<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10/A
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
IMPERIAL PARKING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 31-1534011
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
<TABLE>
<S> <C>
601 West Cordova Street, Suite 300 V6B 1G1
Vancouver, BC Canada
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (604) 681-7311
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
Common Stock, American Stock Exchange
par value $.01 per share
</TABLE>
Securities to be registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
IMPERIAL PARKING CORPORATION
INFORMATION INCLUDED IN INFORMATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION CAPTION IN INFORMATION STATEMENT
- ---- -------------------- --------------------------------
<C> <S> <C>
1. Business................................... Summary -- Background and Reasons for the
Distribution, Pre-Distribution
Transactions, Impark, Management of
Impark, Summary Financial Data; The
Distribution -- Pre-Distribution
Transactions; Historical Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business
2. Financial Information...................... Summary -- Summary Financial Data;
Capitalization; Historical Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Index to Financial
Statements
3. Properties................................. Business -- Parking Facilities and Surface
Lots
4. Security Ownership of Certain Beneficial
Owners and Management...................... Security Ownership of Certain Beneficial
Owners and Management
5. Directors and Executive Officers........... Management -- Executive Officers and
Directors
6. Executive Compensation..................... Management -- Executive Compensation
7. Certain Relationship and Related
Transactions............................... Summary -- Background and Reasons for the
Distribution; Pre-Distribution
Transactions, Trading Market; The
Distribution -- Reasons for the
Distribution, Pre-Distribution
Transactions; Listing and Trading of
Impark Common Stock; Certain Transactions
8. Legal Proceedings.......................... Business -- Litigation
9. Market Price of and Dividends on the
Registrant's Common Equity and Related
Shareholder Matters........................ Summary -- Distribution Ratio and
Mechanics, Trading Market,
Post-Distribution Dividend Policy; Risk
Factors -- Market Risks Associated with
New Public Companies; Listing and Trading
of Impark Common Stock, Description of
Capital Stock
10. Recent Sales of Unregistered Securities.... Not Applicable
11. Description of Registrant's Securities to
be Registered.............................. Description of Capital Stock
12. Indemnification of Directors and
Officers................................... Indemnification of Directors and Officers
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM FORM 10 ITEM CAPTION CAPTION IN INFORMATION STATEMENT
- ---- -------------------- --------------------------------
<C> <S> <C>
13. Financial Statements and Supplementary
Data....................................... Index to Financial Statements
14. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure................................. Not Applicable
15. Financial Statements and Exhibits.......... F-1; A-1
</TABLE>
<PAGE> 4
[FIRST UNION CORPORATION AND IMPARK LETTERHEAD]
------------------------------------
March 27, 2000
Dear Shareholder:
First Union Real Estate Equity and Mortgage Investments is making a special
distribution of our subsidiary, Imperial Parking Corporation, known as Impark.
The enclosed Information Statement and share certificate are being mailed to you
on the day of the distribution, March 27, 2000. You are receiving one share of
Impark common stock for every 20 shares of First Union you own on March 20,
2000. Immediately following consummation of the distribution, Impark will be
owned by its shareholders in the same proportions as those shareholders own
First Union shares.
First Union is a real estate investment trust whose primary business has
been to manage and own retail, apartment, office and parking properties
throughout the United States. In 1997, First Union acquired the parking
properties of Impark Holdings, Inc. and our affiliate First Union Management,
Inc. acquired the parking services and ancillary businesses of Impark Holdings,
Inc. As a result of tax legislation enacted in 1998, our ability to grow these
businesses was substantially curtailed. Additionally, we believe the investment
characteristics of Impark and First Union are substantially different. First
Union's board of trustees has therefore unanimously approved the distribution as
being in the best interests of First Union's shareholders.
We have applied to list Impark's shares on the American Stock Exchange
under the symbol "IPK." The distribution of Impark's shares is the first public
distribution of those shares. Accordingly, we can provide no assurance to you as
to what their market price may be.
The enclosed Information Statement provides important information regarding
the distribution and Impark's organization, business, properties and historical
and pro forma financial information. Shareholders are encouraged to read this
material carefully.
First Union shareholders on the record date for the distribution are not
required to take any action to participate in the distribution. Shareholder
approval of the distribution is not required, and First Union is therefore not
soliciting your proxy. On behalf of First Union, we thank you for your continued
support. On behalf of Impark, we welcome you as a new shareholder.
Sincerely,
/s/ DANIEL P. FRIEDMAN
--------------------------------------
DANIEL P. FRIEDMAN
President and Chief Executive Officer
of First Union
/s/ CHARLES E. HUNTZINGER
--------------------------------------
CHARLES E. HUNTZINGER
President and Chief Executive Officer
of Impark
<PAGE> 5
SUBJECT TO COMPLETION DATED MARCH 21, 2000
INFORMATION STATEMENT
IMPERIAL PARKING LOGO
IMPERIAL PARKING CORPORATION
DISTRIBUTION OF COMMON STOCK
We are furnishing you with this Information Statement on March 27, 2000 in
connection with the distribution by First Union Real Estate Equity and Mortgage
Investments, an Ohio business trust known as First Union, of substantially all
of the outstanding shares of common stock, $.01 par value per share, of Imperial
Parking Corporation, a Delaware corporation owned by First Union, to the
shareholders of First Union. We generally refer to Imperial Parking Corporation
in this Information Statement as Impark.
First Union is distributing the shares of Impark's common stock to holders
of First Union shares on the basis of one share of Impark common stock for every
20 First Union shares held on March 20, 2000. No consideration will be payable
by First Union shareholders for the Impark shares, nor will they be required to
surrender or exchange shares of First Union, or take any other action in order
to receive the Impark common stock.
There is currently no public market for shares of Impark, although it is
expected that a "when issued" trading market may develop prior to the time of
the Distribution. We have applied to have our common stock listed on the
American Stock Exchange under the symbol "IPK." See "Listing and Trading of
Impark Common Stock."
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 18.
------------------------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT AND REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS INFORMATION STATEMENT IS , 2000.
1
<PAGE> 6
No person is authorized to give any information or to make any
representations other than those contained in this Information Statement, and if
given or made, such information or representations must not be relied upon as
having been authorized. This Information Statement does not constitute an offer
to sell or a solicitation of any offer to buy any securities. This Information
Statement presents information concerning Impark believed by Impark to be
accurate as of the date set forth on the cover hereof. This Information
Statement presents information concerning First Union believed by First Union to
be accurate as of the date set forth on the cover hereof. Changes may occur in
the presented information after that date. Neither Impark nor First Union plans
to update said information except in the course of fulfilling their respective
normal public reporting and disclosure obligations.
Certain statements in this Information Statement constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects," "intends" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of Impark to differ
materially from those indicated by such forward-looking statements, including
among others, those set forth in this Information Statement under the heading
"Risk Factors."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
SUMMARY..................................................... 3
THE DISTRIBUTION............................................ 9
RISK FACTORS................................................ 18
LISTING AND TRADING OF IMPARK COMMON STOCK.................. 22
CAPITALIZATION.............................................. 23
HISTORICAL SELECTED FINANCIAL DATA.......................... 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 27
BUSINESS.................................................... 32
MANAGEMENT.................................................. 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 47
CERTAIN TRANSACTIONS........................................ 49
DESCRIPTION OF CAPITAL STOCK................................ 50
INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 52
AVAILABLE INFORMATION....................................... 52
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
2
<PAGE> 7
SUMMARY
This summary highlights information contained elsewhere in this document.
You should read the entire document carefully. This document contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this document.
THE DISTRIBUTION
Background and Reasons for
the Distribution........... First Union Real Estate Equity and Mortgage
Investments, which we refer to as First Union, is a
real estate investment trust. It manages and owns
real estate. First Union has an affiliate, First
Union Management, Inc., which we refer to as FUMI.
FUMI, through its subsidiaries, is an operating
company primarily engaged in managing real estate
through management contracts and leases. A trust
holds all of the shares of FUMI for the sole
benefit of the shareholders of First Union. This
type of arrangement is commonly referred to as a
stapled REIT. In April 1997, as part of a strategy
to grow its management business and to assist First
Union in managing parking properties which it
owned, FUMI acquired the parking services and
ancillary businesses of Impark Holdings, Inc.,
which, through its operating subsidiaries, was a
major provider of parking services in Canada as
well as an owner of parking properties. After FUMI
acquired these businesses, First Union purchased
the parking properties of Impark Holdings.
In July 1998 the United States enacted tax
legislation which posed certain limitations on the
activities of stapled REITs with respect to
properties acquired or committed to be acquired
after March 26, 1998. As a result of this
development, the trustees of First Union reviewed
the advisability of having FUMI continue to own its
parking services business. The First Union trustees
concluded that it would be in the best interests of
First Union's shareholders to combine the parking
services and ancillary businesses operated by FUMI
with the parking properties business in Canada
owned by First Union, and then distribute the stock
of that corporation to the shareholders of First
Union. In this Information Statement we refer to
this distribution of stock as the Distribution. The
new company will be a Delaware corporation named
Imperial Parking Corporation, which we refer to as
Impark.
The First Union board believes that the
Distribution will benefit both First Union and
Impark by:
- Improving each company's access to capital;
- Improving the focus of management and employees
of each company on the performance of their
respective businesses; and
- Providing management incentives linked to the
objective performance of each company's shares
in the public markets.
The estimated cost of planning and implementing the
Distribution and its antecedent transactions is
approximately $2.5 million. First Union will be
responsible for paying these costs.
3
<PAGE> 8
Pre-Distribution
Transactions............... Prior to the Distribution, Impark's parking
services and related business were owned by FUMI
and its parking properties were owned by First
Union. In preparation for the Distribution, First
Union and FUMI have taken, or will take, a number
of actions to organize Impark and to establish
Impark on a sound financial footing with the
capacity to grow. These actions include:
- Hiring a new chief executive officer and senior
vice president, operations to lead Impark;
- Disposing of some of the ancillary businesses of
FUMI and one of the parking businesses of FUMI;
- Combining the parking services and related
business of FUMI with the parking properties in
Canada owned by First Union; and
- Providing working capital to Impark in the form
of both contributions of cash and debt.
Please see "The Distribution -- Pre-Distribution
Transactions" for a more detailed description of
these transactions.
Impark..................... Following the Distribution, Impark will be a
leading provider of parking services in North
America. From our base in Vancouver and our
regional offices in Calgary, Edmonton, Toronto,
Winnipeg and Minneapolis, we employ more than 2,000
employees in both Canada and the United States. As
of December 31, 1999, we managed, leased or owned
over 1,400 parking facilities and lots in Canada
and the United States, containing more than 250,000
parking spaces, making us the largest parking
provider in Canada and one of the four largest in
North America. We also provide parking lot
patrolling, ticketing and collection services for
our own lots and for those operated by other
parties.
Management of Impark....... The current executive officers of Impark will
continue to serve as such following the
Distribution. They are Charles E. Huntzinger,
president and chief executive officer, J. Bruce
Newsome, senior vice president finance, chief
financial officer and secretary, and Bryan L.
Wallner, senior vice president of operations. In
addition, two executive officers of First Union,
Daniel P. Friedman and David Schonberger, will also
be employed by Impark on a part-time basis. Messrs.
Huntzinger, Newsome and Wallner have over 45 years
of combined experience in the parking industry.
They have operated major parking operations
throughout the United States and Canada and have
been involved in numerous acquisitions.
Shares to be distributed... At the time of the Distribution, the nine members
of the Impark board of directors will collectively
hold less than 1% of the Company's common stock.
First Union will own all of the remaining common
stock, approximately 2.1 million shares, and will
distribute those shares to the First Union
shareholders. This number will be reduced to the
extent that cash payments are made in lieu of the
issuance of fractional shares of Impark common
stock.
Distribution Ratio and
Mechanics.................. One share of Impark common stock will be
distributed for every 20 First Union shares held at
the close of business on March 20, 2000. No
fractional shares of Impark common stock will be
issued in
4
<PAGE> 9
connection with the Distribution. Instead, our
distribution agent will send to each person who
would be entitled to a fractional share, a check
for the amount (without interest) equal to the
fraction multiplied by the average trading price of
the Impark common stock, based on its closing price
for the five business days following the
Distribution. First Union will not require or
accept any payment from the holders of its shares
for the Impark common stock to be received by them
in the Distribution. Furthermore, First Union
beneficiaries will not be required to surrender or
exchange First Union shares in order to receive
Impark common stock in the Distribution.
Risk factors............... The shares of Impark common stock that First Union
will distribute involve a high degree of risk.
Shareholders should consider and read carefully the
factors discussed under "Risk Factors."
Federal income tax
consequences of the
Distribution............. As a result of the Distribution, each shareholder
will be treated for federal income tax purposes as
having received a distribution from First Union in
an amount equal to the fair market value of the
Impark shares received by the beneficiary. In
general, the distribution will be taxable as a
dividend to the extent of First Union's current or
accumulated earnings and profits. Any excess will
be treated as a return of the shareholder's
investment in his First Union shares and then as
gain from the sale of such shares. A portion of the
Distribution received by a shareholder otherwise
taxable as a dividend may be characterized as a
capital gain dividend to the extent that First
Union has capital gains for the year of the
Distribution and elects to so characterize a
portion of the Distribution. The taxable value of
the Distribution will be determined with reference
to all relevant facts and circumstances at the time
of the Distribution. If the Impark shares are
immediately tradable, the most relevant fact for
establishing their value will likely be their
trading price immediately following the
Distribution.
Anti-takeover provisions... Provisions of Impark's charter and bylaws and
Delaware corporate law will have the effect of
making more difficult a change of control of Impark
in a transaction not approved by the Impark board
of directors.
Distribution agent......... National City Bank will be the distribution agent
for the Distribution of the Impark common stock.
Record date................ March 20, 2000.
Distribution effective
date....................... March 27, 2000. Upon the Distribution of the Impark
common stock, the distribution agent will begin
mailing certificates for Impark common stock to
First Union shareholder as of the record date.
First Union shareholders will not be required to
make any payment or to take any other action in
order to receive the Impark common stock to which
they are entitled in the Distribution.
Trading market............. There is currently no public market for the Impark
common stock. We have applied to list the Impark
common stock on the American Stock Exchange under
the symbol "IPK."
5
<PAGE> 10
Post-Distribution dividend
policy..................... Following the Distribution, Impark intends to
retain earnings, if any, to fund the development
and growth of its business. Therefore, we do not
anticipate the payment of any dividends on Impark
common stock in the foreseeable future.
Information about Impark... The principal executive office of Impark is located
at 601 West Cordova Street, Suite 300, Vancouver,
BC Canada V6B 1G1 and its telephone number is (604)
681-7311.
6
<PAGE> 11
SUMMARY FINANCIAL DATA
The financial data presented below is based on the consolidated and
combined financial statements of Impark. Adjusted pro forma information for the
year ended December 31, 1999 has been extracted from pro forma financial
statements included elsewhere in this Information Statement. The adjusted pro
forma financial data reflects the historical actual operating results for the
periods presented adjusted to give effect to the transactions that will result
in the formation of Impark as well as the elimination of the revenues and
expenses associated with businesses sold in 1999 which do not meet the
definition of a discontinued operation for accounting purposes. Please see note
3 to the adjusted pro forma financial statements to see how the adjustment was
done. For a description of the transactions that have been taken into account by
the pro forma financial statements see note 2 to the pro forma financial
statements.
This summary financial data should be read in conjunction with the pro
forma consolidated and combined financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this Information Statement.
<TABLE>
<CAPTION>
ADJUSTED PRO
FORMA
NINE MONTHS YEARS ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
DECEMBER 31, ------------------------------ ------------
1996 1997 1998 1999 1999
------------ -------- -------- -------- ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues............................. $ 35,755 $ 50,775 $ 54,087 $ 60,145 $ 56,354
Direct costs......................... 25,209 37,076 39,196 44,359 42,210
-------- -------- -------- -------- --------
Gross margin......................... 10,546 13,699 14,891 15,786 14,144
General and administrative
expenses........................... 7,568 11,073 14,972 10,236 11,785
Depreciation and amortization........ 2,567 4,951 5,443 5,027 4,984
-------- -------- -------- -------- --------
Operating income (loss).............. 411 (2,325) (5,524) 523 (2,625)
Other income (expense)............... 87 (4,311) (21,458) (5,163) (282)
-------- -------- -------- -------- --------
Income (loss) from continuing
operations......................... $ 498 $ (6,636) $(26,982) $ (4,640) $ (2,907)
======== ======== ======== ======== ========
BALANCE SHEET DATA
(DECEMBER 31, 1999)
Cash................................. $ 3,378 $ 7,680
Working capital...................... (30,144) (4,779)
Fixed assets......................... 13,705 13,320
Goodwill............................. 43,344 43,498
Total assets......................... 76,176 76,662
Total liabilities.................... 84,407 18,012
Total stockholders' equity
(deficiency)....................... (8,230) 58,650
OTHER
Cash provided by (used in)
Operating activities............... $ 297 $ (762) $ (5,610) $ 4,478 $ 3,225
Financing activities............... 45,360 35,248 18,943 666 --
Investing activities............... (45,040) (34,228) (13,135) (2,863) (3,262)
Gross collections.................... 126,458 172,729 173,925 177,833 172,670
EBITDA............................... 2,978 2,626 (81) 5,550 2,559
</TABLE>
Other income (expense) principally includes gains or losses on the sale or
write-downs of assets, other interest expense and income taxes. In the year
ended December 31, 1998, other income (expense) included a write-down of
goodwill of $15.0 million. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
7
<PAGE> 12
The gross collections amount represents the aggregate cash collected from
the revenue generating activities of our operations that will be continuing
subsequent to the Distribution for the periods presented. It includes revenues
reported under generally accepted accounting principles as well as collections
made on parking facilities for which we have management contracts. Gross
collections are not a measure under generally accepted accounting principles and
are not an alternative to revenues or cash flows. Gross collections are
significant to an understanding of the operations of the predecessor entities to
Impark because:
- Management uses gross collections as a key indicator of its business
opportunities;
- Gross collections demonstrates the magnitude of our historical business
activities;
- Management contract revenues are partly based on the level of gross
collections; and
- Management decisions on the allocation of resources among its business
activities is in part based on the level of gross collections.
EBITDA equals operating income as shown in the table above, plus
depreciation and amortization expense and, in the adjusted pro forma statement
of operations data only, a non-cash stock compensation charge of $200,000 for
the pro forma transaction described in note 2(f). EBITDA is included because
management believes that it is a useful tool for measuring our ability to
generate cash flow from operations. EBITDA does not represent cash flow from
operations, is not a measure under generally accepted accounting principles and
should be considered together with the other financial information included in
this table and presented elsewhere in this Information Statement. EBITDA
measures as presented may not be comparable to similarly titled measures of
other entities.
The adjusted pro forma financial data does not give effect to any
additional costs that we may incur due to being a public company or a registrant
with the SEC.
8
<PAGE> 13
THE DISTRIBUTION
INTRODUCTION
On March 7, 2000 (the "Declaration Date"), the First Union board of
trustees declared a dividend of one share of Impark common stock for every 20
First Union shares held of record on March 20, 2000. On March 27, 2000, First
Union will effect the Distribution by delivering substantially all of the issued
and outstanding shares of Impark common stock to the distribution agent for
transfer and distribution to the holders of record of First Union shares on
March 20, 2000. We expect that certificates representing shares of Impark common
stock will be mailed to First Union shareholders on or about March 27, 2000. As
a result of the Distribution, substantially all of the outstanding shares of
Impark common stock will be distributed to First Union shareholders.
First Union shareholders of record with inquiries relating to the
Distribution should contact National City Bank, the distribution agent, by
telephone at (800) 622-6757 or First Union in writing at First Union Real Estate
Equity and Mortgage Investments, 551 Fifth Avenue, Suite 1416, New York, NY
10176-1499, Attention: Brenda Mixson, Chief Financial Officer.
