internal laws of the State of Wisconsin
and applicable federal law.
(g) Severability. If any provision of the Plan or any Award
Agreement or any Award is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction, or as to any Person or Award, or
would disqualify the Plan, any Award Agreement or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any Award Agreement
or the Award, such provision shall be stricken as to such jurisdiction,
Person or Award, and the remainder of the Plan, any such Award Agreement
and any such Award shall remain in full force and effect.
(h) No Fractional Shares. No fractional Shares or other
securities shall be issued or delivered pursuant to the Plan, any Award
Agreement or any Award, and the Committee shall determine (except as
otherwise provided in the Plan) whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or
other securities, or whether such fractional Shares or other securities or
any rights thereto shall be canceled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Section 9. Effective Date of the Plan
The Plan shall be effective on the IPO Effective Date, provided
that, the Plan is adopted by the shareholders prior thereto but less than
12 months following the date of adoption of the Plan by the Board of
Directors, and all Awards granted under the Plan prior to the date of
effectiveness shall be subject to such effectiveness and the effective
date of such Award grants shall be deemed to be the date of such
effectiveness of the Plan.
Section 10. Term of the Plan
No Award shall be granted under the Plan following the tenth
anniversary of its effective date. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond such date and, to the extent set
forth in the Plan, the authority of the Committee to amend, alter, adjust,
suspend, discontinue or terminate any such Award, or to waive any
conditions or restrictions with respect to any such Award, and the
authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond such date.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of
our reports (and all references to our Firm, included in or made a
part of this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
May 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-28-1998
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 136,100
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 136,100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 100
<TOTAL-LIABILITY-AND-EQUITY> 136,100
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
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