<PAGE> 1
C2, INC.
5,202,664 SHARES OF COMMON STOCK
$4.00 PER SHARE
-------------------------
Each shareholder of Christiana Companies, Inc. has a right to purchase one
share of C2 for each share of Christiana held immediately before Christiana is
acquired by Weatherford International, Inc. These rights ensure that Christiana
shareholders can purchase the same ownership interest in C2 as they had in
Christiana. Non-Christiana shareholders may purchase shares of C2 common stock
remaining after Christiana shareholders exercise their rights. At the completion
of this offering, C2 will purchase a two-thirds ownership interest in
Christiana's only operating business, Total Logistic Control, LLC, for
$10,666,667. Sheldon Lubar, the Chairman of Christiana, David Lubar, the
President of C2, and other members of the Lubar family have committed to
purchase a minimum of 2,750,000 shares of C2 to ensure that the net proceeds of
this offering will be at least enough to complete the purchase of Total Logistic
Control.
This offering and our purchase of Total Logistic Control must occur as part
of the acquisition of Christiana by Weatherford. On July 13, 1998, we mailed to
Christiana shareholders a prospectus offering the same shares of common stock of
C2 as are offered by this Prospectus. The reason Christiana shareholders are
receiving a second prospectus is that Weatherford's acquisition of Christiana,
as originally proposed and approved by the shareholders of both companies in
August of 1998, was not completed. On October 14, 1998, Weatherford and
Christiana amended their transaction. A joint proxy statement/prospectus will be
mailed to Christiana and Weatherford shareholders in connection with separate
special shareholder meetings to approve the amended transaction. You should rely
strictly on this Prospectus in determining whether or not to purchase C2 common
stock. If you subscribed for C2 common stock after receiving the earlier C2
prospectus, you must subscribe again. Subscriptions must be made by completing
and submitting the letter of transmittal provided with the joint proxy
statement/prospectus. Subscription instructions are provided beginning on Page
37 of this Prospectus.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 IN THIS PROSPECTUS.
<TABLE>
<CAPTION>
THE OFFERING PER SHARE MINIMUM MAXIMUM
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Public Price...................... $4.00 $11,000,000 $20,810,656
- -------------------------------------------------------------------------------------------------------------
Estimated Expenses................ $0.05 $275,000 $275,000
- -------------------------------------------------------------------------------------------------------------
Proceeds to C2.................... $3.95 $10,725,000 $20,535,656
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Proposed Trading Symbol: Nasdaq SmallCap Market -- CTOO.
Prior to the offering, there has not been a public market for the C2 Common
Stock.
THE OFFERING IS CONTINGENT UPON THE CLOSING OF WEATHERFORD'S ACQUISITION OF
CHRISTIANA. IF THAT TRANSACTION DOES NOT OCCUR, THIS OFFERING WILL IMMEDIATELY
CEASE AND ANY PAYMENT FOR SHARES OF C2 COMMON STOCK WILL BE REFUNDED PROMPTLY,
WITHOUT INTEREST.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 7, 1999
<PAGE> 2
THE TOTAL LOGISTIC CONTROL NETWORK
MAP
K E Y
--------------------------
[ ] Refrigerated
Distribution Center
P Non-refrigerated
Distribution Center
Total Logistic Control operates
through a network of refrigerated
and non-refrigerated warehousing
and distribution centers. Total
Logistic Control uses this network
to provide its warehousing and
transportation services to its
customers.
2
<PAGE> 3
PROSPECTUS SUMMARY
You should read this summary together with the more detailed information,
and the consolidated financial statements of C2 and Total Logistic Control and
notes to these statements, appearing elsewhere in this Prospectus. We sometimes
refer to Total Logistic Control as TLC.
C2 incorporated on December 11, 1997. We will operate through TLC, which
following this offering will be a 66% owned subsidiary of C2. TLC assists
companies in managing the physical movement of products and materials. TLC
provides refrigerated and non-refrigerated warehousing, transportation and
services. TLC's industry consists of competitors that generally provide only
warehousing or trucking operations and other competitors that provide only
management services for the distribution and warehousing needs of their
customers. TLC's services combine transportation, warehousing and information
services to manage the distribution channel for a customer's products from the
point of manufacturing to the point of consumption. This combination provides
TLC with a competitive advantage. TLC's products and services capitalize on the
growing trend of corporations toward reducing costs by outsourcing large
components of their transportation and warehousing needs.
TLC's operations are conducted through a network of 12 distribution
warehouses, comprised of an aggregate of 34 million cubic feet of refrigerated
and frozen storage capacity. TLC's facilities consists of seven refrigerated and
five non-refrigerated distribution centers, primarily in the upper Midwest. TLC
provides its services utilizing owned equipment as well as outside carrier
management services.
TLC's refrigerated warehousing operations include: temperature sensitive
storage services; freezing services; vegetable processing; and packaging
services. Its transportation and distribution services include: refrigerated and
non-refrigerated transportation; full service truckload; less-than-truckload;
dedicated transportation services; management of transportation and other
specialized services. TLC also provides: a full range of international
transportation services; fully computerized inventory management; assembly; and
repackaging.
We believe TLC is the nation's sixth largest provider of public
refrigerated warehouse space. Two of its refrigerated distribution centers are
located in Rochelle, Illinois; and two are located in Kalamazoo, Michigan. TLC's
other refrigerated distribution centers are located in 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 non-refrigerated distribution centers
are located in Zeeland, Michigan and the others are located in Kalamazoo,
Michigan; Munster, Indiana; and Dayton, New Jersey.
3
<PAGE> 4
The following summarizes certain financial data regarding TLC (amounts in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues............................................... $22,370 $23,047 $ 90,179 $84,208
Income from operations................................. 1,764 1,947 6,974 6,311
Net income............................................. 1,086 923 3,741 12,181(2)
EBITDA(1).............................................. 3,367 3,402 13,571 13,143
Cash flows from operating activities................... 1,768 2,841 12,305 9,294
Cash flows from investing activities................... (430) (839) (1,653) (1,822)
Cash flows from financing activities................... (1,459) (1,648) (10,335) (7,277)
</TABLE>
- -------------------------
(1) EBITDA is defined as income (loss) before taxes plus fixed charges. Fixed
charges consist of interest expense, depreciation and amortization, and
gains or losses on the disposal of assets. EBITDA is not a measure of
financial performance under generally accepted accounting principles and
should not be considered as an alternative to net income as a measure of
performance nor as an alternative to cash flow as a measure of liquidity.
Since all companies do not calculate EBITDA uniformly, it may not be an
accurate measure of comparison.
(2) Includes $11,171 of income related to an adjustment of deferred income taxes
resulting from a change in TLC's tax status from a C-Corporation to a
limited liability company.
TLC was formed on June 30, 1997 as a result of the combination of Wiscold,
Inc. and Total Logistic Control, Inc. (two former wholly-owned subsidiaries of
Christiana) into TLC. Christiana acquired Wiscold in September of 1992 and Total
Logistic Inc. in January of 1994.
C2 is a Wisconsin corporation with its executive offices located at 700
North Water Street, Suite 1200, Milwaukee, Wisconsin 53202, and its telephone
number is (414) 291-9000. TLC is a Delaware limited liability company with is
principal executive offices located at 8300 Logistic Drive, Zeeland, Michigan
49464, and its telephone number is (616) 748-0700.
4
<PAGE> 5
ACQUISITION OF TWO-THIRDS OF TOTAL LOGISTIC CONTROL
We will purchase from Christiana two-thirds of TLC for approximately $10.7
million. The purchase price of $10.7 million must be paid no later than thirty
(30) days after Weatherford acquires Christiana.
A written agreement by and among C2, TLC, Christiana and Weatherford
governs the TLC purchase. That agreement is attached as Annex A. The agreement
generally requires C2 to pay all liabilities to which Weatherford, Christiana or
any affiliates of Christiana may become liable as a result of the business,
operations or assets of Christiana or any affiliate of Christiana prior to the
date on which Weatherford acquires Christiana. TLC agreed to be primarily
responsible for paying the liabilities relating to any historical business,
operations or assets of TLC. The agreement also requires C2 and TLC to indemnify
Christiana and any affiliate of Christiana against liabilities that relate to
actions or omissions prior to Weatherford's acquisition of Christiana.
WEATHERFORD'S ACQUISITION OF CHRISTIANA
Weatherford will purchase Christiana through a merger resulting in
Christiana becoming a wholly-owned subsidiary of Weatherford. The terms of this
transaction are set forth in an agreement and plan of merger. The merger will
result in Christiana shareholders receiving the amount of shares of Weatherford
common stock held by Christiana immediately prior to the transaction. This
amount is estimated to be approximately 0.85 shares of Weatherford common stock
per share of Christiana. Christiana shareholders will also receive cash equal to
the cash of Christiana on the date when the transaction is completed, less
certain liabilities. The amount of cash is expected to be between approximately
$3.50 and $4.00 per share of Christiana. On August 17, 1998, Christiana
shareholders approved the transaction. However, the transaction did not close
because a significant decrease in the price of Weatherford common stock
prevented the transaction from qualifying as a partially tax-free transaction,
as required by the parties. The agreement and plan of merger was amended on
October 14, 1998 to:
- Eliminate the requirement that Christiana hold $10.0 million of cash
for five years to satisfy certain contingent liabilities and
indemnification obligations;
- Require Christiana to use the $10.0 million to purchase Weatherford
common stock; and
- Require Christiana to purchase up to an additional $5.0 million of
Weatherford common stock if necessary to qualify the transaction as
a partially tax-free transaction.
Prior to the date of this Prospectus, Christiana purchased 489,300 shares
of Weatherford common stock for a total price of $10.0 million. This purchase
increased the amount of Weatherford common stock owned by Christiana to
4,386,762. It also increased the amount of Weatherford common stock to be
received by Christiana shareholders in the transaction.
No later than 30 days after Weatherford acquires Christiana, Weatherford
and Christiana will determine the amount of cash to be paid to Christiana
shareholders in the transaction. Weatherford will then pay the cash
consideration due each Christiana shareholder to Firstar Bank Milwaukee, N.A.
and Firstar will promptly distribute such cash according to the elections made
by the Christiana shareholders in their letters of transmittal.
5
<PAGE> 6
TIMELINE OF KEY EVENTS
Set forth below is a timeline of key events relating to this offering,
Weatherford's acquisition of Christiana and our purchase of two-thirds of TLC.
<TABLE>
<CAPTION>
KEY EVENT PROPOSED DATE
--------- -------------
<S> <C> <C>
- - First special meeting of shareholders of Weatherford and
Christiana August 17, 1998
- - Amendment to agreement and plan of merger by which
Weatherford will acquire Christiana October 14, 1998
- - Special meeting of shareholders of Weatherford and
Christiana to vote on amended transaction February 8, 1999
- - Expiration date for submission of letter of transmittal or
subscription agreement to purchase C2 common stock. February 5, 1999
- - Complete acquisition of two-thirds of TLC with obligation to
pay purchase price no later than thirty (30) days following
purchase February 8, 1999
- - Complete Weatherford acquisition of Christiana with
distribution of cash consideration to be made no later than
thirty (30) days following acquisition, except to the extent
applied to purchase C2 common stock as directed in the
letter of transmittal February 8, 1999
- - Distribution of cash consideration and/or application of
cash consideration to purchase C2 common stock, based on
election made in letter of transmittal March 10, 1999
- - Purchase of at least 2,750,000 shares of C2 common stock by
Lubar family, if necessary March 10, 1999
- - Payment of purchase price for acquisition of two-thirds of
TLC by C2 March 10, 1999
- - Issuance of C2 common stock to subscribers March 10, 1999
</TABLE>
6
<PAGE> 7
The following diagram sets forth the organizational structure and stock
ownership of C2, TLC, Christiana and Weatherford following the Merger and the
Acquisition.
DIAGRAM
7
<PAGE> 8
THE OFFERING
C2 common stock offered....... 5,202,664 shares
Minimum number of shares of C2
common stock to be outstanding
after the offering............ 2,750,000 shares. This represents the
commitment of Sheldon Lubar, Chairman of
Christiana, David Lubar, President of C2 and
other members of the Lubar family to purchase
enough shares of C2 to have the net proceeds
from this offering be at least $10,666,667, the
amount necessary to fund C2's purchase of two-
thirds of TLC.
Maximum number of shares of C2
common stock to be outstanding
after the offering............ 5,202,689 shares
Subscription price............ $4.00 per share of C2 common stock.
Subscription agent............ Firstar Bank Milwaukee, N.A.
Rights to purchase C2 common
stock......................... Each Christiana shareholder has a right to
purchase one share of C2 common stock for every
one share of Christiana common stock held
immediately before Weatherford's acquisition of
Christiana. The rights are not transferable. If
shares of C2 common stock remain available
because less than all Christiana shareholders
exercised their rights in full, TLC management,
Christiana shareholders who wish to purchase
additional shares of C2 common stock and the
general public, in that order of preference,
will have the right to purchase any remaining
shares of C2 common stock on a pro rata basis.
Subscription procedure for
Christiana shareholders....... Rights to purchase C2 common stock may be
exercised by delivery of a properly completed
letter of transmittal provided to you as part
of the joint proxy statement/prospectus of
Weatherford and Christiana. The letter of
transmittal must be delivered to Firstar Bank
Milwaukee, N.A. on or before February 5, 1999.
Subscription procedure for
others........................ Non-Christiana shareholders may purchase shares
of C2 common stock, if available after
Christiana shareholders exercise their rights.
Such purchases may be made by executing the
subscription agreement provided with this
Prospectus, providing full payment for all
shares of C2 common stock subscribed for and
delivering the Subscription Agreement to
Firstar Bank Milwaukee, N.A. on or before
February 5, 1999.
Proceeds of the offering...... If fully subscribed, the offering will result
in proceeds to C2, net of estimated offering
expenses, of $20,535,656.
8
<PAGE> 9
RISK FACTORS
You should carefully consider the following factors and other information
in this Prospectus before deciding to invest in shares of C2's common stock.
Certain statements in this section and elsewhere in this Prospectus are
forward-looking statements. In deciding whether to invest in C2 common stock,
you should remember that future events could differ dramatically from those
anticipated by any such forward-looking statements as a result of many factors,
including those cited in this section.
C2'S DEPENDENCE ON SINGLE LINE OF BUSINESS
Our ownership interest in TLC will represent our only non-cash asset. TLC's
business could be adversely affected if outside warehousing and transportation
services cease to be a preferred method of distribution or if new technological
methods of food preservation become available and widely utilized.
TLC'S DEPENDENCE ON SIGNIFICANT CUSTOMERS
A number of TLC's facilities depend on a small number of customers or
commodities. During fiscal 1998, 10 of TLC's customers accounted for 43% of
TLC's total revenues. A reduction in the business received by these customers
will result in a decrease in the sales at such facilities and, possibly, in the
overall net sales of TLC. Moreover, increasing consolidation among TLC's
customers and the resulting ability of such customers to utilize their size to
negotiate lower outsourcing costs has, and may continue in the future, to have a
depressing effect on the pricing of services.
RISK OF EXCESS WAREHOUSE CAPACITY
Local, regional and national companies may seek to expand their presence
into the local markets in which TLC operates. If there is excess warehousing
capacity in these markets, it may have a depressing effect on the pricing of
warehousing services which, in fiscal 1998, accounted for approximately 58% of
TLC's business.
EFFECT OF DEBT OF TLC ON C2 SHAREHOLDERS
Prior to Weatherford's acquisition of Christiana, TLC is required to pay a
dividend of $20 million to Christiana and to repay approximately $3 million of
outstanding principal plus accrued interest under a promissory note to
Christiana. TLC will borrow $23 million under its revolving credit facility to
finance these obligations. Following this, TLC will have approximately $17
million of available borrowing capacity under its revolving credit facility. TLC
and C2, on a pro forma basis, will be highly leveraged. Assuming a fully
subscribed offering, C2's pro forma total funded debt to total capitalization
including minority interest at September 30, 1998 was 62%. In addition, TLC may,
subject to certain restrictions in its debt agreements, incur further
indebtedness from time to time to finance expansion.
Due to this substantial indebtedness, a significant portion of TLC's cash
flow from operations will be required for debt service. The extent to which TLC
is leveraged could have consequences to the holders of C2 common stock,
including:
- impairment of TLC's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or
other purposes;
- dedication of a substantial portion of TLC's cash flow from
operations to the payment of debt service requirements (principal
and interest) on its indebtedness;
- vulnerability of TLC to changes in general economic conditions; and
- limitations on TLC's ability to capitalize on significant business
opportunities and to respond to competition.
9
<PAGE> 10
ASSUMED LIABILITIES AND INDEMNIFICATION OBLIGATIONS OF C2 AND TLC
Under the agreement governing C2's purchase of TLC, C2 assumes certain
liabilities and indemnification obligations including liabilities resulting
from, among other things, the business operations or assets or environmental
contract, or other claims against Christiana. Prior to the October 14, 1998
amendment to the terms of Weatherford's acquisition of Christiana, Christiana
was to hold $10.0 million following the transaction to pay for any such
liability or claim. With the elimination of the $10.0 million holdback, C2 is
primarily responsible to indemnify Weatherford for liabilities or claims
relating to a matter other than the TLC's historic business.
TLC is primarily responsible for liabilities or claims relating to TLC's
historic business, including, among other things, the business operation and
assets of TLC or environmental, contract, tax or other claims against TLC. If
TLC is obligated to pay any amounts relating to an assumed liability or an
indemnification claim, Christiana will receive a cash payment from C2 equal to
one-third of any such amount paid when and if TLC or all or substantially all of
its assets are sold; C2 sells its membership units in TLC; or if there is a
transfer of membership units of TLC held by C2 or of all of the C2 Common Stock.
The obligations of C2 under the agreement to acquire two-thirds of TLC are
secured by all of C2's ownership interest in TLC. Any substantial claims made by
Weatherford, Christiana or any of their affiliates in connection with the
assumed liabilities or the indemnification obligations that are not covered by
the insurance of Weatherford may have a material adverse effect on C2's
financial condition and results of operations. Any failure by C2 to satisfy its
obligations under such indemnification provisions could result in the loss of
C2's ownership interest in TLC.
RESTRICTIONS AND POTENTIAL CONFLICTS UNDER THE OPERATING AGREEMENT BETWEEN C2
AND CHRISTIANA
The operating agreement, which is attached as Annex B, will be entered into
by C2 and Christiana when Weatherford acquires Christiana. The operating
agreement restricts C2's control of TLC. The operating agreement vests the
management of TLC in a board of managers consisting of six members. C2 and
Christiana share the power to appoint managers to the TLC board of managers
under the operating agreement. Christiana and C2 will each be entitled to elect
a number of managers that is proportionate to their ownership in TLC. Christiana
(which will be controlled by Weatherford) will have the power to appoint two
members of the board of managers. Certain significant corporate actions, such as
issuing additional ownership interests, selling TLC and making certain
distributions to members, require unanimous consent of the board of managers.
C2's interests may not always be consistent with Christiana's interests. As a
result, C2 will be unable to cause TLC to take these actions without the consent
of Christiana's representatives on the board of managers.
RESTRICTIONS ON THE ABILITY OF C2 TO TRANSFER ITS OWNERSHIP INTEREST IN TLC
Generally, neither C2 nor Christiana may voluntarily transfer any ownership
interest in TLC without the consent of the board of managers of TLC.
RESTRICTION ON CHANGE OF CONTROL OF C2 AND TLC
Neither C2 nor TLC may transfer a majority of C2's or TLC's assets to any
person or entity unless the acquiring person or entity meets certain net worth
requirements and assumes the obligations of C2 or TLC, as the case may be. These
transfer restrictions may prevent C2 from divesting of its assets, including its
ownership in TLC, even if C2 believes such action is appropriate.
CHRISTIANA'S PUT RIGHT
The Purchase Agreement provides that during the one year period following
the fifth anniversary of the merger, Christiana will have the option to sell to
C2 or TLC, and C2 or TLC as applicable, will be required to purchase, all of
Christiana's one-third ownership interest in TLC for a price of $7 million.
There is a risk that
10
<PAGE> 11
Christiana's one-third ownership interest on TLC may not be worth $7 million at
the time Christiana exercises its option.
SHORTAGE OF CONTRACT CARRIERS AND AVAILABLE DRIVERS
TLC utilizes both its own fleet of trucks and third-party carriers to
conduct its operations. As TLC expands, it will likely require the services of
additional carriers. At some TLC locations, only a few third-party carriers meet
TLC's quality standards. In addition, the trucking industry has experienced
severe shortages of available drivers in recent years. This may curtail the
ability of TLC to expand and may require TLC and its third-party carriers to
increase drivers' compensation, thereby increasing transportation costs to TLC.
POSSIBLE INCREASE IN FUEL COSTS
Changes in fuel prices and supply or increases in fuel or energy taxes will
increase the operating expenses of TLC's internal fleet of trucks and those of
its third-party carriers. These increases will result in higher transportation
operating costs for TLC. TLC's operating margins would be adversely affected if
it were unable to pass these increases through to its customers.
DEPENDENCE ON C2 AND TLC MANAGEMENT
We believe that our ability to successfully implement our business strategy
and to operate profitably depends on the continued employment of our senior
management teams including, in the case of C2, William T. Donovan and David J.
Lubar and in the case of TLC, Brian L. Brink, John R. Patterson, Gary R. Sarner
and other members of TLC's senior management group. Neither C2 nor TLC has
written employment agreements with any of its executive officers and no
insurance is maintained on the lives of these individuals.
POTENTIAL CONFLICTS OF INTEREST BETWEEN MANAGEMENT AND C2
Sheldon B. Lubar, a director of C2, David J. Lubar, President and a
director of C2 and William T. Donovan, Chairman and a director of C2, have
participated individually, and as a group, in investments in other business
entities independent from Christiana. There is a risk that management may take
advantage of business opportunities that may be available to C2. We have adopted
guidelines which generally require that before independently pursuing an
acquisition opportunity, the opportunity will be presented to C2's board of
directors. A majority of the members of the C2 board who are not interested in
the opportunity will decide whether C2 should pursue the opportunity.
LUBAR FAMILY'S SIGNIFICANT INFLUENCE OVER C2
Following this offering, the Lubar family and the other officers and
directors of C2 will own at least 66% of the outstanding shares of C2 common
stock. Accordingly, the Lubar family and the other directors and officers of C2
will have the ability to influence significantly the election of directors and
most corporate actions.
DILUTION
Dilution represents the difference between the amount paid by an investor
in C2 and the investor's share of the tangible assets of C2. This difference is
represented by the intangible assets of C2. Investors will experience
substantial dilution as a result of C2's acquisition of two-thirds of TLC to the
extent of intangible assets purchased, which, at September 30, 1998, was
$5,396,000, or $1.04 per share assuming this offering is fully subscribed.
USE OF PROCEEDS
The net proceeds to C2 from the sale of 5,202,664 shares of C2 common
stock, after deducting offering expenses payable by C2 of $275,000, will be
approximately $20,536,000. The Lubar family has committed to purchase enough
shares of C2 to ensure that the net proceeds of the offering to C2 will be at
least $10,666,667.
11
<PAGE> 12
The first $10,666,667 of the net proceeds will be used to pay for C2's
acquisition of two-thirds of TLC. The remainder of the net proceeds will be used
for offering expenses and general corporate purposes, including future
acquisitions. Proceeds not immediately required for the purposes described above
will be invested principally in United States government securities or other
high-grade, short-term, interest-bearing investments.