REASONS FOR THE DISTRIBUTION
First Union is a real estate investment trust, or REIT. It manages and owns
real estate. First Union's affiliate, FUMI, through its subsidiaries, is an
operating company primarily engaged in managing real estate through management
contracts and leases. Adolph Posnik, one of FUMI's three directors, is the
trustee of the trust that holds all of the shares of FUMI for the sole benefit
of the First Union shareholders. This type of arrangement is commonly referred
to as a stapled REIT. In April 1997, as part of a strategy to grow its
management business and to assist First Union in managing parking properties
which it owned, FUMI acquired the parking services and ancillary businesses of
Impark Holdings, Inc. Impark Holdings, through its operating subsidiaries, was a
major provider of parking services in Canada as well as an owner of parking
properties. After FUMI acquired the parking services businesses of Impark
Holdings, First Union purchased the parking properties of Impark Holdings.
In July 1998 the United States enacted tax legislation which posed certain
limitations on the activities of stapled REITs with respect to properties
acquired or committed to be acquired after March 26, 1998. The new legislation
made it likely that the income from new lease transactions and new capital
investments made by FUMI would be non-qualified income attributed to First
Union. First Union will not be able to maintain its tax status as a REIT if it
has exceeded a prescribed percentage of non-qualified income. If First Union
does not qualify as a REIT, it could be subject to substantial additional
taxation. The First Union board of trustees and management were concerned about
the new legislation at the time it was enacted. They did not immediately take
action with respect to the legislation for several reasons. First, the current
trustees of First Union were appointed only a brief time before the enactment of
the new legislation and the newly appointed senior executives of First Union
were not in place until November 1998. In addition, this new team operating
First Union concentrated their efforts during the period from mid-1998 to
mid-1999 on restructuring existing debt of First Union, selling a number of
properties and conducting a rights offering.
After completing those important tasks, they turned their attention to
determining what steps, if any, should be taken to address the effects of the
new legislation, as well as to the more general strategic question of whether
First Union should maintain its investment in the Imperial Parking business.
First Union hired several brokers to explore the potential sale of various
assets. This process resulted in the sale of a number of individual assets of
First Union, primarily shopping malls, office buildings and apartment complexes.
With the approval of the FUMI board, the Impark assets were marketed for sale as
part of this sales program. The marketing effort did not produce a sales
proposal acceptable to management and the Impark assets were not sold at that
time.
In the fall of 1999 the First Union board directed management to prepare a
feasibility study with respect to the possible liquidation of the assets of
First Union and the spin-off to shareholders of an entity
9
<PAGE> 14
owning the Imperial Parking assets. The board of FUMI acknowledged the
advisability of restructuring the relationship with First Union as respects the
Imperial Parking assets and approved the feasibility study with respect to the
Imperial Parking assets. First Union and FUMI engaged a financial advisor to
assist in this examination. The feasibility study took the following factors,
among others, into account:
- the amount and nature of distributions to shareholders;
- tax and REIT qualification considerations; and
- other relevant legal and business considerations.
Management then presented two alternatives to the boards:
- adoption by First Union, FUMI and other affiliated companies of plans of
settlement and reorganization which would result in a single entity
owning the Imperial Parking assets of First Union and FUMI, the shares
of which would be distributed to the shareholders of First Union; or
- transferring the real estate assets of First Union to a separate
company, the shares of which would be distributed to the First Union
shareholders (under this alternative, the Imperial Parking assets would
be consolidated in First Union, which would ultimately be converted from
a REIT to a subchapter "C" corporation).
After consideration of the various factors involved, including the
importance of the maintenance of the REIT status of First Union and the federal
tax effects of transferring the real estate assets of First Union, and after
consultation with its professional advisors, the First Union board concluded
that it would be in the best interests of First Union's shareholders to combine
the parking services business operated by FUMI with the parking properties in
Canada owned by First Union and then distribute the stock of that corporation to
the beneficiaries of First Union. The FUMI board determined that it would be in
the best interests of the FUMI shareholders to approve the plan adopted by the
First Union board and approved such plan.
The First Union board believes that the Distribution will benefit both
First Union and Impark in several ways:
- It will improve each company's access to capital. With respect to First
Union, REIT investors generally prefer to invest in real estate assets,
and the parking management business is inconsistent with this
preference. Imperial Parking will benefit in two ways. As a subchapter
"C" corporation it will not be constrained by REIT rules requiring that
95% of its annual income be distributed to shareholders and, therefore,
will be able to provide capital for operations and future growth in part
from internally generated funds. Also, as an independent entity it is
able to provide a clear, uncomplicated business plan to prospective
investors.
- It will focus the management and employees of each company on the
performance of their respective businesses.
- It will provide management incentives linked to the objective
performance of each company's shares in the public markets.
PRE-DISTRIBUTION TRANSACTIONS
While considering the possibility of the Distribution, First Union and FUMI
developed a plan for the organization and funding of Impark as an independent
company. The goal of the plan was to create a parking services company with a
sound financial footing and the capacity to grow. The key aspects of this plan
are described below.
Hire New Management Team. In early 1999, Charles E. Huntzinger was hired
to be president and chief executive officer of the businesses that would become
Impark and Bryan L. Wallner was hired to serve those businesses as senior vice
president for operations. These individuals have substantial experience in the
parking services industry. They, along with J. Bruce Newsome, senior vice
president finance, chief
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financial officer and secretary, have had key roles in planning the organization
of Impark, including the dispositions of businesses and the provision of
financing resources described below.
Dispose of Businesses. While planning Impark's organization, the new
management team determined that it was necessary to streamline the company's
operations by disposing of entities that were not part of its core business.
This included the disposal of the security business, equipment business and the
non-North American parking operations. In addition, Robbins Parking Service,
Ltd. was sold as part of the termination settlement with the former President
and CEO of Impark.
- Inner-Tec Security Consultants Ltd., a security business, was sold in
June 1999. The sale was made to a former executive officer of Impark's
predecessor and formed part of the terms of the settlement of severance
obligations. In the financial information in this Information Statement
results of operations of Inner-Tec have been recorded as discontinued
operations in the FUMI Parking Business for all periods presented.
Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a description of the FUMI Parking
Business. Inner-Tec was recorded as a discontinued operation in the FUMI
Parking Business and therefore no revenue has been recorded. Inner-Tec
earned net income of $0.2 million for 1999 and $0.1 million for 1998.
- Imperial Parking (Asia) Ltd., an Asian parking business, was sold in
September 1999. The sale was to an unrelated party. The financial
condition and operating results of this business have been eliminated
from the Pro Forma Consolidated and Combined Financial Statements as
part of "Businesses sold" to form the Adjusted Pro Forma Combined
Statement of Operations. Asia represented 3.3% of revenues for 1999 and
4.3% for 1998 and represented 0.2% of net loss for 1999 and 0.3% for
1998 in the FUMI Parking Business Financial Statements.
- VenTek International, Inc., a parking equipment distributorship, was a
subsidiary of one of Impark's predecessors. That Impark predecessor was
an indirect subsidiary of FUMI. The Impark predecessor is selling VenTek
to FUMI prior to the Distribution. VenTek was recorded as a discontinued
operation in the FUMI Parking Business and therefore no revenue has been
recorded. VenTek represented 25.8% of net loss for 1999 and 6.5% for
1998 in the FUMI Parking Business Financial Statements.
- Robbins Parking Services Ltd., a parking subsidiary, was sold in April
1999. The sale was made to the former president and chief executive
officer of one of Impark's predecessors and formed an important part of
the settlement of severance obligations. As Robbins did not meet
generally accepted accounting principles requirements to be a
discontinued operation, its results are included in the FUMI Parking
Business in all periods presented. The operating results of Robbins were
eliminated for all periods from the Pro Forma Combined Statement of
Operations as part of "Businesses sold" to form the Adjusted Pro Forma
Combined Statement of Operations. Robbins represented 1.2% of revenue in
1999 and 4.1% in 1998, and its operations and related adjustments
contributed to the FUMI Parking Business net income in the amount of
$1.9 million in 1999 and represented 8.1% of the net loss in 1998
disclosed in the FUMI Parking Business Financial Statements.
Combine First Union Properties in Canada with FUMI Parking and Other
Businesses. Immediately prior to the Distribution, First Union and FUMI will
implement a series of transactions which will result in the parking services and
other business of FUMI being combined with the parking properties in Canada
owned by First Union. These assets will be held in Impark or its subsidiaries.
Impark will be a wholly-owned subsidiary of First Union until the Distribution.
Eliminate Debt and Provide Working Capital. In order to place Impark on
sound financial footing, First Union and FUMI will take a number of actions
prior to the Distribution, as follows:
- A subsidiary of First Union will purchase the credit facilities of
entities within the FUMI Parking Business with HSBC Bank Canada and
Deutsche Bank Canada for cash consideration. The cash will be
contributed to the First Union subsidiary by First Union in
consideration for common
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shares. The credit facilities are estimated to have a balance of
approximately $23.5 million at closing. The common shares to be given as
consideration for the repayment will be of a predecessor of Impark.
Through the plan of reorganization and distribution those shares will
become part of the approximately 2.1 million shares of Impark being
distributed pursuant to this Information Statement. The repayment and
issuance of shares have been recorded in the Pro Forma Consolidated
Balance Sheet and the related interest on long-term debt and bank
indebtedness has been eliminated from the Pro Forma Combined Statement of
Operations.
- Since the acquisition of the parking properties and business of Impark
Holdings, Inc. by First Union and FUMI, there have been a series of
loans and transactions between First Union, FUMI, the FUMI Parking
Business and the FUR Parking Business. Please see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" for a description of the FUR Parking Business. The loans and
the other amounts of approximately $40.0 million are to be extinguished
as part of the combination of the FUMI Parking Business and the FUR
Parking Business. The debt extinguished and common shares issued have
been recorded in the Pro Forma Combined Balance Sheet. The common shares
to be given as consideration for the extinguishing of loans and other
amounts will be of a predecessor of Impark. Through the plan of
reorganization and distribution those shares will become part of the
approximately 2.1 million shares of Impark being distributed pursuant to
this Information Statement. The interest expense and income between
related parties have been eliminated from the Pro Forma Combined
Statement of Operations. In addition, management fee income earned by
Impark on U.S. properties leased to FUMI by First Union has been
eliminated from the Pro Forma Combined Statement of Operations for all
periods as this fee will not continue to be earned subsequent to the
Distribution.
- First Union will contribute up to $7.0 million in cash in consideration
for common shares of a predecessor of Impark; those common shares will
become part of the approximately 2.1 million shares of Impark being
distributed pursuant to this Information Statement. Of this amount, $2.0
million will be restricted cash to be utilized to repay a tax liability
discussed in note 16(c)(i) to the FUMI Parking Business Financial
Statements. The $7.0 million has been included in cash and stockholders'
equity in the Pro Forma Consolidated and Combined Financial Statements
of Impark.
- First Union will provide a secured line of credit to Impark in the
amount of $8.0 million. See "Liquidity and Capital Resources" for more
information on the First Union line of credit.
- First Union will contribute its interest in a limited liability company,
the members of which are an entity within the FUMI Parking Business and
First Union, to develop approximately 4,900 parking spaces for the new
San Francisco Giants baseball park, "Pacific Bell Park" to Impark. The
First Union investment in the limited liability company will be up to
$6.7 million. In addition, the FUMI Parking Business expects to invest
$1.1 million in this limited liability company. At December 31, 1999,
$1.3 million was invested in the limited liability company by First
Union and is included in other assets in the Pro Forma Consolidated
Balance Sheet of Impark. Because operation of the lot commences in 2000,
no results from operations have been recorded in the Pro Forma Combined
Statement of Operations.
- First Union will indemnify Impark for any liability resulting from an
existing legal dispute regarding a software contract between an Impark
subsidiary and Oracle. The liabilities on the books of Impark relating
to this litigation have been eliminated from the Pro Forma Consolidated
and Combined Financial Statements of Impark.
- First Union will indemnify Impark for any liability which may arise from
$11.5 million of performance bonds for the manufacture and installation
of transit equipment as described in note 16(c)(ii) to the FUMI Parking
Business on page F-27.
Taken together, these pre-distribution transactions make up a complicated
series of steps and we may encounter difficulties in implementing them. For
example, the pre-distribution transactions will require
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coordinating the efforts of many entities. Also, we will have to obtain approval
from various Canadian regulatory bodies. Finally, there may be adverse tax
consequences to First Union in the event that we are unable to complete these
transactions in a timely manner.
MANNER OF EFFECTING THE DISTRIBUTION
We expect that the date of the Distribution will be March 27, 2000. At the
time of the Distribution, First Union will deliver share certificates for Impark
common stock to the distribution agent. The distribution agent will then begin
mailing the share certificates to holders of First Union shares as of the March
20, 2000 record date. The Distribution consists of one share of Impark common
stock for every 20 First Union shares held on the record date. We will not issue
certificates representing fractional shares of Impark common stock in connection
with the Distribution. Instead, the distribution agent will send to each person
who would be entitled to a fractional share, a check for the amount (without
interest) equal to the fraction multiplied by the average trading price of the
Impark common stock, based on its closing price for the five business days
following the Distribution.
Prior to the Distribution, inquiries relating to the Distribution should be
directed to the distribution agent at National City Bank, Corporate Trust
Operations, 3rd Floor, North Annex, Location 5352, 4100 West 150th Street,
Cleveland, Ohio 44135-1385, or by telephone at (800)622-6757, Monday through
Friday, 9:00 a.m. to 5:00 p.m. (Cleveland Time). After the Distribution,
inquiries may be directed to the distribution agent or Impark Investor
Relations, at Suite 300, The Station, 601 West Cordova Street, Vancouver,
British Columbia, VGB 1G1, (604) 681-7311, Attention: Mr. Bruce Newsome, Monday
through Friday, 9:00 a.m. to 5:00 p.m. (Vancouver Time).
NO HOLDER OF FIRST UNION SHARES WILL BE REQUIRED TO MAKE ANY PAYMENT FOR
THE SHARES OF IMPARK COMMON STOCK TO BE RECEIVED IN THE DISTRIBUTION OR TO
SURRENDER OR EXCHANGE FIRST UNION SHARES OR TO TAKE ANY OTHER ACTION IN ORDER TO
RECEIVE IMPARK COMMON STOCK TO WHICH SUCH HOLDER IS ENTITLED IN THE
DISTRIBUTION.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
Introduction. The following is a summary of the material U.S. federal
income tax considerations associated with the Distribution. This discussion is
based upon the laws, regulations and reported rulings and decisions in effect as
of the date of this Information Statement, all of which are subject to change,
retroactively or prospectively, and to possibly differing interpretations. This
discussion does not purport to deal with the federal income or other tax
consequences applicable to all investors in light of their particular
circumstances or to all categories of investors, some of whom may be subject to
special rules (including, for example, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations,
persons who are not citizens or residents of the United States, shareholders who
hold their shares as part of a hedge, appreciated financial position straddle or
conversion transaction and beneficiaries who do not own their shares as a
capital asset). In addition, this discussion does not address any state, local
or foreign considerations that may be relevant to particular investors. No
ruling on the federal, state or local tax considerations relevant to the
operation of First Union or Impark or to the Distribution is being requested
from the Internal Revenue Service or from any other tax authority.
ALL FIRST UNION SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
Taxation of Impark. Impark will not seek to qualify for taxation as a real
estate investment trust. Accordingly, Impark will be taxed as a C corporation,
subject to regular corporate income tax rates.
Income Recognition by First Union as a Result of the Distribution. At the
time of the Distribution, First Union will recognize gain on the Distribution to
the extent that the value of the Impark common
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stock distributed by First Union exceeds the basis that First Union has in such
stock. The gain, if any, will increase First Union's earnings and profits. First
Union will realize loss on the Distribution to the extent that the value of the
Impark common stock distributed by First Union is less than the basis that First
Union has in such stock. Although no deduction would be allowable for any such
loss, First Union would be able to currently reduce its earnings and profits by
the amount of the loss. First Union will make a determination of the fair market
value of the Impark common stock as of the date of the Distribution with
reference to all relevant facts and circumstances at such time. If the Impark
common stock is immediately tradable, the most relevant fact for establishing
its value will likely be the trading price immediately following the
Distribution. There can be no assurance that the Internal Revenue Service or the
courts will agree with the value determined by First Union.
First Union's tax basis in the Impark common stock at the time of the
Distribution is expected to generally equal the sum of the fair market value of
the parking services and ancillary businesses acquired from FUMI and First
Union's tax basis in the parking properties that are contributed to Impark.
Recent appraisals of the parking properties indicate that they have an aggregate
value approximately equal to their aggregate tax basis. Accordingly, we expect
that the basis that First Union has in the Impark common stock at the time of
the Distribution will substantially equal the value of such stock so that little
gain or loss will be recognized by First Union on the Distribution. However, as
previously mentioned, the determination of the fair market value of assets or
businesses is dependant on all relevant facts and circumstances, and no
assurances can be given that the Internal Revenue Service will agree with the
values determined by First Union.
Taxation of Taxable Domestic Shareholders of First Union as a Result of the
Distribution. The Distribution will be treated as a distribution the amount of
which is equal to the value of the Impark common stock distributed plus any cash
in lieu of fractional shares.
Provided First Union qualifies as a REIT under Sections 856 through 860 of
the Internal Revenue Code in the year of the Distribution, the portion of the
Distribution made to First Union's taxable U.S. shareholders out of First
Union's current or accumulated earnings and profits (including earnings and
profits attributable to any gain realized by First Union as a result of the
Distribution as discussed above under "Income Recognition by First Union as a
Result of the Distribution") will be taken into account by such U.S.
shareholders as ordinary income except to the extent First Union designates a
portion of the dividend as a capital gain dividend under the applicable REIT
rules (not to exceed the amount of capital gains recognized by First Union
during 2000). For corporate shareholders, any dividend from First Union will not
be eligible for the dividends-received deduction. Any portion of the
Distribution in excess of current and accumulated earnings and profits allocable
to the Distribution will not be taxable to a First Union shareholder to the
extent that such portion does not exceed the adjusted basis of the shareholder's
First Union shares, but rather will reduce the shareholder's adjusted basis of
such shares. To the extent that the amount of the Distribution exceeds First
Union's current and accumulated earnings and profits and exceeds the adjusted
basis of a shareholder's First Union shares, the excess will be included in
income as capital gain (taxable at the short-term or long-term rates depending
on the period of time that the shareholder has held the shares) assuming the
shares are a capital asset in the hands of the shareholder.
To the extent that First Union designates a portion of the Distribution as
a capital gain dividend, such portion will be taxable to First Union
beneficiaries as gain from the sale of a capital asset held for more than one
year, without regard to the period for which the shareholder has held its First
Union common shares. U.S. beneficiaries that are corporations, however, may be
required to treat up to 20% of certain capital gain dividends as ordinary
income.
The REIT qualification requirements are complicated. Moreover, the
determination of whether an entity satisfies such requirements is made as of the
end of the entity's taxable year. Accordingly, the determination of whether
First Union will qualify as a REIT for 2000 cannot be made until December 31,
2000. In the event that First Union does not qualify as a REIT for 2000, the
portion of the Distribution made to First Union's taxable U.S. shareholders out
of First Union's current or accumulated earnings and
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profits (including any earnings and profits attributable to gain realized by
First Union as a result of the Distribution as discussed above under "Income
Recognition by First Union as a Result of the Distribution") will be taken into
account by each such U.S. shareholders as ordinary income, and, for corporate
shareholders, would be eligible for the dividends received deduction. Any
portion of the Distribution in excess of current and accumulated earnings and
profits will not be taxable to the shareholder to the extent that such portion
does not exceed the adjusted basis of the shareholders's First Union shares, but
rather will reduce the shareholders's adjusted basis in such shares. To the
extent that the amount of the Distribution exceeds First Union's current and
accumulated earnings and profits and exceeds the adjusted basis of a
shareholder's First Union shares, the excess will be included in income as
capital gain (taxed at the short-term or long-term rates depending on the period
of time that the beneficiary has held the shares) assuming the shares are a
capital asset in the hands of the shareholder.
First Union beneficiaries will receive a basis in Impark common stock equal
to the value thereof at the time of the Distribution. A First Union
beneficiary's holding period in the Impark common stock will not include any
period during which such stock was held by First Union.
Taxation of Tax-Exempt Shareholders of First Union as a Result of the
Distribution. Most tax-exempt employees' pension trusts are not subject to
federal income tax except to the extent of their receipt of "unrelated business
taxable income," or UBTI, as defined in Section 512(a) of the Internal Revenue
Code. The Distribution to a First Union shareholder that is a tax-exempt entity
should not constitute UBTI, provided that the tax-exempt entity has not financed
the acquisition of its First Union common shares with "acquisition indebtedness"
within the meaning of the Internal Revenue Code and the First Union common
shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity. In addition, certain pension trusts that own more than 10% of
a "pension-held REIT" must report a portion of the dividends that they receive
from such a REIT as UBTI. First Union has not been and does not expect to be
treated as a pension-held REIT for purposes of this rule. In the event that
First Union does not qualify as a REIT for 2000, the tax consequences of the
Distribution to First Union's tax-exempt shareholders will be the same as
described above.
Taxation of Foreign Shareholders of First Union as a Result of the
Distribution. The rules governing U.S. federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders, whom we refer to collectively as non-U.S. shareholders, are
complex, and no attempt will be made in this Information Statement to provide
more than a summary of such rules. Non-U.S. shareholders should consult with
their own tax advisors to determine the impact of federal, state, local and
foreign tax laws with regard to the Distribution, including any reporting
requirements. In general, as is the case with domestic taxable shareholders of
First Union, the Distribution is treated as a distribution the amount of which
is equal to the value of the Impark common stock distributed plus any cash in
lieu of fractional shares, and non-U.S. shareholders will receive a basis in
Impark common stock equal to the fair market value thereof at the time of the
Distribution.
The Distribution will be treated as an ordinary income dividend to the
extent that it is made out of current and accumulated earnings and profits of
First Union and is neither attributable to gain from sale or exchange by First
Union of U.S. real property interests nor designated by First Union as a capital
gain dividend. The portion of the Distribution that will be treated as an
ordinary income dividend ordinarily will be subject to a withholding tax equal
to 30% of the gross amount thereof, unless an applicable tax treaty reduces or
eliminates that tax. First Union expects to withhold U.S. income tax at the rate
of 30% on the gross amount of the Distribution made to a non-U.S. shareholder
unless (i) a lower treaty rate applies and the non-U.S. shareholder has filed
the required IRS Form 1001 with First Union or (ii) the non-U.S. shareholder
files an IRS Form 4224 with First Union claiming that the Distribution is
effectively connected with the non-U.S. shareholder's conduct of a U.S. trade or
business. The portion of the Distribution that is in excess of First Union's
current and accumulated earnings and profits allocable to the Distribution will
be subject to a 10% withholding requirement but will not be taxable to a
shareholder to the extent that such excess does not exceed the adjusted basis of
the shareholder's First Union common shares, but rather will reduce the adjusted
basis of such shares. To the extent that the portion of the
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Distribution in excess of current and accumulated earnings and profits allocable
to the Distribution exceeds the adjusted basis of a non-U.S. shareholder's
shares, the Distribution will give rise to tax liability if the non-U.S.
shareholder would otherwise be subject to tax on any gain from the sale or
disposition of the First Union common shares.
Provided that First Union is a "domestically-controlled REIT" for federal
income tax purposes, a non-U.S. shareholder would be subject to taxation on gain
from the sale or disposition of First Union common shares only if (i) the
investment in the First Union common shares were treated as effectively
connected with the non-U.S. shareholder's U.S. trade or business, in which case
the non-U.S. shareholder would be subject to the same treatment as U.S.
shareholders with respect to such gain, or (ii) the non-U.S. shareholder were a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and either the individual has a "tax home" in
the United States or the gain is attributable to an office or other fixed place
of business maintained by the individual in the United States, in which case the
gain would be subject to a 30% tax. We believe that First Union is and will
continue to be a domestically-controlled REIT.
As First Union will not be able to determine, at the time that the
Distribution is made, the portion of the distribution, if any, that will be in
excess of the current and accumulated earnings and profits, the Distribution
will be subject to withholding as though the entire distribution (apart from any
portion designated as a capital gain dividend) were an ordinary income dividend.
However, a non-U.S. shareholder may seek a refund of such amounts from the
Internal Revenue Service if it is subsequently determined that a portion of the
distribution was, in fact, in excess of First Union's current and accumulated
earnings and profits.
It is possible that the Impark common stock may constitute a U.S. real
property interest if 50% or more of the fair market value of Impark's assets
constitute interests in real property located in the United States. To the
extent that a portion of the Distribution were to be treated as attributable to
gain upon the disposition of a U.S. real property interest, a non-U.S.
shareholder would be subject to tax on such portion as though it were gain that
was effectively connected with a United States trade or business of such
non-U.S. shareholder. Thus, non-U.S. shareholders would be taxed on such portion
of the Distribution at the normal capital gain rates applicable to U.S.
shareholders. First Union is required under applicable Treasury Regulations to
withhold 35% of any distribution to a non-U.S. shareholder that could be
designated by First Union as a capital gain dividend. The amount so withheld is
creditable against the non-U.S. shareholder's U.S. tax liability and the
non-U.S. shareholders may seek a refund to the extent the amount withheld
exceeds such non-U.S. shareholders U.S. tax liability.
In the event that First Union does not qualify as a REIT for 2000, the
Distribution will be treated as an ordinary income dividend to the non-U.S.
shareholder to the extent that it is made out of current and accumulated
earnings and profits of First Union. Any portion of the Distribution in excess
of First Union's current and accumulated earnings and profits will not be
taxable to the non-U.S. shareholder to the extent that such excess does not
exceed the adjusted basis of such beneficiary's First Union common shares, but
rather will reduce the adjusted basis of such shares. To the extent that the
portion of the Distribution in excess of current and accumulated earnings and
profits exceeds the adjusted basis of a non-U.S. shareholder's shares, the
Distribution will give rise to a tax liability if the non-U.S. shareholder would
otherwise be subject to tax on any gain from the sale or disposition of the
First Union common shares.
A non-U.S. shareholder would be subject to taxation on gain from the sale
or disposition of First Union common shares only if (i) the First Union common
shares were treated as a United States real property interest, (ii) the
investment in the First Union common shares were treated as effectively
connected with the non-U.S. shareholder's U.S. trade or business, in which case
the non-U.S. shareholder would be subject to the same treatment as U.S.
shareholder's with respect to such gain, or (iii) the non-U.S. shareholder were
a nonresident alien individual who was present in the United States for 183 or
more days during the taxable year and either the individual has a "tax home" in
the United States or the gain is attributable to an office or other fixed place
of business maintained by the individual in the United States,
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in which case the gain would be subject to a 30% tax. We believe that the First
Union common shares would be a United States real property interest. The
Distribution would be subject to withholding in the same manner as described
above.
Amounts required to be withheld from payments to non-U.S. shareholders will
be collected by converting a portion of the Impark common stock to be
distributed into cash.
LISTING AND TRADING OF IMPARK COMMON STOCK
There is currently no public market for Impark common stock. Although we
currently expect to list the Impark common stock on the American Stock Exchange
following the Distribution, there can be no assurance that a regular trading
market in Impark common stock will develop or, if a public market develops, will
be sustained or provide liquidity.
At the time of the Distribution, Impark will have approximately 9,000
stockholders, based on the number of beneficiaries of First Union shares on the
record date. The transfer agent and registrar for the Impark common stock will
be National City Bank.
SHARES AVAILABLE FOR FUTURE SALE
Impark common stock issued in the Distribution will be freely transferable,
except for securities received by persons who may be deemed to be "affiliates"
of Impark under the Securities Act. Persons who may be deemed to be affiliates
of Impark after the Distribution generally include individuals or entities that
control, are controlled by, or are under common control with Impark and include
directors and executive officers, as well as principal stockholders of Impark.
Persons who are affiliates of Impark will be permitted to sell their shares of
Impark common stock only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act. Impark is not able to predict whether substantial amounts of
Impark common stock will be sold in the open market following the Distribution.
Sale of substantial amounts of Impark common stock in the public market, or the
perception that such sales might occur, could adversely affect the market price
of Impark common stock.
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RISK FACTORS
You should carefully consider the risks described below and the other
information in this document, including our financial statements and related
notes. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties, including those not presently known to
us or that we currently deem immaterial, may also impair our business.
If any of the following risks actually occur, our business, financial
condition and future operating results could be adversely affected. The trading
price of Impark common stock could decline due to any of these risks, and you
could lose all or part of your investment. This document contains
forward-looking statements that involve risks, uncertainties and assumptions.
These statements relate to our beliefs, intentions, plans and strategies
regarding the future. These forward-looking statements are usually accompanied
by words such as "intends," "believes," "anticipates," "plans," "expects" and
similar expressions. Our actual results may differ materially from the results
discussed in the forward-looking statements because of factors discussed below
and elsewhere in this Information Statement.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE
We have incurred both historical and pro forma net losses in every fiscal
period since 1996. We cannot be certain when we will become profitable, if at
all. Failure to achieve profitability may adversely affect the market price of
our common stock. Even if we do achieve profitability, we cannot assure you that
we can sustain or increase profitability on a quarterly or annual basis.
WE MAY NOT BE ABLE TO RETAIN OUR MANAGEMENT CONTRACTS AND LEASES
Approximately 20 of our 1,405 management contracts and leases may be
cancelled by the owner in the event of a change of control. It is possible that
some of the third parties with whom we have management contracts and leases may
seek to characterize the Distribution as a change of control. If most or all of
the third parties with the right to terminate management contracts and leases in
the event of a change of control chose to terminate or renegotiate those
agreements and were successful in asserting that the Distribution is a change of
control, our business would be harmed.
OUR GROWTH STRATEGY MAY NOT SUCCEED
As part of our business strategy, we intend to pursue acquisitions of other
parking operators. In executing our acquisition strategy, we may be unable to
identify suitable acquisition candidates. In addition, we expect to face
competition from other parking providers for acquisition candidates, making it
more difficult to acquire suitable companies on favorable terms. If we pursue
any acquisition, our management could spend a significant amount of time and
effort in identifying and completing the acquisition. If we complete an
acquisition, we may have to devote a significant amount of management resources
to integrating the acquired business with our existing business. An acquisition
might not produce the revenue or earnings that we anticipated, and an acquired
operation may not perform as expected. Accordingly, our acquisition efforts may
not succeed. In addition, from an accounting perspective, an acquisition may
result in non-recurring charges or involve amortization of significant amounts
of goodwill that could adversely affect our operating results.
To pay for an acquisition, we might use capital stock or cash.
Alternatively, we might borrow money from a bank or other lender. If we use
capital stock, our stockholders may experience dilution. If we use cash or debt
financing, our financial liquidity would be reduced. We cannot be certain that
we will have sufficient access to capital to permit us to implement our
acquisition strategies.
SEVERE WINTER WEATHER MAY ADVERSELY AFFECT OUR BUSINESS
The parking business depends on the free flow of vehicular traffic. Severe
winter weather conditions in Canada and the northern United States could close
or significantly slow roadways. This, in turn, may harm
18
<PAGE> 23
our business and adversely effect our cash flow by reducing the demand for
parking and increasing our snow removal costs.
OUR MANAGEMENT TEAM IS NEW AND MAY NOT BE ABLE TO PERFORM SUCCESSFULLY
The current management structure and the senior management team of Impark
have been in place for a relatively short time. Mr. Huntzinger, the president
and chief executive officer, began his employment in January 1999. Mr. Wallner,
the senior vice president, operations, began his employment in March 1999. These
individuals have not, therefore, been significantly involved in other than the
most recent operating history of Impark. Our future success depends in large
part on the successful and continued service of our key management personnel.
CHANGES IN PRIVACY LEGISLATION COULD HARM OUR BUSINESS BY MAKING COLLECTIONS
MORE DIFFICULT AND COSTLY
City Collections, an Impark subsidiary, identifies vehicle owners through
searches based on license plate numbers. The license plate data are maintained
by each province. Although most provinces have enacted privacy legislation
regulating access to such data, City Collections has entered into access
agreements with several provinces. Should more restrictive privacy legislation
be enacted it could adversely affect City Collections' business. In addition,
fees charged for searches of motor vehicle registration are also set by
provincial governments and any increase in these fees will have an adverse
effect on City Collections' business.
AN INCREASE IN THE COST OF INSURANCE CLAIMS COULD INCREASE OUR COSTS
We typically have a large number of small property or personal injury
claims. We have insurance to cover the cost of these claims, to the extent such
costs exceed a deductible. However, a major increase in the number and cost of
claims to the insurance company could significantly increase the amount that we
pay to insure against these claims.
CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS
While our consolidated financial statements are prepared in United States
dollars, most of our operations are conducted in Canadian dollars. Fluctuations
in exchange rates may have a material adverse effect on our financial results,
particularly our operating margins, and could also result in exchange losses. To
date we have not sought to hedge these risks, but may undertake hedging
transactions in the future. We cannot be certain, however, that any hedging
techniques would be successful in preventing or limiting the adverse financial
effects of exchange rate fluctuations.
WE FACE RISKS ASSOCIATED WITH ENVIRONMENTAL REGULATIONS
Various federal, state, provincial and local environmental laws and
regulations impose liabilities on a current or previous owner or operator of
real property for the cost of removal or remediation of hazardous or toxic
substances on the property. These laws typically impose liability without regard
to whether the owner or operator knew of, or was responsible for, the presence
of the hazardous or toxic substances. In connection with our ownership or
operation of parking facilities, we may be potentially liable for such costs.
Although we are currently not aware of any material environmental claims pending
or threatened against us or any of our owned or operated parking facilities, we
cannot give any assurance that a material environmental claim will not be
asserted against us or against our owned or operated parking facilities. We
could face significant costs in defending against claims of liability or in
remediating a contaminated property.
AN INCREASE IN GOVERNMENT REGULATION OR TAXATION COULD HARM OUR BUSINESS
The parking business is subject to a significant degree of government
regulation. The regulations include potentially costly matters such as requiring
improvements to meet civic by-laws, worker's
19
<PAGE> 24
compensation regulations and, labor standards, as well as environmental and
other potentially costly legislation. Any new or increased levels of regulation
could adversely impact our business.
The parking industry is also subject to increased taxation from the various
levels of government. Historically, it has been considered as an environmentally
unfriendly industry due to its primary purpose, which is to park automobiles
driven into downtown business districts. Consequently the parking industry has
been the subject of significant taxation including federal and provincial sales
taxes, property taxes, business taxes and federal and provincial/state income
taxes. Our business will be adversely affected by any significant new tax
legislation or increased levels of taxation.
Various other governmental regulations affect our operation of parking
facilities, both directly and indirectly, including air quality laws, licensing
laws and the Americans with Disabilities Act of 1990. Under the ADA, all public
accommodations, including parking facilities, are required to meet certain
federal requirements related to access and use by disabled persons. Although we
believe that the parking facilities we own and operate are in substantial
compliance with these requirements, a determination that we or the facility
owner is not in compliance with the ADA could result in the imposition of fines
or damage awards against us.
In addition, several provincial, state and local laws have been passed in
recent years that encourage car pooling and the use of mass transit, including,
for example, laws prohibiting employers from reimbursing employee parking
expenses. Laws and regulations that reduce the number of cars and vehicles being
driven could hurt our business.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES
The parking industry is highly competitive. Our competitors range from
small single-lot operators to large regional and national multi-facility
operators, and include municipal and other governmental entities. Some of our
present and potential competitors have or may obtain greater financial and
marketing resources than we have. Furthermore, we compete for qualified
management personnel with other parking facility operators, with property
management companies and with property owners. We may encounter increased
competition in the future. Among other things, increased construction of parking
facilities could limit our ability to attract customers, expand our business or
maintain profitable pricing levels and could decrease our market share. We
compete for acquisitions with other parking facility operators, real estate
developers and real estate investment trusts. We may encounter increased
competition for acquisitions in the future, and this competition could hurt our
ability to complete acquisitions or have the effect of increasing the prices we
must pay for acquisitions.
We believe that there will be rapid business consolidation in the parking
services industry. If this occurs and we are unable to participate successfully
in the business consolidation, our business and financial results could be
harmed.
YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH NEW PUBLIC
COMPANIES
Before the Distribution, there has been no public market for our common
stock. Although we currently expect that our common stock will be listed on the
American Stock Exchange, an active trading market may not develop and be
sustained after this Distribution.
The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, the market prices of shares in newly public
companies have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, including the
following:
- Quarterly variations in our operating results;
- Adverse business developments;
- Changes in financial estimates by securities analysts;
20
<PAGE> 25
- Investor perception of Impark; and
- General economic conditions both in Canada and the United States.
In the event of broad fluctuations in the market price of our common stock,
you may be unable to resell your shares at or above the fair market value at the
time of the Distribution.
PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER OF
OUR COMPANY MORE DIFFICULT
Delaware corporate law and our certificate of incorporation and by-laws
contain certain provisions that could have the effect of delaying, deferring or
preventing a change in control of Impark or our management. These provisions
could discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that certain investors might be willing to
pay in the future for shares of our common stock. Some of these provisions:
- Authorize the issuance of "blank check" preferred stock (preferred stock
that can be created and issued by our board of directors without prior
stockholders' approval) with rights senior to those of common stock;
- Provide for a staggered board of directors (so that it would take three
successive annual meetings to replace all directors);
- Prohibit stockholder action by written consent; and
- Establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
A LABOR STRIKE COULD HURT OUR COMPETITIVENESS
A significant number of our employees are members of labor unions. As a
result there is a risk of work stoppages due to strikes which could potentially
be costly to us because increased labor costs could adversely affect our ability
to retain management contracts and to remain competitive in the marketplace.
21
<PAGE> 26
LISTING AND TRADING OF IMPARK COMMON STOCK
At the time of the Distribution, the nine Impark board members collectively
own less than 1% of the Impark common stock. First Union owns all of the
remaining shares of Impark common stock. No trading prices are available with
respect to such shares. There can be no assurance as to the price at which First
Union shares or Impark common stock may be traded after the Distribution or
whether their initial combined price will be higher or lower than the price of
the First Union shares prior to the Distribution. After the Distribution,
approximately 2.1 million shares of Impark common stock will be issued and
outstanding. In addition, shortly following the Distribution Date, it is
anticipated that Impark will grant (i) options covering an aggregate of 196,562
shares of Impark common stock to employees of Impark and (ii) shares, in an
amount to be determined, of Impark common stock to each of its outside
directors. See "Management -- Stock Plans" and "Management -- Director
Compensation."
Impark has applied to list its common stock on the American Stock Exchange.
Based on the expected number of holders of First Union shares of record as of
the Record Date, Impark is expected initially to have approximately 9,000
shareholders of record on the Distribution Date. The transfer agent and
registrar for the Impark common stock will be National City Bank. There can be
no assurance that an active trading market in Impark common stock will develop
or, if a market does develop, at what prices Impark common stock will trade.
Although shares of Impark common stock will not trade on the American Stock
Exchange on a "when-issued" basis, it is expected that a "when-issued" trading
market in Impark common stock may develop prior to the Record Date. We cannot
predict where such a trading market will develop. A "when-issued" trading market
occurs when trading in shares begins after the declaration of the dividend, but
prior to the time stock certificates are actually available or issued.
Shares of Impark common stock distributed to First Union beneficiaries will
be freely transferable, except for shares received by persons who may be deemed
to be "affiliates" of Impark under the Securities Act. Persons who may be deemed
to be affiliates of Impark after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control with
Impark, and will include: (a) the directors and executive officers of Impark and
(b) Gotham Partners, L.P., Gotham International Advisors, L.L.C., Gotham
Partners III, L.P., Apollo Real Estate Investment Fund II, L.P. Apollo Real
Estate Advisors II, L.P., and Magten Asset Management Corp. All of the shares of
Impark common stock held by affiliates of Impark may generally only be resold
(i) in compliance with the applicable provisions of Rule 144 under the
Securities Act, (ii) under an effective registration statement under the
Securities Act or (iii) pursuant to an exemption from the registration
requirements of the Securities Act.
Under Rule 144, an affiliate is entitled to sell, within any three-month
period, a number of shares of Impark common stock that does not exceed the
greater of 1% of the then outstanding shares of Impark common stock
(approximately 21,000 shares immediately after the Distribution) or the average
weekly trading volume of the Impark common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied.