DIVIDEND POLICY
C2 was formed on December 11, 1997 and has never paid any cash dividends on
its capital stock. C2's ability to generate cash for the payment of dividends is
restricted by the terms of the operating agreement. C2 and its board of
directors currently intend to retain any earnings for use in the expansion of
C2's business and do not anticipate paying any cash dividends on the C2 common
stock in the foreseeable future.
TLC's revolving credit facility prohibits TLC from paying dividends (other
than the $20.0 million dividend to Christiana) except that TLC may pay dividends
to cover members' income tax liabilities resulting from their ownership of TLC.
SUMMARY OF CERTAIN TERMS OF
WEATHERFORD'S ACQUISITION OF CHRISTIANA
GENERAL
Weatherford will acquire Christiana through a merger of a subsidiary of
Weatherford with and into Christiana. Each outstanding share of Christiana
common stock will be converted into a right to receive approximately 0.85 shares
of Weatherford common stock and cash currently estimated to be between
approximately $3.50 and $4.00 per share of Christiana. Christiana may purchase
up to an additional $5.0 million of Weatherford common stock. Any such purchase
by Christiana will increase the amount of Weatherford common stock received and
decrease the amount of cash received.
CALCULATION OF CASH CONSIDERATION TO BE RECEIVED
The exact calculation of cash consideration will equal the quotient of the
Christiana Net Cash (as defined below) divided by 5,149,330. The definitive
calculation of cash consideration will be made by Weatherford and Christiana no
later than thirty (30) days following the completion of Weatherford's
acquisition of Christiana.
The "Christiana Net Cash" will be equal to
- the sum of all of the cash on hand of Christiana as of the completion of
Weatherford's acquisition, minus
- the sum of the amount of cash necessary to pay Christiana's liabilities,
without giving effect to the use or application of any tax deductions
relating to the exercise of options or any tax benefits that may be
realized as a result of amended tax returns of Christiana.
Based on the current capitalization of Christiana and the assets and
liabilities of Christiana as of September 30, 1998, and after giving effect to
the estimated expenses of the transaction payable by Christiana, the cash
consideration per share of Christiana is anticipated to be between approximately
$3.50 and $4.00.
12
<PAGE> 13
CAPITALIZATION
The following table sets forth the combined capitalization of C2 as of
September 30, 1998:
- on a pro forma combined basis to give effect to the acquisition of
two-thirds of TLC, the $20.0 million dividend payable by TLC to Christiana
and repayment of $3 million plus accrued interest by TLC to Christiana and
- as further adjusted to give effect to this offering and the
application of the estimated net proceeds from this offering, assuming the
sale of a minimum of 2,750,000 shares of C2 common stock to the Lubar
family.
This table should be read in conjunction with the unaudited Pro Forma
Combined Financial Data of C2 and the related notes included elsewhere in
this Prospectus. See "Pro Forma Summary Combined Financial Data."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------
PRO FORMA AS ADJUSTED(4)
--------- --------------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Short-term debt:
Short-term obligations(1)................................. $ -- $ --
Current maturities of long-term debt(1)................... 2,630,000 2,630,000
Liability for purchase of 666.667 Membership Units of TLC... 10,667,000 --
Long-term debt, net of current maturities(1)................ 49,275,000 49,275,000
Minority interest(2)........................................ 8,104,000 8,104,000
Shareholders' equity:
Preferred Stock, par value $0.01 per share, 10,000,000
shares authorized; none issued or outstanding............. -- --
Common Stock, par value $0.01 per share, 50,000,000 shares
authorized, none issued and outstanding; pro forma
2,734,250 shares issued and outstanding, as adjusted(3)... -- 28,000
Additional paid-in capital.................................. -- 10,697,000
Retained earnings(2)........................................ 3,326,000 3,326,000
----------- -----------
Total shareholders' equity................................ 3,326,000 14,051,000
----------- -----------
Total capitalization including minority
interest........................................ $74,002,000 $74,060,000
=========== ===========
</TABLE>
- -------------------------
(1) For a description of TLC's debt, see "Notes to the Financial Statements of
TLC" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Description of Credit Agreement."
(2) The retained earnings amount as included in the capitalization table
represents the difference between the purchase price of two-thirds of TLC
($10,667,000) and the carry over basis of TLC equity as adjusted for:
- the dividend;
- the drop down of certain Christiana assets and liabilities;
- minority interest: and
- deferred income taxes of C2 related to the difference between
purchase price and carry over basis.
13
<PAGE> 14
A CALCULATION OF THE RETAINED EARNINGS ADJUSTMENT IS AS FOLLOWS:
<TABLE>
<S> <C> <C>
Purchase price of two-thirds of TLC................. $10,667,000
Net book value of TLC at September 30, 1998......... 44,983,000
Less: Drop down assets/liabilities of............... (668,000)
Christiana Less: Dividend to Christiana........... (20,000,000)
Less: Minority interest............................. (8,104,000)
Less: Deferred income taxes......................... (2,218,000)
----------- -----------
Retained earnings adjustment........................ $ 3,326,000
</TABLE>
C2 has recorded this difference as retained earnings in the above
capitalization table since the amount does not reflect cash proceeds of the
offering and the amount does not meet the definition of paid-in capital.
(3) Does not include up to 520,000 additional shares reserved for issuance under
C2's 1998 Equity Incentive Plan, of which options to purchase 12,000 shares
of C2 common stock will be granted to independent directors of C2
concurrently with this offering at an exercise price of $4.00 per share. See
"Management -- 1998 Equity Incentive Plan."
(4) The minimum number of shares of C2 common stock which will be issued in this
offering is 2,750,000 pursuant to the commitment of the Lubar family. The
maximum number of shares to be issued in this offering is 5,202,664. If the
maximum amount of shares are issued in this offering, total shareholders
equity on a pro forma basis, as of September 30, 1998, would be $23,862,000.
14
<PAGE> 15
C2 FINANCIAL DATA
Set forth below is the audited balance sheet of C2 as of December 31, 1997
which is derived from and qualified by reference to, and should be read in
conjunction with the balance sheet of C2 and notes thereto which have been
audited by Arthur Andersen LLP and which appear elsewhere in this Prospectus.
The balance sheet of C2 as of December 31, 1997 set forth below reflects only
the initial capitalization of C2 pursuant to a $100 investment by Sheldon B.
Lubar. Also set forth below is the unaudited balance sheet of C2 as of September
30, 1998 which reflects the initial capitalization of C2 in addition to costs
deferred in connection with the public offering and acquisition of a two-thirds
interest in TLC. In the opinion of C2, the unaudited balance sheet as of
September 30, 1998 includes all adjusting entries necessary to present fairly
the information set forth therein. This financial information should be read in
conjunction with C2's balance sheet as of September 30, 1998 and related notes
thereto which appear elsewhere in this Prospectus.
C2, INC.
(A NEWLY-FORMED HOLDING COMPANY)
BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash...................................................... $ 100 $ --
Due from shareholder for common stock subscribed.......... -- 100
Deferred offering and acquisition costs................... 240,000 --
-------- ----
Total Assets...................................... $240,100 $100
======== ====
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses.......................................... $240,000 $ --
-------- ----
Total Liabilities................................. 240,000 --
======== ====
SHAREHOLDER'S EQUITY:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized, none issued or outstanding................. -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized, 25 shares issued and outstanding........... -- --
Additional paid-in capital................................ 100 100
-------- ----
Total Shareholder's Equity........................ 100 100
-------- ----
Total Liabilities and Shareholder's Equity........ $240,100 $100
======== ====
</TABLE>
15
<PAGE> 16
PRO FORMA SUMMARY COMBINED FINANCIAL DATA
Set forth below is unaudited pro forma summary combined financial
statements for the year ended June 30, 1998 and the three months ended September
30, 1998 and as of September 30, 1998.
These pro forma summary combined financial statements should be read in
conjunction with other information contained elsewhere in this Prospectus,
including "Selected Historical TLC Financial Data," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," the historical
financial statements of TLC, and the historical balance sheet of C2. See "Index
to Financial Statements."
The pro forma summary combined statements of income for the year ended June
30, 1998 and the three months ended September 30, 1998 reflect the effects on
the historical results of operations of C2 of the following transactions as if
these transactions had occurred on July 1, 1997:
- the sale of 5,202,664 shares of C2 common stock;
- the application of the proceeds for the purchase of 666.667
membership units of TLC from Christiana for approximately $10.7 million;
- the additional operating expenses associated with corporate charges
including officers salaries, professional, legal, occupancy, public company
and other corporate related expenses; and
- the establishment of deferred income taxes for TLC.
In addition, the pro forma financial data reflects the following
pre-acquisition adjustments:
- the approximately $3 million repayment by TLC of a note to
Christiana;
- $20 million of borrowings by TLC and subsequent payment of the
dividend to Christiana; and
- the additional interest expense associated with these aforementioned
increases in outstanding debt and the adjustment to interest expense to
reflect the costs of borrowing under TLC's new credit facility.
The pro forma summary combined balance sheet reflects the affects of the
aforementioned transactions as if these transactions had occurred on September
30, 1998.
The pro forma financial data does not purport to represent what C2's
financial position or results of operations would actually have been if such a
transaction in fact had occurred on those dates or to project C2's financial
position or results of operations for any future period.
16
<PAGE> 17
PRO FORMA SUMMARY COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
---------------------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA OFFERING AS
TLC ADJUSTMENTS(1) C2, INC. ADJUSTMENTS ADJUSTED
---------- -------------- --------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents........... $ 420,000 $ -- $ 420,000 $ 20,536,000 (8) $10,289,000
(10,667,000)(9)
Other current assets.... 10,331,000 10,331,000 10,331,000
Total long-term
assets................ 75,539,000 1,086,000(4) 76,625,000 76,625,000
----------- ----------- ----------- ------------ -----------
Total assets............ $86,290,000 $ 1,086,000 $87,376,000 $ 9,869,000 $97,245,000
=========== =========== =========== ============ ===========
Total current
liabilities........... $11,697,000 $ 928,000 (4) $12,625,000 $12,625,000
Due to Parent company... 3,000,000 (3,000,000)(2) -- --
Liability for purchase
of 666.667 Membership
Units of TLC.......... -- 10,667,000 (7) 10,667,000 (10,667,000)(9) --
Deferred income taxes... -- 2,218,000 (6) 2,218,000 2,218,000
Long-term debt.......... 26,275,000 20,000,000 (3) 49,275,000 49,275,000
3,000,000 (2)
Other liabilities....... 335,000 826,000 (4) 1,161,000 1,161,000
----------- ----------- ----------- ------------ -----------
Total liabilities....... 41,307,000 34,639,000 75,946,000 (10,667,000) 65,279,000
Minority interest....... -- 8,104,000 (5) 8,104,000 8,104,000
Preferred stock......... --
Common Stock............ -- 52,000 (8) 52,000
Additional paid-in
capital............... -- 20,484,000 (8) 20,484,000
Retained earnings
Members' equity....... 44,983,000 (20,000,000)(3) 3,326,000 3,326,000
(8,104,000)(5)
(2,218,000)(6)
(668,000)(4)
(10,667,000)(7)
----------- ----------- ----------- ------------ -----------
Total shareholders'
equity................ 44,983,000 (41,657,000) 3,326,000 20,536,000 23,862,000
----------- ----------- ----------- ------------ -----------
Total liabilities and
shareholders'
equity................ $86,290,000 $ 1,086,000 $87,376,000 $ 9,869,000 $97,245,000
=========== =========== =========== ============ ===========
</TABLE>
17
<PAGE> 18
NOTES TO PRO FORMA SUMMARY COMBINED BALANCE SHEET
(1) The acquisition of 666.667 Membership Units of TLC by C2 represents a
combination of entities under common control because a single group of
shareholders controlled TLC and will control C2. Accordingly, no purchase
accounting adjustments have been recorded and the difference between the
acquisition price and the historical cost basis of TLC has been reflected as
an equity adjustment.
(2) Represents a $3 million draw on TLC's revolving credit facility and
subsequent payment of the Wiscold note prior to the acquisition of
two-thirds of TLC.
(3) Represents a $20 million draw on TLC's revolving credit facility (interest
at LIBOR plus 175 basis points) and the subsequent payment of the $20.0
million dividend to Christiana prior to the Acquisition.
(4) Represents the book value of certain assets and liabilities of Christiana
which were contributed to TLC prior to the acquisition of two-thirds of TLC
by C2 as follows:
<TABLE>
<S> <C>
ASSETS:
Long-term assets............................................ $1,086,000
LIABILITIES:
Accrued liabilities......................................... $ (928,000)
Other long-term liabilities................................. (826,000)
----------
Reduction to equity related to asset/liability transfer..... $ (668,000)
==========
</TABLE>
(5) Represents the establishment of minority interest for the one-third interest
in TLC not owned by C2. Minority interest represents one-third of TLC's
members equity subsequent to the adjustment for the dividend to Christiana
and contribution of certain Christiana assets and liabilities.
(6) Represents the establishment of a deferred income tax liability attributed
to temporary differences between the purchase price and carryover basis of
TLC assets and liabilities.
(7) Represents the liability for cash consideration to be paid to Christiana
related to the purchase of 666.667 membership units of TLC.
(8) Represents the amount of net proceeds associated with the sale of 5,202,664
shares of common stock offered by C2 at $4.00 per share, net of expenses of
$275,000.
(9) Represents the payment of the purchase price due to Christiana in connection
with the acquisition of two-thirds of TLC by C2.
18
<PAGE> 19
PRO FORMA SUMMARY COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1998
-----------------------------------------------------
PRO FORMA
HISTORICAL TLC PRO FORMA ADJUSTMENTS C2, INC.
-------------- --------------------- -----------
<S> <C> <C> <C>
Revenues....................................... $90,179,000 $ -- $90,179,000
Operating expenses............................. 83,205,000 1,000,000 (1) 84,205,000
Interest expense............................... 2,854,000 1,615,000 (2) 4,469,000
Other expense, net............................. 379,000 -- 379,000
Income (loss) before minority interest and
income taxes................................. 3,741,000 (2,615,000) 1,126,000
Provision for income taxes..................... -- 200,000 (3) 200,000
Minority interest expense...................... -- 625,000 (4) 625,000
Net income (loss).............................. 3,741,000 (3,440,000) 301,000
Basic and diluted net income per share of
common stock................................. $ 0.11(5)
Weighted average shares outstanding (basic and
diluted)..................................... 2,750,000(5)
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------------
PRO FORMA
HISTORICAL TLC PRO FORMA ADJUSTMENTS C2, INC.
-------------- --------------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................................... $22,370,000 $ -- $22,370,000
Operating expenses......................... 20,606,000 250,000 (1) 20,856,000
Interest expense........................... 621,000 404,000 (2) 1,025,000
Other expense, net......................... 57,000 -- 57,000
Income (loss) before minority interest and
income taxes............................. 1,086,000 (654,000) 432,000
Provision for income taxes................. -- 74,000 (3) 74,000
Minority interest expense.................. -- 206,000 (4) 206,000
Net income (loss).......................... 1,086,000 (934,000) 152,000
Basic and diluted net income per
share of common stock.................... $ 0.06(5)
Weighted average shares outstanding (basic
and diluted)............................. 2,750,000(5)
</TABLE>
19
<PAGE> 20
NOTES TO PRO FORMA SUMMARY
COMBINED STATEMENTS OF INCOME
(1) Represents additional operating expenses resulting from corporate expenses,
including officers' salaries, occupancy expenses, professional, legal,
public company and other corporate related expenses.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED JUNE MONTHS ENDED
30, 1998 SEPTEMBER 30, 1998
------------ ------------------
<S> <C> <C>
Officers salaries...................................... $ 390,000 $ 98,000
Occupancy expenses..................................... 150,000 38,000
Other corporate expenses............................... 460,000 114,000
---------- --------
$1,000,000 $250,000
</TABLE>
(2) Represents the additional interest expense on the $20 million of additional
debt incurred immediately prior to the Acquisition and the increase in
interest expense related to higher borrowing rates on the new revolving
credit facility as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
JUNE 30, 1998 SEPTEMBER 30, 1998
------------- ------------------
<S> <C> <C>
$20 million draw on TLC's revolving credit facility,
interest at an average rate of LIBOR + 175 basis
points................................................. $1,450,000 $363,000
Additional interest expense on historical outstanding
debt bearing interest at a rate of LIBOR + 175 basis
points (revolving credit facility rate) versus a
historical rate of LIBOR + 125 basis points............ 165,000 41,000
---------- --------
$1,615,000 $404,000
</TABLE>
(3) Represents the incremental provision for Federal and state income taxes
required on the earnings of TLC, in addition to the required adjustment for
the tax impact of the pro forma adjustments.
(4) Represents 33.3% of net income allocable to TLC's minority interest owner,
calculated as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
JUNE 30, 1998 SEPTEMBER 30, 1998
------------- ------------------
<S> <C> <C>
Historical TLC income before minority interest and
income taxes........................................... $ 3,741,000 $1,086,000
Less: Pro forma interest expense....................... (1,615,000) (404,000)
Less: C2 management fee charged to TLC................. (250,000) (63,000)
----------- ----------
1,876,000 619,000
Minority ownership percentage.......................... 33.3% 33.3%
----------- ----------
$ 625,000 $ 206,000
=========== ==========
</TABLE>
(5) Basic and diluted income per share have been calculated using the number of
shares required to complete the TLC acquisition and pay the expenses of the
offering.
20
<PAGE> 21
SELECTED HISTORICAL TLC FINANCIAL DATA
The following table sets forth certain selected historical financial data
for TLC as of and for each of the five years ended June 30, 1998 and as of June
30, 1998 and as of and for the three months ended September 30, 1998 and 1997.
The historical financial data as of and for each of the four years ended June
30, 1998 was derived from the financial statements of TLC, which were audited by
Arthur Andersen LLP, independent public accountants. The historical financial
data as of and for the year ended June 30, 1994 and as of and for the three
months ended September 30, 1998 and 1997 has not been audited. In the opinion of
TLC, the historical financial data as of and for the year ended June 30, 1994
and as of and for the three months ended September 30, 1998 and 1997 includes
all adjusting entries necessary to present fairly the information set forth
therein. The following selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and TLC's Financial Statements and related notes
thereto appearing elsewhere in this Prospectus.
SELECTED HISTORICAL TLC FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER MEMBERSHIP UNIT DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED JUNE 30,
-------------------- ------------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994(1)
---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues........................ $22,370 $23,047 $90,179 $ 84,208 $76,976 $71,029 $42,355
Income from operations.......... 1,764 1,947 6,974 6,311 5,689 7,555 4,611
Interest expense................ 621 773 2,854 3,216 3,176 3,378 3,003
Net income...................... 1,086 923 3,741 12,181(4) 1,536 2,562 995
Basic and diluted income per
membership unit(2)............ 1,086 923 3,741 12,181 1,536 2,562 995
OTHER DATA:
Capital Expenditures............ 546 839 2,283 3,294 17,646 7,552 3,146
Depreciation and amortization... 1,721 1,706 6,651 7,186 6,971 6,684 4,671
EBITDA(3)....................... 3,367 3,402 13,571 13,143 12,552 14,218 9,303
Cash flows from operating
activities.................... 1,768 2,841 12,305 9,294 11,043 10,180 7,121
Cash flows from investing
activities.................... (430) (839) (1,653) (1,822) (16,262) (7,116) (2,858)
Cash flows from financing
activities.................... (1,459) (1,648) (10,335) (7,277) 4,883 (3,247) (3,934)
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, AS OF JUNE 30,
-------------------- -----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994(1)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets..................... $86,290 $93,007 $85,611 $90,140 $97,923 $88,731 $87,079
Total Debt....................... 31,905 41,604 33,364 40,394 47,671 42,788 46,035
Total Member's Equity............ 44,983 42,058 43,897 43,461 31,280 29,744 27,182
</TABLE>
- -------------------------
(1) Effective January 4, 1994, Christiana consummated the acquisition of Total
Logistic Inc. The statement of income data and cash flow information for
fiscal 1994 reflects the combined operating results of Wiscold and Total
Logistic Inc. subsequent to its date of acquisition. The balance sheet data
reflects the combined results of these aforementioned entities as of June
30, 1994.
(2) Effective June 30, 1997, Wiscold and Total Logistic Inc. were merged to form
TLC. Basic and diluted income per membership unit for periods presented
prior to 1997 are shown as if the units had been outstanding for all periods
presented.
(3) EBITDA is defined as income (loss) before taxes plus fixed charges. Fixed
charges consist of interest expense, depreciation and amortization and gains
or losses on disposal of assets. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered as an alternative to net income as a measure of performance nor
as an alternative to cash flow as a measure of liquidity. Since all
companies do not calculate EBITDA uniformly, it may not be an accurate
measure of comparison.
(4) Includes $11,171 of income related to an adjustment of deferred income taxes
resulting from a change in TLC's tax status from a C-Corporation to a
limited liability company.
21
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 FOR TLC
In the quarter ended September 30, 1998 consolidated revenues were
$22,370,000 compared to $23,047,000 for the same period the prior year
reflecting a decrease of $677,000 or 2.9%. Revenues from transportation services
for the quarter showed a slight decline of $107,000 or 1.1%. The decline related
to a softening in some carrier management accounts over the prior year. Revenues
from non-refrigerated warehousing services declined for the quarter by $572,000
or 24.7% due to the closure of a contracted facility in Puerto Rico at the end
of the quarter last year and the reduction of public non-refrigerated
warehousing activities at the Zeeland, Michigan facility as TLC continues to
de-emphasize public non-refrigerated warehousing. Refrigerated warehousing
revenues increased $348,000 or 3.8% in the quarter. This growth is attributable
to new customers in the Rochelle, Illinois facility and expanded programs with
current customers in other facilities resulting in increased capacity
utilization for the balance of the refrigerated facilities. Distribution
services for the Michigan Department of Education were down in revenue for the
quarter by $161,000 or 8% due to changed buying patterns by the state that
reduced the volume of commodity products available for distribution. The balance
of the revenue decline was in international freight forwarding of $182,000 or
26%, due to reduced shipments by customers to Asian markets.
In the quarter gross profit was $3,737,000 or 16.7% compared to $3,846,000
or 16.7% for the same quarter ended September 30, 1997. Gross profit from
transportation services were down by $113,000 or 11.5% due to the decline in
revenue and compressed margins from carrier management operations resulting from
higher costs to acquire transportation in a tight freight market.
Non-refrigerated warehousing services posted an increase in gross profit of
$112,000 or 40.6%. Improved efficiencies in continuing facilities with
contracted customers contributed to the significant improvement. Refrigerated
warehousing services reflected flat performance in gross profit quarter to
quarter. Positive gross profit growth in Milwaukee and Rochelle Logistic Centers
were offset by lower results in the Beaver Dam Logistic Center due to vegetable
processing volumes being down from last year. Distribution services for the
Michigan Department of Education had a gross profit decline of $50,000 or 40.6%
related to reduced revenue and a change in the mix of products being delivered.
The balance of the shortfall in gross profit relates to start up costs for new
logistic accounts that did not generate any significant revenue for the quarter.
Selling, general and administrative expenses for the quarter were
$1,973,000 compared to $1,899,000 for the quarter ended September 30, 1997
reflecting an increase of $74,000 or 3.8%. The increase in these expenses is due
primarily to inflation.