Upon consummation of the Distribution, affiliates of Impark will hold
approximately 783,000 shares of Impark common stock. Following the Distribution
Date, Impark will file with the Commission a Registration Statement on Form S-8
to register under the Securities Act the 315,000 shares of Impark common stock
which have been reserved for issuance pursuant to the 2000 Stock Incentive Plan.
22
<PAGE> 27
CAPITALIZATION
The following table sets forth the capitalization of Impark as of December
31, 1999:
- On an actual basis combining the FUR Parking Business and FUMI Parking
Business; and
- On a pro forma basis giving effect to the pro forma transactions
described in note 2 to the Pro Forma Financial Statements.
You should read the capitalization information set forth in the table below
in conjunction with the financial statements and notes appearing elsewhere in
this Information Statement.
<TABLE>
<CAPTION>
AS AT DECEMBER 31, 1999
-----------------------
ACTUAL PRO FORMA
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Term facility (current portion)............................. $21,229 $ --
Advances payable to FUMI, unsecured, non-interest bearing
and having no specific terms of repayment................. 11,607 --
Promissory note payable to First Union, unsecured, bearing
interest at 11.875% per annum and maturing April 17,
2009...................................................... 28,061 --
Other....................................................... 356 --
------- -------
61,253 --
Stockholders' equity
Owners' deficiency.......................................... (8,230) --
Capital stock
Preferred Stock, $.01 par value per share; 2,000,000
shares authorized; no shares issued and outstanding.... -- --
Common Stock, $.01 par value per share; 10,000,000 shares
authorized; no shares issued and outstanding, actual;
2,100,000 shares issued and outstanding, pro forma..... -- 58,650
------- -------
$53,023 $58,650
======= =======
</TABLE>
First Union will cause a subsidiary to acquire the term facility for cash
consideration prior to the Distribution. The cash will be contributed to the
First Union subsidiary by First Union in consideration for common shares of the
subsidiary. In addition, FUMI will capitalize the advances payable and First
Union will capitalize the promissory note and other long-term debt prior to the
Distribution.
First Union will provide an $8.0 million line of credit to Impark prior to
the Distribution. Amounts drawn under this line of credit will bear interest at
LIBOR plus 4.5% per annum, be secured by real estate owned by Impark as well as
being full recourse to Impark. The line of credit will have a term of six months
from the date of issuance with two three-month extension options.
23
<PAGE> 28
HISTORICAL SELECTED FINANCIAL DATA
The historical selected financial data presented below has been calculated
by combining information in the combined financial statements of the FUR Parking
Business and the FUMI Parking Business and from the consolidated financial
statements of Impark Holdings Inc. These combined and consolidated financial
statements are included in this Information Statement. The selected financial
data for all periods has been extracted from audited financial statements.
The amounts presented below have been extracted from the historical
financial statements and are presented on a combined basis without giving effect
to any accounting adjustments that may be required to be given effect prior to
the completion of the plan of organization of Impark. As Impark's predecessor
changed its fiscal year end in 1996 from March 31st to December 31st to be
consistent with that of its then parent company, information for 1996 is
presented for nine months only.
This financial data should be read in conjunction with the consolidated and
combined financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------
1996 1997 1998 1999
------------ -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1),(2)
Revenues........................................ $ 35,755 $ 50,775 $ 54,087 $ 60,145
Direct costs.................................... 25,209 37,076 39,196 44,359
-------- -------- -------- --------
Gross margin.................................... 10,546 13,699 14,891 15,786
General and administrative expenses(3).......... 7,568 11,073 14,972 10,236
Depreciation and amortization................... 2,567 4,951 5,443 5,027
-------- -------- -------- --------
Operating income (loss)......................... 411 (2,325) (5,524) 523
Interest expense................................ (587) (3,335) (5,574) (4,884)
Other income (expense)(3)....................... 674 (976) (15,884) (279)
-------- -------- -------- --------
Income (loss) from continuing operations........ $ 498 $ (6,636) $(26,982) $ (4,640)
======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD)(1),(2)
Working capital................................. $ (7,833) $ (7,023) $ (8,181) (30,144)
Fixed assets.................................... 11,479 14,259 13,888 13,705
Goodwill........................................ 31,457 66,560 45,379 43,344
Total assets.................................... 69,499 99,423 74,923 76,176
Long-term liabilities........................... 26,351 52,365 55,219 40,024
Total liabilities............................... 44,472 84,656 77,720 84,407
Total owners' equity (deficiency)............... 25,027 14,767 (2,797) (8,230)
OTHER INFORMATION(1),(2)
Cash provided by (used in)
Operating activities.......................... $ 297 $ (762) $ (5,610) $ 4,478
Financing activities.......................... 45,360 35,248 18,943 666
Investing activities.......................... (45,040) (34,228) (13,135) (2,863)
Gross collections(4)............................ 126,458 172,729 173,925 177,833
EBITDA(5)....................................... 2,978 2,626 (81) 5,550
</TABLE>
- ---------------
(1) The amounts presented for the nine months ended December 31, 1996 have been
extracted from the consolidated financial statements of Impark Holdings
Inc., which, for accounting and SEC reporting purposes, represents a
predecessor entity to Impark.
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<PAGE> 29
(2) The amounts presented for these captions have been accumulated as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------------------------------------- ----------------------------------------
IMPARK FUMI FUR ELIMINATION TOTAL FUMI FUR ELIMINATION TOTAL
------ -------- ------- ----------- ------- ------- ------ ----------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues...................... 14,065 36,710 302 (302) 50,775 54,087 454 (454) 54,087
Direct costs.................. 11,724 25,654 -- (302) 37,076 39,638 12 (454) 39,196
------ -------- ------- ------- ------- ------ -------
Gross margin.................. 2,341 11,056 302 13,699 14,449 442 14,891
General and administrative
expenses.................... 3,547 7,526 -- -- 11,073 14,972 -- -- 14,972
Depreciation and
amortization................ 1,066 3,854 31 -- 4,951 5,398 45 -- 5,443
------ -------- ------- ------- ------- ------ -------
Operating income (loss)....... (2,272) (324) 271 (2,325) (5,921) 397 (5,524)
Interest expense.............. (453) (4,650) (904) 2,672 (3,335) (6,542) (2,757) 3,725 (5,574)
Other income (expense)........ 67 (370) 1,999 (2,672) (976) (15,492) 3,333 (3,725) (15,884)
------ -------- ------- ------- ------- ------ -------
Income (loss) from continuing
operations.................. (2,658) (5,344) 1,366 (6,636) (27,955) 973 (26,982)
BALANCE SHEET DATA (END OF
YEAR)
Working capital............... -- (7,375) 352 -- (7,023) (9,353) 1,172 -- (8,181)
Fixed assets.................. -- 5,158 9,101 -- 14,259 5,330 8,558 -- 13,888
Goodwill...................... 66,560 -- -- 66,560 45,379 -- -- 45,379
Total assets.................. -- 89,440 41,660 (31,677) 99,423 65,229 42,002 (32,308) 74,923
Long-term liabilities......... -- 60,768 22,977 (31,380) 52,365 63,052 23,759 (31,592) 55,219
Total liabilities............. -- 92,529 23,804 (31,677) 84,656 85,577 24,451 (32,308) 77,720
Total owners' equity
(deficiency)................ -- (3,089) 17,856 -- 14,767 (20,348) 17,551 -- (2,797)
OTHER
Cash provided by (used in)
Operating activities........ (182) (1,409) 829 -- (762) (5,734) 124 -- (5,610)
Financing activities........ (36) 34,482 31,144 (30,342) 35,248 18,610 333 -- 18,943
Investing activities........ (399) (33,095) (31,076) 30,342 (34,226) (12,994) (141) -- (13,135)
Gross collections............. 49,631 123,098 302 (302) 172,729 173,925 454 (454) 173,925
EBITDA........................ (1,206) 3,530 302 -- 2,626 (523) 442 -- (81)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------------------------------
FUMI FUR ELIMINATION TOTAL
------- ------- ----------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues.................................................... 60,145 582 (582) 60,145
Direct costs................................................ 44,939 2 (582) 44,359
------- ------- -------
Gross margin................................................ 15,206 580 15,786
General and administrative expenses......................... 10,236 -- -- 10,236
Depreciation and amortization............................... 4,984 43 -- 5,027
------- ------- -------
Operating income (loss)..................................... (14) 537 523
Interest expense............................................ (5,872) (3,044) 4,032 (4,884)
Other income (expense)...................................... (431) (14,816) 14,968 (279)
------- ------- -------
Income (loss) from continuing operations.................... (6,317) (17,323) (4,640)
BALANCE SHEET DATA (END OF YEAR)
Working capital............................................. (33,218) 3,074 -- (30,144)
Fixed assets................................................ 4,984 8,721 -- 13,705
Goodwill.................................................... 43,344 -- -- 43,344
Total assets................................................ 65,109 30,113 (19,046) 76,176
Long-term liabilities....................................... 48,292 28,061 (36,329) 40,024
Total liabilities........................................... 93,710 28,742 (38,045) 84,407
Total owners' equity (deficiency)........................... (28,601) 1,371 19,000 (8,230)
OTHER
Cash provided by (used in)
Operating activities...................................... 3,697 781 -- 4,478
Financing activities...................................... 677 (11) -- 666
Investing activities...................................... (2,858) (5) -- (2,863)
Gross collections........................................... 177,833 582 (582) 177,833
EBITDA...................................................... 4,970 580 -- 5,550
</TABLE>
25
<PAGE> 30
(3) Other income (expense) principally includes gains or losses on the sale or
write-down of assets, other interest expense and income taxes. In the year
ended December 31, 1998, other income (expense) includes a write-down of
goodwill of $15.0 million. General and administrative expenses for 1998
include a severance provision of $2.4 million and for 1999 include a
recovery of previously overprovided amounts of $1.8 million. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information on this write-down.
(4) Gross collections represent the aggregate cash collected from the revenue
generating activities of our operations that will be continuing subsequent
to the Distribution for the periods presented. It includes revenues reported
under generally accepted accounting principles as well as collections made
on parking facilities for which we have a management contract. Gross
collections are not a measure under generally accepted accounting principles
and are not an alternative to revenues or cash flows. Gross collections are
significant to an understanding of the operations of the predecessor
entities to Impark because management uses gross collections as a key
indicator of its business opportunities, they demonstrate the magnitude of
our historical business activities, management contract revenues are partly
based on the level of gross collections and management's decisions on the
allocation of resources among its business activities are in part based on
the level of gross collections.
(5) EBITDA equals operating income as shown on the table above, plus
depreciation and amortization expense. EBITDA is included because management
believes it to be a useful tool for measuring our ability to generate cash
flow from operations. EBITDA does not represent cash flow from operations,
is not a measure under generally accepted accounting principles and should
be considered together with the other financial information included in the
table and presented elsewhere in this Information Statement. EBITDA measures
as presented may not be comparable to similarly titled measures of other
entities.
26
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
YEARS ENDED DECEMBER 31, 1998 AND 1997
The following discussion of Impark's historical results of operations and
financial condition should be read in conjunction with Historical Financial
Statements and the Summary Financial Data, which are included in this
Information Statement.
DESCRIPTION OF FINANCIAL INFORMATION
Impark is the corporation which will result from the combination of the
parking related businesses of FUMI and the Canadian parking facilities of First
Union. We have set out below a brief description of the operations of each
business being combined.
FUMI Parking Business. The FUMI Parking Business consists of the parking
services and related ancillary activities that will continue in Impark. Since
April 1997 subsidiaries of FUMI have carried on these activities. The continuing
operations of FUMI's indirect subsidiaries, Imperial Parking Limited and Impark
Services Ltd., consist of operating and managing parking facilities in Canada
and the United States and carrying on other parking related activities.
FUR Parking Business. The FUR Parking Business consists primarily of
owning 15 parking properties in Canada. Since April 1997 subsidiaries of First
Union have operated this business, including leasing the properties to FUMI for
operation and management.
Impark Holdings Inc. Impark Holdings Inc. acquired Imperial Parking
Limited from its shareholders in March 1996 and sold this business to First
Union and FUMI in April 1997. Impark Holdings operated and managed parking
facilities in Canada, the United States and Asia.
Periods Presented. The results of operations for the year ended December
31, 1997 combine the period from January 1, 1997 to April 16, 1997 of Impark
Holdings with that from April 17, 1997 to December 31, 1997 of the FUMI Parking
Business and the FUR Parking Business. The results of operations for the years
ended December 31, 1998 and 1999 combine the results of the FUMI Parking
Business and the FUR Parking Business.
During the three years ended December 31, 1999 our revenues have been
generated from the following sources:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------
1997 1998 % CHANGE 1998 1999 % CHANGE
------- ------- -------- ------- ------- --------
(THOUSANDS OF DOLLARS, EXCEPT PERCENTS)
<S> <C> <C> <C> <C> <C> <C>
Leased Facilities...................... $37,833 $42,045 11.1% $42,045 $48,771 16.0%
Managed Facilities..................... 7,752 7,967 2.8% 7,967 7,193 (9.7)%
Owned Facilities....................... 1,414 1,510 6.8% 1,510 1,676 11.0%
Other.................................. 3,776 2,565 (32.1)% 2,565 2,505 (2.3)%
------- ------- ------ ------- ------- ----
Total.................................. $50,775 $54,087 6.5% $54,087 $60,145 11.2%
======= ======= ====== ======= ======= ====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total Revenues. Total revenues increased $6.0 million, or 11.2%, to $60.1
million in the year ended December 31, 1999 compared to $54.1 million in the
year ended December 31, 1998. This increase was attributable to greater revenues
from parking services, as detailed below which was partially offset by lower
ancillary services revenues.
Parking revenues from leased facilities increased $6.8 million, or 16.0%,
to $48.8 million during the year ended December 31, 1999 as compared to $42.0
million in the year ended December 31, 1998. This increase was driven by new
business growth, primarily in Calgary, Alberta, Toronto, Ontario, Minneapolis,
27
<PAGE> 32
Minnesota and Milwaukee, Wisconsin where 15 major new leased facilities were
added during the period. Also, the parking revenues have been reduced in 1999
versus 1998 by $1.5 million as a result of the Robbins Parking Service Ltd. and
Imperial Parking (Asia) Ltd. businesses sold during the year.
Parking revenues from management contracts decreased $0.8 million, or 9.7%,
to $7.2 million in the year ended December 31, 1999 as compared to $8.0 million
in the year ended December 31, 1998. This decrease resulted primarily from FUMI
cancelling the agreements for Impark to manage its U.S. properties in October
1998. Also, the parking revenues have been reduced in 1999 versus 1998 by $0.4
million as a result of the Robbins Parking Service Ltd. and Imperial Parking
(Asia) Ltd. businesses sold during the year.
Parking revenues from owned facilities remained relatively stable,
increasing $0.2 million, or 11.0%, to $1.7 million during the year ended
December 31, 1999 as compared to $1.5 million in the year ended December 31,
1998.
Other revenue decreased by $0.1 million, or 2.3%, to $2.5 million for the
year ended December 31, 1999 from $2.6 million for the year ended December 31,
1998. The decrease was mainly attributable to lower equipment sales as we wound
down our equipment sales and installation division.
Direct costs increased $5.2 million, or 13.2%, to $44.4 million in the year
ended December 31, 1999 from $39.2 million in the year ended December 31, 1998.
This increase was due principally to increased rents of $4.8 million on the 15
major new lease facilities added during the year. The remaining increase was
primarily due to increased payroll cost of $0.5 million on the 15 new
facilities. Direct costs, as a percentage of total revenues, increased to 73.8%
in the year ended December 31, 1999 from 72.5% in the year ended December 31,
1998. The increase was primarily attributable to the 15 large new lease deals in
Calgary, Toronto, Minneapolis and Milwaukee. A number of these locations were
unprofitable or only marginally profitable in their first year. New lease
locations may require a few years to achieve their revenue and profit potential.
In order to maximize the financial performance of a new lease, we would make
physical and operational changes that include but are not limited to, providing
better lighting, developing new pricing and marketing policies, implementing new
safety and security procedures, upgrading signage and parking equipment and
redirecting traffic flow. Also, the direct costs have been reduced in 1999
versus 1998 by $1.5 million as a result of the Robbins Parking Service Ltd. and
Imperial Parking (Asia) Ltd. businesses sold during the year.
General and administrative expenses decreased by $4.8 million, or 31.6%, to
$10.2 million for the year ended December 31, 1999 from $15.0 million for the
year ended December 31, 1998. The decrease was primarily due to an employee
severance provision of $2.4 million in 1998. This provision was ultimately
determined to be over-accrued by $1.8 million which was reversed in 1999. This
reversal was partially offset by a severance provision in 1999 of $0.9 million.
The decrease was also partially attributable to $1.1 million higher U.S.
expansion costs for the year ended December 31, 1998. Also, general and
administrative expenses have been reduced in 1999 versus 1998 by $0.2 million as
a result of the Robbins Parking Service Ltd. and Imperial Parking (Asia) Ltd.
businesses sold during the year. General and administrative expenses, before
taking into account severance, decreased as a percentage of total revenue from
23.3% in 1998 to 18.5% in 1999. This was a result of management efforts to
reduce general and administrative expenses and the effect of spreading general
and administrative expenses over a greater revenue base.
Depreciation and amortization decreased from $5.4 million for the year
ended December 31, 1998 to $5.0 million for the year ended December 31, 1999, a
decrease of $0.4 million. The decrease was attributable to lower depreciation
and amortization on management contracts and agreements in 1999 than 1998 as
they became fully amortized during this period.
Interest expense totalled $4.9 million for the year ended December 31, 1999
compared to $5.6 million for the year ended December 31, 1998, a decrease of
$0.7 million. Interest on bank debt decreased $0.3 million as bank debt was
repaid during the period. Debt owing to a former shareholder was repaid in June
1998 resulting in a decrease in other interest of $0.6 million. These decreases
in interest were offset
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by an increase in interest to related parties of $0.2 million. With respect to
credit facilities which represent substantially all of Impark's indebtedness,
the weighted average balance outstanding for the year ended December 31, 1999
was approximately $22.8 million at a weighted average interest rate of 6.9%.
Other expenses in fiscal 1998 include a write-down in the value of goodwill
of $15.0 million at the fiscal year end. Goodwill was primarily created on the
push-down of the acquisition of the business of Impark Holdings by FUMI in April
1997. Due to the losses incurred in the FUMI Parking Business since its
acquisition, at December 31, 1998 the management of FUMI and of an Impark
predecessor assessed the recoverability of the net book value of goodwill. This
review was made by comparing the net book value to the estimates of future cash
flows from the FUMI Parking Businesses. As a result of this review, an
impairment charge in goodwill of $15.0 million was recorded.
Net loss decreased from $27.0 million for fiscal 1998 to $4.6 million for
fiscal 1999, a decrease of $22.4 million. The decrease is primarily due to
recording in 1998 the $15.0 million goodwill write-down combined with lower
general and administrative expenses of $4.8 million, lower interest costs of
$0.7 million, lower depreciation and amortization of $0.4 million, reduced other
expenses of $0.6 million, and increased gross margin of $0.9 million.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total Revenues. Total revenues increased $3.3 million, or 6.5%, to $54.1
million in the year ended December 31, 1998 compared to $50.8 million in the
year ended December 31, 1997. This increase was attributable to increased
revenues in both parking services and ancillary services from new business
growth and the 41 facilities that were acquired in 1998.
Parking revenues from leased and owned facilities in fiscal 1998 increased
$4.4 million, or 11.0%, to $43.6 million from $39.2 million in fiscal 1997. The
increase was attributable to new business growth in Canada and the United States
combined with 41 facilities acquired in 1998 from two small Canadian parking
operators.
Management contract revenues increased $0.2 million, or 2.8% to $8.0
million from $7.8 million in fiscal 1997. The increase was due primarily to
managing First Union's U.S. properties for a period of ten months in fiscal 1998
compared to six months in fiscal 1997.
Other revenue decreased $1.2 million, or 32.1%, to $2.6 million in fiscal
1998 from $3.8 million in fiscal 1997. The decrease was due primarily to lower
equipment sales and installation.
Direct costs in fiscal 1998 increased $2.1 million, or 5.7%, to $39.2
million from $37.1 million in fiscal 1997. Direct costs increased principally as
a result of new business and from acquisitions. Direct costs as a percentage of
total revenues, decreased to 72.5% in fiscal 1998 from 73.0% in fiscal 1997.
This decrease was attributable predominately to the spreading of fixed costs,
primarily rent and property costs, over a larger revenue base.
General and administrative expenses in fiscal 1998 increased $3.9 million,
or 35.2%, to $15.0 million from $11.1 million is fiscal 1997. This increase was
primarily a result of severance expenses of $2.4 million, U.S. expansion costs
of $2.0 million and $0.5 million allocated First Union stock compensation
expense, offset by one-time provisions of $1.1 million in fiscal 1997 to
terminate equipment installation contracts.
Depreciation and amortization increased from $5.0 million in fiscal 1997 to
$5.4 million in fiscal 1998, an increase of $0.4 million. The increase was due
primarily to increased amortization of management contracts and agreements for a
full year in fiscal 1998 following the April 1997 acquisition by FUMI.
Interest expense totalled $5.6 million in 1998 compared to $3.3 million in
1997. The increased interest expense was a result of higher interest rates in
1998 and a full year of financing from related parties following the acquisition
of Impark by FUMI on April 17, 1997. With respect to credit facilities which
represent substantially all of Impark's indebtedness, the weighted average
balance outstanding for fiscal 1998 was approximately $24.2 million at a
weighted average interest rate of 7.2%.
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Other expenses in fiscal 1998 include a write-down in the value of goodwill
of $15.0 million at the fiscal year end. Goodwill was primarily created on the
push-down of the acquisition of the business of Impark Holdings by FUMI in April
1997.
Net loss increased from $6.6 million for fiscal 1997 to $27.0 million for
fiscal 1998, an increase of $20.4 million. The increase is primarily due to
recording in 1998 the $15.0 million goodwill write-down combined with increased
general and administrative expenses of $3.9 million, increased interest costs of
$2.2 million, increased depreciation and amortization of $0.4 million, which was
partially offset by increased gross margin and reduced other expense totaling
$1.1 million.
LIQUIDITY AND CAPITAL RESOURCES
On an adjusted pro forma basis, Impark had cash of $7.7 million at December
31, 1999 as compared to $3.4 million before the pro forma changes and the
adjustments described in "Adjusted Pro Forma Selected Financial Data." The
additional $4.3 million primarily represents a contribution of up to $7.0
million cash which First Union will make to Impark immediately prior to the
Distribution. Of the cash to be contributed, $2.0 million is restricted solely
for settlement of tax contingencies.
Following the Distribution, Impark will have no long term bank or other
long term debt outstanding. We will have an $8.0 million line of credit from
First Union to fund working capital requirements, acquisitions and other capital
investment opportunities. The credit facility will be due on September 30, 2000,
with two options to extend for three additional months each. We are required to
pay $40,000 for each extension. The line of credit bears interest at a floating
annual rate equal to the London Interbank Offer Rate plus 4.5% per annum. The
credit facility will be secured by a cross collateralized mortgage on the
parking real estate contributed by the FUR Parking Business. We intend to obtain
a new credit facility with a commercial bank as soon as practicable after the
Distribution. This anticipated additional line will be used to establish letters
of credit, support working capital, fund capital investment opportunities and
repay the First Union line of credit. Impark may need letters of credit when it
bids on larger lease and management contracts.
In the 12 months following the Distribution, we anticipate the working
capital necessary to satisfy current obligations will be generated from
operations, available cash, the First Union credit facility, and Impark's new
credit facility.
Depending on the timing and magnitude of future investment opportunities,
which could be in the form of leased or purchased properties, Impark's joint
ventures and acquisitions, we anticipate the cash required to come from
operations, the First Union credit facility (or its commercial bank
replacement), a rights offering or an equity offering.
In the future, if we identify investment opportunities requiring cash in
excess of operating cash flows and credit facilities, we may seek additional
sources of capital, including the sale or issuance of Impark common stock or a
rights offering, or amending our credit facility to obtain additional
indebtedness. No assurances can be given that such increases would be available
at the time needed to complete any such acquisition.
Following the Distribution, Impark will be committed to the completion of
the development of the approximately 4,900 spaces for the new San Francisco
Giants Stadium (Pacific Bell Park). At closing, of the $7.8 million estimated
cost, Impark will have funded $1.1 million and First Union will contribute its
investment in the limited liability company and commit to fund the balance up to
$6.7 million. Should the development cost exceed $7.8 million, the excess cost
will be funded by Impark.
Net cash provided by operating activities for the year ended December 31,
1999 was $4.5 million. The primary factors which contributed to this cash
provision was income before depreciation and amortization of $0.4 million and
decreases in working capital of $2.8 million.
Net cash used in investing activities was $2.9 million for the year ended
December 31, 1999. The primary factor which contributed to the investing
activity was fixed asset expenditures of $1.4 million and
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investment in other assets of $1.1 million primarily related to funding the San
Francisco Giant Stadium project.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is effective for fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS 133 establishes consistent accounting and reporting standards for
derivative instruments and for hedging activities. As of December 31, 1999 we
have not adopted this standard and do not expect to do so prior to its required
application date. To December 31, 1999, we do not believe we have entered into
significant instruments that are subject to SFAS 133. However, we are continuing
to review and evaluate SFAS 133 and its impact on Impark.
FOREIGN CURRENCY EXPOSURE
Impark operates wholly owned subsidiaries in Canada. Total historical
revenues from Canadian operations amounted to $44.9 million and $49.7 million
for fiscal years 1998 and 1999, respectively. Impark intends to continue to
invest in Canadian leased or owned facilities, and may identify expansion
opportunities in other foreign countries. Our exposure to foreign currency
fluctuations is limited as the Canadian dollar revenues have to date been
significantly offset by Canadian dollar operating costs. In limited
circumstances we have denominated Canadian contracts in U.S. dollars to limit
currency exposure. Presently, Impark has no formal hedging programs. We
anticipate implementing a hedging program if such risk materially increases.
IMPACT OF INFLATION AND CHANGING PRICES
The primary sources of revenues to Impark are parking revenues from owned
and leased locations and management contract revenue (net of expense
reimbursements). In the years ended December 31, 1998 and 1999 inflation had a
limited impact on our operations.
YEAR 2000 COMPLIANCE PROJECT
In June 1998, we began implementing a Year 2000 compliance project which
was intended to assess the ability of our computer systems to recognize dates
properly on or after January 1, 2000 and to ensure that these systems were Year
2000 compliant as soon as possible. This project addressed three main areas: (a)
information technology systems, (b) process control instrumentation and (c)
third-party, suppliers and customers. This compliance project was completed
prior to December 31, 1999. Subsequent to that date we have not experienced any
significant problems with respect to the Year 2000 change. However, there can be
no certainty that we will not be affected during the fiscal year ending December
31, 2000 due to Year 2000 system facilities or other related events by our
suppliers.
QUARTERLY RESULTS
Impark may experience fluctuations in its income from quarter to quarter.
We may continue to experience fluctuations in revenues and related expenses due
to acquisitions, pre-opening costs, travel and transportation patterns affected
by weather and calendar related events, and local and national economic
conditions. Additionally, Impark manages the parking for a number of sports
stadiums and arenas and our income can be affected by the relative degree of
success of various sports teams.
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BUSINESS
GENERAL
We are a leading provider of parking services in North America. As of
December 31, 1999, we managed, leased or owned over 1,400 parking lots in Canada
and the United States, containing more than 250,000 parking spaces, making us
the largest parking provider in Canada and one of the four largest in North
America. We estimate that the more than 230,000 parking spaces we operate
throughout Canada give us approximately half of the urban, private parking lot
business in Canada. We also provide parking lot patrolling, ticketing and
collection services for our own lots and for those operated by other parties.
We provide parking services at multi-level parking facilities and surface
lots. We operate these facilities and lots under three general types of
arrangements: management contracts, leases and fee ownership. As of December 31,
1999, we managed 915 parking facilities and lots, leased 490 parking facilities
and lots and owned 15 parking facilities and lots.
Imperial Parking Limited, one of the entities that is part of Impark, was
originally incorporated in 1962 in Vancouver, British Columbia and initially
established a significant presence in Western Canada. Since then we have
expanded our operations throughout Canada and also into the United States. Over
the past 13 years we have completed 15 parking-related acquisitions.
Over the last five years Impark increased its number of locations operated
from 1,020 at January 1, 1995 to 1,420 at December 31, 1999. The growth was
achieved through a combination of acquisitions and internal growth.
Impark acquisitions included Citipark, Inc., a national Canadian parking
company in 1995 (176 locations), and several smaller companies including: P1
Parking in 1998 (18 locations), Prairie Parking Ltd. in 1998 (23 locations),
Advanced Parking Systems Ltd. in 1996 (45 locations), and Park Rite Ltd. in 1994
(28 locations). In 1999, as part of the FUMI reorganization plan as described on
pages 11, 12 and F-4 of this Information Statement, Impark disposed of Robbins
Parking Services Ltd. (141 locations) and Imperial Parking (Asia) Ltd. (14
locations).
Our management team has extensive experience in the parking industry. Our
three most senior officers, Messrs. Huntzinger, Wallner and Newsome, have over
45 years of combined experience. They have operated major parking operations
throughout the United States and Canada and have been involved in numerous
acquisitions. See "Management -- Executive Officers and Directors."
Charles Huntzinger, President and CEO will report to the Board of Directors
and Bruce Newsome, Senior Vice President Finance, CFO and Secretary and Bryan
Wallner, Senior Vice President Operations will reporting to Charles Huntzinger.
David Schonberger, Vice President will also report to Charles Huntzinger.
Following the Distribution, Impark will be a publicly held Delaware
corporation. It will have the following operating subsidiaries:
- Imperial Parking Inc., a Delaware corporation will be the operating
company for our parking business in the U.S.
- Imperial Parking Canada Corporation, a Nova Scotia corporation and
successor to Imperial Parking Limited, will operate the parking business
in Canada. Advanced Parking Limited will be a subsidiary of Imperial
Parking Canada Corporation.
- City Collection Company Ltd., a British Columbia company, will provide
collection services for Impark and other entities in Canada and the U.S.
Each of the subsidiaries listed above will maintain subsidiaries of its own
to provide management structure and contain liabilities.
Impark will be a North American parking company which will concentrate its
efforts in parking and the related collections business. We will expand through
a combination of strategic acquisitions and
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internal business growth. We will continue our efforts to increase profitability
from existing locations concentrating our attention on facilities that do not
meet minimum profitability standards.
Our clients include a number of significant owners and developers of
commercial real estate in Canada and the United States, including Trizec/Hahn,
Colliers International, Marathon Properties, Trammell Crow Faison, Cadillac
Fairview and Oxford Properties. We provide parking at several high profile
sites, such as Waterfront Center, GM Place and BC Place in Vancouver, the
Skydome in Toronto, Clise Properties in Seattle and Trammell Crow Faison Tower
Place Mall in Cincinnati. In addition, we were recently awarded the right to
manage the parking facilities at the San Francisco Giants' new Pacific Bell
baseball park.
Upon the Distribution, we will no longer be involved in non-parking related
ancillary businesses we have historically operated and we will no longer have
operations outside of North America. We believe this renewed focus on our core
business of parking management, including ticketing and patrolling services, and
our core geographic market of North America will enable our management to
concentrate its efforts on further improving the businesses that have
historically been most profitable for us, and will minimize the distractions we
have encountered from our non-core operations.
INDUSTRY
The parking industry is highly fragmented and competitive. Industry
participants, the vast majority of which are privately held companies, consist
of a relatively few national companies and a large number of small regional or
local operators, including a substantial number of companies providing parking
as an ancillary service in connection with property management or ownership. The
parking industry has begun to experience consolidation as smaller operators have
found that they lack the capital, economies of scale and sophisticated
management techniques required to compete with larger providers. We expect this
trend will continue and will provide significant opportunities for us to acquire
smaller existing providers.
We expect that a number of other trends in the commercial property
management business will continue to provide opportunities for large,
specialized providers of high-quality parking services. We believe that:
- The trend toward consolidation of property management companies will
favor larger, nationwide parking providers, as increasingly centralized
property management companies and property owners seek to minimize the
number of separate parking providers they deal with;
- As the property management industry becomes increasingly sophisticated
and professional, property management companies and property owners will
likely seek to work with specialized, professional parking service
providers;
- Parking is increasingly seen by building owners as a profit center, and
owners seek parking providers who can help them to maximize
profitability, increase efficiency and reduce financial
unpredictability; and
- The owners of premier properties, as they begin to recognize that the
parking experience often provides both the first and last impression of
their properties to tenants and users, are seeking to offer the highest
possible level of quality in their parking services as a means of
distinguishing their properties from those of competitors.
We believe that the industry trends toward outsourcing by private-sector
owners and privatization by government entities provide additional significant
growth opportunities for parking facility operators. Private-sector parking
owners have begun to move from owner-operation of their parking facilities to
outsourcing the management of operations to specialized operators. This allows
them to focus on their core competencies while increasing overall returns on
parking assets. In addition, governments and government agencies, particularly
cities and municipal authorities, are increasingly retaining private firms to
operate facilities and parking-related services in an effort to reduce operating
budgets and increase efficiency.
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GROWTH STRATEGY
Our strategy is to strengthen our position as the leading parking provider
in Canada while significantly expanding our presence into selected markets in
the United States. Key elements of this growth strategy include:
Increase penetration of existing core markets. We will seek to leverage
our long-standing relationships with real estate owners in cities where we
currently have significant operations. Our reputation for premium service, our
local market knowledge and our management infrastructure, allow us to compete
aggressively for new business in these core cities. Because existing parking
operations are sufficient to cover the costs of local and regional personnel,
additional parking operations in these markets will provide a greater
contribution to our profits than the operations in new markets. As we compete
for new business, it will also be critical to retain and improve the
profitability of existing contracts.
Pursue aggressive growth in other urban markets. We have targeted major
cities in Canada and the United States where we currently have little or no
presence for aggressive expansion. We believe that expansion in the United
States will be the key component to enhancing our overall profitability. This is
because we have little presence in the United States, the largest parking market
in the world, and key members of our new management team have significant
experience in the United States. Also, there are far greater opportunities to
bid for contracts in the United States than in Canada where we already dominate
the industry. Additionally, parking rates and average profits per facility tend
to be higher than in Canada. Our strategy is to enter a new market only if we
believe we can quickly gain a significant position in the market, with
sufficient "critical mass" to compete effectively and realize economies of
scale. Certain markets are dominated by national parking companies that have
established strong relationships through more advanced parking techniques. We
may avoid these markets initially. However, where a market is fragmented by a
number of smaller less sophisticated parking operators we believe there is an
opportunity to gain market share by providing superior systems and controls to
prospective customers. We will pursue opportunities in these markets either
through acquisition or by establishing our own operations there. We believe that
there are approximately ten new markets in the United States in which we can
secure market share over the next three years.
Pursue acquisition opportunities. We believe there are significant
opportunities to expand our business through the acquisition of smaller
operators, both in existing core markets and in other targeted cities where we
believe we can attain a significant market share. The parking industry is highly
fragmented and we believe that many of our smaller competitors have limited
access to capital or do not have the systems or the scale to compete
effectively. We have successfully completed five acquisitions in the last five
years (adding approximately 300 facilities). Typically, we seek to acquire
smaller local operators with several years of experience in their market. We
believe this allows for the immediate understanding of the market and provides a
platform for additional acquisitions and increased penetration in the same city.
Participate in outsourcing and privatization trends. We believe
significant opportunities for growth will result from the current trend toward
outsourcing and privatization of parking services. We believe we are
particularly well positioned to participate in these trends because we are able
to provide parking facility management and related services at lower costs and
higher service levels than those provided by municipalities, hospitals and
universities. We have been successful in the past in working with the City of
Victoria and the City of Nanaimo to issue municipal tickets on our lots and have
parking contracts for the City of Coquitlam, the University of British Columbia
and the British Columbia Transit Authority. Our collection subsidiary, City
Collection Company Ltd., is a licensed debt collection company in several
Canadian provinces. We believe that having our own licensed debt collection
company enhances our ability to compete for outsourcing business by allowing us
to provide a package of both management and debt collection services.
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OPERATING STRATEGY
We seek to increase the revenues and profitability of our parking
facilities through a variety of operating strategies, including the following:
Focus on larger urban markets. We intend to focus on larger urban markets.
We believe that (i) urban markets are more resistant to economic downturns, (ii)
property owners and real estate asset managers in these markets typically have a
presence in other cities, which provides opportunities to leverage these
relationships to expand to new locations, (iii) the typically higher prices
charged in these markets can support our premium service levels, and (iv) our
senior management team has significant expertise in these markets. Charles
Huntzinger and Bryan Wallner primarily contribute to the management team's
expertise in these markets. Between them they have 33 years of parking
experience in major U.S. cities including New York, Philadelphia, Baltimore,
Washington, Boston, Richmond, Jacksonville, Pittsburgh, Cleveland, Columbus,
Cincinnati, Milwaukee, Denver, San Francisco, Los Angeles, Seattle, St. Louis,
Indianapolis, as well as Toronto and Ottawa, Canada. We recently hired several
regional and city managers who have experience in major U.S. cities including
Minneapolis, Kansas City and Salt Lake City.
Focus on increasing profitability. We believe there is a significant
opportunity to increase the profitability of existing and future operations and
we intend to focus on the profitability of our operations. Our policy is to
continue to operate only those facilities that meet or exceed profitability
targets. When Mr. Huntzinger joined Impark in January 1999 he shifted Impark's
strategy from one of gaining market share to increasing the profitability of
each location. We now view each location as a stand alone profit center and not
a loss leader to gain market share.
Generally, we will seek to close or renegotiate the arrangements with
respect to facilities that do not meet our targets within the next 12 months
following our identification of such arrangements. In March 1999 we identified
124 locations, approximately 9% of our total locations operated, that were not
profitable. By August 1999 we were able to improve the results or cancel 95 of
those locations. In addition, we identified 453 locations, approximately 32% of
our total locations operated, that fell below our minimum profitability goals.
Our goal in 2000 is to convert at least 50% of these locations to higher
profitability levels. Typically there are few costs associated with closing a
facility other than ensuring that any equipment or supplies in the facility are
removed and any deposits repaid to customers.
We will also seek to reduce overhead costs through a program of continuing
cost cutting initiatives, including labor cost reduction, exploiting purchasing
power and other economies of scale and ongoing improvements of automation and
technology. In 1999, we eliminated approximately $500,000 of office overhead. We
are targeting a further $350,000 (approximately) in 2000. Corporate and branch
entertainment and travel expenses are more closely controlled. For example,
executives no longer fly first or business class but economy or discount class;
they stay at mid-priced hotels and also drive compact rental cars. Entertainment
expenses, charitable donations and the use of outside consultants have been
curtailed.
Increase proportion of leased facilities. We intend over time to increase
the number of facilities we operate under lease relative to the number we
operate under management contracts. Historically, our net profits have been
significantly higher on leased facilities than on managed facilities. Our goal
is to have a higher proportion of leased facilities than managed facilities. We
believe a mix of leased, managed, and owned parking facilities will diversify
our operations, providing us with a balance of lower risk and lower profit
managed operations, and higher risk and higher profit leased and owned
operations.
Provide consistently high level of service. Our goal is to provide a
uniformly high level of quality and service across all of the facilities we
manage, characterized by clean, well-lit, secure and pleasant surroundings,
attractive graphics and signage, and professional, courteous and well-dressed
staff. We also offer a wide range of optional premium services, including valet
parking, concierge services, car washing, dry cleaning drop off and pick up and
vehicle repair. These premium services are typically offered to owners of
first-class properties who seek to provide their tenants with the highest
possible level of service
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to help differentiate their property from competing properties. Recently our
Toronto branch was awarded the 1999 Pinnacle Award by the Building Owners and
Managers Association (BOMA) of Ontario. The award is given to the company and
property voted by BOMA to have exhibited excellence in customer service. Many of
our clients and prospective clients are BOMA members.