Earnings from operations for the quarter ended September 30, 1998 were
$1,764,000 a decrease of $183,000 or 9.4%. The decrease in earnings from
operations is due to a decrease in margins coupled with a slight increase in
selling, general and administrative expenses.
Interest expense for the quarter was $621,000, which was a decrease of
$152,000 over the same quarter last year. Borrowings on bank financing lines
continue to decrease and reduce the interest expense paid to financial
institutions.
Net earnings for the quarter were $1,086,000 compared to $923,000 for the
same period last year for an increase of $163,000 or 17.7%. The decline in
operating profits were offset by a marked reduction in interest expense from
strong cash flow and related reductions in outstanding debt and lower borrowing
rates. No federal taxes were provided, as TLC is a limited liability company.
22
<PAGE> 23
TLC HISTORICAL INCOME STATEMENT INFORMATION
The following table sets forth, for the fiscal years ended June 30, 1998,
1997 and 1996 respectively, certain consolidated financial data for TLC,
expressed as a percentage of net sales, and the percentage changes in the dollar
amounts as compared to the prior period:
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
JUNE 30, PERCENTAGE CHANGE
----------------------- ------------------
1997 1996
1998 1997 1996 TO 1998 TO 1997
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... 100.0% 100.0% 100.0% 7.1% 9.4%
Warehouse and Logistic Expenses................... 84.3% 84.3% 84.4% 7.2% 9.3%
Selling and Administration........................ 8.0% 8.2% 8.2% 3.2% 9.4%
Income from operations............................ 7.7% 7.5% 7.4% 10.5% 10.9%
</TABLE>
COMPARISON OF YEAR ENDED JUNE 30, 1998 TO THE YEAR ENDED JUNE 30, 1997 FOR TLC
TLC's consolidated revenues for fiscal 1998 were $90,179,000 compared to
$84,208,000 reported for fiscal 1997, an increase of $5,971,000 or 7.1%. Revenue
growth at TLC was primarily attributable to volume increases in services which
includes carrier management services, transportation management services and
transportation operations. During fiscal 1998, revenues attributable to
transportation services increased $6,049,000 or 18.1% over the prior year due to
operation of an expanded fleet and strong demand. Revenue growth in refrigerated
warehousing services was $1,686,000 or 5.1% in fiscal 1998 due primarily to
increased utilization of existing facilities from both new and existing customer
relationships. Revenues from non-refrigerated warehousing operations in fiscal
1998 declined $3,599,000 or 29.9%, due to the closure of two facilities at the
end of fiscal 1997 consistent with TLC's strategy to de- emphasize public
non-refrigerated warehousing activities. The balance of the revenue increase in
fiscal 1998 of $1,835,000, is primarily attributable to expanded volume in
distribution services of food products to the State of Michigan Department of
Education under a new 5 year contract.
Gross profit for the year increased $887,000 or 6.7% to $14,122,000 from
$13,235,000 in 1997. Each of TLC's service lines with the exception of
non-refrigerated warehousing had increased gross profit due primarily to better
utilization of TLC's assets, improved productivity and strong cost controls.
Transportation services increased gross profit by $1,009,000 or 38.5%, due to
volume growth, higher utilization of revenue producing assets and an expanded
fleet compared to fiscal 1997. Refrigerated warehousing operations increased
gross profit by $465,000 or 6.0%, through increased capacity utilization of
facilities and strong cost control. Non-refrigerated warehousing had a decline
in gross profit of $494,000 or 26% primarily due to reduced revenues in this
area. Distribution services gross profit increased $240,000 or 49%, due to
higher volume attributable to a new 5-year contract with Michigan Department of
Education covering an expanded region of service.
Selling, general and administrative expenses, which include marketing and
advertising expenses, increased $224,000 or 3.2% for the fiscal year compared to
fiscal year 1997. The increase in these expenses is due primarily to increases
associated with inflation.
Income from operations for the fiscal year ended June 30, 1998 increased
$663,000 or 10.5% from $6,311,000 in 1997 to $6,974,000 in 1998. Revenue growth,
especially in Transportation services, was the primary reason for increased
operating income and higher operating margin.
Interest expense for the fiscal year was $2,854,000, a reduction of
$362,000 from the prior year of $3,216,000. Interest expense in fiscal 1998 was
lower due to strong cash flow which enabled over $9,000,000 of debt reduction
during the year.
Pretax income for the fiscal year was $3,741,000, an increase of $2,036,000
or 119.4% over fiscal year 1997. Strong growth and margins in transportation and
the improved capacity utilization in refrigerated warehousing were the main
operational contributors to these results. The 1998 pretax results include
one-time non-operating expenses totaling $325,000. This amount is made up of
$200,000 associated with the closure
23
<PAGE> 24
and sale of Wisconsin Logistic Center. The remaining $125,000 in costs were
expenses attributable to financing requirements related to the merger between
Christiana and Weatherford. Pretax results for fiscal 1997 included a loss of
$1,086,000 for the disposal of special freezing equipment in connection with
securing a long-term contract for vegetable processing, freezing and warehousing
with a major customer at the Beaver Dam facility.
No provision for income taxes was recorded for the fiscal year because TLC
was a limited liability company for this period. For the fiscal year 1997, TLC
recorded an income tax provision of $695,000.
COMPARISON OF YEAR ENDED JUNE 30, 1997 TO THE YEAR ENDED JUNE 30, 1996 FOR TLC
Total revenue for fiscal 1997 increased $7,232,000 or 9.4% to $84,208,000
compared to fiscal 1996 due primarily to increased volume in transportation and
refrigerated warehousing services. The most significant improvement was in
revenue from transportation operations which increased 20.6% over the previous
year, from $27,677,000 in fiscal 1996 to $33,392,000 in fiscal 1997. During
fiscal 1997, TLC secured a large multi-year contract to provide transportation
services to a major frozen food producer. This contract, and certain management
changes, enabled TLC to improve significantly the operating performance in
transportation-related logistic services during fiscal 1997. Refrigerated
warehousing service revenue increased 5.7% from $35,428,000 to $37,450,000 due
primarily to increased utilization of expanded capacity at the Rochelle Logistic
Center and higher utilization at all the Michigan based refrigerated facilities
during fiscal 1997. In late fiscal 1997, TLC closed two non-refrigerated 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
non-refrigerated warehousing operations. As a result of these strategic changes,
revenue for non-refrigerated 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. Non-refrigerated warehousing and added
transportation expenses had a negative impact on gross profits by $358,000 due
to changes related to warehouse closures and corporate restructuring.
Selling, general and administrative expenses increased $593,000 or 9.4% in
fiscal 1997, due in large part to increased activities in marketing and sales.
Income from operations increased by $622,000 or 10.9% over fiscal 1996.
Operating income in 1997 was $6,311,000 compared to $5,689,000 in 1996. This
increase was due primarily to volume and productivity gains in transportation
operations.
Interest expense for the year was $3,216,000 compared to $3,176,000 in
fiscal 1996.
Pre-tax income was $1,705,000, a decrease of $906,000 compared to fiscal
1996, due primarily to a loss of $1,036,000 related to the disposal of special
freezing equipment in connection with securing a longer term contract for
vegetable processing, freezing and warehouse services with a major customer of
the Beaver Dam Logistic Center.
The provision for taxes for fiscal year 1997 was $695,000 compared to
$1,075,000 for 1996. The effective tax rates for the two years were the same. In
1997, an adjustment of $11,171,000 was made to add to income the deferred income
taxes that resulted from a change in TLC's tax status from a C-corporation to a
limited liability company.
Net income for 1997 was $12,181,000, up from $1,536,000 in 1996 based on
the results of operations and the change in the tax status that eliminated the
deferred taxes as of 1997.
24
<PAGE> 25
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES FOR C2 AND TLC
C2's current sources of capital to fund corporate expenses are management
fees of $250,000 payable by TLC, short-term investments which are expected to be
$10,289,000, assuming the Offering is fully subscribed, and the income on such
investments.
C2 will continue to evaluate new acquisitions in areas strategic to
existing operations as well as new lines of business. Future acquisitions may be
funded through the proceeds of this offering, cash from operations, borrowings
under the existing line of credit or other credit facilities, along with
potential future equity issuances.
TLC has historically funded its operations and capital expenditures with
cash flow from operations supplemented by its revolving credit facility. Net
cash provided from operations was $12,305,000 in fiscal 1998 compared to
$9,294,000 in fiscal 1997, primarily as a result of an increase in earnings
after considering the elimination of $11,171,000 of income related to an
adjustment of deferred income taxes resulting from a change in TLC's tax status
from a C-Corporation to a limited liability company during fiscal 1997. Net cash
provided from operations was $1,768,000 in the three months ended September 30,
1998 compared to $2,841,000 in the three months ended September 30, 1997,
primarily as a result of changes in TLC's working capital between years.
Net cash used in investing activities for TLC for the fiscal year ended
June 30, 1998 decreased to $1,653,000 from $1,822,000 in fiscal 1997. The
decrease between years is primarily the result of a decrease in capital
expenditures.
Net cash used in financing activities for the fiscal year ended June 30,
1998 increased to $10,335,000 from $7,277,000 during the fiscal year ended June
30, 1997. The increase in cash used in financing activities is primarily due to
distributions made to Christiana related to the retirement of a promissory note
and payment of income taxes in the amount of $2,326,000 and $979,000,
respectively.
In January 1997, TLC increased its transportation fleet by assuming the
leases for 60 additional tractors and 75 additional trailers from one of its
customers. The addition of these tractors and trailers represented approximately
a 50% increase in TLC's transportation fleet.
TLC has available to it a revolving credit facility of $70,000,000 at a
floating rate of LIBOR plus 175 basis points to finance its capital needs, the
$20 million dividend to Christiana and the repayment of the note to Christiana
in the amount of $3 million, plus interest. After the offering, TLC will have
approximately $17 million of additional available borrowings under its credit
facility.
As of September 30, 1998, TLC had no significant capital commitments.
TLC believes the future cash generated from operations will be more than
adequate to service its debt requirements and future capital expenditures for
the foreseeable future.
YEAR 2000
During fiscal 1998, TLC completed a comprehensive assessment of Year 2000
issues for both its financial information systems and other non-financial
systems. In the opinion of management, all hardware and software that could have
a significant Year 2000 impact have been identified and a remediation plan has
been implemented. Year 2000 issues for financial information systems are being
corrected through hardware and software upgrades. Non-financial systems,
primarily telephone and security, will be repaired or replaced in order to
achieve Year 2000 compliance. Based upon TLC's current projections, all Year
2000 compliant systems, both financial and non-financial, will be implemented no
later than January 1, 1999 to allow for sufficient testing. As of September 30,
1998, TLC was approximately 70% complete with the installation of its Year 2000
upgrades. By the time these upgrades are completed, TLC estimates that it will
have expended approximately $950,000 to resolve its Year 2000 problems.
TLC believes that its efforts are sufficient to address its Year 2000
problem. However, there can be no assurances that TLC will be successful in its
efforts. Any failure to address the Year 2000 problem may have a
25
<PAGE> 26
material adverse effect on TLC's ability to provide its transportation and
warehousing services and process vital financial data. This could result in
material lost revenues to TLC in amounts which are not known at this time. TLC
currently has no contingency plans if its efforts to address the Year 2000
problem fail. After TLC has completed the upgrades described above, contingency
plans will be developed.
TLC has solicited all of its major service providers concerning their
progress in compliance with the Year 2000 problem. TLC has received responses
and is not aware of the inability of any service provider to address its Year
2000 problem.
DESCRIPTION OF CREDIT AGREEMENT
TLC entered into a credit agreement, dated November 2, 1998, with Firstar
Bank Milwaukee, N.A. and certain other banks. Subject to the achievement of
certain financial ratios and compliance with certain conditions, TLC has the
right to obtain revolving loans in the following outstanding principal amounts:
<TABLE>
<CAPTION>
MAXIMUM AMOUNT
OF REVOLVING LOANS
TIME PERIOD OUTSTANDING
----------- ------------------
<S> <C>
Closing date through November 2, 1999....................... $70 million
November 3, 1999 through November 2, 2000................... $68.75 million
November 3, 2000 through November 2, 2001................... $64.35 million
November 3, 2001 through November 2, 2002................... $59.35 million
November 3, 2002 through November 2, 2003................... $53.35 million
</TABLE>
The entire unpaid principal balance of loans made under the credit agreement
will be due and payable on November 2, 2003.
The proceeds of the initial loans under the credit agreement were used to
refinance existing indebtedness of TLC in the amount of approximately
$32,000,000. Additional loans will be used to finance the payment of the $20
million dividend from TLC to Christiana and finance the repayment of
approximately $3 million, plus accrued interest under a note to Christiana. The
available balance of the facility, estimated to be approximately $17 million
after completion of this offering will be available for working capital and
general corporate purposes, including the issuance of letters of credit of up to
$3.5 million outstanding at any one time.
The credit agreement will be secured by liens or security interests on all or
substantially all of the assets of TLC, other than certain transportation
equipment, and mortgages on its real estate.
The interest rate on borrowings under the credit agreement is expected to be, at
the option of TLC, LIBOR plus 175 basis points or the prime rate, less 25 basis
points. These rates will vary over the term of the credit agreement pursuant to
a pricing grid based on the ratio of consolidated funded debt to consolidated
EBITDA, all as defined in the credit agreement, in accordance with the following
table:
APPLICABLE PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE FOR APPLICABLE APPLICABLE
CONSOLIDATED EURODOLLAR PERCENTAGE FOR PERCENTAGE FOR
PRICING FUNDED DEBT REVOLVING PRIME RATE LETTER OF
LEVEL RATIO LOANS LOANS CREDIT FEE
- ------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
7 >4.5:1.0 2.25 0.00 1.25
6 <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5 <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4 <3.5:1.0 but >3.0:1.0 1.50 (0.50) 1.25
3 <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2 <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1 <2.0:1.0 0.75 (1.00) 1.25
</TABLE>
26
<PAGE> 27
The credit agreement also contains provisions requiring TLC to reimburse its
lenders for increases in certain taxes, revenue requirements and other costs
incurred by such lenders.
Loans made under the credit agreement may be prepaid in whole or in part
without premium or penalty, except for reimbursement of the lenders for any
losses the lenders suffer as a result of repayment of LIBOR-based loan prior to
the last day of that applicable interest period.
Events of default under the credit agreement, include without limitation,
those relating to:
- non-payment of interest, principal or fees payable under the credit
agreement;
- inaccuracy of representations or warranties in the loan documents;
- non-performance of covenants;
- cross-default to other material debt of TLC and its subsidiaries;
- bankruptcy or insolvency;
- judgments in excess of specified amounts;
- certain ERISA events;
- impairment of security interests in collateral;
- invalidity of guarantees;
- materially inaccurate or false representations or warranties; and
- a change in control.
27
<PAGE> 28
BUSINESS
GENERAL
C2. C2 incorporated on December 11, 1997 and has conducted no operations
to date. Following this offering, C2's only non-cash asset will be its 66%
ownership interest in TLC. C2 intends to pursue acquisitions of businesses which
may or may not relate to the business of TLC.
TLC. TLC was formed on June 30, 1997 through a combination of the
operations of two wholly-owned subsidiaries of Christiana, Wiscold and Total
Logistic Inc. On September 1, 1992, Christiana acquired the assets of Wiscold, a
company formed in 1915, which engaged in providing public refrigerated
warehousing services, vegetable processing and freezing services, automated
vegetable packaging services, and transportation services into and out of its
facilities. On January 4, 1994, Christiana acquired Total Logistic Inc., a
Zeeland, Michigan-based firm engaged in providing fully integrated warehousing,
distribution and transportation services in both refrigerated and
non-refrigerated facilities.
TLC's transportation fleet is comprised of 175 tractors, 97 of which are
0-3 years old; 78 of which are 4-6 years old; and none of which are older than 6
years.
TLC's customers consist primarily of national, regional and local firms
engaged in food processing, consumer product manufacturing, wholesale
distribution and retailing. During fiscal 1998, TLC's top 10 customers accounted
for approximately 43% of total revenues. TLC serves approximately 1,450
customers.
Other Assets and Liabilities. Prior to Weatherford's acquisition of
Christiana, Christiana will contribute certain assets and liabilities to TLC for
no consideration. On the asset side, these items consist primarily of mortgage
notes receivable derived from certain condominium sales by Christiana which, as
of September 30, 1998, had an aggregate principal amount outstanding of $187,000
accruing interest at 8.25% and approximately $899,000 of cash surrender value of
life insurance. In addition, Christiana has already contributed to TLC
approximately 1.9 acres of undeveloped, partially submerged land in Huntington
Beach, California with a current book value of $0. This property is currently
subject to an easement granted in favor of the City of Huntington Beach.
Christiana is currently pursuing a change in zoning applicable to the property
in order to conduct residential development on the property. The outcome of
these efforts, and the value of the property if such efforts are successful, are
unable to be predicted at this time. On the liability side, the items
contributed by Christiana consist of accounts payable and accrued liabilities
including compensation, vacation, insurance benefits and taxes in the aggregate
amount of $1,754,000.
STRATEGY
TLC's strategy is to grow its business by emphasizing and enhancing its
ability to offer "one-stop shopping" to its customers through its wide variety
of services. TLC believes that its asset base of refrigerated and
non-refrigerated warehouses and trucking operations, together with its expertise
in transportation and inventory management strategy and solutions, provides it
with an advantage over its competitors. TLC's competitors provide individual
services such as warehousing, transportation and freight forwarding in
substantially the same manner as TLC. Some TLC competitors provide only
transportation services or warehousing services. Others provide only management
services. TLC provides all of these services in an integrated fashion. This
provides more efficient distribution programs and reduced inventory for its
customers. It is the goal of TLC to continue to enhance the services that it
provides to its customers by continuing to develop solutions involving multiple
services throughout the entire supply chain from the manufacturer to end
consumer.
TLC's strategy is based on its belief that competitive market forces are
requiring corporations to focus on core competencies leading more corporations
to outsource transportation services and distribution functions. In addition,
TLC believes that corporations are recognizing, on an increasing basis, that
properly provided transportation services will provide enhanced inventory
management, more responsive information systems and more efficient use of
trucking capacity.
28
<PAGE> 29
REVENUE BY BUSINESS
TLC's revenue for each of its basic businesses are detailed below for
fiscal years ended June 30, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
REVENUES
------------------------------------------
1998 1997 1996
------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Refrigerated.......................................... $44 49% $38 45% $35 45%
Dry Warehousing....................................... 8 9% 12 14% 14 18%
Transportation........................................ 39 43% 33 39% 28 36%
International......................................... 2 2% 3 4% 3 4%
Eliminations.......................................... (3) (3%) (2) (2%) (3) (3%)
--- --- --- --- --- ---
Total Revenues.............................. $90 100% $84 100% $77 100%
=== === === === === ===
</TABLE>
CUSTOMERS
TLC's services target the consumer goods industries; industries in which
logistics performance is important to success. Nearly 75% of TLC's revenues come
from food manufacturers, food wholesalers and food retailers.
While TLC's top 15 customers, all of which participate in the food
industry, account for 60% of revenues, no one customer represents more than 10%
of TLC's business. Beyond the food industry, the balance of TLC's customer base
is spread across a broad base of industries including pharmaceuticals,
automotive suppliers, building supplies and office furniture.
COMPETITION
Competition in TLC's industry is very fragmented. Leonard's Guide, a
leading industry publication, lists more than 1500 companies competing in the
United States marketplace. Companies, such as Exel, AmeriCold Logistics,
Prologis, Inc., GATX Logistics, Inc., or Ryder Integrated Logistics, Inc. own
and operate warehouses and/or transportation equipment. Others, such as Hub
Group Logistics Services, Menlo Logistics, and C.H. Robinson Logistics offer
transportation management expertise and information systems and subcontract
warehousing and transportation services.
TLC experiences competition for management services on a national basis. In
its warehousing and transportation business, TLC competes on a regional and
local basis. Other than the high capital requirements of building a refrigerated
warehouse facility, there are no significant barriers to entry into any of the
markets in which TLC operates. This permits a large number of smaller
competitors to enter TLC's industry.
In addition, TLC's customers, many of which have substantially greater
resources than TLC, may divert business from TLC's warehousing and
transportation operations by building their own warehouse facilities or
operating their own transportation fleet.
ORGANIZATION
TLC's operations are headquartered in Zeeland, Michigan, and TLC also
maintains an office in Milwaukee, Wisconsin. TLC is organized into three main
operating units: refrigerated warehousing, non-refrigerated 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.
29
<PAGE> 30
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; non- refrigerated warehousing team;
transportation team; and logistics sales team. Each of these teams has primary
responsibility for selling their specific services. The goal is to develop the
sales team to effectively present the fullest extent of TLC's services suited
for each customer.
Marketing and advertising is done centrally for the entire company and uses
a combination of media advertising and direct mail. The marketing organization
also has responsibility for maintaining and gathering information on market
intelligence related to competition, customers and the transportation and
warehousing industry in general.
Business development supports both sales and operations by providing
pricing and costing services and assisting in the startup of complex
transportation and distribution projects.
EMPLOYEES
The only employees of C2 are the executive officers described under
"Management -- Executive Officers and Directors of C2." TLC had approximately
737 employees as of September 30, 1998. A breakdown of the employees by
functional area is set forth below:
<TABLE>
<CAPTION>
FUNCTION NUMBER OF EMPLOYEES PERCENTAGE OF TOTAL
-------- ------------------- -------------------
<S> <C> <C>
Operations................................................. 484 65.7%
Transportation............................................. 192 26.1%
Administration............................................. 51 6.9%
Sales and Marketing........................................ 10 1.3%
--- -----
Total............................................ 737 100%
</TABLE>
No TLC employees are covered by union contracts.
PATENTS, LICENSES AND TRADEMARKS
TLC's operations are not dependent on any particular patent, license,
franchises, or trademarks. TLC has registered a trademark and the name "TLC"
with the United States Patent and Trademark office.
GOVERNMENT REGULATIONS
TLC's transportation operations in interstate commerce are regulated by the
Interstate Commerce Commission 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. 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.
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 any federal or state agencies could result in
substantial fines or revocation of TLC's operating authority.
30
<PAGE> 31
PROPERTIES
As of September 30, 1998, TLC owned or leased twelve facilities in five
states. Of this total, seven are refrigerated with the balance being
non-refrigerated facilities. The refrigerated facilities are operated through
seven public refrigerated warehouses located in Wisconsin (2), Michigan (3), and
Illinois (2). TLC's refrigerated facilities are large single-story buildings
constructed at dock height with full insulation and vapor barrier protection.
The refrigeration is provided by screw-type compressors in ammonia-based cooling
systems. These facilities are strategically located and well served by rail and
truck.
In addition to the refrigerated facilities discussed above, there are five
public non-refrigerated warehouse distribution facilities, three of which are
located in Michigan and one in each of Indiana and New Jersey. Zeeland Logistic
Center II, located in Zeeland, Michigan is a company owned facility. All other
non-refrigerated 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
non-refrigerated facilities are approved as food grade storage facilities.
The following tables list the twelve facilities by location, size, type,
and if owned or leased. Other than as indicated, all facilities are owned.
REFRIGERATED WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE SPACE TYPE OF
FACILITY LOCATION (CUBIC FEET IN MILLIONS) FACILITY
-------- -------- ------------------------ --------
<S> <C> <C> <C>
Rochelle Logistic Center I......... Rochelle, Illinois #1 10.6 Distribution
Rochelle Logistic Center II........ Rochelle, Illinois #2 3.5 Distribution
Beaver Dam Logistic Center......... Beaver Dam, Wisconsin 7.2 Distribution/
Production
Milwaukee Logistic Center.......... Wauwatosa, Wisconsin 4.3 Distribution
Holland Logistic Center(1)......... Holland, Michigan 2.1 Distribution/
Production
Kalamazoo Logistic Center I(2)..... Kalamazoo, Michigan 3.3 Distribution
Kalamazoo Logistic Center II....... Kalamazoo, Michigan 2.8 Distribution
----
TOTAL 33.8
====
</TABLE>
DRY WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE
SPACE (SQ. FT. TYPE OF
FACILITY LOCATION IN THOUSANDS) FACILITY
-------- -------- -------------- --------
<S> <C> <C> <C>
Zeeland Logistic Center I(1)....................... Zeeland, MI 202 Public
Zeeland Logistic Center II......................... Zeeland, MI 220 Public
Michigan Distr. Center I(1)........................ Kalamazoo, MI 88 Public
Munster Logistic Center(1)......................... Munster, IN 125 Public
Dayton Logistic Center(1).......................... Dayton, NJ 90 Public
---
TOTAL.............................................. 725
===
</TABLE>
- -------------------------
(1) Leased facility
(2) Includes 1.8 million cubic feet of non-refrigerated storage capacity.
DESCRIPTION OF PROPERTIES
A brief description of each of the Properties follows, listed
alphabetically by state and city.
31
<PAGE> 32
ILLINOIS PROPERTIES
<TABLE>
<S> <C>
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
</TABLE>
Rochelle Cold Storage campus is TLC's newest and largest refrigerated facility,
initially constructed in 1986. TLC believes that Rochelle Cold Storage is one of
the largest and most modern cold storage warehouse facilities in the United
States. Currently this facility is comprised of 14,100,000 cubic feet of
capacity after undergoing four capacity expansions in 1988, 1990, 1993, and
1996. All space is capable of temperatures of - 20(0)F to ambient. Rochelle Cold
Storage is strategically located at the intersection of two main line East-West
railroads, the Burlington Northern and the Chicago Northwestern, and the cross
roads of interstate highways I 39 and I 88. Rochelle Cold Storage serves
primarily distribution customers in the Midwest.
INDIANA PROPERTIES
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with access
to major north-south and east-west highways. The facility has access to rail
through Conrail and is a food grade warehouse. The total facility has available
125,000 square feet of non-refrigerated 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
rail spur with two refrigerated rail docks. This facility is held under a lease
which expires December 31, 2000.
<TABLE>
<S> <C>
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
</TABLE>
Kalamazoo Logistic Center campus has two distribution centers at this location.
Facility #1 is a 3,300,000 cubic foot facility with 1,100,000 cubic feet of
freezer capacity, 400,000 cubic feet of cooler capacity and 1,800,000 cubic feet
of non-refrigerated 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.
32
<PAGE> 33
<TABLE>
<S> <C>
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
</TABLE>
Zeeland Logistic Center campus has two facilities each of which provide
non-refrigerated 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.
NEW JERSEY PROPERTIES
Dayton Logistic Center
260 Docks Corner Road
Dayton, New Jersey 08810
Dayton Logistic Center provides warehousing and distribution services for
customers to the northeast region of the country. The facility has both
contractual and short term customers and operates as a public warehouse. In
total, the facility has 90,000 square feet of non-refrigerated storage capacity.
WISCONSIN PROPERTIES
Beaver Dam Logistic Center
1201 Green Valley Road
Beaver Dam, WI 53916
Beaver Dam Logistic Center was originally constructed in 1975. Since 1975, this
facility has undergone three freezer additions, the most recent in 1991, and is
comprised of 7,200,000 cubic feet of freezer storage space. Beaver Dam Logistic
Center serves distribution related customers as well as vegetable and cranberry
processors. This facility's unique capabilities involve value added services for
vegetable processors including freezing, blanching, slicing, dicing and food
service and retail poly bag packaging operations.
Milwaukee Logistic Center
11400 West Burleigh Street
Wauwatosa, WI 53222
Milwaukee Logistic Center was originally constructed in 1954. There have been
six expansions of this facility. The Milwaukee Logistic Center facility
comprises 4,300,000 cubic feet of which 3,754,000 cubic feet is freezer capacity
and 546,000 cubic feet is cooler space. This facility has multi-temperature
refrigerated storage ranging from -20(0)F to +40(0)F and daily blast freezing
capacity of 750,000 pounds. This location has a 7-car private rail siding. An
additional 3,000,000 cubic feet of company owned refrigerated and processing
space adjacent to the Milwaukee Logistic Center facility is leased on a long
term basis to a third party retail grocery company.
LEGAL PROCEEDINGS
As of the date of this Prospectus, C2 has never been a party to any legal
proceeding. From time to time, TLC is named as a defendant in actions arising
out of the normal course of its business. As of the date of this Prospectus, TLC
is not a party to any pending legal proceeding that it believes to be material.
33
<PAGE> 34
THE TLC PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the agreement by
which C2 will acquire two-thirds of TLC. The complete agreement is attached as
Annex A. You are encouraged to read Annex A.
PURCHASE PRICE
Immediately before Weatherford's acquisition of Christiana, C2 will acquire
two-thirds of TLC for an aggregate purchase price of $10,666,667. The purchase
price is payable no later than thirty (30) days following Weatherford's
acquisition of Christiana. Accordingly, C2's purchase of TLC will be completed
with the obligation of C2 to pay the purchase price no later than thirty (30)
days later.
ASSUMPTION OF LIABILITIES
C2 and TLC agreed to assume certain liabilities of Christiana arising prior
to Weatherford's acquisition of Christiana, including without limitation,
liabilities resulting from:
- the business, operations or assets of Christiana or any Christiana
affiliate;
- any taxes for which Christiana or any Christiana affiliate may be
obligated except for Christiana taxes expressly retained by
Christiana;
- 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;
- any product or service provided by Christiana or any Christiana
affiliate; and
- Weatherford's acquisition of Christiana or C2's acquisition of TLC or
any related transactions.
Certain accounts payable as well as tax liabilities for Weatherford income
attributable to Christiana will be retained by Christiana.
INDEMNIFICATION OBLIGATIONS
TLC and C2 have agreed to indemnify, defend and hold Christiana,
Weatherford and affiliates of Weatherford harmless against liabilities that such
parties incur as a result of:
- any breach of any covenant or agreement of TLC or C2 contained in the
agreement by which C2 will acquire TLC or any other related agreement;
- the acts or omissions of Christiana or any Christiana affiliate on or
before the date on which Weatherford acquires Christiana;
- the Christiana liabilities assumed by C2 and TLC;
- any taxes as a result of Weatherford's acquisition of Christiana
failing to be a partially tax-free reorganization;
- environmental liabilities of Christiana or any Christiana affiliate
arising out of acts or omissions before Weatherford's acquisition of
Christiana;
- any liability relating to Christiana's 401(k) Plan and the other
employee benefit or welfare plans of Christiana or any Christiana
affiliate arising out of circumstances occurring on or prior to
Weatherford's acquisition of Christiana.
CHRISTIANA "PUT" AND PARTICIPATION RIGHTS
The agreement also provides that at any time after the fifth anniversary of
Weatherford's acquisition of Christiana, Christiana has the option to sell to C2
or TLC, and C2 or TLC will be obligated to purchase, Christiana's one-third
ownership interest in TLC for $7 million. In addition, if there is a change of
control of C2 or C2 proposes to sell its interest in TLC to an unrelated third
party, Christiana has the right, but not the obligation, to participate in such
transaction with respect to its one-third interest in TLC by selling its
interest to C2 for the same equivalent consideration.
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<PAGE> 35
THE OPERATING AGREEMENT
The following is a brief summary of certain provisions of the Operating
Agreement between C2 and Christiana as the two members of TLC. The complete
Operating Agreement is attached as Annex B. You are encouraged to read Annex B.
GENERAL
The Operating Agreement sets forth the terms and conditions of C2's and
Christiana's interests in TLC following Weatherford's acquisition of Christiana.
The Operating Agreement provides that TLC is a Delaware limited liability
company.
MEMBERS
The initial members of TLC are C2 and Christiana. Additional members may be
admitted to TLC only with the unanimous vote or written consent of C2.
ALLOCATIONS
All items of income, gain, loss or deduction of TLC will be allocated among
C2 and Christiana in proportion to their respective ownership interests.
DISTRIBUTIONS
In order to permit the members to make their required estimated income tax
payments as a result of their ownership interests in TLC, TLC will make
mandatory distributions to the members in amounts sufficient to cover the
members' respective tax liabilities. TLC may make additional distributions to
the members in proportion to their respective ownership interests only upon the
agreement of both C2 and Christiana.
MANAGEMENT
The Management of TLC is vested in a board of managers. The initial board
of managers will consist of six managers, including William T. Donovan, Bernard
J. Duroc-Danner, Curtis W. Huff, Sheldon B. Lubar, John R. Patterson and Gary R.
Sarner. See "Management-Executive Officers and Prospective Managers of TLC".
Generally each manager is elected by the vote or written consent of the members
holding at least a majority of ownership in TLC. However, Christiana and C2 will
be entitled to elect, without the consent of any other member, a number of
managers that is proportionate to their respective ownership interests. The
operating agreement provides that the board of managers may not cause TLC to
take certain specified actions without the prior approval of all of the members.
Such matters include:
- the authorization or issuance of additional ownership interests
- the authorization or payment of any distribution, except for the
payment of any distribution that is necessary for C2 to fulfill its
purchase obligation with respect to Christiana's interest in TLC
- purchase or acquisition by TLC or any subsidiary of TLC of ownership
interests in TLC
- approval of any merger, consolidation or similar transaction or sale
of all or substantially all of the operating assets of TLC
- the creation of any new subsidiary of TLC
- the liquidation or dissolution of TLC or any subsidiary of TLC
- any transaction between TLC or subsidiary of TLC and any affiliate of
a member
- any amendment to the operating agreement and
- any other matter for which approval of members is required under the
Delaware Limited Liability Company Act.
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<PAGE> 36
TLC will generally indemnify the managers to the fullest extent permitted
under the Delaware Limited Liability Company Act against any losses incurred by
reason of any act or omission in connection with the business of TLC. The board
of managers may appoint officers of TLC to perform such duties as are set forth
in the operating agreement or as specified by the board of managers. The board
of managers may authorize TLC to pay the officers any reasonable fees for their
services. Neither the members nor the managers are required to devote their full
time and efforts to TLC. TLC will pay C2 an annual management fee of $250,000.
ASSIGNMENT, TRANSFER AND REPURCHASE OF A MEMBER'S UNITS
Generally, neither C2 nor Christiana may transfer its interest in TLC
without the prior written consent of all of the board of managers. At any time
after the fifth anniversary of Weatherford's acquisition of Christiana,
Christiana may transfer any or all of interest in TLC to any person. However, C2
will have a right of first refusal to purchase Christiana's interest for the
same price and at the same terms as such interest has been offered to the
transferee.
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<PAGE> 37
HOW TO PARTICIPATE IN THE OFFERING
LETTER OF TRANSMITTAL
Each Christiana shareholder has a right to subscribe for one share of C2
common stock for each share of Christiana common stock held immediately before
Weatherford's acquisition of Christiana.
Prior to February 5, 1999, each Christiana shareholder should provide to
Firstar Bank Milwaukee, N.A. Letters of Transmittal electing one of the
following:
- To reconfirm the prior election pursuant to the letter of
transmittal provided on July 13, 1998
- To purchase no shares of C2 common stock
- To purchase as many shares of C2 common stock as possible using the
cash consideration to be received in Weatherford's acquisition of
Christiana
- To purchase a stated number of shares of C2 common stock using a
portion of the cash consideration
- To purchase all shares of C2 common stock to which such Christiana
shareholder is entitled using the cash consideration, together with
an additional payment
- To purchase all shares of C2 common stock to which such Christiana
shareholder is entitled, plus a stated number of additional shares
using the cash consideration and an additional payment.
Within 30 days of Weatherford's acquisition of Christiana, Weatherford will
pay to Firstar Bank Milwaukee, N.A. the cash consideration due to such
Christiana shareholder and Firstar Bank Milwaukee, N.A. will apply such cash
consideration in the manner directed by the letter of transmittal submitted by
such Christiana shareholder.
Because the cash consideration may be less than $4.00 per share, an
election to purchase C2 common stock may require an additional cash payment. The
amount of the additional cash payment will be set forth in an invoice sent by C2
to the subscriber setting forth the amount owed. This invoice must be paid, in
the form of a check made payable to "Firstar Bank Milwaukee, N.A." within 15
days of receipt. For example, if a Christiana shareholder holds 1,000 shares of
Christiana common stock and wishes to purchase 1,000 shares of C2 common stock
in this offering, $3,900 (assuming the cash consideration equals $3.90 per
share, $3.90 multiplied by 1,000) will be applied automatically by Firstar Bank
Milwaukee, N.A., and the Christiana shareholder will be invoiced for the $100
difference ($4,000 total subscription price less the $3,900 paid automatically
by Firstar Bank Milwaukee, N.A.). The Christiana shareholder will then satisfy
such invoice in the form of a check made payable to "Firstar Bank Milwaukee,
N.A."
The method of delivery of letters of transmittal, subscription agreements
and payment of the subscription price to Firstar Bank Milwaukee, N.A. will be at
the election and risk of the Subscriber, not C2, Christiana, TLC, Weatherford,
Firstar or any affiliates thereof. If sent by mail, it is recommended that the
letter of transmittal and/or subscription agreement be sent by registered mail,
properly insured, with return receipt requested, and that a sufficient number of
days be allowed to ensure receipt by Firstar Bank Milwaukee, N.A. prior to
February 5, 1999.
Record holders of shares of Christiana common stock, such as brokers,
trusts or depositaries for securities, who hold the shares for the account of
others, should notify the respective beneficial owners of the shares as soon as
possible to ascertain the beneficial owners' intentions and instructions with
respect to the purchase of C2 common stock. Based upon the instructions received
from the beneficial holders, the record holders should complete the Letters of
Transmittal and submit them with the applicable payment.
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<PAGE> 38
SUBSCRIPTION PRICE
The subscription price for the C2 common stock was determined by the board
of directors and is not based on an independent valuation. In setting the price,
C2 considered primarily the price to be paid for its two-thirds interest in TLC
and the potential usefulness of the excess funds to be generated from the
offering. These factors, taken together, formed the basis of the $4.00 per share
price for the C2 common stock. Other secondary factors were also considered
including the desire to simplify the process of Christiana shareholders
purchasing C2 common stock by setting a price which would be proximate to the
cash consideration per share to be received from Weatherford in connection with
its acquisition, while at the same time, meeting the minimum initial bid price
of $4.00 per share for the C2 common stock to qualify for listing on the Nasdaq
SmallCap Market.
NON-CHRISTIANA SHAREHOLDERS
C2 will not advertise to or solicit investments from the general public.
The general public may purchase shares of C2 common stock remaining after
Christiana shareholders make their elections by requesting a prospectus from C2
and delivering a properly completed and executed subscription agreement on or
before February 5, 1999 to Firstar Bank Milwaukee, N.A., together with payment
in full in the form of a check made payable to "Firstar Bank Milwaukee, N.A."
LUBAR FAMILY COMMITMENT
The Lubar family committed to purchase a minimum of 2,750,000 shares of C2
common stock to ensure that the net proceeds of this offering to C2 will be at
least $10,666,667. This will allow C2 to have sufficient funds to acquire
two-thirds of the ownership interest of TLC. Members of the Lubar Family may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933. If
members of the Lubar Family are deemed to be underwriters, they will not be able
to resell their shares of C2 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.
CERTIFICATES
Certificates for shares of C2 common stock will be mailed as soon as
practicable after the subscriptions have been accepted by Firstar Bank
Milwaukee, N.A.
SUBSCRIPTION AGENT
The subscription agent is Firstar Bank Milwaukee, N.A. The address to which
Letters of Transmittal and subscription agreements should be delivered, whether
by hand, by mail or by overnight courier, is:
Firstar Bank Milwaukee, N.A.
1555 North River Center Drive
Suite 301
Milwaukee, Wisconsin 53212
QUESTIONS
All questions regarding the timeliness, validity, form and eligibility of
any subscription will be determined by C2, in its sole discretion, whose
determination will be final and binding. C2 reserves the absolute right to
reject any subscription if such subscription is not in proper form or if the
acceptance thereof or the issuance of shares of C2 common stock pursuant thereto
could be deemed unlawful. C2, in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine. Any questions or requests for assistance concerning
the method of subscribing for shares of C2 common stock should be directed to
William T. Donovan (414) 291-9000.
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<PAGE> 39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE C2
The following table contains the name, age and position with C2 of each
executive officer and director as of June 30, 1998. Each person's respective
background is described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William T. Donovan................ 46 Chairman and Director
David J. Lubar.................... 43 President and Director
Oyvind Solvang.................... 39 Vice President
David E. Beckwith................. 70 Secretary
Nicholas F. Brady................. 68 Director
Sheldon B. Lubar.................. 69 Director
Albert O. Nicholas................ 67 Director
</TABLE>
William T. Donovan was named Chairman of C2 in December 1997. Mr. Donovan
is also the President, Chief Financial Officer and a director of Christiana,
positions he will vacate upon completion of Weatherford's acquisition of
Christiana. Mr. Donovan has held various executive positions with Christiana
since June 1988. Mr. Donovan has also been a principal of Lubar & Co., a venture
capital and investments firm located in Milwaukee, Wisconsin since January 1980.
Mr. Donovan is also a Director of Grey Wolf, Inc.
David J. Lubar has been President of C2 since December 1997. Mr. Lubar also
serves as President of Lubar & Co., a position he has held since January 1991.
Mr. Lubar is a Director of Christiana, a position he will vacate upon the
completion of Weatherford's acquisition of Christiana. Mr. Lubar is the son of
Sheldon B. Lubar.
Oyvind Solvang has been Vice President of C2 since December 1997. Mr.
Solvang is also the Vice President of Christiana, a position he will vacate upon
the completion of Weatherford's acquisition of Christiana. Mr. Solvang has
served as President of Cleary Gull Reiland & McDevitt, Inc., an investment
banking firm located in Milwaukee, Wisconsin from January 1996 to October 1996
and Chief Operating Officer of Cleary Gull Reiland & McDevitt, Inc., from
October 1995 to January 1996. Prior thereto, from May 1994 to September 1995,
Mr. Solvang served as President of Scinticor, Incorporated, a manufacturer of
cardiac imaging devices, located in Milwaukee, Wisconsin, and from August 1990
to April 1994 as Vice President and General Manager of Applied Power, Inc., a
supplier of hydraulic systems, located in Butler, Wisconsin.
David E. Beckwith has been Secretary of C2 since December 1997. Since May
1995, he served as Secretary of Christiana, a position he will vacate upon the
completion of Weatherford's acquisition of Christiana. Mr. Beckwith has been
associated with the law firm of Foley & Lardner since 1952 and has been a
Partner at Foley & Lardner since 1960.
Nicholas F. Brady has been a Director of C2 since December 1997. Since
February 1993, Mr. Brady has been Chairman and President of Darby Advisors,
Inc., a private investment company located in Easton, Maryland. Prior thereto,
Mr. Brady served as Secretary of the United States Department of the Treasury
for over four years, and before that, Chairman of Dillon, Reed & Co., Inc. Mr.
Brady is a Director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a Director (or trustee) of 27 Templeton funds, which are registered
investment companies. Mr. Brady is also a Director of Christiana, a position he
will vacate upon completion of Weatherford's acquisition of Christiana.
Sheldon B. Lubar has been a Director of C2 since December 1997. Mr. Lubar
has also been a principal of Lubar & Co. since its inception in 1977. Mr. Lubar
is a Director of Ameritech Corporation, Weatherford, Firstar Corporation,
Massachusetts Mutual Life Insurance Co. and MGIC Investment Corporation. Mr.
Lubar currently serves as Chairman, Chief Executive Officer and a Director of
Christiana, all of which positions he will vacate upon completion of
Weatherford's acquisition of Christiana. Mr. Lubar is the father David J. Lubar.
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<PAGE> 40
Albert O. Nicholas has been a Director of C2 since December 1997. Mr.
Nicholas has been owner and President of Nicholas Company, Inc., a registered
investment advisor located in Milwaukee, Wisconsin since December, 1967.
Nicholas Company, Inc. is the advisor to six registered investment companies:
Nicholas Fund, Inc., Nicholas Two, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Addition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Income Fund. Mr. Nicholas is the President and a Director of each of these
investment companies. Mr. Nicholas is also a Director of Bando McGlocklin
Capital Corporation. In addition, Mr. Nicholas serves as a Director of
Christiana, a position he will vacate upon completion of Weatherford's
acquisition of Christiana.
EXECUTIVE OFFICERS AND PROSPECTIVE MANAGERS OF TLC
The following table contains the name, age and position with TLC of each
executive officer as of June 30, 1998 and the persons who will serve on the
board of managers upon completion of the offering. Each person's respective
background is described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary R. Sarner.................... 52 Chairman and Manager
John R. Patterson................. 51 President, Chief Executive Officer
and Manager
Brian L. Brink.................... 38 Vice President and Chief Financial
Officer
Sheldon B. Lubar.................. 69 Manager
William T. Donovan................ 46 Manager
Bernard J. Duroc-Danner........... 44 Manager
Curtis W. Huff.................... 40 Manager
</TABLE>
Gary R. Sarner was named Chairman of TLC in January 1994. Prior thereto,
Mr. Sarner was the President of Wiscold, Inc., the business of which was
acquired by Christiana in September 1992. Mr. Sarner is a Director of
Christiana, a position he will vacate upon completion of Weatherford's
acquisition of Christiana.
John R. Patterson has served as President and Chief Executive Officer of
TLC since February 1996. Prior thereto, from June 1993 to February 1996, Mr.
Patterson served as Vice President-Operations for Schneider Logistics, Inc., a
provider of transportation and logistics services located in Green Bay,
Wisconsin. For the six prior years, Mr. Patterson was the President and
principal owner of Pro Drive, Inc., a truck driver recruiting and training firm
in Green Bay, Wisconsin. Mr. Patterson is a director of Christiana, a position
he will vacate upon completion of Weatherford's acquisition of Christiana.
Brian L. Brink has been Vice President and Chief Financial Officer of TLC
since May 1997. Prior thereto from December 1993 to May 1997, Mr. Brink served
as Chief Financial Officer for the Van Eerden Company, a national refrigerated
transportation and wholesale food distribution company. From May 1988 to
December 1993, Mr. Brink served as Controller of Bil Mar Foods, a division of
Sara Lee Company, an international food processor.
Bernard J. Duroc-Danner joined Weatherford in May 1987 to initiate the
start-up of Weatherford's oilfield service and equipment business. He was
elected President of Weatherford in January 1990 and Chief Executive Officer in
May 1990. In connection with the Weatherford Merger, Mr. Duroc-Danner was
elected to the additional position of Chairman of the Board. Mr. Duroc-Danner
holds a Ph.D. in economics from Wharton (University of Philadelphia). Mr.
Duroc-Danner is a director of Parker Drilling Company.
Curtis W. Huff became Senior Vice President, General Counsel and Secretary
of Weatherford in June 1998. Prior thereto, Mr. Huff served as a Partner of the
law firm of Fullbright & Jaworski L.L.P. for seven years. Mr. Huff is a director
of UTI Energy Corporation.