Continue to implement standardized systems and controls. Over the course
of more than 35 years in the parking management business, we have developed
sophisticated and comprehensive management systems and controls, which we seek
to implement uniformly at all facilities we manage. These systems include
accounting and financial management and reporting practices, general operating
procedures, training, employment policies and practices, cash controls,
marketing procedures and visual image. We believe that our standardized systems
and controls enhance our ability to successfully expand our operations into new
markets.
Aggressively implement technology and automation. We believe that
automation and technology can enhance customer convenience, lower labor costs,
improve cash management and increase overall profitability. We have been a
leader in the field of introducing automation and technology to the parking
business and we were among the first to widely adopt innovations such as the use
of credit card payment systems, hand-held computers to track violators and issue
citations, bar-code scanners to ensure monthly parkers are using the correct lot
and are up-to-date in payment and entry and exit gates incorporating sensing
equipment that can automatically recognize and admit authorized vehicles. We
believe that our high proportion of unmanned facilities gives us a cost
advantage as we compete for business. We have also developed a sophisticated
management information system that enables us to effectively track revenue and
manage cash on a daily basis and generate a wide variety of internal reports, as
well as customized reports requested by our clients.
Implement incentive compensation program. We have adopted a
performance-based compensation system for city managers, vice presidents and
others based on the profitability of each individual's area of responsibility.
We believe this program will enhance the entrepreneurship of our
management-level employees by tying their compensation directly to improvements
in the profitability of the operations they manage and will encourage them to
improve operations and control costs.
Provide profitable patrol, enforcement and ticketing services. We seek to
increase the profitability of our overall operations by providing parking lot
patrol, enforcement and ticketing services, both at our own facilities and at
facilities operated by others. We believe there are significant opportunities to
market these services to facilities not operated by us, especially those owned
by municipalities or by suburban retail centers, who wish to discourage all-day
parkers by enforcing parking regulations favoring short-term parkers.
Maintain strict cash control. Strict cash control is critical to our
success and that of our clients. Our cash control procedures are based on a
ticketing system supervised by high level managers and include on-site spot
checks, multiple daily cash deposits, local audit functions, managerial
oversight and review, and internal audit procedures. It is our policy that
tickets and gate counts are reconciled daily against cash collected. We believe
our cash control procedures are effective in minimizing the loss of revenues at
parking facilities.
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PARKING FACILITIES AND SURFACE LOTS
The following table summarizes certain information regarding our parking
facilities and surface lots as of December 31, 1999.
<TABLE>
<CAPTION>
LEASED MANAGED OWNED TOTAL
------------- -------------- ------------- ---------------
LOCATION LOTS SPACES LOTS SPACES LOTS SPACES LOTS SPACES
- -------- ---- ------ ---- ------- ---- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CANADA
BRITISH COLUMBIA
Vancouver.................... 66 5,958 506 102,530 -- -- 572 108,488
Other........................ 7 755 41 4,942 -- -- 48 5,697
--- ------ --- ------- --- ----- ----- -------
Total...................... 73 6,713 547 107,472 -- -- 620 114,185
ALBERTA
Edmonton..................... 92 7,190 43 6,086 2 623 137 13,899
Calgary...................... 81 9,335 28 7,414 3 345 112 17,094
Banff........................ 2 83 6 612 -- -- 8 695
--- ------ --- ------- --- ----- ----- -------
Total...................... 175 16,608 77 14,112 5 968 257 31,688
SASKATCHEWAN
Saskatoon.................... 42 3,027 13 1,695 -- -- 55 4,722
Regina....................... 47 2,256 13 2,128 1 20 61 4,404
--- ------ --- ------- --- ----- ----- -------
Total...................... 89 5,283 26 3,823 1 20 116 9,126
MANITOBA
Winnipeg..................... 68 4,485 77 15,719 8(1) 682 153 20,886
ONTARIO
Toronto...................... 27 4,145 79 34,562 1 50 107 38,757
Hamilton..................... 4 595 12 3,995 -- -- 16 4,590
London....................... 3 709 11 3,106 -- -- 14 3,815
Ottawa....................... 2 144 9 5,348 -- -- 11 5,492
Windsor...................... 1 63 5 409 -- -- 6 472
Sudbury...................... 2 570 4 910 -- -- 6 1,480
--- ------ --- ------- --- ----- ----- -------
Total...................... 39 6,226 120 48,330 1 50 160 54,606
QUEBEC/OTHER
Montreal..................... 3 145 17 3,950 -- -- 20 4,095
Halifax...................... 2 48 7 939 -- -- 9 987
St. John's................... 2 246 4 621 -- -- 6 867
--- ------ --- ------- --- ----- ----- -------
Total...................... 7 439 28 5,510 -- -- 35 5,949
TOTAL CANADA................. 451 39,754 875 194,966 15 1,720 1,341 236,440
UNITED STATES
Minneapolis.................. 19 3,133 30 6,569 -- -- 49 9,702
Milwaukee.................... 14 2,123 2 250 -- -- 16 2,373
Buffalo...................... 6 1,552 2 774 -- -- 8 2,326
Seattle...................... -- -- 5 1,520 -- -- 5 1,520
Cincinnati................... -- -- 1 1,605 -- -- 1 1,605
--- ------ --- ------- --- ----- ----- -------
TOTAL UNITED STATES.......... 39 6,808 40 10,718 -- -- 79 17,526
TOTAL........................ 490 46,562 915 205,684 15 1,720 1,420 253,966
=== ====== === ======= === ===== ===== =======
</TABLE>
- ---------------
(1) Represents eight parking facilities located on seven properties acquired
from First Union.
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<PAGE> 42
OPERATING ARRANGEMENTS
We operate parking facilities under three general types of arrangements:
leases, management contracts, and fee ownership. As of December 31, 1999, we
leased 490 parking facilities, operated 915 parking facilities through
management contracts and owned 15 parking facilities.
The general terms and benefits of these types of arrangements are described
below:
Leases. Under a lease arrangement, the parking facility operator generally
pays either a fixed annual rent, a percentage of gross customer collections, or
a combination thereof to the property owner. The parking facility operator
collects all revenues and is responsible for most operating expenses, but is
typically not responsible for major maintenance. In contrast to the management
contracts, lease arrangements are typically for terms of three to ten years and
typically contain a renewal term, and provide for a fixed payment to the
facility owner regardless of the operating earnings of the parking facility. As
a result, the leased facilities generally require a longer commitment and a
larger capital investment by the parking facility operator than do managed
facilities, but generally provide a greater opportunity for long-term revenue
growth.
Management Contracts. Under a management contract, the facility manager
generally receives a base monthly fee for managing the facilities and often
receives an incentive fee based on the achievement of facility revenues above a
base amount. Facility managers generally charge fees for various ancillary
services such as accounting, equipment leasing and consulting. Responsibilities
under a management contract include hiring, training and staffing parking
personnel, and providing collections, accounting, record-keeping, insurance and
facility marketing services. In general, the facility manager is not responsible
for providing security or guard services. Under typical management contracts,
the facility owner is responsible for operating expenses such as taxes, license
and permit fees, insurance premiums, payroll and accounts receivable processing
and wages of personnel assigned to the facility. In addition, the facility owner
is responsible for non-routine maintenance, repair costs and capital
improvements. The typical management contract is for a term of one to three
years (though the owner often reserves the right to terminate, without cause, on
30 days' notice) and may contain a renewal clause.
Fee ownership. Under fee ownership arrangements, the parking facility
operator owns the property and fixtures. Ownership of parking facilities
typically requires a larger capital investment than managed or leased facilities
but provides maximum control over the operation of the parking facility, and all
increases in revenue flow directly to the owner. Ownership provides the
potential for realizing capital gains from the appreciation in the value of the
underlying real estate, but it also subjects the property owner to risks
including reduction in value of the property and additional potential
liabilities, as well as additional costs such as real estate taxes and
structural, mechanical or electrical maintenance or repairs.
ENFORCEMENT AND COLLECTIONS
Approximately 70% of our parking lots are operated with parking meters and
without parking lot attendants. We enforce user payment at these lots by having
patrollers circulate regularly through lots to identify delinquent parkers and
issue violation notices. We use modern technology which enables our patrollers
to monitor and identify first-time and repeat offenders using hand-held
computers. The hand-held computers are updated daily to mainframe computers that
track violation history. This equipment generates violation notices for
first-time offenders. Payments on account of these violation notices are
collected by our collections operation and all of the proceeds become our
revenues. Therefore, we have a direct incentive to issue ticket and collect
violation notice payments from parking violators.
We facilitate information collection by using current technology including
bar scanning systems. Parking lot supervisors travel to each lot on a regular
basis to collect cash from both parking meters and lot attendants in order to
keep cash balances low and reduce the potential for shrinkage.
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<PAGE> 43
MANAGEMENT INFORMATION SYSTEMS
We have made a significant commitment to technology over the last several
years to provide our employees the tools to perform efficiently in today's
competitive environment, to provide our landlords the information they expect
from a parking operator and to provide management the reporting necessary to
manage the business.
The following is a brief list of key features of our information system:
- Monthly Parking System -- a sophisticated system developed in-house to
manage our more than 100,000 active monthly parkers;
- Attendant System -- a control system developed in-house to assist in
balancing, recording, reporting and auditing attendant transactions;
- Parking Meter System -- a control option developed in-house to assist in
balancing, recording, reporting and auditing parking meter transactions
at "unattended" locations;
- Vehicle Violation System -- a system developed in-house to manage the
approximately 700,000 violation notices issued per year; and
- Financial Reporting System -- an in-house developed general ledger,
accounts payable and landlord reporting system to report to our
management and landlords. This is a new system completed in Spring of
1999.
Our information system runs on a Unisys mainframe computer which connects
to all of our major branch offices. The computer system is scalable and, as the
applications have only recently been developed, a continued moderate annual
investment in technology and continued development enhancement should be able to
meet our business objectives for the next few years.
COMPETITION
The parking industry is fragmented and highly competitive, with few
barriers to entry. We compete regularly with a wide variety of parking service
providers to retain our operations and to expand our operations in existing and
new markets. We compete for clients based on the pricing of our services and our
ability to increase revenues and control expenses for each of our client's
parking facilities.
Our largest competitors in North America are Central Parking Corporation,
APCOA/Standard Parking, Inc. and Ampco System Parking. Impark is substantially
smaller in number of locations and revenue than Central Parking. We have
approximately the same number of locations as APCOA/Standard and Ampco System.
However, Impark has lower revenues and profits than both APCOA/Standard and
Ampco System because they are principally in the United States where gross
revenue and profits generated from a location are typically higher than in
Canada. However, being principally in Canada gives us a solid Canadian base as
Canadian corporations prefer to do business with an established Canadian parking
company. Additionally, since profit per location is generally lower in Canada,
most U.S. competitors focus their efforts in the U.S. marketplace where there is
higher potential profit. Hence, we believe we have a secure base to work from in
Canada while growing our market in the U.S. where we believe new locations will
create higher profit margins than we typically realize.
We also compete with many regional or local parking service providers, as
well as municipalities and other governmental entities, property owners and
others.
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<PAGE> 44
REGULATION
Our business is not substantially affected by direct governmental
regulation, however, several provincial, state and local laws have been passed
in recent years that encourage car pooling and the use of mass transit,
including, for example, laws prohibiting employers from reimbursing employee
parking expenses. Laws and regulations that reduce the number of cars and
vehicles being driven could hurt our business. We are also affected by laws and
regulations (such as zoning ordinances and business taxes) that are common to
any business that own or leases real estate and by regulations (such as labor
and tax laws) that affect companies with a large number of employees.
Under various federal, provincial, state, and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws typically impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. In
connection with ownership or operation of parking facilities, we may be
potentially liable for such costs. Although we are currently not aware of any
material environmental claims pending or threatened against us or any of our
owned or operated parking facilities, there can be no assurance that a material
environmental claim will not be asserted against us or against our owned or
operated parking facilities. The cost of defending against claims of liability,
or of remediating a contaminated property, could have a material adverse effect
on our financial condition or results of operations.
Various other governmental regulations affect our operation of parking
facilities, both directly and indirectly. In the United States, these include
the Americans with Disabilities Act, or ADA. Under the ADA, all public
accommodations in the United States, including parking facilities, are required
to meet certain federal requirements related to access and use by disabled
persons. For example, the ADA requires parking facilities to include handicapped
spaces, headroom for wheelchair vans, attendants' booths that accommodate
wheelchairs, and elevators that are operable by disabled persons. We believe
that the parking facilities we own and operate are in substantial compliance
with these requirements.
EMPLOYEES
As of December 31, 1999, we employed approximately 2,050 individuals,
including approximately 1,350 full-time and 700 part-time employees. We believe
that our employee relations are good. Approximately 46% of our Canadian
employees (some 845 employees) are represented by unions, including the
Construction and Specialized Workers' Union Local 1611 (British Columbia),
Christian Labour Association of Canada Local 501 (British Columbia), Service
Employees International Union (Regina), Saskatchewan Joint Board, Retail,
Wholesale & Department Store Union Local 558 (Saskatoon), Canada Labour Congress
(Winnipeg), Steelworkers (Sudbury), Teamsters (Ottawa), SEIU, UFCW (Toronto),
SEIU (London), Le Syndicat des employes and Union des employes de service
(Montreal).
LITIGATION
The provision of services to the public entails an inherent risk of
liability. We are engaged from time to time in routine litigation incidental to
our business. Other than a case involving Eau Claire Market in Calgary, Alberta
described below, there is no legal proceeding to which we are a party which, if
decided adversely could materially harm our financial condition. We attempt to
disclaim liability for personal injury and property damage claims by printing
disclaimers on our ticket stubs and by placing warning signs in the facilities
we operate. We also carry liability insurance that we believe meets or exceeds
industry standards as determined by our landlords. We can provide no assurance,
however, that any future legal proceedings (including any related judgments,
settlements or costs) will not have a material adverse effect on our financial
condition, liquidity or results of operations.
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<PAGE> 45
The Eau Claire Market litigation was filed in the Queen's Bench of Alberta
on August 20, 1998. It involves a claim against a property in which we are the
lessee. The plaintiff asserts that it is entitled to priority over our lease and
to possession of the property. We believe that this claim is without merit. If,
however, we do not prevail in the litigation, we may be forced to renegotiate
the lease with the landlord, in which case the rent could be substantially
increased and may materially impact our results.
Imperial Parking Limited, which will be a subsidiary of Impark after the
distribution, is a defendant in a lawsuit brought by Newcourt Financial Ltd. as
the assignee of Oracle Corporation Canada Inc. The suit was filed in Ontario
Superior Court on June 11, 1999. It alleges that Imperial Parking and FUMI owe
approximately $825,000 under a software license and services agreement. We
believe that these claims are without merit, however the legal action is in its
earliest stages. First Union has agreed to assume all liability with respect to
this claim.
41
<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages as of December 31,
1999, are as set forth below. Each of the individuals who is to serve as a
director will begin that service immediately prior to the Distribution.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Charles E. Huntzinger................ 52 President and Chief Executive Officer, Director
J. Bruce Newsome..................... 49 Senior Vice President, Finance, Chief Financial
Officer and Secretary
Bryan L. Wallner..................... 40 Senior Vice President, Operations
David Schonberger.................... 44 Vice President
William A. Ackman(1)................. 33 Chairman, Director
Daniel P. Friedman................... 42 Vice Chairman, Director
Talton R. Embry...................... 53 Director
Armand E. Lasky(2)................... 52 Director
William A. Scully.................... 37 Director
Beth A. Stewart...................... 43 Director
Mary Ann Tighe(1)(2)................. 51 Director
David J. Woods(2).................... 50 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
CHARLES E. HUNTZINGER has served as president and chief executive officer
since joining Imperial Parking in January 1999. From 1993 until December 1998,
Mr. Huntzinger was associated with Central Parking Corporation where he was
vice-president for the Midwest Region and, later, for the New York Region. From
1992 until 1993 Mr. Huntzinger was vice president of Spectacore, a stadium
management company and owner of the Philadelphia Flyers; he was in charge of
parking operations. Mr. Huntzinger was the chief operating officer for Parkway
Corporation from 1978 until 1992, where he was in charge of parking operations
nationwide.
J. BRUCE NEWSOME has served as senior vice president finance and chief
financial officer of Impark since 1989. From 1986 to 1989, Mr. Newsome served as
vice president for finance and controller. Prior to 1989, Mr. Newsome served as
Impark's controller. He has been involved in several acquisitions in the last 16
years and is responsible for ensuring that financial, accounting, MIS and
treasury systems will accommodate expansion plans. Before joining Imperial
Parking, Mr. Newsome was a senior manager at the accounting firm of KPMG.
BRYAN L. WALLNER became senior vice president of Imperial Parking in March
1999. Prior to joining Impark, Mr. Wallner was a regional manager for Central
Parking Corporation ("Central Parking"). He guided Central Parking's growth in
the Midwest, opening offices in four new cities. He has expertise in
stadium/arena, mixed use, retail, office as well as valet, shuttle, and patrol
contracts. Mr. Wallner began his career in the parking industry in 1987 with
Central Parking in St. Louis, Missouri.
DAVID SCHONBERGER will become a vice president of Impark upon the
Distribution. He has been executive vice president of First Union since November
1998, where he is primarily responsible for retail, office and residential
projects. From November 1997 to November 1998, he was senior vice president of
Enterprise Asset Management Inc. At Enterprise, he was responsible for retail
and raw land development projects. Since January 1990, Mr. Schonberger has been
director of Legacy Construction Corporation, a privately held leasing and
project management company specializing in institutional property management and
oversight of specialty construction and development projects. In February 1996,
Legacy Construction Corporation merged with Peter Elliot Corporation to form
Peter Elliot LLC. From February 1996 to October 1997, Mr. Schonberger served as
treasurer and manager of Peter Elliot LLC.
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<PAGE> 47
DANIEL P. FRIEDMAN will become vice chairman of the Impark board of
directors upon the Distribution. He has served as president, chief executive
officer and a trustee of First Union since November 1998. He was president and
chief operating officer of Enterprise Asset Management, Inc. from June 1996 to
November 1998 and was executive vice president and chief operating officer of
Enterprise from February 1992 to June 1996. At Enterprise, he was responsible
for asset management and new business development. From September 1994 to
November 1998, Mr. Friedman was a manager of all the Cheshire Limited Liability
Companies ("Cheshire"). Cheshire acquires and restructures non-performing
underlying residential co-op mortgage loans and unsold co-op apartments. From
May 1993 to December 1997, Mr. Friedman was a board member of Emax Advisors,
Inc. From May 1993 to December 1996, he was a board member of Emax Securities,
Inc., a NASD broker/dealer.
WILLIAM A. ACKMAN will become chairman of the Impark board of directors
upon the Distribution. He has been chairman of the board of trustees of First
Union since June 1998. Since January 1, 1993, through a company he owns, Mr.
Ackman has acted as co-investment manager of three investment funds: Gotham
L.P., Gotham III L.P. and Gotham Partners International, Limited.
TALTON R. EMBRY has been the chairman of Magten Asset Management Corp.
("Magten") since 1998, where he is the chief investment officer for Magten's
clients. He has been with Magten since 1978. Mr. Embry is also a director of
Anacomp, Inc., Salant Corporation and BDK Holdings, Inc.
ARMAND E. LASKY has been the president of Empire State Collateral
Corporation Real Estate since 1983, where he oversees the acquisition of parking
properties and related commercial real estate.
WILLIAM A. SCULLY has been vice chairman of the board of trustees of First
Union since November 1998. Mr. Scully has been a partner of Apollo since 1996
and is responsible for new investments and investment management. From 1994 to
1996, Mr. Scully was a senior vice president of O'Connor Capital, Inc., the
general partner of The Argo Funds, and the director of acquisitions for The Argo
Funds. From 1993 to 1994, Mr. Scully directed private investment activities for
entities related to Clark Construction and The Carlyle Group, primarily in land
development projects in suburban Washington, D.C.
BETH A. STEWART has been president of Stewart Real Estate Capital since
1993, where she has been involved with numerous equity investments in private
and public securities with partners and properties throughout the United States.
Ms. Stewart worked for Goldman, Sachs & Co. from 1980 to 1992 where she was vice
president of the Real Estate Department from 1986 until 1992. Ms. Stewart is a
director of General Growth Properties, Inc.