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<PAGE> 41
BOARD COMMITTEES OF C2
The board of directors has established an audit committee, a compensation
and nominating committee and a finance committee, each consisting of three or
more directors. C2 will maintain at least two independent directors on its board
of directors.
The duties of the audit committee will be to select and engage independent
public accountants to audit the books and records of C2 annually, to review the
activities and the reports of the independent public accountants and authorize
appropriate action. The audit committee will also approve any other services to
be performed by and approve the audit fee and other fees payable to the
independent public accountants and monitor the internal accounting controls of
C2. A majority of the members of the audit committee will consist of independent
directors.
The duties of the compensation and nominating committee will be to:
- provide a general review of the C2's compensation and benefit plans
to ensure that they meet C2's objectives;
- to administer the 1998 Plan described below and to grant awards
thereunder;
- to consider and establish the compensation of all officers of C2 and
adopt major C2 compensation policies and practices;
- to consider and make recommendations to the board of directors
regarding the selection and retention of all elected officers of C2 and its
subsidiaries; and
- such other duties assigned by the board of directors or the bylaws
of C2.
A majority of the members of the compensation and nominating committee will
consist of independent directors.
The duties of the finance committee will be to assist the board of
directors in making financial decisions, which shall include:
- reviewing and approving all investments and capital commitments of
C2 not delegated to management pursuant to resolutions adopted by the
majority of the entire board of directors;
- development of financial plans and strategies of C2; and
- such other duties delegated to the finance committee by the board of
directors.
EXECUTIVE COMPENSATION
C2 incorporated on December 11, 1997. Since its incorporation, C2 has
conducted no operations, and has generated no revenue. C2 has never paid any of
its executive officers compensation. C2 anticipates that during fiscal 1999 its
most highly compensated officers will be William T. Donovan, David J. Lubar and
Oyvind Solvang, who will be paid $175,000, $120,000 and $120,000, respectively.
1998 EQUITY INCENTIVE PLAN
The 1998 Plan authorizes the granting of:
- stock options, which may be either incentive stock options or
nonqualified stock options;
- stock appreciation rights;
- restricted stock;
- performance shares; and
- stock option grants to directors who are not employees of C2
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<PAGE> 42
The 1998 Plan is designed to provide the compensation and nominating
committee with broad flexibility and discretion to deal with the ever changing
executive compensation environment. In general, the terms and conditions of key
employee awards under the 1998 Plan will be left to the discretion of the
compensation and nominating committee. This will allow the Compensation and
nominating committee to structure varying incentive compensation awards from
time to time in order to best achieve the purposes of the 1998 Plan. The 1998
Plan provides that up to a total of 520,000 shares of C2 Common Stock will be
available for issuance pursuant to the granting of awards thereunder, with no
more than 50,000 shares issuable as restricted stock.
As of the date of the Prospectus, no awards have been granted under the
1998 Plan, except automatic grants to independent directors on the effective
date of this offering.
DIRECTOR COMPENSATION
The directors of C2 will receive no compensation for service as members of
either the board of directors or committees thereof other than option grants
pursuant to 1998 Plan. Effective after this offering, independent directors will
be entitled to reimbursement of out-of-pocket expenses.
In addition, under the 1998 Plan, on the effective date of this offering,
each then serving independent director will be granted non-qualified stock
options under the 1998 Plan to purchase 12,000 shares of C2 common stock at a
per share exercise price equal to the $4.00 per share. Each independent
director's initial option grant will vest ratably over an approximate five-year
period, provided that the independent director continues to serve as a member of
the board of directors at the end of each vesting period with respect to the
increment then vesting. All outstanding options granted to independent Directors
under the 1998 Plan will vest immediately upon a "change in control," or the
director's death or disability. All options granted to independent directors
under the 1998 Plan will expire upon the earlier to occur of five years from the
grant date or one year from the independent director ceasing to hold such
position.
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<PAGE> 43
CERTAIN TRANSACTIONS
Pursuant to Weatherford's acquisition of Christiana, each share of
Christiana common stock will be converted into the right to receive Weatherford
common stock and cash.
The directors and officers of C2 beneficially own shares of Christiana
common stock (including shares of Christiana common stock subject to options) in
the following amounts:
<TABLE>
<CAPTION>
SHARES OF CHRISTIANA COMMON
NAME STOCK BENEFICIALLY OWNED
---- ---------------------------
<S> <C>
Sheldon B. Lubar...................................... 968,615(1)
Albert O. Nicholas.................................... 310,700
David J. Lubar........................................ 427,403
Nicholas F. Brady..................................... 200,000
William T. Donovan.................................... 178,532
</TABLE>
- -------------------------
(1) Includes 433,705 shares owned by Mr. Lubar's wife and 91,205 shares held in
trusts for the benefit of Mr. Lubar's grandchildren for which Mr. Lubar
serves as trustee.
Sheldon B. Lubar's three daughters, Joan P. Lubar, Kristine L. Thomson and
Susan L. Solvang (the wife of Oyvind Solvang, a Vice President of C2), own
448,551, 430,478 and 442,953 shares of Christiana Common Stock, respectively.
Sheldon B. Lubar entered into a letter agreement with C2 in which C2 and
Mr. Lubar agreed that all Christiana shareholders would have the right to
purchase at least the same percentage ownership in C2 as such Christiana
shareholder has in Christiana immediately prior to Weatherford's acquisition and
at the same price per share as each of the Lubar family and that Mr. Lubar and
the remainder of the Lubar family would purchase enough C2 common stock in this
offering to ensure that the net proceeds of the offering to C2 will be at least
$10,666,667.
The Lubar family, Lubar & Co. and Venture Capital Fund, L.P., a fund
managed by Lubar & Co., and William T. Donovan own 5.3%, 0.8%, 6.0% and 0.7%,
respectively, of Emmpak Foods, Inc., a customer of TLC. During fiscal 1998,
Emmpak Foods, Inc. accounted for approximately $2.2 million in gross revenue for
TLC. David J. Lubar serves on the board of directors of Emmpak Foods, Inc.
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<PAGE> 44
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of C2 common stock, after giving effect to Weatherford's
acquisition of Christiana and this offering, by each of C2's directors; each of
C2's executive officers; each person who is known by C2 to own beneficially more
than 5% of C2 common stock; and all C2's executive officers and directors as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED
OFFERING AFTER OFFERING
---------------- ----------------
NAME NUMBER PERCENT NUMBER PERCENT
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
William T. Donovan.......................................... -- -- (1) (1)
David J. Lubar(2)........................................... -- -- (1) (1)
Oyvind Solvang.............................................. -- -- (1) (1)
David E. Beckwith........................................... -- -- (1) (1)
Nicholas F. Brady........................................... -- -- (1) (1)
Sheldon B. Lubar............................................ 25 100% (1) (1)
Albert O. Nicholas.......................................... -- -- (1) (1)
Joan P. Lubar(2)............................................ -- -- (1) (1)
Kristine L. Thomson(2)...................................... -- -- (1) (1)
Susan L. Solvang(2)......................................... -- -- (1) (1)
All directors and executive officers as a group (seven
persons):................................................. 25 100% (1) (1)
</TABLE>
- -------------------------
* Less than one percent.
(1) To be determined following the amount of shares purchased by Christiana
shareholders and the above named individuals. The Lubar family, which
includes Sheldon B. Lubar, David J. Lubar, Joan P. Lubar, Kristine L.
Thomson and Susan L. Solvang, has committed to purchase such amount of C2
common stock to generate net proceeds from the offering of at least
$10,666,667.
(2) David J. Lubar is the son of Sheldon B. Lubar and Joan P. Lubar, Kristine L.
Thomson and Susan L. Solvang are daughters of Sheldon B. Lubar.
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<PAGE> 45
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of C2 will consist of 50,000,000 shares of C2
common stock, $.01 par value, and 10,000,000 shares of undesignated preferred
stock, $.01 par value. Upon completion of the offering, 5,202,689 shares of C2
common stock and no shares of preferred stock will be issued and outstanding,
assuming the maximum number of shares of C2 common stock offered hereby are
sold.
The following summary description of the C2 common stock and preferred
stock is subject to, and qualified in its entirety by, the provisions of the
amended and restated articles of incorporation and amended and restated by-laws
which are included as exhibits to the Registration Statement of which this
Prospectus is a part and by the provisions of applicable law.
C2 COMMON STOCK
After all cumulative dividends have been paid or declared and set apart for
payment on any shares of preferred stock that are outstanding, the C2 common
stock is entitled to such dividends as may be declared from time to time by the
board of directors in accordance with applicable law. For certain restrictions
on the ability of C2 to declare dividends, see "Dividend Policy."
Except as may be determined by the board of directors of C2 with respect to
any series of preferred stock, only the holders of C2 common stock shall be
entitled to vote for the election of directors of C2 and on all other matters.
Upon any such vote the holders of C2 common stock will be entitled to one vote
for each share of C2 common stock held by them subject to any applicable law.
Cumulative voting is not permitted.
All shares of C2 common stock are entitled to participate equally in
distributions in liquidation, subject to the prior rights of any preferred stock
that may be outstanding. Except as the board of directors may in its discretion
otherwise determine, holders of common stock have no preemptive rights to
subscribe for or purchase shares of C2. There are no conversion rights or
sinking fund or redemption provisions applicable to the C2 common stock. The C2
common stock to be outstanding upon completion of this offering will be fully
paid and nonassessable (subject to Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law ("WBCL")).
The transfer agent for the C2 common stock is Firstar Bank Milwaukee, N.A.
PREFERRED STOCK
C2's amended and restated articles of incorporation will provide that the
board of directors has the authority, without further action by the
shareholders, to issue up to 10,000,000 shares of preferred stock in one or more
series and to fix the designations, powers, preferences, privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of C2 Common Stock; provided that C2
will not offer preferred stock to any officer, director, 5% shareholder or other
affiliate except on the same terms as it is offered to all other existing
shareholders or new shareholders. The board of directors, without shareholder
approval, can issue preferred stock with voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of C2
common stock. Preferred stock could thus be issued quickly with terms calculated
to delay or prevent a change in control of C2 or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of C2 common stock, and may adversely affect the
voting and other rights of the holders of C2 common stock. C2 has no present
plans to issue any shares of preferred stock.
CERTAIN ANTI-TAKEOVER AND INDEMNIFICATION PROVISIONS
By-law Provisions. C2's amended and restated by-laws provide that a
special meeting may be called only by the Chairman of the board, the President,
or the board of directors and shall be called by the Chairman of the board or
the President upon the demand of the holders of record of shares representing at
least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the special meeting.
45
<PAGE> 46
The amended and restated by-laws provide that the directors and executive
officers of C2 shall be indemnified to the fullest extent permitted by the
Wisconsin Business Corporation Law ("WBCL") against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred by them in
connection with any proceeding arising out of their status as directors and
executive officers.
Statutory Provisions. Section 180.1150 of the WBCL provides that the
voting power of shares of public Wisconsin corporations, such as C2, held by any
person or persons acting as a group that hold in excess of 20% of the voting
power for the election of directors is limited to 10% of the full voting power
of those shares. This restriction does not apply to shares acquired directly
from C2 or in certain specified transactions or shares for which full voting
power has been restored pursuant to a vote of shareholders.
Sections 180.1140 to 180.1144 (the "Wisconsin Business Combination
Statute") of the WBCL contain certain limitations and special voting provisions
applicable to "business combinations" between a Wisconsin corporation and an
"interested shareholder." The term "business combination" is defined for
purposes of the Wisconsin Business Combination Statute to include a merger or
share exchange, sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets equal to at least 5% of the market value of the stock or
assets of a corporation or 10% of its earning power, issuance of stock or rights
to purchase stock with a market value equal to at least 5% of the outstanding
stock, adoption of a plan of liquidation and certain other transactions
involving an "interested shareholder." An "interested shareholder" is defined as
a person who beneficially owns, directly or indirectly, 10% of the voting power
of the outstanding voting stock of a corporation or who is an affiliate or
associate of the corporation and beneficially owned 10% of the voting power of
the then outstanding voting stock within the last three years. The Wisconsin
Business Combination Statute prohibits a corporation from engaging in a business
combination, other than a business combination of a type specifically excluded
from the coverage of the statute, with an interested shareholder for a period of
three years following the date such person becomes an interested shareholder,
unless the board of directors approved the business combination or the
acquisition of the stock that resulted in a person becoming an interested
shareholder before such acquisition. Business combinations after the three-year
period following the stock acquisition date are permitted only if:
- the board of directors approved the acquisition of the stock prior
to the acquisition date;
- the business combination is approved by a majority of the
outstanding voting stock not beneficially owned by the interested
shareholder; or
- the consideration to be received by shareholders meets certain
requirements of the Wisconsin Business Combination Statute with respect to
form and amount.
Sections 180.1130 to 180.1133 of the WBCL provide that certain "business
combinations" not meeting certain fair price standards must be approved by a
vote of at least 80% of the votes entitled to be cast by all shareholders and by
two-thirds of the votes entitled to be cast by shareholders other than a
"significant shareholder" who is a party to the transaction. The term "business
combination" is defined, for purposes of Sections 180.1130 to 180.1133 of the
WBCL, to include, subject to certain exceptions, a merger or consolidation of
the corporation (or any subsidiary thereof) with, or the sale or other
disposition of substantially all of the assets of the corporation to, any
significant shareholder or affiliate thereof. "Significant shareholder" is
defined generally to include a person that is the beneficial owner of 10% or
more of the voting power of the corporation.
Section 180.1134 of the WBCL (the "Wisconsin Defensive Action
Restrictions") provides that, in addition to the vote otherwise required by law
or the articles of incorporation of an issuing public corporation, the approval
of the holders of a majority of the shares entitled to vote is required before
such corporation can take certain action while a takeover offer is being made or
after a takeover offer has been publicly announced and before it is concluded.
Under the Wisconsin Defensive Action Restrictions, shareholder approval is
required for the corporation to:
- acquire more than 5% of its outstanding voting shares at a price
above the market price from any individual or organization that owns more
than 3% of the outstanding voting shares and has held such shares for less
than two years, unless a similar offer is made to acquire all voting
shares; or
46
<PAGE> 47
- (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 C2 with the goal of seeking to have C2
repurchase such shares at a premium over the market price.
SHARES ELIGIBLE FOR FUTURE SALE
After the offering, assuming the issuance of 5,202,664 shares of C2 common
stock, C2 will have outstanding 5,202,689 shares of C2 common stock. The
5,202,664 shares of C2 common stock to be sold in this offering will be freely
tradeable without restriction unless acquired by affiliates of C2. All but the
25 shares of common stock issued to Sheldon B. Lubar in connection with C2's
initial capitalization were registered in the offering. The registered shares
held by affiliates are hereinafter referred to as "control shares" and the 25
unregistered shares held by Sheldon B. Lubar are hereinafter referred to as
"restricted shares." The restricted shares may be resold only upon registration
under the Securities Act or in compliance with an exemption from the
registration requirements of the Securities Act.
With respect to restricted shares, under Rule 144 as currently in effect,
if one year has elapsed since the later of the date of the acquisition of
restricted shares from either C2 or any affiliate of C2, the acquiror or
subsequent holder thereof may sell, within any three-month period commencing 90
days after consummation of the offering, a number of shares that does not exceed
the greater of one percent of the then outstanding shares of C2 common stock, or
the average weekly trading volume of the common stock on the Nasdaq SmallCap
Market during the four calendar weeks preceding the date on which notice of the
proposed sale is sent to the Commission. Sales under Rule 144 are also subject
to certain manner of sale provisions, notice requirements and the availability
of current public information about C2. If two years have elapsed since the
later of the date of the acquisition of restricted shares of common stock from
C2 or any affiliate of C2, a person who is not deemed to have been an affiliate
of C2 at any time for 90 days preceding a sale would be entitled to sell such
shares under Rule 144 without regard to the volume limitations, manner of sale
provisions or notice requirements. Affiliates, will also be able to sell their
control shares pursuant to the Rule 144 exemption, except that the one year
period will not apply.
LEGAL MATTERS
The validity of the issuance of C2 Common Stock offered hereby will be
passed upon for C2 by Foley & Lardner, Milwaukee, Wisconsin.
EXPERTS
The audited financial statements of C2 and TLC appearing in this Prospectus
and elsewhere in this registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports and
are included in this Prospectus in reliance upon the authority of Arthur
Andersen as experts in giving such reports.
AVAILABLE INFORMATION
C2 has filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act with respect to the C2 common
stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made.
After the offering, C2 will 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 C2 with the Commission, may be inspected and copied at the public
reference
47
<PAGE> 48
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York,
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
C2 intends to furnish its shareholders with annual reports containing
audited financial statements certified by its independent auditors.
Christiana and Weatherford have filed a joint proxy statement/prospectus
with the Commission relating to Weatherford's proposed acquisition of Christiana
and related matters. Christiana and Weatherford have filed reports and
information with the Commission in accordance with the Commission's rules. Such
reports and information may be obtained as described above.
The Commission maintains an Internet web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's web site is
http://www.sec.gov.
48
<PAGE> 49
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
C2, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................. F-2
Balance Sheet as of December 31, 1997..................... F-3
Notes to Balance Sheet.................................... F-4
Balance Sheets as of September 30, 1998 and December 31,
1997 (unaudited)....................................... F-5
Notes to Balance Sheets (unaudited)....................... F-6
TLC FINANCIAL STATEMENTS
Report of Independent Public Accountants.................. F-7
Balance Sheets as of June 30, 1998 and 1997............... F-8
Statements of Income for the years ended June 30, 1998,
1997 and 1996.......................................... F-9
Statements of Equity for the years ended June 30, 1998,
1997 and 1996.......................................... F-10
Statements of Cash Flows for the years ended June 30,
1998, 1997 and 1996.................................... F-11
Notes to Financial Statements............................. F-12
Condensed Balance Sheets as of September 30, 1998 and June
30, 1998 (unaudited)................................... F-18
Condensed Statements of Income for the three months ended
September 30, 1998 and 1997 (unaudited)................ F-19
Condensed Statements of Cash Flows for the three months
ended September 30, 1998 and 1997 (unaudited).......... F-20
Notes to Condensed Financial Statements (unaudited)....... F-21
</TABLE>
F-1
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Shareholder of C2, Inc.
We have audited the accompanying balance sheet of C2, Inc. (a Wisconsin
corporation), as of December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of C2, Inc. as of December 31, 1997,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 6, 1998
F-2
<PAGE> 51
C2, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Due from Shareholder for common stock subscribed.......... $100
----
Total assets...................................... $100
====
LIABILITIES AND SHAREHOLDER'S EQUITY:
Total liabilities......................................... $ --
SHAREHOLDER'S EQUITY:
Preferred stock, $.01 par, 10,000,000 shares authorized,
none issued or outstanding............................. --
Common stock, $.01 par, 50,000,000 shares authorized, 25
shares issued and outstanding.......................... --
Additional paid-in capital................................ 100
----
Total shareholder's equity........................... 100
----
Total liabilities and shareholder's equity........ $100
====
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE> 52
C2, INC.
NOTES TO BALANCE SHEET
A. BUSINESS AND ORGANIZATION:
C2, Inc. (the "Company") was organized in December 1997, for the purposes
of acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"), a
transportation, warehousing and logistics company (the "Acquisition"). The
Company intends to complete an initial public offering of up to 5,202,664 shares
of its common stock (the "Offering") and utilize the proceeds to fund the
Acquisition and for future operations. There is no assurance the Acquisition
will be completed and that the Company will be able to generate future operating
revenues.
The Company's assets as of December 31, 1997 consist exclusively of an
amount due from the sole shareholder pertaining to the initial capitalization of
the Company. The Company has not conducted any operations and all activities to
date have related to the Acquisition and the Offering. Accordingly, statements
of operations, changes in shareholder's equity and cash flows would not provide
meaningful information and have been omitted.
B. SHAREHOLDER'S EQUITY:
In connection with its organization and initial capitalization, the Company
issued 25 shares of common stock for $100.
C. COMMITMENTS AND CONTINGENCIES:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana") 666.667
Membership Units (two-thirds) of TLC for cash consideration of $10,667,000. The
Acquisition is contingent upon the consummation of the merger between Christiana
and Weatherford, discussed elsewhere in this Prospectus.
Under the Agreement, the company agreed to indemnify Christiana for certain
liabilities of Christiana. Christiana further has the right to require the
Company to purchase all of Christiana's 333.333 Membership Units in TLC for a
price equal to $7 million. See "The Purchase Agreement" included elsewhere in
the Prospectus.
D. STOCK OPTIONS
The Company's shareholder has approved the 1998 Equity Incentive Plan (the
"1998 Plan") under which a total of 520,000 shares of Common Stock are reserved
for awards to officers, directors and key employees as stock options, stock
appreciation rights, restricted stock and performance shares. As of December 31,
1997, no awards have been granted under the 1998 Plan.
E. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
(1) Subsequent to December 31, 1997, the Company has incurred various legal
and professional fees associated with the Acquisition and the Offering. On
February 10, 1998, the Company filed a Registration Statement on Form S-1 for
the sale of its common stock. See "Risk Factors" included elsewhere in this
Prospectus.
(2) Subsequent to December 31, 1997, the Company amended its Articles of
Incorporation to change the par value of its Common Stock from $1.00 to $.01,
increase the number of common shares authorized from 9,000 to 50,000,000 and
authorize 10,000,000 shares of $.01 par value preferred stock. The impact of
this amendment resulted only in a reclassification of amounts within the
Company's shareholder equity accounts. The balance sheet as of December 31, 1997
has been restated to reflect the impact of this amendment.
F-4
<PAGE> 53
C2
BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS:
Cash........................................................ $ 100 $ --
Due from shareholder for common stock subscribed............ -- 100
Deferred offering and acquisition costs..................... 240,000 --
-------- ----
Total assets.............................................. $240,100 $100
======== ====
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accrued expenses............................................ $240,000 $ --
-------- ----
Total liabilities......................................... 240,000 --
SHAREHOLDERS EQUITY:
Preferred stock, $.01 par, 10,000,000 shares authorized,
none issues or outstanding................................ -- --
Common stock, $.01 par, 50,000,000 shares authorized, 25
shares issued and outstanding............................. -- --
Additional paid-in capital.................................. 100 100
-------- ----
Total shareholder's equity................................ 100 100
-------- ----
Total liabilities and shareholder's equity................ $240,100 $100
======== ====
</TABLE>
The accompanying notes are an integral part of this balance sheets.
F-5
<PAGE> 54
C2, INC.
NOTES TO BALANCE SHEETS (UNAUDITED)
JUNE 30, 1998
A. BUSINESS AND ORGANIZATION:
C2, Inc. (the "Company") was organized in December 1997, for the purposes
of acquiring a two-thirds interest in Total Logistic Control, LLC ("TLC"), a
transportation, warehousing and logistics company (the "Acquisition"). The
Company intends to complete an initial public offering of up to 5,202,664 shares
of its common stock (the "Offering") and utilize the proceeds to fund the
Acquisition and for future operations. There is no assurance the Acquisition
will be completed and that the Company will be able to generate future operating
revenues.
The Company's assets as of June 30, 1998, consist of cash and costs
incurred in connection with the Offering and Acquisition which have been
deferred in the accompanying balance sheet. These offering and acquisition costs
have been deferred as they will be included either as a reduction to the amount
raised in the Offering or as an expense of the Acquisition. As of December 31,
1997, the Company's assets consisted exclusively of an amount due from the sole
shareholder pertaining to the initial capitalization of the Company. Other than
activities related to the Offering and Acquisition, the Company has not
conducted any operations. Accordingly, statements of operation, changes in
shareholder's equity and cash flows would not provide meaningful information and
have been omitted for all periods presented.