MARY ANN TIGHE has been vice chairman of Insignia/ESG, a commercial real
estate firm, since January 1999. From 1993 until January 1999 she was an
executive managing director and from June 1992 until March 1993 was senior
managing director. She has also chaired the Executive and Strategic Planning
Committees of Insignia since November 1998. Ms. Tighe is a trustee of First
Union.
DAVID J. WOODS has been president of Pattison Outdoor Group, an outdoor
advertising firm since May 1997. From January 1997 to April 1997, Mr. Woods was
vice president for finance at Interactive Media Inc. From September 1995 until
December 1996 he was senior vice president for finance at Gannett Inc. From
January 1995 until August 1995 Mr. Woods was executive vice president at
Mediacom Inc.
Following the Distribution, the Impark board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. The Board will consist of three Class I directors (Messrs. Lasky and
Scully and Ms. Tighe), three Class II directors (Messrs. Embry, Huntzinger and
Woods) and three Class III directors (Messrs. Ackman and Friedman and Ms.
Stewart). At each annual meeting of stockholders, a class of directors will be
elected for a three-year term to succeed the directors of the same class whose
terms are then expiring. The terms of the Class I directors, Class II directors
and Class III directors expire upon the election and qualification of successor
directors at the annual meeting of stockholders held during the calendar years
2001, 2002 and 2003 respectively.
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<PAGE> 48
Each executive officer serves at the discretion of the board of directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of our directors or executive officers.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has an executive committee, composed of Messrs.
Ackman, Friedman and Huntzinger and Ms. Stewart, which oversees all aspects of
the management of the business of Impark. In addition, the board of directors
has a compensation committee, composed of Mr. Ackman and Ms. Tighe, which makes
recommendations concerning salaries and incentive compensation for our employees
and consultants and administers and grants stock options pursuant to our stock
option plans. The board of directors also has an audit committee, composed of
Messrs. Woods and Lasky and Ms. Tighe, which reviews the financial statements of
Impark that will be issued to its shareholders, the results and scope of the
annual audit and other services provided by our independent public accountants
and reviews matters that arise from time to time related to our internal
accounting controls.
DIRECTOR COMPENSATION
The directors of Impark will receive the following compensation:
- $1,500 for each board meeting attended;
- $500 for each board meeting participated in by telephone or committee
meeting; and
- an annual grant of $20,000 worth of Impark common stock, valued at the
time of the grant, but vesting one year after the grant; the initial
grant will be made at the time of the Distribution and will be fully
vested.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1999 for Impark's chief executive officer and for
the two other executive officers whose salary and bonus totaled at least
$100,000 for 1999.
In accordance with the rules of the Securities and Exchange Commission the
compensation set forth in the table below does not include medical, group life
and other benefits which are available to all of our salaried employees, or
perquisites or other benefits, securities or property which do not exceed the
lesser of $50,000 or 10% of the person's salary and bonus shown in the table. In
the table below, columns required by the regulations of the Securities Exchange
Commission have been omitted where no information was required to be disclosed
under these columns.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS ALL OTHER
- --------------------------- -------- ------- ---------
<S> <C> <C> <C>
Charles E. Huntzinger
President and Chief Executive Officer(1)(2)(3)............ $510,000 $29,100 $10,000
Bryan L. Wallner
Senior Vice President(4)(5)(6)............................ $205,500 $20,000 $ 4,150
J. Bruce Newsome
Senior Vice President, Finance, Chief Financial Officer
and Secretary(7)(8)....................................... $146,207 $15,400 $13,587
</TABLE>
- ---------------
(1) Paul Clough resigned as President and Chief Executive Officer on January 4,
1999 and Mr. Huntzinger was appointed to those offices effective January 4,
1999.
44
<PAGE> 49
(2) The amount listed for Mr. Huntzinger's bonus was a payment to compensate him
for various costs associated with his relocation.
(3) Mr. Huntzinger's other compensation consists of a car allowance.
(4) Mr. Wallner's salary is prorated to reflect the fact that he started in
February 1999. His annual salary is at a rate of $237,500.
(5) The amount listed for Mr. Wallner's bonus was a signing bonus paid upon his
joining Impark.
(6) Mr. Wallner's other compensation consists of use of a car that Impark rents
for him.
(7) Mr. Newsome's salary, bonus and other compensation are paid in Canadian
dollars. The figures in this table were converted to US dollars, based on a
conversion rate of 1.45 Canadian dollars to one US dollar on January 7,
2000, as published in the Federal Reserve Statistical Release, January 10,
2000.
(8) Mr. Newsome's other compensation consists of $11,518 for a car allowance and
$2,069 in club membership fees.
STOCK PLANS
A total of 315,000 shares of Impark common stock have been reserved for
issuance in the aggregate under our stock plan described below.
2000 Stock Incentive Plan. Under our 2000 Stock Incentive Plan, a variety of
awards, including incentive stock options intended to qualify under Section 422
of the Internal Revenue Code, nonstatutory stock options, stock appreciation
rights, restricted and unrestricted stock awards and other stock-based awards,
may be granted to our officers, employees, directors, consultants and advisors
and officers, employees, directors, consultants and advisors our subsidiaries.
The board of directors has authorized the compensation committee to administer
the Stock Incentive Plan. While we currently anticipate that most grants under
the Stock Incentive Plan will consist of stock options, we may also grant stock
appreciation rights, which represent the right to receive any excess in value of
the shares of common stock over the exercise price; restricted stock awards,
which entitle recipients to acquire shares of Impark common stock, subject to
our right to repurchase all or part of such shares at their purchase price in
the event that the conditions specified in the award are not satisfied; or
unrestricted stock awards, which represent grants of shares to participants free
of any restrictions under the Stock Incentive Plan. Options or other awards that
are granted under the Stock Incentive Plan but expire unexercised are available
for future grants. As of the date of the Distribution, we will not have any
options outstanding, but we expect to grant options to purchase shares of Impark
common stock thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer has served as a director of or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, any of whose executive officers serve as a director of or
member of the compensation committee of the board of directors.
EMPLOYMENT AGREEMENTS
Mr. Huntzinger has entered into a 5 year employment agreement with us
effective as of the date of the Distribution to serve as our Chief Executive
Officer and President. Mr. Huntzinger will receive an annual base salary of
$425,000. He will also be granted on the 30th day following the Distribution an
option to acquire 95,625 shares of our common stock at a per share exercise
price equal to the greater of the closing price of a share on that date and the
average of the closing prices of a share during the 10 trading day period
immediately preceding the grant date. The options vest over four years based on
continued employment. If we consummate a rights offering for common stock, Mr.
Huntzinger will be granted an option to acquire 4.5% of the shares issued for
the first $30 million of capital raised. If we terminate Mr. Huntzinger's
employment without "cause" or if he terminates his employment for "good reason"
the options described above will vest and we will pay him in cash two times the
sum of his base salary and bonus (but not less than $1 million). Upon certain
change in control transactions, the option
45
<PAGE> 50
described above will vest. Mr. Huntzinger's employment agreement contains
standard non-compete, non-solicitation and non-disclosure covenants.
Mr. Wallner's five-year employment agreement, effective as of the date of
the Distribution, provides for a base salary of $237,500 per year. The agreement
also provides that Mr. Wallner is eligible to earn a bonus of 1.75% of the
increase of Impark's EBITDA over its EBITDA for 1998 after amortizing capital
expenditures and applying a 10% cost of capital. He will also be granted on the
30th day following the Distribution an option to acquire 21,250 shares of our
common stock at a per share exercise price equal to the greater of the closing
price of a share on that date and the average of the closing prices of a share
during the 10 trading day period immediately preceding the grant date. The
options vest over four years based on continued employment. If we consummate a
rights offering for common stock, Mr. Wallner will be granted an option to
acquire 1.0% of the shares issued for the first $30 million of capital raised.
If we terminate Mr. Wallner's employment without "cause" or if he terminates his
employment for "good reason" the options described above will vest and we will
pay him in cash two times the sum of his base salary and bonus (but not less
than $474,000). Upon certain change in control transactions, the option
described above will vest. Mr. Wallner's employment agreement contains standard
non-compete, non-solicitation and non-disclosure covenants.
Mr. Newsome's four-year employment agreement, effective January 1998,
provides for a base salary of $136,900 in the first year. The base salary is
subject to annual adjustment by the Compensation Committee and for changes based
on the Consumer Price Index with respect to Vancouver, British Columbia. The
agreement also provides for a bonus to be determined by the Compensation
Committee annually. In the event that Impark chooses not to renew Mr. Newsome's
contract, he will be entitled to a lump sum payment equal to his total salary
for the preceding 24 month period.
Mr. Schonberger's employment arrangements with Impark provide for him to
serve on an at-will basis at a salary of $112,500 per year. Impark has also
agreed to grant Mr. Schonberger options for 26,562 shares on terms similar to
those for Messrs. Huntzinger and Wallner. Mr. Schonberger is not obligated to
work for Impark on a full-time basis and Mr. Schonberger will continue in his
current duties at First Union.
Mr. Friedman's employment arrangements with Impark provide for him to serve
on an at-will basis at a salary of $82,500 per year. Impark has also agreed to
grant Mr. Friedman options to purchase 53,125 shares on terms similar to those
for Messrs. Huntzinger and Wallner. Mr. Friedman's employment agreement does not
require Mr. Friedman to work for Impark on a full-time basis, and Mr. Friedman
will continue in his current duties at First Union while working for Impark.
Messrs. Friedman and Schonberger are expected to have arrangements to
maintain their level of ownership of Impark similar to those of Messrs.
Huntzinger and Wallner, except that their arrangements are expected to require
that they purchase some significant part of the shares necessary to maintain
their percentages.
46
<PAGE> 51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, with respect to each member of the board of
directors, the executive officers, and all directors and executive officers as a
group, information relating to their anticipated beneficial ownership of Impark
shares as of the date of the Distribution.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT
- ------------------------ ----------------------- -------
<S> <C> <C>
DIRECTORS
Charles E. Huntzinger (also an executive officer)......... 751 *
William A. Ackman(2)...................................... 292,777 13.94%
Daniel P. Friedman(3)..................................... 20,653 *
Talton R. Embry(4)........................................ 308,280 14.68%
Armand E. Lasky........................................... 766 *
William A. Scully(5)...................................... 716 0
Beth A. Stewart........................................... 941 *
Mary Ann Tighe(6)......................................... 1,191 *
David J. Woods............................................ 716 0
EXECUTIVE OFFICERS
J. Bruce Newsome.......................................... 0 0
Bryan L. Wallner.......................................... 0 0
David Schonberger(7)...................................... 6,453 *
All directors and executive officers (12 in number) as a
group..................................................... 633,144 30.15%
</TABLE>
- ---------------
* Beneficial ownership does not exceed 1%.
(1) Pursuant to Rule 13d-3 of the Exchange Act, a person is deemed to be a
beneficial owner if he has or shares voting power or investment authority in
respect of such security or has the right to acquire beneficial ownership
within 60 days. The amounts shown in the above table do not purport to
represent beneficial ownership except as determined in accordance with this
Rule. Each director and executive officer has sole voting and investment
power with respect to the amounts shown or shared voting and investment
powers with his or her spouse, except as indicated below.
(2) Mr. Ackman is the president of Karenina Corporation, a general partner of
Section H Partners, LP. Section H is the sole general partner of Gotham LP
and Gotham Partners III, LP. Accordingly, Mr. Ackman, Karenina Corporation
and Section H may be deemed beneficial owners of shares owned by Gotham LP
and Gotham III LP. Gotham International Advisors, LLC, a Delaware limited
liability company, has the power to vote and dispose of the shares held for
the account of Gotham Partners International, Limited, a Cayman exempted
company, and accordingly, may be deemed the beneficial owner of such shares.
Mr. Ackman is a senior managing member of Gotham Partners International and
may be deemed a beneficial owner of shares owned by Gotham Partners
International. For purposes of this table, all of such ownership is
included. Mr. Ackman's address is c/o Gotham Partners, L.P., 110 East 42nd
Street, New York, NY 10017.
(3) Includes 18,187 shares that Mr. Friedman has a right to acquire through the
exercise of First Union options within 60 days after December 31, 1999.
(4) Mr. Embry is the chairman of Magten Asset Management Corp. and, accordingly,
may be deemed a beneficial owner of shares owned by Magten. For purposes of
this table, all such ownership is included. Mr. Embry disclaims beneficial
ownership of 222,638 shares owned by clients of Magten, 62,006 shares owned
by Magten's pension and profit sharing plans of which Mr. Embry is a
trustee, 2,275 shares owned by his wife and 5,425 shares owned by his
children. Mr. Embry shares investment and/or voting power with respect to
the shares held by Magten clients. Mr. Embry's address is c/o Magten Asset
Management Corp., 35 East 21st Street, New York, NY 10010.
(5) Mr. Scully is a limited partner of Apollo LP. As a limited partner, he has
no right to vote or dispose of any shares held by Apollo LP, and therefore
does not beneficially own any shares held by Apollo LP.
47
<PAGE> 52
(6) Ms. Tighe is a limited partner of Gotham L.P. As a limited partner of Gotham
L.P., she has no right to vote or dispose of any shares held by Gotham L.P.,
and therefore does not beneficially own any Shares held by Gotham L.P.
(7) Includes 6,453 shares that Mr. Schonberger has a right to acquire through
the exercise of First Union options within 60 days after December 31, 1999.
The following table sets forth, according to publicly available information
on file with the Commission as of the dates indicated in the accompanying
footnotes, except as otherwise indicated, information concerning each person
known by Impark to be the beneficial owner of more than 5% of First Union shares
and, therefore, who would own a similar percentage of Impark shares after the
Distribution.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT
- ------------------------ ----------------------- -------
<S> <C> <C>
Gotham Partners, L.P.(2).................................... 292,061 13.91%
Gotham International Advisors, L.L.C.
Gotham Partners III, L.P.
110 East 42nd Street
New York, NY 10017
Apollo Real Estate Investment Fund II, L.P.(3).............. 149,518 7.12%
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, NY 10019
Magten Asset Management Corp.(4)............................ 223,319 10.63%
35 East 21st Street
New York, NY 10010
Snyder Capital Management, L.P.(5).......................... 225,950 10.76%
Snyder Capital Management, Inc.
350 California Street
Suite 1460
San Francisco, CA 94104
</TABLE>
- ---------------
(1) Pursuant to Rule 13d-3 of the Exchange Act, a person is deemed to be a
beneficial owner if he has or shares voting power or investment authority in
respect of such security or has the right to acquire beneficial ownership
within 60 days. The amounts shown in the above table do not purport to
represent beneficial ownership except as determined in accordance with this
Rule.
(2) The information regarding these holders was received by Impark from a
Schedule 14A filed with the Commission on October 14, 1999. Gotham L.P. has
sole voting and investment power with respect to 216,556 shares, Gotham
International Advisers has shared voting and investment power with respect
to 71,583 shares and Gotham III L.P. has sole voting and investment power
with respect to 3,922 shares.
(3) The information regarding these holders was received by Impark from a
Schedule 14A filed with the Commission on October 14, 1999. These holders
have shared voting and investment power with respect to all of their shares.
(4) The information regarding this holder is as of December 31, 1999, and was
obtained from Magten Asset Management Corporation. Includes 415 shares
attributable to the holder's pro-rata interest in shares owned by Magten
Partners, L.P. and 226 shares attributable to the holder's pro-rata interest
in shares owned by Magten Offshore Fund, Ltd. This holder has shared voting
and investment power with respect to 117,793 shares and shared investment
power with respect to 104,845 shares.
(5) The information regarding these holders was received by Impark from a
Schedule 13G filed with the Commission on February 15, 2000. These holders
have shared voting and investment power with respect to 201,617 shares and
shared investment and no voting power with respect to 24,333 shares.
48
<PAGE> 53
CERTAIN TRANSACTIONS
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with all of our executive
officers. We have also agreed to grant options to our executive officers. See
"Management -- Employment Agreements."
AFFILIATE TRANSACTION POLICY
We have adopted a policy providing that all material transactions between
us and our officers, directors and other affiliates must be:
- Approved by a majority of the members of our board of directors and by a
majority of the disinterested members of our board of directors; and
- On terms no less favorable to us than could be obtained from
unaffiliated third parties.
CONSULTING RELATIONSHIP WITH MS. BETH A. STEWART
Ms. Stewart worked for First Union under a consulting agreement dated
February 1999. She was retained to guide the process of evaluating whether
Impark should be sold, merged with another company or distributed to the First
Union shareholders and to oversee the implementation of the chosen alternative.
Through December 31, 1999, her fees under this agreement were $157,500 plus out
of pocket expenses. It is expected that Ms. Stewart will receive approximately
$42,500, plus out of pocket expenses in 2000 prior to the Distribution. Ms.
Stewart will not serve as a consultant to Impark after the Distribution.
AGREEMENT WITH PATTISON OUTDOOR GROUP
Pattison Outdoor is the largest outdoor advertising company in Canada with
billboards in all the major markets in the country. David Woods, who will become
director of Impark immediately prior to the Distribution, is the president of
Pattison Outdoor. Pursuant to a competitive bidding process, Pattison Outdoor
entered into a 10-year exclusive agreement with Impark to place a substantial
number of billboards (approximately 265 advertising faces) of various designs on
Impark-operated parking lots throughout Canada. The agreement between Imperial
Parking and Pattison Outdoor runs from July 1, 1999 to June 30, 2009. Pattison
Outdoor pays Impark a fee for the right to place billboards on these parking
lots and in year one these payments will be approximately $424,138 escalating to
$582,759 in year 10. The contract is in Canadian dollars. These amounts were
converted to U.S. dollars based on a conversion rate of 1.45 Canadian dollars to
one U.S. dollar on January 7, 2000, as published in the Federal Reserve
Statistical Release, January 10, 2000. Prior to July 1, 1999, the companies had
entered into similar agreements that covered only one to two years.
SALE OF SECURITY BUSINESS
Imperial Parking, previously operated Inner-Tec, a parking lot security
business. Imperial Parking will continue as an operating subsidiary of Impark.
In 1999, Imperial Parking sold the security business to Michael Merzies, a
former executive officer, for cash of $1.3 million and promissory notes of
approximately $500,000.
SALE OF PARKING BUSINESS
In 1999, Imperial Parking sold Robbins, a subsidiary with parking lot
operations to Paul Clough, its former president and chief executive officer, for
consideration equal to $2.1 million, the settlement of termination benefit
claims, and related costs.
49
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Impark consists of 10,000,000 shares of
common stock, $.01 par value per share, and 2,000,000 shares of preferred stock,
$.01 par value per share. Immediately following the Distribution, there will be
approximately 2.1 million shares of common stock outstanding held by
approximately 9,000 stockholders.
The following summary of the material provisions of Impark common stock,
preferred stock, certificate of incorporation and by-laws is qualified by
reference to the provisions of applicable law and to our certificate of
incorporation, by-laws and other agreements included as exhibits to the
registration statement of which this document is a part. See "Additional
Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared by the board of directors out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
preferred stock. Upon the dissolution or liquidation of Impark, subject to the
prior rights of holders of any outstanding preferred stock, the holders of
common stock are entitled to receive ratably the net assets of Impark available
after the payment of all debts and other liabilities. Holders of common stock
have no preemptive, subscription or redemption rights. The rights, preferences
and privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which our board of directors may designate and issue in the future.
At present, there is no established trading market for Impark Common Stock.
We have applied to list the common stock on the American Stock Exchange under
the symbol "IPK."
PREFERRED STOCK
Under the terms of our certificate of incorporation, the board of directors
is authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue up to 2,000,000 shares of preferred stock in one or more
series. Each such series of preferred stock would have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as may be
determined by the board of directors.
The purpose of authorizing the board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock. We have no present plans to issue any
shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Impark is subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes mergers, assets sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three years
did own, 15% or more of the corporation's voting stock.