B. SHAREHOLDER'S EQUITY:
In connection with its organization and initial capitalization, the Company
issued 25 shares of common stock for $100.
C. COMMITMENTS AND CONTINGENCIES:
On December 12, 1997, the Company entered into a Purchase Agreement (the
"Agreement") to acquire from Christiana Companies, Inc. ("Christiana") 666.667
Membership Units (two-thirds) of TLC for cash consideration of $10,667,000. The
Acquisition is contingent upon the consummation of the merger between Christiana
and Weatherford, discussed elsewhere in this Prospectus.
Under the Agreement, the Company agreed to indemnify Christiana for certain
liabilities of Christiana. Christiana further has the right to require the
Company to purchase all of Christiana's 333.333 Membership Units in TLC for a
price equal to $7 million. See "The Purchase Agreement" included elsewhere in
the Prospectus.
D. STOCK OPTIONS:
The Company's shareholder has approved the 1998 Equity Incentive Plan (the
"1998 Plan") under which a total of 520,000 shares of common stock are reserved
for awards to officers, directors and key employees as stock options, stock
appreciation rights, restricted stock and performance shares. As of March 31,
1998, no awards have been granted under the 1998 Plan.
F-6
<PAGE> 55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of Total Logistic Control, LLC:
We have audited the accompanying balance sheets of Total Logistic Control,
LLC (a Delaware limited liability company and wholly owned subsidiary of
Christiana Companies, Inc.) as of June 30, 1998 and 1997, and the related
statements of income, equity and cash flows for each of the three years in the
period ended June 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidencing
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Logistic Control, LLC
as of June 30, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three year period ended June 30, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 12, 1998
F-7
<PAGE> 56
TOTAL LOGISTIC CONTROL, LLC
BALANCE SHEETS
AS OF JUNE 30
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 541,000 $ 224,000
Accounts receivable, less allowance.................... 7,739,000 7,552,000
for uncollectable accounts Inventories............... 233,000 273,000
Prepaids and other assets.............................. 311,000 259,000
----------- -----------
Total current assets.............................. 8,824,000 8,308,000
LONG-TERM ASSETS:
Fixed assets, net...................................... 70,601,000 75,501,000
Goodwill............................................... 5,435,000 5,592,000
Other assets........................................... 751,000 739,000
----------- -----------
Total long-term assets............................ 76,787,000 81,832,000
----------- -----------
Total assets...................................... $85,611,000 $90,140,000
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt........................................ $ 239,000 --
Current maturities of long-term debt................... 3,003,000 1,245,000
Accounts payable....................................... 3,774,000 2,868,000
Accrued liabilities.................................... 4,236,000 3,056,000
----------- -----------
Total current liabilities......................... 11,252,000 7,169,000
DUE TO PARENT COMPANY..................................... 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt......................................... 27,122,000 36,149,000
Other liabilities...................................... 340,000 361,000
----------- -----------
Total long-term liabilities....................... 27,462,000 36,510,000
----------- -----------
Total liabilities................................. 41,714,000 46,679,000
----------- -----------
TOTAL MEMBER'S EQUITY............................. 43,897,000 43,461,000
----------- -----------
Total liabilities and member's equity............. $85,611,000 $90,140,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-8
<PAGE> 57
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Warehousing and logistic services.................. $90,179,000 $84,208,000 $76,976,000
OPERATING EXPENSES:
Warehousing and logistic expenses.................. 76,057,000 70,973,000 64,956,000
Selling, general and administrative expenses....... 7,148,000 6,924,000 6,331,000
----------- ----------- -----------
83,205,000 77,897,000 71,287,000
----------- ----------- -----------
Income from operations.................................. 6,974,000 6,311,000 5,689,000
OTHER INCOME (EXPENSES):
Interest expense................................... (2,854,000) (3,216,000) (3,176,000)
Gain (Loss) on disposal of assets.................. (159,000) (1,036,000) 206,000
Other expense, net................................. (220,000) (354,000) (108,000)
----------- ----------- -----------
(3,233,000) (4,606,000) (3,078,000)
----------- ----------- -----------
NET INCOME BEFORE INCOME TAXES.......................... 3,741,000 1,705,000 2,611,000
PROVISION FOR INCOME TAXES.............................. -- 695,000 1,075,000
ADJUSTMENT OF DEFERRED INCOME TAXES RESULTING FROM A
CHANGE IN TAX STATUS.................................. -- 11,171,000 --
----------- ----------- -----------
NET INCOME.............................................. $ 3,741,000 $12,181,000 $ 1,536,000
=========== =========== ===========
BASIC AND DILUTED INCOME PER MEMBERSHIP UNIT............ $ 3,741 $ 12,181 $ 1,536
=========== =========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE MEMBERSHIP UNITS
OUTSTANDING........................................... 1,000 1,000 1,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 58
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
MEMBERSHIP MEMBER'S
UNITS EQUITY
---------- --------
<S> <C> <C>
Balance, June 30, 1995...................................... 1,000 $29,744,000
Net income.................................................. -- 1,536,000
----- -----------
Balance, June 30, 1996...................................... 1,000 $31,280,000
Net income.................................................. -- 12,181,000
----- -----------
Balance, June 30, 1997...................................... 1,000 $43,461,000
Net income.................................................. -- 3,741,000
Distribution to Christiana for promissory note retirement... -- (2,326,000)
Distribution to Christiana for income taxes................. -- (979,000)
----- -----------
Balance, June 30, 1998...................................... 1,000 $43,897,000
===== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 59
TOTAL LOGISTIC CONTROL, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 3,741,000 $ 12,181,000 $ 1,536,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization...................... 6,651,000 7,186,000 6,971,000
(Gain) loss on disposal of assets.................. 159,000 1,036,000 (206,000)
Deferred income tax provision...................... -- 1,023,000 746,000
Adjustment of deferred income taxes resulting from
a change in tax status.......................... -- (11,171,000) --
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable......... (187,000) 465,000 (404,000)
(Increase) decrease in inventories................. 40,000 166,000 (191,000)
(Increase) decrease of prepaids and other assets... (164,000) 668,000 564,000
Increase (decrease) in accounts payable and accrued
liabilities..................................... 2,065,000 (2,260,000) 2,027,000
------------ ------------ ------------
Net cash provided by operating activities.......... 12,305,000 9,294,000 11,043,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets........................... (2,283,000) (3,294,000) (17,646,000)
Proceeds from sale of fixed assets................. 630,000 1,472,000 1,384,000
------------ ------------ ------------
Net cash used in investing activities........... (1,653,000) (1,822,000) (16,262,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net....... 239,000 (1,354,000) (490,000)
Proceeds from issuance of long-term debt........... -- -- 9,011,000
Payment of amounts due to Christiana............... -- (295,000) --
Payment of long-term debt.......................... (7,269,000) (5,628,000) (3,638,000)
Distribution to Christiana for promissory note
retirement...................................... (2,326,000) -- --
Distribution to Christiana for income taxes........ (979,000) -- --
------------ ------------ ------------
Net cash provided by (used in) financing
activities.................................... (10,335,000) (7,277,000) 4,883,000
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................................... 317,000 195,000 (336,000)
BEGINNING CASH AND CASH EQUIVALENTS, JULY 1.......... 224,000 29,000 365,000
------------ ------------ ------------
ENDING CASH AND CASH EQUIVALENTS,
JUNE 30............................................ $ 541,000 $ 224,000 $ 29,000
============ ============ ============
Supplemental Disclosures of Cash Flow Information
Interest paid...................................... $ 2,683,000 $ 3,000,000 $ 3,046,000
Amounts paid to Parent for income taxes............ -- 300,000 279,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 60
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS: Total Logistic Control, LLC ("TLC") is a wholly
owned subsidiary of Christiana Companies, Inc. ("Christiana"). TLC was formed on
June 30, 1997 as a result of the combination of Wiscold, Inc. ("Wiscold") and
Total Logistic Control, Inc. ("Total Logistic"), both former wholly owned
subsidiaries of Christiana. The accompanying financial statements have been
restated to reflect this combination for all periods presented. The June 30,
1998 and 1997 balance sheets reflect the consolidated results of TLC. The fiscal
1998 statements of earnings, equity and cash flows reflect the consolidated
results of TLC. The fiscal 1997 and 1996 statements of earnings, equity and cash
flows reflect the combined operations of Wiscold and Total Logistic. All
material intercompany transactions have been eliminated. TLC operates in one
industry segment providing fully integrated third-party logistic services,
including warehousing, distribution and transportation services in both
refrigerated and non-refrigerated facilities predominantly in the Midwest United
States.
REVENUE RECOGNITION: Transportation revenue is recognized when the goods
are delivered to the customer. Warehousing revenue is recognized as services are
provided. Costs and related expenses are recorded as incurred.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
ACCOUNTS RECEIVABLE: Accounts receivable are presented net of an allowance
for uncollectable accounts of $222,000 and $223,000 at June 30, 1998 and 1997,
respectively. The provision for bad debts was $119,000, $123,000 and $227,000
for the years ended June 30, 1998, 1997 and 1996, respectively.
INVENTORIES: Inventories consist predominately of transportation equipment
repair parts. These items are carried at their lower of FIFO (first-in,
first-out) cost or market value.
FIXED ASSETS: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated methods
for financial reporting purposes. The cost of major renewals and improvements
are capitalized; repair and maintenance costs are expensed as incurred. Tires
related to new equipment are included in the capitalized equipment cost and
depreciated using the same methods as equipment. Replacement tires are expensed
when placed in service. A summary of the cost of fixed assets, accumulated
depreciation and the estimated useful lives for financial reporting purposes is
as follows:
<TABLE>
<CAPTION>
ESTIMATED
1998 1997 USEFUL LIVES
---- ---- ------------
<S> <C> <C> <C>
Land.................................................. $ 3,331,000 $ 3,380,000 --
Machinery and equipment............................... 52,859,000 52,816,000 5-7 years
Buildings and improvements............................ 41,488,000 41,534,000 30-32 years
Construction in progress.............................. 616,000 451,000 --
Less: Accumulated depreciation........................ (27,693,000) (22,680,000)
------------ ------------
$ 70,601,000 $ 75,501,000
============ ============
</TABLE>
GOODWILL: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1998, 1997 and 1996). The accumulated amortization at June 30, 1998
and 1997 was $723,000 and $566,000, respectively. TLC continually evaluates
whether events and circumstances have occurred that indicate the remaining
estimated useful life may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, TLC uses an estimate of the
F-12
<PAGE> 61
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
LONG-LIVED ASSETS: During fiscal 1997, TLC adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." Adoption of this standard did
not have a material impact on TLC's financial position or results of operations.
TLC continually evaluates whether events and circumstances have occurred that
may indicate the remaining estimated useful life may warrant revision or that
the remaining balance of long-lived assets may not be recoverable. When factors
indicate that long-lived assets should be evaluated for possible impairment, TLC
uses an estimate of the undiscounted cash flows over the remaining life of the
long-lived assets measuring whether the long-lived assets are impaired. If
impaired, a loss is recognized for the amount the carrying value exceeds the
fair value.
B. RELATED PARTY TRANSACTIONS:
As of June 30, 1998 and 1997, TLC had amounts due to Christiana of
$3,000,000 which represented a note payable to Christiana that bears interest at
a rate of 8.0% per annum. Related party interest expense was $240,000 for fiscal
1998, 1997 and 1996. Prior to the combination of Wiscold and Total Logistic,
Total Logistic charged Christiana a management fee related to certain
administrative services rendered by TLC on behalf of Christiana. The amount of
this management fee was $240,000 for fiscal 1997 and 1996 and is reflected as a
reduction to selling, general and administrative expenses in the statement of
earnings. The amount of services rendered by Christiana on behalf of TLC for
fiscal 1998, 1997 and 1996 is not material.
During fiscal 1998, TLC made a payment on behalf of Christiana to retire a
promissory note and accrued interest thereon in the amount of $2,326,000. TLC
will make distributions for current taxes payable attributable to TLC's income.
During fiscal 1998, TLC recorded distributions to Christiana of $979,000. These
distributions to Christiana are reflected as a reduction to Member's Equity in
the period then ended.
C. INDEBTEDNESS:
The following is a summary of indebtedness as of June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revolving credit agreement........................... $27,273,000 $31,248,000
Line of credit....................................... 239,000 --
Notes payable........................................ 1,088,000 4,382,000
Subordinated Note.................................... 1,764,000 1,764,000
----------- -----------
30,364,000 37,394,000
----------- -----------
Less: Current portion of long-term debt.............. (3,003,000) (1,245,000)
Line of credit................................. (239,000) --
----------- -----------
Long-term debt....................................... $27,122,000 $36,149,000
=========== ===========
</TABLE>
TLC has a revolving credit agreement that provides for borrowings at June
30, 1998 of up to $35,000,000. Borrowings under this agreement mature on March
31, 2001 and bear interest, payable monthly at either
F-13
<PAGE> 62
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LIBOR plus 125 basis points, or a floating rate at the bank's prime rate (6.9%
at June 30, 1998) and are unsecured. The revolving credit agreement requires,
among other things, that defined levels of net worth and debt service coverage
be maintained and restricts certain activities including limitation on new
indebtedness and the disposition of assets. As of June 30, 1998, TLC was in
compliance with all covenants. No compensating balances are required under the
terms of this credit facility.
TLC has a bank line of credit which permits borrowings up to $5,000,000. As
of June 30, 1998 and 1997, borrowings outstanding under this line of credit were
$239,000 and $-0-, respectively. Borrowings bear interest at either LIBOR plus
200 basis points, or the bank's prime rate, at TLC's option (7.65% and 7.69% at
June 30, 1998 and 1997, respectively), and are secured by certain accounts
receivable. This line of credit was terminated on August 5, 1998. Notes payable
relate to specific equipment purchases, primarily transportation and material
handling equipment and a new distribution facility, and are secured by certain
assets of TLC. These notes bear interest on both fixed and floating terms
ranging from 6.375% to 9.37%. No compensating balances are required under the
terms of these credit arrangements. TLC's subordinated note bears interest at 8%
and is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30 TOTAL
---------- -----
<S> <C>
1999................................................... $ 3,003,000
2000................................................... 5,008,000
2001................................................... 22,114,000
</TABLE>
The weighted average interest rate paid on short-term borrowings was 7.73%
and 7.46% for fiscal 1998 and 1997, respectively. The carrying value of TLC's
debt approximates fair value. The carrying amount of TLC's floating rate debt
was assumed to approximate its fair value. The fair value of TLC's fixed-rate,
long-term notes payable was based on the market value of debt with similar
maturities and interest rates. The fixed-rate subordinated note that was given
to a former owner of TLC was negotiated in the overall context of the
acquisition. TLC believes it is impracticable to obtain the current fair value
of this note because of the excessive costs that would have to be incurred to
obtain this information.
D. INCOME TAXES:
Prior to July 1, 1997, TLC was included in the consolidated income tax
return of Christiana. The amounts reflected in the financial statements are as
if TLC was filing on a stand-alone basis. Income taxes paid as shown in the
statement of cash flows represents combined cash payments made to Christiana by
TLC.
Effective June 30, 1997, TLC converted from a C-Corporation to a Limited
Liability Company. For purposes of taxation, all earnings of TLC are "passed
through" to its members and taxed at the member level. As TLC is no longer a
taxable entity at June 30, 1997, all deferred taxes of TLC have been removed
from the balance sheet. The removal of these deferred taxes due to TLC's change
in tax status resulted in an increase to earnings of $11,171,000 during fiscal
1997. The $695,000 provision for income taxes for fiscal 1997 represents the
combined Federal and state income tax provision for the period during the fiscal
year that TLC was a C-Corporation.
F-14
<PAGE> 63
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------
1997 1996
---- ----
<S> <C> <C>
Current:
Federal.............................................. $ (279,000) $ 280,000
State................................................ (49,000) 49,000
Deferred............................................... 1,023,000 746,000
---------- ----------
$ 695,000 $1,075,000
========== ==========
</TABLE>
In the event that TLC was a taxable entity, a net deferred tax liability of
$11,227,000 and $11,171,000 as of June 30, 1998 and 1997 would have been
recorded on the balance sheet. The components are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred Tax assets:
Accrued expenses................................... $ 978,000 $ 596,000
Book over tax amortization......................... 424,000 584,000
Deferred revenue
----------- -----------
Total deferred tax asset................... $ 1,402,000 $ 1,180,000
=========== ===========
Deferred tax liabilities:
Tax over book depreciation......................... $12,629,000 $12,351,000
----------- -----------
Total deferred tax liability............... $12,629,000 $12,351,000
=========== ===========
</TABLE>
A reconciliation of the statutory Federal income tax rate to TLC's
effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------
1997 1996
---- ----
<S> <C> <C>
Statutory Federal income tax rate......................... 34% 34%
Increase in taxes resulting from State income tax, net.... 5 5
Other, net................................................ 2 2
-------- --------
41% 41%
======== ========
</TABLE>
E. EMPLOYEE BENEFIT PLANS:
TLC has two 401(k) plans covering substantially all employees. The expense
incurred by TLC related to these plans is not material. TLC does not provide
post employment medical or insurance benefits.
F-15
<PAGE> 64
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
F. COMMITMENTS:
TLC has operating leases for warehousing and office facilities along with
certain transportation equipment. Rental expense under these leases was
$6,812,000, $7,213,000 and $5,479,000 in fiscal 1998, 1997 and 1996,
respectively. At June 30, 1998, future minimum lease payments under these
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30 AMOUNT
---------- ------
<S> <C>
1999................................................... $4,226,000
2000................................................... 3,765,000
2001................................................... 3,304,000
2002................................................... 2,630,000
2003................................................... 1,825,000
Thereafter............................................... 8,456,000
</TABLE>
G. ACCOUNTING PRONOUNCEMENTS:
Effective July 1, 1998, TLC adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and display of comprehensive income and its
components. Components of comprehensive income are net income and all other
non-shareholder changes in equity. For the quarter ended September 30, 1998, TLC
will be required to show components of comprehensive income in a separate
financial statement, if any other comprehensive income exists.
Effective July 1, 1998, TLC adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." This statement establishes
standards for the way a public company reports information about operating
segments in its annual financial statements. It also requires TLC to report
selected information about operating segments in its interim financial reports.
This statement requires that a public company report financial and descriptive
information about its operating segments based on the way that the chief
operating decision maker organizes segments within TLC for making operating
decisions and assessing performance. TLC believes that it operates in a single
segment as of June 30, 1998.
H. WEATHERFORD INTERNATIONAL, INC. MERGER AGREEMENT:
On December 12, 1997, Christiana entered in an agreement with Weatherford
International, Inc. ("Weatherford") whereby Weatherford will purchase all of the
outstanding shares of Christiana. The terms of the merger provide that each
Christiana common share will be converted into (i) .7453 shares of Weatherford
International, Inc. common stock, (ii) cash in the approximate amount of $4.00,
depending upon the balance of certain assets and liabilities at the time of
closing and (iii) a contingent cash payment of approximately $1.92 after 5
years, subject to the incurrence of any indemnity claims by Weatherford during
this period.
On August 17, 1998, the shareholders of both Weatherford and Christiana
overwhelmingly approved the Merger agreement and sale of TLC to C2, Inc.
However, due to the recent decline in the value of Weatherford's common stock
price, the merger transaction was postponed until the conditions are met for
Christiana's shareholders to not recognize any taxable gain or loss on their
exchange of Christiana shares for Weatherford common stock in the merger. To
meet this requirement, Weatherford's stock price must be approximately $30.00
per share.
On October 14, 1998, Weatherford and Christiana amended the merger
agreement in order to complete the merger on a partially tax-free basis. The
revised merger agreement eliminates the requirement for a contingent cash
payment after five years. This cash payment will be used by Christiana to
purchase additional Weatherford common stock in the open market. Additionally,
Christiana agreed to spend up to $5 million of
F-16
<PAGE> 65
TOTAL LOGISTIC CONTROL, LLC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
available cash to by Weatherford Stock, if necessary. The share price of
Weatherford stock needed to consummate the merger was reduced from $30 to
approximately $13 per share.
By its terms, the Merger Agreement may be terminated by either party after
January 31, 1999. At or prior to the completion of the merger:
(1) TLC will declare and pay a $20,000,000 dividend to Christiana which
will be financed by a new $65,000,000 revolving credit facility which
will bear interest at a floating rate of LIBOR plus 225 basis points,
mature on April 15, 2003, and be secured by substantially all of the
assets of TLC.
(2) Christiana will sell 666.667 Membership Units (two-thirds) of TLC to
C2, Inc. (a newly formed corporation) for $10,667,000.
(3) TLC will agree to indemnify Christiana for certain liabilities of
Christiana. See "The Purchase Agreement" included elsewhere in this
prospectus.
F-17
<PAGE> 66
TOTAL LOGISTIC CONTROL, LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
AS OF SEPTEMBER 30, 1998 AND JUNE 30, 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 JUNE 30, 1998
------------------ -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 420,000 $ 541,000
Accounts receivable, net.................................. 9,170,000 7,739,000
Inventories, prepaids and other assets.................... 1,161,000 544,000
----------- -----------
Total current assets.............................. 10,751,000 8,824,000
LONG-TERM ASSETS:
Fixed assets, net......................................... 69,410,000 70,601,000
Goodwill.................................................. 5,396,000 5,435,000
Other assets.............................................. 733,000 751,000
----------- -----------
Total long-term assets............................ 75,539,000 76,787,000
----------- -----------
Total assets...................................... $86,290,000 $85,611,000
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term debt........................................... $ -- $ 239,000
Current maturities of long-term debt...................... 2,630,000 3,003,000
Accounts payable.......................................... 5,551,000 3,774,000
Accrued liabilities....................................... 3,516,000 4,236,000
----------- -----------
Total current liabilities......................... 11,697,000 11,252,000
DUE TO PARENT COMPANY..................................... 3,000,000 3,000,000
LONG-TERM LIABILITIES:
Long-term debt............................................ 26,275,000 27,122,000
Other liabilities......................................... 335,000 340,000
----------- -----------
Total long-term liabilities....................... 26,610,000 27,462,000
----------- -----------
Total liabilities................................. 41,307,000 41,714,000
----------- -----------
MEMBER'S EQUITY........................................... 44,983,000 43,897,000
----------- -----------
Total liabilities and member's equity............. $86,290,000 $85,611,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
F-18
<PAGE> 67
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
REVENUES:
Warehousing and logistic services......................... $22,370,000 $23,047,000
OPERATING EXPENSES:
Warehousing and logistic expenses......................... 18,633,000 19,201,000
Selling, general and administrative expenses.............. 1,973,000 1,899,000
----------- -----------
20,606,000 21,100,000
----------- -----------
Income from operations.................................... 1,764,000 1,947,000
OTHER INCOME (EXPENSES):
Interest expense.......................................... (621,000) (773,000)
Gain on sale of assets.................................... 61,000 --
Other expense, net........................................ (118,000) (251,000)
----------- -----------
(678,000) (1,024,000)
----------- -----------
INCOME BEFORE INCOME TAXES.................................. 1,086,000 923,000
PROVISION FOR INCOME TAXES.................................. -- --
----------- -----------
NET INCOME.................................................. $ 1,086,000 $ 923,000
=========== ===========
BASIC AND DILUTED NET INCOME PER MEMBERSHIP UNIT............ $ 1,086 $ 923
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-19
<PAGE> 68
TOTAL LOGISTIC CONTROL, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 1,086,000 $ 923,000
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and amortization.......................... 1,721,000 1,706,000
Gain on sale of assets................................. (61,000) --
Changes in Assets and Liabilities:
Increase in accounts receivable........................ (1,431,000) (3,202,000)
(Increase) decrease in inventories, prepaids and other
assets................................................ (599,000) 349,000
Increase in accounts payable and accrued liabilities... 1,052,000 3,065,000
----------- -----------
Net cash provided by operating activities......... 1,768,000 2,841,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... (546,000) (839,000)
Proceeds from sale of fixed assets.......................... 116,000 --
----------- -----------
Net cash used in investing activities............. (430,000) (839,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit, net................ (239,000) 944,000
Payment of long-term debt................................... (1,220,000) (266,000)
Dividend distribution to Parent Company..................... -- (2,326,000)
----------- -----------
Net cash used in financing activities............. (1,459,000) (1,648,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (121,000) 354,000
BEGINNING CASH AND CASH EQUIVALENTS......................... 541,000 224,000
----------- -----------
ENDING CASH AND CASH EQUIVALENTS............................ $ 420,000 $ 578,000
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid............................................. $ 573,000 $ 765,000
Amounts paid to Parent for income taxes................... -- --
</TABLE>
The accompanying notes are an integral part of these condensed statements.
F-20
<PAGE> 69
TOTAL LOGISTIC CONTROL, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1998
1. BASIS OF PRESENTATION:
TLC is a wholly owned subsidiary of Christiana Companies, Inc.
("Christiana"). The condensed financial statements reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods presented. These financial statements should be
read in conjunction with the TLC's audited financial statements for the year
ended June 30, 1997 found elsewhere in this Prospectus.
2. EARNINGS PER MEMBERSHIP UNIT:
Earnings per Membership Unit have been computed based on the weighted
number of units outstanding as if outstanding for all periods presented.
Effective December 1997, TLC adopted Statement of Financial Accounting Standards
No. 128. "Earnings Per Share" ("SFAS No. 128"). Under SFAS No. 128 presentation
of both basic and diluted earnings per membership unit is required. As TLC does
not have any outstanding dilutive financial instruments, there is no difference
between basic and diluted earnings per membership unit as presented.
3. INCOME TAXES:
TLC is a Limited Liability Company ("LLC"). For purposes of taxation, all
earnings of the LLC are "passed through" to its members and taxed at the member
level. Accordingly, the financial statements do not show a provision for income
taxes or deferred income taxes.
4. DISTRIBUTION TO PARENT COMPANY:
During the three month period ended September 30, 1997, TLC made a payment
on behalf of Christiana to pay down a promissory note payable and accrued
interest thereon in the amount of $2,326,000. This payment has been deemed a
dividend distribution to Christiana and is reflected as a reduction to member's
equity in the period then ended.
5. COMPREHENSIVE INCOME:
Effective January 1, 1998, TLC adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
established standards for reporting and display of comprehensive income and its
components. Components of comprehensive income are net income and all other
non-owner changes in equity. Because TLC has no comprehensive income components
other than net income, comprehensive income and net income are identical for all
periods presented.
6. ACCOUNTING PRONOUNCEMENTS:
Effective January 1, 1998, TLC adopted Statement of Position ("SOP") No.
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." TLC's accounting for costs of computer software developed or
obtained for internal use is consistent with the guidance established in the
SOP. As a result, adoption of this statement did not have a material impact on
TLC's financial position or results of operations.
Effective January 1, 1998, TLC adopted SOP 98-5, "Reporting on the Costs of
Start-up Activities." This SOP provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. Adoption of this statement
did not have a material impact on TLC's financial position or results of
operations.
F-21
<PAGE> 70
TLC is currently researching SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement shall be effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. Earlier application of all provisions of this
statement is permitted. This statement shall not be applied retroactively to
financial statements of prior periods. This statement is expected not to impact
TLC's operating results or financial position as TLC does not currently use
derivative financial instruments.
F-22
<PAGE> 71
ANNEX A
AGREEMENT*
BY AND AMONG
WEATHERFORD INTERNATIONAL, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.
AND
C2, INC.
DECEMBER 12, 1997
- ---------------
* As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998 and Amendment No. 2 to Logistic Purchase
Agreement dated October 14, 1998.
A-1
<PAGE> 72
AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 12th day of December, 1997, as
amended by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated October
14, 1998, by and among WEATHERFORD INTERNATIONAL, INC., a Delaware corporation
("Weatherford"), TOTAL LOGISTIC CONTROL, LLC, a Delaware limited liability
company ("TLC"), CHRISTIANA COMPANIES, INC., a Wisconsin corporation
("Christiana") and C2, INC., a Wisconsin corporation ("C2").
WITNESSETH:
WHEREAS, Weatherford, Christiana Acquisition, Inc., a Wisconsin corporation
("Sub"), Christiana and C2 have entered into an Amended and Restated Agreement
and Plan of Merger dated December 12, 1997 (the "Merger Agreement") pursuant to
which Sub, a wholly owned subsidiary of Weatherford, will merge with and into
Christiana and thereby Christiana will become a wholly owned subsidiary of
Weatherford (the "Merger")
WHEREAS, as a condition to the Merger, Christiana will sell 666.667
Membership Units (as defined in Section 1.16 hereof) of TLC to C2 pursuant to
the terms and conditions hereinafter set forth (the "Logistic Sale").
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein and the mutual benefits derived from this Agreement ("Agreement"), the
parties, intending to be legally bound, hereby agree as follows:
1. Definitions.
1.1 Affiliate. Affiliate means, as to the person specified, any person
controlling, controlled by or under common control with such person, with the
concept of control in such context meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract or otherwise.
1.2 Assumed Liabilities. Assumed Liabilities means any and all Liabilities
and Environmental Liabilities (except for the Retained Liabilities) to which
Christiana, Weatherford or a Christiana Company may now or at any time in the
future become subject (whether directly or indirectly, including by reason of
Christiana or a Christiana Company owning, controlling or operating any business
or assets of any Person (including any current or past Affiliate)), resulting
from, arising out of or relating to (i) any Christiana Company (other than TLC),
(ii) the business, operations or assets of Christiana or any Christiana Company
on or prior to the Effective Date, (iii) any Christiana Taxes for periods ending
on or before the Effective Date (except Christiana Taxes to be expressly
retained by Christiana pursuant to the Merger 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;
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(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 Weatherford's counsel's evaluation of the Merger and the
Logistic sale.
1.3 Business Day. Business Day means a day on which national banks are
generally open for the transaction of business in Houston, Texas.
1.4 CERCLA. CERCLA means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. sec. 9601, et seq.
1.5 Christiana. Christiana, for purposes of the assumption indemnification
provisions of this Agreement includes Christiana Companies, Inc. and any and all
predecessors thereto, whether by merger, purchase or acquisition of assets or
otherwise, and any and all predecessors to any such entities.
1.6 Circumstance. Circumstance has the meaning specified in Section 6.2
hereof.
1.7 Effective Date. Effective Date means the time and date the Merger is
made effective.
1.8 Environmental Conditions. Environmental Conditions means any
pollution, contamination, degradation, damage or injury caused by, related to,
arising form or in connection with the generation, handling, use, treatment,
storage, transportation, disposal, discharge, release or emission of any Waste
Materials.
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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. sec. 7401 et seq., The Clean Water Act, 33 U.S.C. sec. 1251 et
seq., the Resource Conservation Recovery Act, 42 U.S.C. sec. 6901 et seq., the
Superfund Amendments and Reauthorization Act, 42 U.S.C. sec. 11011 et seq., the
Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., the Water Pollution
Control Act, 33 U.S.C. sec. 1251, et seq., the Safe Drinking Water Act, 42
U.S.C. sec. 300f et seq., CERCLA and any state, county or local regulations
similar thereto.
1.10 Environmental Liabilities. Environmental Liabilities means any and
all liabilities, responsibilities, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative or monitoring
costs and any other related costs and expenses), other causes of action
recognized now or at any later time, damages, settlements, expenses, charges,
assessments, liens, penalties, fines, pre-judgment and post-judgment interest,
attorney fees and other legal fees (i) pursuant to any agreement, order, notice,
requirement, responsibility or directive (including directives embodied in
Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of or in connection with any Environmental Laws, or
(ii) pursuant to any claim by a governmental entity or other person or entity
for personal injury, property damage, damage to natural resources, remediation
or similar costs or expenses incurred or asserted by such entity or person
pursuant to common law or statute.
1.11 Weatherford Indemnified Parties. Weatherford Indemnified Parties
shall have the meaning set forth in Section 6.1(a) hereof.
1.12 Christiana Company. Christiana Company means any corporation,
partnership, limited liability company, association or other entity, of which
Christiana or any Christiana Company now or at any time in the past owned,
directly or indirectly, an ownership interest in (whether or not such ownership
interest constituted control of the entity and whether or not such interest
represented a passive or active investment), including those companies named on
Schedule 1.12 hereto.
1.13 Christiana Taxes. Christiana Taxes means any and all taxes (other
than Weatherford Related Taxes as defined in the Merger Agreement) to which
Christiana or any Christiana Company may be obligated relating to or arising
from (i) the current or past operations or assets of Christiana or any
Christiana Company through the Effective Date, (ii) the Logistic Sale, (iii) the
Merger, (iv) any tax return filed by any current or past member of 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.
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1.18 Merger Agreement. Merger Agreement means the Amended and Restated
Agreement and Plan of Merger dated December 12, 1997, by and among Weatherford,
Christiana Acquisition, Inc., Christiana Companies, Inc. and C2, Inc.
1.19 Operating Agreement. Operating Agreement shall mean the form of
Operating Agreement attached hereto as Exhibit A.
1.20 Person. Person means an individual, corporation, limited liability
company, partnership, governmental authority or any other entity.
1.21 Properties. Properties means the properties currently or previously
owned or operated by Christiana or any Christiana Company.
1.22 Retained Liabilities. Retained Liabilities shall mean and be limited
solely to (i) those accounts payable relating to Christiana that are reflected
on the Effective Date balance sheet of Christiana, (ii) those accounts payable
reflected on the Effective Date balance sheet of Christiana and agreed to by
Weatherford prior to the Effective Date, (iii) the obligations of Christiana
that arise after the Effective Date (other than obligations relating to matters
existing or occurring on or prior to the Effective Date and indemnification,
warranty and product liability, wrongful death or property claims associated
with actions or omissions prior to the Effective Date or any business conducted
prior to the Effective Date) and (iv) Weatherford Related Taxes (as defined in
the Merger Agreement).
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
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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 Weatherford to the Exchange Agent (as defined in the
Merger Agreement) pursuant to Section 1.8(c) of the Merger Agreement by C2 to
Christiana in the form of a certified or cashier's check, or, at the option of
Christiana, by wire transfer of immediately available funds to an account
designated by Christiana and (ii) the assumption by C2 at the closing of the
Assumed Liabilities.
2.4 Absolute Assumption. It is the intent of the parties that the
Liabilities and Environmental Liabilities assumed by C2 and TLC under this
Agreement shall be without regard to the cause thereof or the negligence of any
Person, whether such negligence be sole, joint or concurrent, active or passive,
and whether such Liability or Environmental Liability is based on strict
liability, absolute liability or arising as an obligation of contribution. C2
and TLC each hereby waives and releases for itself and on behalf of Affiliates
(other than Christiana, Weatherford and their respective Affiliates) any claims,
defenses or claims for contribution that it has or may have against Christiana,
Weatherford or any of their respective Affiliates with respect to the Assumed
Liabilities.
3. Representations of Christiana.
3.1. Organization. Christiana is a corporation duly organized and validly
existing under the laws of the state of Wisconsin. TLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Delaware.
3.2. Title. The 666.667 Membership Units being transferred pursuant to
this Agreement without any representation or warranty of any kind, including any
implied representations of the title.
4. Representations of C2 and TLC.
4.1. Organization. TLC is a limited liability company duly organized and
validly existing under the laws of the state of Delaware. C2 is a corporation
duly organized and validly existing under the laws of the state of Wisconsin.
4.2. Corporate Power. Each of C2 and TLC has full power, legal right and
authority to enter into this Agreement, and to carry out the transactions
contemplated hereby. The execution of this Agreement, and full performance
hereunder, has been duly authorized by C2's Board of Directors and TLC's
Members.
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.
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5.3 Participation Rights. If there is a proposed merger, consolidation or
share exchange involving C2 or TLC or if C2 shall propose to transfer or sell
all its interest in TLC to an unrelated third party (a "Third Party") in one or
more transactions, Christiana shall have the right to participate (a "Tag Along
Right") in such sale with respect to the Membership Units held by it for the
same equivalent consideration per equivalent unit in TLC and otherwise on the
same terms as such member sells or transfers their interests in C2. If
circumstances occur which give rise to the Tag Along Right, then C2 shall give
written notice ("Tag Along Notice") to Christiana providing a summary of the
terms of the proposed sale to the Third Party and advising Christiana of its Tag
Along Right. Christiana may exercise its Tag Along Right by delivery of written
notice to C2 within fifteen (15) days of its receipt of the Tag Along Right. If
Christiana gives written notice indicating that it wishes to sell, it shall be
obligated to sell its Membership Units upon the substantially same terms and
conditions as the members of C2 are selling to the Third Party conditioned upon
and contemporaneous with completion of the transaction of purchase and sale with
the Third Party.
6. Indemnification.
6.1 Indemnification Matters.
(a) Indemnification. Each of C2 and TLC, jointly and severally,
hereby agree to indemnify, defend and hold Christiana, Weatherford and
their respective officers, directors, employees, agents and assigns
(collectively, the "Weatherford Indemnified Parties") harmless from and
against any and all Liabilities or Environmental Liabilities (including,
without limitation, reasonable fees and expenses of attorneys, accountants,
consultants and experts) that the Weatherford Indemnified Parties incur,
are subject to a claim for, or are subject to, that are based upon, arising
out of, relating to or otherwise in respect of:
(i) Any breach of any covenant or agreement of C2 or TLC contained
in this Agreement or in any other agreement contemplated hereby;
(ii) The acts or omissions of Christiana or any Christiana Company
on or before the Effective Date;
(iii) The acts or omissions of TLC, any Christiana Company or any
of its Affiliates (other than Christiana or Weatherford) or the conduct
of any business by them on or after the Effective Date (it being
understood that this indemnification shall not apply to acts or
omissions by Christiana or Weatherford after the Effective Date);
(iv) The Assumed Liabilities;
(v) Any and all amounts for which Christiana or Weatherford may be
liable on account of any claims, administrative charges, self-insured
retentions, deductibles, retrospective premiums or fronting provisions
in insurance policies, including as the result of any uninsured period,
insolvent insurance carriers or exhausted policies, arising from claims
by Christiana or any Christiana Company, or the employees of any of the
foregoing, or claims by insurance carriers of Christiana or any
Christiana Company for indemnity arising from or out of claims by or
against Christiana or any Christiana Company for acts or omissions of
Christiana or any Christiana Company, or related to any current or past
business of Christiana or any Christiana Company or any product or
service provided by Christiana or any Christiana Company in whole or
part prior to the Effective Date;
(vi) Any settlements or judgments in any litigation commenced by
one or more insurance carriers against Christiana or Weatherford on
account of claims by any Christiana Company or employees of any
Christiana Company and, if filed prior to the Effective Date, by
Christiana or any employee of Christiana;
(vii) Any Taxes (other than Weatherford Related Taxes) as a result
of the Logistic Sale and any Taxes as a result of the Merger
subsequently being determined to be a taxable transaction for foreign,
federal, state or local law purposes regardless of the theory or reason
for the transactions being subject to Tax;
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(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 Weatherford
pursuant to its obligations hereunder in seeking to obtain or obtaining
any consent or approval to assign and transfer any interest in TLC;
(xii) Any acts or omissions of Christiana or any Christiana Company
relating to the ownership or operation of the business of Christiana or
any Christiana Company or the Properties on or prior to the Effective
Date;
(xiii) Any Liability relating to any claim or demand by any
stockholder of Christiana or Weatherford with respect to the Merger, the
Logistic Sale or the transactions relating thereto; and
(xiv) Any Liability relating to any Christiana or any Christiana
Company employee benefit or welfare plans arising out of circumstances
occurring on or prior to the Effective Date.
(b) Allocation of Liability Payment Obligations. To the extent a
Liability exists or a claim for indemnification is made by an Weatherford
Indemnified Party hereunder, such Liability shall be paid and such claim
shall be defended and paid as follows:
(i) If the Liability or claim relates primarily to the historic
assets, liabilities, operations or businesses TLC (the "TLC Historic
Business"), TLC shall, as between C2 and TLC, be primarily responsible
for the payment of such Liability and the defense and payment of such
claim. If TLC does not defend or pay such claim, C2 shall be responsible
for the defense and payment of such claim.
(ii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, C2 shall, as between C2 and TLC and
subject to the provisions of clause (iii) below, be primarily
responsible for the payment of such Liability and the defense and
payment of such claim. If C2 does not defend or pay such claim, TLC
shall be responsible for the defense and payment of such claim.
(iii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, the costs of defense and payment of the
Liability shall be paid by Weatherford to the extent and only to the
extent of the Christiana Retained Cash (as defined in the Merger
Agreement); provided that once such Christiana Retained Cash is paid
pursuant to the Merger Agreement, Weatherford shall have no obligation
to pay such amounts. Any such payments shall be subject to Weatherford
being provided with reasonable documentation regarding the payment
obligations.
(iv) If TLC pays any amounts relating to an Assumed Liability or an
indemnification claim hereunder, Christiana shall be entitled to receive
a cash payment equal to one-third of any such amount paid when and if
(i) TLC or all or substantially all of its assets are sold, (ii) there
is a sale of Membership Units by C2 or (iii) there is a direct or
indirect transfer or sale of the membership units of TLC held by C2 or
of the membership units of C2. The obligation to pay such amounts shall
be payable by C2.
(v) To secure the obligations of C2 hereunder, C2 shall pledge to
Christiana all of C2's interest in TLC, including all rights to
distributions in respect thereof, pursuant to a pledge agreement in such
form and having such terms as Christiana may reasonably request.
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(vi) Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed to be an assumption of any obligation or
responsibility by Weatherford of any Assumed Liabilities and its
obligations hereunder shall be personal to TLC and C2 to the extent and
only to the extent Weatherford has agreed to fund the payment of
indemnity claims by it with the Christiana Retained Cash as expressly
provided herein. No third party shall be deemed to have any rights
against Weatherford as result of this Agreement.
(c) Absolute Indemnity. NONE OF THE WEATHERFORD INDEMNIFIED PARTIES
WILL BE OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN CONNECTION WITH THE
COLLECTION OR PURSUIT OF ANY INSURANCE IN ORDER TO EXERCISE AN
INDEMNIFICATION REMEDY UNDER THIS SECTION VI. UNLESS OTHERWISE SPECIFICALLY
EXPRESSED, THIS INDEMNITY OBLIGATION SHALL APPLY WITHOUT REGARD TO WHETHER
THE LIABILITY OR ENVIRONMENTAL LIABILITY WAS CAUSED BY THE ORDINARY OR
GROSS NEGLIGENCE OF ANY OF THE WEATHERFORD INDEMNIFIED PARTIES (WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE), OR
WHETHER THE LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT
LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION OF CONTRIBUTION OR
INDEMNITY. EACH OF C2 AND TLC ACKNOWLEDGES THAT IT IS AWARE OF VARIOUS
THEORIES KNOWN AS THE "EXPRESS NEGLIGENCE" DOCTRINE AND OTHER SIMILAR
DOCTRINES AND THEORIES THAT MAY LIMIT INDEMNIFICATION AND AGREES AND
STIPULATES THAT THE PROVISIONS OF THIS AGREEMENT REFLECT THE EXPRESS INTENT
OF THE PARTIES THAT THE INDEMNIFICATION TO BE PROVIDED BY TLC AND C2 APPLY
NOTWITHSTANDING THE FACT THAT THE LIABILITY OR ENVIRONMENTAL LIABILITY (I)
MAY NOT CURRENTLY BE KNOWN BY IT OR MANIFEST ITSELF IN ANY REGARD, (II) MAY
ARISE UNDER A STATUTE OR THEORY THAT MAY NOT CURRENTLY EXIST OR BE KNOWN TO
TLC, (III) MAY ARISE AS A RESULT OF A NEGLIGENT ACT OR OMISSION BY ANY OF
THE WEATHERFORD INDEMNIFIED PARTIES (WHETHER SUCH CONDUCT BE SOLE, JOINT OR
CONCURRENT OR ACTIVE OR PASSIVE) OR (IV) MAY CONSTITUTE A VIOLATION OF ANY
APPLICABLE CIVIL OR CRIMINAL LAW OR REGULATION.
6.2 Notice of Circumstance. After receipt by an Weatherford Indemnified
Party of notice, or an Weatherford Indemnified Party's actual discovery, of any
action, proceeding, claim, demand or potential claim which could give rise to a
right to indemnification pursuant to any provision of this Agreement (any of
which is individually referred to a as a "Circumstance"), the Weatherford
Indemnified Party shall give TLC and C2 (collectively the "TLC Parties") written
notice describing the Circumstances in reasonable detail; provided, however,
that no delay by an Weatherford Indemnified Party in notifying the TLC Parties
shall relieve the TLC Parties from any Liability or Environmental Liability
hereunder unless (and then solely to the extent) the TLC Parties' position is
actually adversely prejudiced. In the event the TLC Parties notifies the
Weatherford Indemnified Party within 15 days after such notice that the TLC
Parties is assuming the defense thereof, (i) the TLC Parties will defend the
Weatherford Indemnified Parties against the Circumstances with counsel of its
choice, provided such counsel is reasonably satisfactory to Weatherford, (ii)
the Weatherford Indemnified Parties may retain separate co-counsel at its or
their sole cost or expense (except that the TLC Parties will be responsible for
the fees and expenses for the separate co-counsel to the extent Weatherford
concludes reasonably that the counsel the TLC Parties has selected has a
conflict of interest), (iii) the Weatherford Indemnified Parties will not
consent to the entry of any judgment or enter into any settlement with respect
to the Circumstances without the written consent of the TLC Parties, and (iv)
the TLC Parties will not consent to the entry of any judgment with respect to
the Circumstances, or enter into any settlement which (x) requires any payments
by or continuing obligations of an Weatherford Indemnified Party, (y) requires
an Weatherford Indemnified Party to admit any facts or liability that could
reasonably be expected to adversely affect an Weatherford Indemnified Party in
any other matter or (z) does not include a provision whereby the plaintiff or
claimant in the matter released the Weatherford Indemnified Parties from all
Liability with respect thereto, without the written consent of Weatherford. In
the event the TLC Parties does not notify Weatherford within 15 days after
Weatherford has given notice of the Circumstance that the
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TLC Parties is assuming the defense thereof, the Weatherford Indemnified Parties
may defend against, or enter into any settlement with respect to, the
Circumstance in any manner the Weatherford Indemnified Parties reasonably may
deem appropriate, at the TLC Parties' sole cost. The foregoing provisions shall
be subject to the provisions of Section 6.1(b).
6.3 Insurance. the TLC Parties shall not be obligated to indemnify the
Weatherford Indemnified Parties for amounts which shall have been covered and
paid by insurance of the Weatherford Indemnified Parties, provided, however,
insurance shall not include deductibles or self-insured retentions.
6.4 Scope of Indemnification. INDEMNIFICATION UNDER THIS SECTION VI SHALL
BE IN ADDITION TO ANY REMEDIES CHRISTIANA, WEATHERFORD OR ANY WEATHERFORD
INDEMNIFIED PARTY MAY HAVE AT LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO
C2'S OF TLC'S INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.5 Indemnity for Certain Environmental Liabilities. It is the intention
of the parties that the indemnity provided herein with respect to Environmental
Liabilities under CERCLA and corresponding provisions of state law is an
agreement expressly not barred by 42 U.S.C. sec. 9607(e)(i) and corresponding
provisions of state law.
6.6 C2 and TLC Covenants. To assure the performance of the obligations of
C2 and TLC under this Agreement, C2 and TLC each hereby covenants and agrees
that it will not, and will cause its subsidiaries to not, merge, convert into
another entity, engage in a share or interest exchange for a majority of its
units or shares, liquidate or transfer, assign or otherwise convey or allocate,
directly or indirectly, in one or more transactions, whether or not related, a
majority of C2's or TLC's assets (determined in good faith by a board or similar
managing body's resolution prior to the transaction on a fair value and
consolidated basis) to any Person unless the acquiring Person expressly assumes
the obligations of C2 or TLC, as the case may be, hereunder, (ii) executes and
delivers to Christiana and Weatherford an agreement agreeing to be bound by each
and every provision of this Agreement as if it were C2 or TLC, as the case may
be,and (iii) has a net worth on a pro forma basis after giving effect to the
acquisition or business combination equal to or greater than that of C2 or TLC,
as the case may be, on a consolidated basis.
7. Miscellaneous.
7.1. Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each party hereto, provided that this
Agreement may be amended only as may be permitted by the laws that govern
Weatherford, TLC, Christiana and C2. The waiver by any party hereto of any
condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party hereto of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
7.2 Arbitration. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.2. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by TLC and C2 and one to be appointed by
Weatherford within fourteen days following the submission of the claim to the
parties hereto and the third to be appointed by the two so appointed within five
days. Should either party refuse or neglect to join in the timely appointment of
the arbitrators, the other party shall be entitled to select both arbitrators.
Should the two arbitrators 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
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additional time is necessary to reach a decision, they may notify the parties
and extend the time to reach a decision in thirty day increments, but in no
event to exceed an additional ninety days. Discovery of evidence shall be
conducted expeditiously by the Parties, bearing in mind the parties desire to
limit discovery and to expedite the decision or award of the arbitrators at the
most reasonable cost and expense of the parties. Judgment upon an award rendered
pursuant to such Arbitration may be entered in any court having jurisdiction, or
application may be made to such court for a judicial acceptance of the award,
and an order of enforcement, as the case may be. The place of Arbitration shall
be Houston, Texas. The decision of the arbitrators, or a majority thereof, made
in writing, shall be final and binding upon the parties hereto as to the
questions submitted, and each party shall abide by such decision.
Notwithstanding the provisions of this Section 7.2, neither party shall be
prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of arbitration and
entry of the arbitrator's award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern District
of Texas in any suit, action or proceeding seeking injunctive relief,
arising out of or relating to this Agreement or any of the other agreements
contemplated hereby and any other court in which a matter that may result
in a claim for indemnification hereunder by an Weatherford Indemnified
Party may be brought with respect to any claim for indemnification by an
Weatherford Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding seeking injunctive relief, orders
in aid of arbitration or entry of an arbitration arising out of or relating
to this Agreement or any of the other agreements contemplated hereby
brought in any state court located in Harris County, Texas or any federal
court sitting in the Southern District of Texas or any other court in which
a matter that may result in a claim for indemnification hereunder by an
Weatherford Indemnified Party may be brought with respect to any claim for
indemnification by an Weatherford Indemnified Party, and further
irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum; and
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any suit,
action or proceeding arising out of or relating to this Agreement or any of
the other agreements contemplated hereby.
7.3. Assignment. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any person other than TLC, C2, Christiana,
Weatherford, and the Weatherford Indemnified Parties any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
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7.4. Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Weatherford:
Weatherford, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Stauss
Facsimile: (713) 651-5246
if to TLC:
Total Logistic Control, LLC
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to Christiana:
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Strauss
Facsimile: (713) 651-5246
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if to C2:
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.4. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.5. Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall by governed by the laws of the State
of Texas without regard to conflict of laws principles.
7.6. Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
7.7. Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.8. Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7.9. Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all other prior agreements and understandings, both oral and written,
among the parties or any of them, with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WEATHERFORD INTERNATIONAL, INC.
("Weatherford")
By: /s/ BERNARD J. DUROC-DANNER
Name: Bernard J. Duroc-Danner
Title: President
TOTAL LOGISTIC CONTROL, LLC
("TLC")
By: /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: Vice President
CHRISTIANA COMPANIES, INC.
("Christiana")
By: /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: President
C2, INC.
("C2")
By: /s/ WILLIAM T. DONOVAN
Name: William T. Donovan
Title: President
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ANNEX B
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
, 1998
B-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
1. FORMATION
1.1 Definitions................................................. B-4
1.2 Formation; Name............................................. B-4
1.3 Purposes.................................................... B-4
1.4 Registered and Principal Offices............................ B-4
1.5 Term........................................................ B-4
1.6 Foreign Qualification....................................... B-4
1.7 No State Law Partnership.................................... B-5
1.8 Partnership Classification.................................. B-5
2. MEMBERS
2.1 Members..................................................... B-5
2.2 Admission of Additional Members............................. B-5
3. CAPITAL CONTRIBUTIONS
3.1 Capital Contributions by Members............................ B-5
3.2 Purchase of Units by C2, Inc................................ B-5
3.3 Loans to the Company........................................ B-5
3.4 Withdrawal and Return of Contributions...................... B-5
3.5 Interest on Contributions................................... B-5
3.6 Limitation on Member's Deficit Make-up...................... B-5
3.7 Capital Accounts............................................ B-5
3.8 Units....................................................... B-6
4. ALLOCATIONS
4.1 Profits and Losses.......................................... B-6
4.2 Tax Allocations............................................. B-6
4.3 Construction................................................ B-6
5. DISTRIBUTIONS
5.1 Current Tax Distributions................................... B-6
5.2 Other Distributions......................................... B-6
5.3 Amounts Withheld............................................ B-6
5.4 Distribution Restrictions................................... B-6
6. MANAGEMENT
6.1 Voting and Decisions........................................ B-6
6.2 Restriction on Transactions................................. B-6
6.3 Regular Meetings............................................ B-6
6.4 Special Meetings............................................ B-8
6.5 Quorum...................................................... B-8
6.6 Notice...................................................... B-8
6.7 Manner of Acting............................................ B-8
6.8 Vacancies................................................... B-8
6.9 Presumption of Assent....................................... B-8
6.10 Resignation of Manager...................................... B-8
6.11 Action Without Meeting...................................... B-8
6.12 Telephonic Meetings......................................... B-8
6.13 Reliance by Third Parties................................... B-9
6.14 Filing of Documents......................................... B-9
6.15 Limitation on Liability; Indemnification.................... B-9
6.16 Delegation to Members or Representatives of Members......... B-9
6.17 Time Devoted to Business.................................... B-10
6.18 Compensation of Members and Officers........................ B-10
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND
DISASSOCIATION
7.1 Assignment and Transfer..................................... B-10
7.2 Disassociation.............................................. B-12
7.3 Restraining Order........................................... B-12
8. DISSOLUTION AND WINDING UP
8.1 Dissolution................................................. B-12
8.2 Winding Up and Liquidation.................................. B-12
8.3 Compliance With Timing Requirements of Regulations.......... B-12
9. BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.1 Books and Records........................................... B-13
9.2 Fiscal Year and Method of Accounting........................ B-13
9.3 Reports and Statements...................................... B-13
9.4 Tax Elections............................................... B-13
9.5 Tax Matters Partner......................................... B-13
10. MISCELLANEOUS
10.1 Amendments.................................................. B-13
10.2 Bank Accounts............................................... B-13
10.3 Binding Effect.............................................. B-14
10.4 Rules of Construction....................................... B-14
10.5 Choice of Law and Severability.............................. B-14
10.6 Counterparts................................................ B-14
10.7 Entire Agreement............................................ B-14
10.8 Last Day for Performance Other Than a Business Day.......... B-14
10.9 Notices..................................................... B-14
10.10 Title to Property; No Partition............................. B-14
11. GLOSSARY............................................................ B-15
</TABLE>
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TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (this "Operating
Agreement") is effective as of the [ ] day of ,
1997, between CHRISTIANA COMPANIES, INC., a Wisconsin corporation, and C2, INC.,
a Wisconsin corporation (individually, "Member", and collectively, the
"Members").
WITNESSETH:
WHEREAS, Christiana Companies, Inc. has formed a limited liability company
known as Total Logistic Control, LLC (the "Company"), by causing the filing of a
Certificate of Organization (the "Certificate") pursuant to the Act;
WHEREAS, C2, Inc. desires to acquire an interest in the Company and
Christiana Companies, Inc. desires to sell a portion of its interest to C2, Inc.
pursuant to the terms and conditions of that certain Purchase Agreement by and
among Weatherford International, Inc., a Delaware corporation, Christiana
Acquisition Co., a Wisconsin corporation, Christiana Companies, Inc., a
Wisconsin corporation, and C2, Inc., a Wisconsin corporation, dated December 12,
1997 as amended by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated
October , 1998 (the "Purchase Agreement").
WHEREAS, the parties hereto desire to set forth in full all of the terms
and conditions of their agreements and understandings in this Operating
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
1. FORMATION
1.1 DEFINITIONS. Capitalized terms used in this Operating Agreement shall
have the meanings set forth in the text of this Operating Agreement in the
Glossary contained in Article XI.
1.2 FORMATION; NAME. Christiana Companies, Inc. formed the Company as a
limited liability company pursuant to the Act by causing, on June 13, 1997, the
Certificate to be filed with the Delaware Secretary of State, which shall
constitute notice that the Company is a limited liability company. The Company's
name shall be Total Logistic Control, LLC.
1.3 PURPOSES. The purposes of the Company shall be to engage in any and
all general business activities permissible under the Act.
1.4 REGISTERED AND PRINCIPAL OFFICES. The registered office of the Company
shall initially be located at 1209 Orange Street, Wilmington (County of New
Castle), Delaware, 19801. The registered agent of the Company shall be the
Corporation Trust Company, whose address is the same as that of the registered
office. The principal office of the Company shall be located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Board of Managers may
establish additional offices or may relocate the principal or registered
offices.
1.5 TERM. The Company's term officially began on June 13, 1997, and shall
continue until terminated by operation of law or by some provision of this
Operating Agreement.
1.6 FOREIGN QUALIFICATION. Prior to the Company's conducting business in
any jurisdiction other than Delaware, the Board of Managers shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Managers, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. Each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Operating Agreement that
are necessary or appropriate to qualify, continue, and terminate the Company as
a foreign limited liability company in all such jurisdictions in which the
Company may conduct business.
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<PAGE> 89
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 Ahereto.
2.2 ADMISSION OF ADDITIONAL MEMBERS. Additional members may be admitted to
the Company only with Member Approval.
3. CAPITAL CONTRIBUTIONS
3.1 CAPITAL CONTRIBUTIONS BY MEMBERS.
(i) Initial Capital Contributions. The initial capital contribution
made by Christiana Companies, Inc. to the Company in exchange for its 100%
percentage interest in the Company is set forth on Exhibit C to this
Operating Agreement of Total Logistic Control, LLC dated June 13, 1997.
Christiana Companies, Inc.'s 100% percentage interest is hereby restated as
1,000 Units in the Company.
(ii) Additional Capital Contributions. No additional capital
contributions to the Company shall be required. Additional capital
contributions to the Company may be made with Manager Approval. No
additional Units in the Company may be issued without prior Member
Approval.
3.2 PURCHASE OF UNITS BY C2, INC. Pursuant to the terms and conditions of
the Purchase Agreement, C2, Inc. purchased 666.667 of the Units in the Company
held by Christiana Companies, Inc. Immediately following such purchase, each
Member holds the number of Units in the Company set forth on Exhibit A hereto.
3.3 LOANS TO THE COMPANY. Except as set forth in this Operating Agreement,
no Member shall make a loan to the Company without Manager Approval.
3.4 WITHDRAWAL AND RETURN OF CONTRIBUTIONS. No Member shall be entitled to
withdraw or to the return of its capital contributions. No Member shall have the
right to demand and receive property other than cash in return for its
contributions, except that upon dissolution, the Members shall be entitled to
share in the distribution of the remaining assets of the Company in accordance
with Article VIII of this Operating Agreement.
3.5 INTEREST ON CONTRIBUTIONS. Capital contributions to the Company shall
not earn interest.
3.6 LIMITATION ON MEMBER'S DEFICIT MAKE-UP. The Members shall have no
obligation to restore any deficit in their Capital Accounts.
3.7 CAPITAL ACCOUNTS.
(i) Maintenance of Capital Accounts. A separate Capital Account shall
be maintained and adjusted for each Member on the books and records of the
Company in accordance with the Code and the Treasury Regulations. The
initial balance of each Member's Capital Account shall be the amount of its
initial contribution to the Company.
(a) Transfers. In the event any interest in the Company is
transferred in accordance with the terms of this Operating Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
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<PAGE> 90
(b) Revaluation. In the event the Values of Company assets are
adjusted pursuant to the definition of the term "Value" in Article XI
hereof, the Capital Accounts of all Members shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the Company
recognized gain or loss equal to the amount of such aggregate net
adjustment, and such adjustment shall be allocated to the Members in
accordance with Article IV hereof.
(c) Interpretation. The manner in which Capital Accounts are to be
maintained pursuant to this Section 3.07 is intended to and shall be
construed so as to comply with the requirements of Section 704(b) of the
Code and the Treasury Regulations promulgated thereunder.
3.8 UNITS. The membership interests in the Company shall be divided into
Units. Except as set forth herein, each Unit shall have identical preferences,
limitations, and other relative rights.
4. ALLOCATIONS
4.1 PROFITS AND LOSSES. Except as otherwise provided in Section 4.02
hereof, Profits and Losses shall be allocated among the Members in proportion to
the number of Units held by such Members.
4.2 TAX ALLOCATIONS.
(i) Capital Contributions. In accordance with section 704(c) of the
Code and the Treasury Regulations under that section, income, gain, loss,
and deduction with respect to any capital contribution shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of the capital contribution for
federal income tax purposes and its initial Value.
(ii) Adjustment of Value. If the Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to the asset shall take account of any variation between the
asset's adjusted basis for federal income tax purposes and its Value as so
adjusted in the same manner as under section 704(c) of the Code and the
Treasury Regulations under that section.
(iii) Elections. Any elections or other decisions relating to the
allocations shall be made by the Board of Managers in any manner that
reasonably reflects the purpose and intent of this Operating Agreement.
Allocations pursuant to this Section 4.02 are solely for purposes of
national, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Capital Account or share of Profits
and Losses, other items, or Distributions pursuant to any provision of this
Operating Agreement.
(iv) Determination of Allocable Amounts. For purposes of determining
the Profits and Losses, or any other items of income, gain, loss, or
deduction allocable to any fiscal period, Profits and Losses, and any other
such items shall be determined on a daily, monthly, or other basis, as
determined by the Board of Managers using any permissible method under
section 706 of the Code and the Treasury Regulations under that section.
(v) Income Tax Consequences. The Members are aware of the income tax
consequences of the allocations made by this Article IV and agree to be
bound by the provisions of this Article IV in reporting their shares of
income, gain, loss, and deductions for income tax purposes.
4.3 CONSTRUCTION. The provisions of this Article IV (and other related
provisions in this Operating Agreement) pertaining to the allocation of items of
Company income, gain, loss, deductions, and credits shall be interpreted
consistently with the Treasury Regulations, and to the extent unintentionally
inconsistent with such Treasury Regulations, shall be deemed to be modified to
the extent necessary to make such provisions consistent with the Treasury
Regulations.
5. DISTRIBUTIONS
5.1 CURRENT TAX DISTRIBUTIONS. To the extent permitted by law and
consistent with the Company's obligations to its creditors, the Company shall
make distributions ("Tax Distributions") in accordance with this Section 5.01 on
or before April 15, June 15, September 15 and December 15 of each year. The
aggregate amount of the Tax Distribution made with respect to a given date shall
be the product of (1) the Company's estimated federal taxable income (computed
without taking into account any asset change in value due to the
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Purchase Agreement for the calendar quarter that includes such date, multiplied
by (2) the sum of (i) the highest corporate federal income tax rate as stated in
the Internal Revenue Code, plus (ii) the highest corporate Wisconsin income tax
rate as stated in Wisconsin law, minus (iii) the product of (i) and (ii). The
aggregate amount of each Tax Distribution shall be distributed to the Members in
proportion to the number of Units held by such Members.
5.2 OTHER DISTRIBUTIONS. At such times and in such form as may be
determined by Member Approval, distributions (in addition to the distributions
described in Sections 5.01 and 5.03) shall be made to the Members in proportion
to the number of Units held by each such Member.
5.3 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Article V for all purposes under this Operating
Agreement.
5.4 DISTRIBUTION RESTRICTIONS. The Company shall make no distribution if,
and to the extent, that after such distribution, the Company would not be able
to pay its debts as they become due in the usual course of business, or the fair
value of the Company's total assets would be less than the sum of its total
liabilities.
6. MANAGEMENT
6.1 VOTING AND DECISIONS. Subject to the provisions of Section 6.02, the
management of the Company shall be vested in a Board of Managers. The initial
Board of Managers shall consist of six Managers. Each Manager shall be elected
by the vote or written consent of the Members owning at least a majority of the
Units in the Company provided, however, that Christiana Companies, Inc. and C2,
Inc. shall at all times each be entitled to elect, without the consent of any
other Member, a number of Managers that is proportionate to the number of Units
in the Company held by Christiana Companies, Inc. and C2, Inc., respectively.
6.2 RESTRICTION ON TRANSACTIONS. The following actions shall require
Member Approval:
(i) The authorization or issuance of additional Units except for the
issuance of up to 101 Units to Company management for management incentive
options with five year cliff vesting;
(ii) The authorization or payment of any distribution with respect to
Units, except for payment of any distribution that is necessary for C2,
Inc. to fulfill its obligation with respect to Section 5.2 of the Purchase
Agreement;
(iii) The direct or indirect purchase or acquisition by the Company or
any Subsidiary of the Company of Units;
(iv) The approval of any merger, consolidation or other similar
transaction involving the Company or any subsidiary of the Company or sale
of all or substantially all of the operating assets of the Company or any
subsidiary of the Company in one or more transactions;
(v) The creation of any new direct or indirect Subsidiary of the
Company;
(vi) The making of any tax election;
(vii) The liquidation or dissolution of the Company or any Subsidiary
of the Company;
(viii) Any transaction between the Company or any Subsidiary of the
Company and any affiliate of a Member (other than a transaction between the
Company and a Subsidiary of the Company);
(ix) The payment of any compensation to any Member or any affiliate of
a Member or the entering into any employee benefit plan or compensatory
arrangement with or for the benefit of any Member or affiliate of any
Member except as permitted under Section 6.18;
(x) Any amendment to this Operating Agreement or the Certificate; and
(xi) Any other matter for which Member Approval is required under the
Act.
6.3 REGULAR MEETINGS. A regular meeting of the Managers shall be held
without other notice other than this Operating Agreement at such time and place
as the Board of Managers shall determine. The Board of Managers may provide, by
resolution, the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings without other notice than such
resolution. An annual meeting of
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Members shall be held without notice other than this Operating Agreement
immediately following the annual meetings of Managers.
6.4 SPECIAL MEETINGS. Special meetings of the Board of Managers or Members
may be called at the request of any two Managers or any Member. The person or
persons authorized to call special meetings of the Board of Managers may fix any
place, either within our without the State of Delaware, as the place for holding
any special meeting of the Board of Managers called by them.
6.5 QUORUM.
(i) Managers. A majority of the number of Managers shall constitute
a quorum for the transaction of business at any meeting of the Board of
Managers, but if less than such majority is present at a meeting, a
majority of the Board of Managers or Members present may adjourn the
meeting from time to time without further notice.
(ii) Members. All Members shall be required to be present to
constitute a quorum for the transaction of business of a meeting of the
Members. A Member may not unreasonably fail to attend a meeting of Members
where such failure would cause irreparable damage to the Company, its
business or its assets.
6.6 NOTICE. Notice of any special meeting shall be given at least five
business days prior thereto by written notice delivered personally or mailed to
each Manager at his business address, or by telegram; provided, however,
telephonic meetings may be called on only two business days' notice. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Manager or Member may waive notice of
any meeting. The attendance of a Manager or Member at a meeting shall constitute
a waiver of notice of such meeting, except where a Manager or Member attends a
meeting for the express purpose of 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
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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
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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. C2 shall be paid an annual management fee of $250,000.
7. ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND DISASSOCIATION
7.1 ASSIGNMENT AND TRANSFER.
(i) General Restrictions on Transfers. Except as otherwise provided
herein, a Member may not Transfer any Unit without the prior written
consent of the Board of Managers. Any Transfer, attempted Transfer, or
purported Transfer in violation of this Operating Agreement's terms and
conditions shall be null and void. Notwithstanding the foregoing, C2, Inc.
may pledge and assign its interest to Christiana and Christiana may effect
a Transfer of C2, Inc.'s Units pursuant to any action taken with respect to
any security interest granted to it by C2, Inc. Christiana may also
transfer its Units without consent of the Board of Managers if the
transferee is an affiliate of Christiana or C2, Inc. and such party agrees
in writing to be bound by the provisions of this Operating Agreement. At
any time after the fifth anniversary
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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
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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.
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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.
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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.
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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.
B-15
<PAGE> 100
"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
B-16
<PAGE> 101
(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:
----------------------------
B-17
<PAGE> 102
EXHIBIT A
<TABLE>
<CAPTION>
MEMBER UNITS
------ -----
<S> <C>
C2, Inc.
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202.................................. 666.667
Christiana Companies, Inc.
5 Post Oak Park
Suite 1760
Houston, TX 77027........................................... 333.333
</TABLE>
<PAGE> 103
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PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. C2 HAS NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 9
Use of Proceeds................... 11
Dividend Policy................... 12
Summary of Certain Terms of
Weatherford's Acquisition of
Christiana...................... 12
Capitalization.................... 13
C2 Financial Data................. 15
Pro Forma Summary Combined
Financial Data.................. 16
Selected Historical TLC Financial
Data............................ 21
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 22
Business.......................... 28
The TLC Purchase Agreement........ 34
The Operating Agreement........... 35
How to Participate in the
Offering........................ 37
Management........................ 39
Certain Transactions.............. 43
Principal Shareholders............ 44
Description of Capital Stock...... 45
Shares Eligible for Future Sale... 47
Legal Matters..................... 47
Experts........................... 47
Available Information............. 47
Index to Financial Statements..... F-1
Purchase Agreement................ Annex A
Operating Agreement............... Annex B
</TABLE>
UNTIL FEBRUARY 1, 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
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- ------------------------------------------------------
5,202,664 SHARES
C2, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JANUARY 7, 1999
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