Our by-laws provide for the division of the board of directors into three
classes as nearly equal in size as possible with staggered three-year terms. See
"Management." In addition, our by-laws provide that directors may be removed
only for cause by the affirmative vote of the holders of more than 50% of the
50
<PAGE> 55
shares of capital stock entitled to vote. Under our by-laws, any vacancy on the
board of directors, including a vacancy resulting from an enlargement of the
board of directors, may only be filled by vote of a majority of the directors
then in office. The classification of the board of directors and the limitation
on the method of filling vacancies could make it more difficult for a third
party to acquire, or discourage a third party from acquiring, control of Impark.
Our by-laws also provide that any action required or permitted to be taken
by the stockholders at an annual meeting or special meeting of stockholders may
only be taken if it is properly brought before such meeting, and may not be
taken by written action in lieu of a meeting. Our certificate of incorporation
provides that special meetings of the stockholders may only be called by our
chairman of the board, our president or our board of directors. In order for any
matter to be considered "properly brought" before a meeting, a stockholder must
comply with advance notice and information disclosure requirements. The
stockholder must deliver written notice of the matter to the secretary of
Impark, to be received not less than 60 days nor more than 90 days prior to the
meeting. However, if less than 70 days' notice or prior public disclosure of the
date of the meeting is given to stockholders, the notice would have to be
received by the secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. If the matter relates to the
election of directors, the notice must set forth specific information regarding
each nominee and the nominating shareholder. For any other matter, the notice
must set forth a brief description of the business desired to be brought and the
reasons for conducting business at the annual meeting and certain information
regarding the proponent stockholder. These provisions could have the effect of
delaying until the next stockholders meeting stockholder actions that are
favored by the holders of a majority of our outstanding voting securities. These
provisions could also discourage a third party from making a tender offer for
the common stock, because even if it acquired a majority of our outstanding
voting securities, the third party would be able to take action as a stockholder
(such as electing new directors or approving a merger) only at a duly called
stockholders' meeting, and not by written consent.
Delaware corporate law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless a corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our by-laws require the affirmative vote of holders of more than 50%
of the votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors to amend or repeal any of the
provisions described in the prior two paragraphs.
Our certificate of incorporation contains certain provisions permitted
under the Delaware corporate law relating to the liability of directors. The
provisions eliminate a director's liability for monetary damages for a breach of
fiduciary duty, except in certain circumstances involving wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions which involve
intentional misconduct or a knowing violation of law. Further, our certificate
of incorporation contains provisions to indemnify our directors and officers to
the fullest extent permitted by the Delaware corporate law. We believe that
these provisions are appropriate and that they will assist us in attracting and
retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be National City
Bank.
51
<PAGE> 56
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and Impark's certificate of
incorporation and by-laws limit the monetary liability of directors to Impark
and to its shareholders and provide for indemnification of Impark's officers and
directors for liabilities and expenses that they may incur in such capacities.
In general, officers and directors are indemnified with respect to actions taken
in good faith in a manner reasonably believed to be in, or not opposed to, the
best interests of Impark, and with respect to any criminal action or proceeding,
actions that the indemnitee had no reasonable cause to believe were unlawful.
Impark also has indemnification agreements with its directors and officers that
provide for the maximum indemnification allowed by law. Reference is made to our
certificate of incorporation and by-laws which are filed as exhibits to the
Registration Statement of which this Information Statement is a part.
Under the Memorandum of Understanding regarding the Distribution, First
Union is obligated, under certain circumstances, to indemnify directors and
officers of Impark against certain liabilities. Reference is made to the form of
Memorandum of Understanding regarding the Distribution which is filed as an
exhibit to the Registration Statement of which this Information Statement is a
part.
AVAILABLE INFORMATION
Following the Distribution, Impark will be required to comply with the
reporting requirements of the Exchange Act and will file annual, quarterly and
other reports with the Commission. Impark will also be subject to the proxy
solicitation requirements of the Exchange Act and will furnish holders of the
common stock with annual reports containing consolidated financial statements
prepared in accordance with generally accepted accounting principles in the
United States which will be audited and reported on, as well as quarterly
reports for the first three quarters of each fiscal year containing unaudited
financial information.
Impark has filed a Registration Statement on Form 10 with the Commission to
register the shares of Impark common stock to be issued on the Distribution Date
under the Exchange Act. This Information Statement does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, as certain items are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration Statement
and the exhibits and schedules thereto, which may be inspected and copied, at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information on
the operation of the Public Reference Room is available by calling the SEC at
1-800-SEC-0330. Copies of such material also can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street,
Washington, D.C. 20549. In addition, Impark is required to file electronic
versions of such material with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
52
<PAGE> 57
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPERIAL PARKING CORPORATION
Pro Forma and Adjusted Pro Forma Consolidated and Combined
Financial Statements (unaudited).......................... F-2
Consolidated Balance Sheet as of December 31, 1999........ F-2
Combined Statement of Operations for the year ended
December 31, 1999...................................... F-3
Notes to Pro Forma and Adjusted Pro Forma Consolidated and
Combined Financial Statements.......................... F-4
FUMI PARKING BUSINESS
Independent Auditors' Report................................ F-7
Combined Balance Sheets as of December 31, 1998 and 1999.... F-8
Combined Statements of Operations for the period from April
17, 1997 to December 31, 1997 and years ended December 31,
1998 and 1999............................................. F-9
Combined Statements of Owner's Deficiency for the period
from April 17, 1997 to December 31, 1997 and years ended
December 31, 1998 and 1999................................ F-10
Combined Statements of Cash Flows for the period from April
17, 1997 to December 31, 1997 and years ended December 31,
1998 and 1999............................................. F-11
Notes to Combined Financial Statements...................... F-13
FUR PARKING BUSINESS
Independent Auditors' Report................................ F-29
Combined Balance Sheets as of December 31, 1998 and 1999.... F-30
Combined Statements of Operations for the period from April
17, 1997 to December 31, 1997 and years ended December 31,
1998 and 1999............................................. F-31
Combined Statements of Owner's Equity for the period from
April 17, 1997 to December 31, 1997 and years ended
December 31, 1998 and 1999................................ F-32
Combined Statements of Cash Flows for the period from April
17, 1997 to December 31, 1997 and years ended December 31,
1998 and 1999............................................. F-33
Notes to Combined Financial Statements...................... F-34
IMPARK HOLDINGS INC.
Independent Auditors' Report................................ F-41
Consolidated Statements of Operations and Retained Earnings
(Deficit) for the nine months ended December 31, 1996 and
the period from January 1, 1997 to April 16, 1997......... F-42
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1996 and the period from January 1,
1997 to April 16, 1997.................................... F-43
Notes to Consolidated Financial Statements.................. F-44
</TABLE>
F-1
<PAGE> 58
UNAUDITED PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
IMPERIAL PARKING CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 3(A))
FUMI FUR ------------------------------------------
PARKING PARKING DISCONTINUED
BUSINESS BUSINESS INTER-ENTITY OPERATION FORMATION PRO FORMA
-------- -------- ------------ ------------ ------------ ---------
(i) (ii) (iii)-(viii)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................ $ 1,394 $ 1,984 139 4,163 $ 7,680
Accounts receivable................. 4,620 30 (1,389) 3,261
Receivables from related parties.... -- 1,717 (1,716) 1
Inventory........................... 4,285 -- (3,395) 890
Deposits and prepaid expenses....... 827 -- (78) 749
-------- ------- -------
11,126 3,731 12,581
Notes receivable...................... -- 17,330 (17,330) --
Fixed assets.......................... 4,984 8,721 (385) 13,320
Management and lease agreements....... 908 -- 908
Other assets.......................... 4,747 331 1,277 6,355
Goodwill.............................. 43,344 -- 154 43,498
-------- ------- -------
$ 65,109 $30,113 $76,662
======== ======= =======
Current liabilities:
Bank indebtedness................... $ 2,356 $ -- (2,356) $ --
Rents payable to unrelated
parties.......................... 5,819 -- 5,819
Rents payable to FUR Parking
Business......................... 1,227 -- (1,227) --
Trade accounts payable.............. 11,352 14 (86) (1,922) (418) 8,940
Income and withholding taxes
payable.......................... -- 240 240
Payable to FUMI..................... -- 403 (403) --
Current portion of long-term debt... 21,229 -- (21,229) --
Deferred revenue.................... 2,361 -- 2,361
-------- ------- -------
44,344 657 17,360
Notes payable to related parties...... 36,329 -- (36,329) --
Payable to FUMI....................... 11,963 -- (11,963) --
Payable to First Union................ -- 28,061 (28,061) --
Deferred revenue...................... 628 -- 628
Deferred income taxes................. -- 24 24
Minority interest..................... 446 -- (446) --
-------- ------- -------
93,710 28,742 18,012
Stockholders' equity (deficiency)..... (28,601) 1,371 18,999 (3,186) 70,067 58,650
-------- ------- -------
$ 65,109 $30,113 $76,662
======== ======= =======
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-2
<PAGE> 59
IMPERIAL PARKING CORPORATION
PRO FORMA AND ADJUSTED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
FUMI FUR (NOTE 3(b))
PARKING PARKING ------------------------ BUSINESSES ADJUSTED
BUSINESS BUSINESS INTER-ENTITY FORMATION PRO FORMA SOLD PRO FORMA
-------- -------- ------------ --------- --------- ---------- ---------
(note 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $ 60,145 $ 582 (582) (1,080) $59,065 (2,711) $56,354
Direct costs............... 44,939 2 (582) 44,359 (2,149) 42,210
-------- -------- ------- -------
Gross margin............... 15,206 580 14,706 14,144
Other operating expenses:
General and
administrative........ 10,236 -- 200 10,436 1,349 11,785
Depreciation and
amortization.......... 4,984 43 8 5,035 (51) 4,984
-------- -------- ------- -------
15,220 43 15,471 16,769
-------- -------- ------- -------
Operating income (loss).... (14) 537 (765) (2,625)
Other income (expense):
Allowance for credit
losses................ $ -- (19,000) 19,000 -- --
Interest expense:
Long-term debt........ (1,840) -- 1,840 -- --
Related parties....... (4,032) (3,044) 4,032 3,044 -- --
Other.................... (105) 66 (39) (39)
Interest income from
related parties....... -- 4,032 (4,032) -- --
-------- -------- ------- -------
(5,977) (17,946) (39) (39)
-------- -------- ------- -------
Income (loss) before income
taxes.................... (5,991) (17,409) (804) (2,664)
Income taxes (recovery).... 326 (86) 240 3 243
-------- -------- ------- -------
Income (loss) from
continuing operations.... $ (6,317) $(17,323) $(1,044) $(2,907)
======== ======== ======= =======
Income (loss) per share
from continuing
operations............... $ (0.50) $ (1.38)
======= =======
</TABLE>
See accompanying notes to pro forma consolidated and combined financial
statements.
F-3
<PAGE> 60
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA AND ADJUSTED PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The pro forma consolidated and combined financial statements of Impark are
based upon the historical financial statements described below after giving
effect to the transactions and adjustments described in notes 2 and 3.
These pro forma consolidated and combined financial statements are not
necessarily indicative of the financial position and results of operations
that would have been achieved had the transactions actually taken place at
the dates indicated and do not purport to be indicative of the effects that
may be expected to occur in the future.
The pro forma consolidated and combined financial statements have been
compiled from financial information in the:
(a) audited combined financial statements of the FUMI Parking Business for
the year ended December 31, 1999;
(b) audited combined financial statements of the FUR Parking Business for
the year ended December 31, 1999; and
(c) the additional information described in note 2.
The adjusted pro forma column in the combined statement of operations gives
effect to the elimination of the operating results of businesses sold in
fiscal 1999, which businesses did not meet the definition of a segment for
purposes of discontinued operations accounting principles.
Impark's consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States. The pro
forma consolidated statements of operations exclude non-recurring charges
or credits directly attributable to the transactions described in note 2.
2. PRO FORMA TRANSACTIONS:
Prior to completion of the Distribution, Impark will be formed through the
combination and amalgamation of the continuing business operations of the
FUMI Parking Business and the FUR Parking Business under First Union. These
pro forma consolidated and combined financial statements reflect the
following formation transactions:
(a) the cancellation of an existing lease agreement between the FUMI
Parking Business and First Union under which certain U.S. properties
owned by First Union are leased to FUMI;
(b) the funding and indemnification by First Union with respect to all
costs related to an existing legal dispute regarding a previously
cancelled software contract;
(c) the acquisition of all holdings of minority interests in entities
comprising the FUMI Parking Business;
(d) the purchase by an entity within the FUR Parking Business of
outstanding credit facilities by virtue of a cash contribution by
First Union;
(e) the effective transfer of the continuing business operations of the
FUMI Parking Business from FUMI to First Union;
(f) the issuance of common shares of Impark to members of its Board of
Directors;
(g) the contribution by First Union to Impark of up to $7.0 million in
cash in consideration for common stock of Impark. Of the $7.0 million
contributed, $2.0 million will be restricted cash to
F-4
<PAGE> 61
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA AND ADJUSTED PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. PRO FORMA TRANSACTIONS: (CONTINUED)
be utilized solely towards the settlement of the goods and services tax
contingency described in note 16(c)(i) to the combined financial
statements of the FUMI Parking Business, and is materially consistent
with the amount accrued in the accounts at December 31, 1999;
(h) the contribution by First Union of its interest in a limited liability
company related to the development of approximately 4,900 parking
spaces for the San Francisco Giants new baseball stadium, "Pacific
Bell Park." Operation of the lot commences in 2000; and
(i) the capitalization of Impark resulting in it having issued and
outstanding 2.1 million common shares with a par value of $0.01 per
share.
3. PRO FORMA ADJUSTMENTS:
(a) Pro forma consolidated balance sheet:
The pro forma consolidated balance sheet gives effect to the
transactions described in note 2 as if they had occurred on December 31,
1999. Pro forma transactions recognized in the consolidated balance
sheet are as follows:
(i) the elimination of all inter-entity balances between the FUMI
Parking Business and the FUR Parking Business;
(ii) the elimination of balance sheet amounts related to the FUMI
Parking Business discontinued operations;
(iii) the acquisition of minority interests in the FUMI Parking Business
by FUMI for consideration having an estimated fair value of
$600,000. This transaction effectively represents a step purchase
of the FUMI Parking Business and has been pushed down into the pro
forma consolidated balance sheet. The excess of the cost of
repurchase over the carrying value of the minority interest
eliminated has been assigned to goodwill;
(iv) the elimination of an amount payable in the amount of $418,000
accrued in the accounts of the FUMI Parking Business related to the
legal action to be funded and indemnified as described in note
2(b);
(v) the purchase or capitalization of long-term debt and the advances
payable and note payable to FUMI and First Union effected by the
transactions as described in notes 2(d) and (e);
(vi) the issuance of compensatory common shares as described in note
2(f) which will increase share capital and reduce retained earnings
of Impark by equivalent amounts;
(vii) the contribution of $4.2 million cash as described in note 2(g),
being the amount which results in First Union's cash contribution
aggregating $7.0 million; and
(viii) the contribution of the interest in the limited liability company
as described in note 2(h) at its cost basis, which is estimated
to equal $6.7 million at the date of contribution. The FUMI
Parking Business holds the remaining interest and it is estimated
that its separate cost basis will equal $1.1 million immediately
prior to this contribution. As at December 31, 1999, First Union
has incurred $1.3 million of costs which have been included as an
adjustment in the pro forma consolidated balance sheet.
F-5
<PAGE> 62
IMPERIAL PARKING CORPORATION
NOTES TO PRO FORMA AND ADJUSTED PRO FORMA CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. PRO FORMA ADJUSTMENTS: (CONTINUED)
(a) Pro forma consolidated balance sheet: (continued)
Adjustments (iii)-(viii) are disclosed in the pro forma consolidated
balance sheet under the column headed "Formation". The net equity of the
predecessor entities has been accounted for as a capital contribution.
(b) Pro forma combined statement of operations:
The pro forma combined statement of operations gives effect to the
transactions described in note 2 as if they had occurred by January 1,
1999. Pro forma transactions recognized in the combined statements of
operations are as follows:
(i) the elimination of inter-entity lease fees and interest costs;
(ii) the elimination of the asset management fee earned during the
period January 1, 1999 to December 31, 1999 for managing the
United States parking properties of First Union. The fee agreement
will be cancelled as described in note 2(a);
(iii) the amortization of the goodwill that will arise from the
acquisition of the minority interest described in note 2(c),
calculated on a straight-line basis over a 20 year period;
(iv) the elimination of interest expense on long-term debt purchased or
the note payable capitalized as described in notes 2(d) and (e);
and
(v) the compensatory element of the common shares issuable to Impark's
Board of Directors as described in note 2(f) at their estimated
fair value of $200,000.
For purposes of the combined statements of operations, no adjustments
have been made for interest on additional cash balances.
4. CAPITAL STOCK:
Capital stock as at December 31, 1999 in the pro forma consolidated balance
sheet is comprised of the equity of the predecessor businesses to Impark.
Pro forma income (loss) per share from continuing operations has been
calculated by dividing pro forma combined income (loss) from continuing
operations by 2.1 million being the estimated number of shares of Impark
common stock to be issued by Impark to First Union prior to the
Distribution.
Per share information is presented as if the common shares issuable were
issued at the beginning of the 1999 year.
F-6
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
First Union Managements, Inc.
We have audited the accompanying combined balance sheets of the FUMI
Parking Business (note 2(a)) as at December 31, 1999 and 1998 and the related
combined statements of operations, owner's deficiency and cash flows for the
years ended December 31, 1999 and 1998 and the period from April 17, 1997 to
December 31, 1997. These financial statements are the responsibility of the
management of the Business. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the FUMI Parking
Business as at December 31, 1999 and 1998 and the results of its operations and
its cash flows for the years ended December 31, 1999 and 1998 and the period
from April 17, 1997 to December 31, 1997 in accordance with generally accepted
accounting principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
February 4, 2000
F-7
<PAGE> 64
FUMI PARKING BUSINESS
COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ -- $ 1,394
Accounts receivable....................................... 6,915 4,620
Inventory................................................. 2,877 4,285
Deposits and prepaid expenses............................. 2,287 827
-------- --------
12,079 11,126
Fixed assets (note 5)....................................... 5,330 4,984
Management and lease agreements (note 6).................... 1,852 908
Other assets (note 7)....................................... 589 4,747
Goodwill (note 8)........................................... 45,379 43,344
-------- --------
$ 65,229 $ 65,109
======== ========
LIABILITIES AND OWNER'S DEFICIENCY
Current liabilities:
Bank indebtedness......................................... $ 2,744 $ 2,356
Rents payable to unrelated parties........................ 6,228 5,819
Rents payable to FUR Parking Business, a related party.... 716 1,227
Trade accounts payable and other accrued liabilities...... 10,390 11,352
Current portion of long-term debt......................... -- 21,229
Deferred revenue.......................................... 1,354 2,361
-------- --------
21,432 44,344
Long-term debt (note 9)..................................... 21,059 --
Notes payable to related parties (note 10).................. 31,592 36,329
Payable to First Union Management, Inc., parent company
(note 10)................................................. 10,401 11,963
Deferred revenue............................................ -- 628
Deferred income taxes....................................... 46 --
Minority interest........................................... 1,047 446
-------- --------
85,577 93,710
Owner's deficiency.......................................... (20,348) (28,601)
Future operations (note 3)
Commitments and contingencies (note 16)
Subsequent event (note 17)
-------- --------
$ 65,229 $ 65,109
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE> 65
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ ------------
<S> <C> <C> <C>
Revenues............................................. $36,710 $ 54,087 $60,145
Direct costs......................................... 25,654 39,638 44,939
------- -------- -------
Gross margin......................................... 11,056 14,449 15,206
Other operating expenses:
General and administrative......................... 7,526 14,972 10,236
Depreciation and amortization...................... 3,854 5,398 4,984
------- -------- -------
11,380 20,370 15,220
------- -------- -------
Operating income (loss).............................. (324) (5,921) (14)
Other expense:
Write-down of assets............................... -- 14,976 --
Interest expense:
Long-term debt.................................. 1,298 2,033 1,840
Amounts due to related entities................. 2,684 3,731 4,032
Other........................................... 668 778 --
Other.............................................. -- -- 105
------- -------- -------
4,650 21,518 5,977
------- -------- -------
Loss from continuing operations before income taxes
and discontinued operations........................ (4,974) (27,439) (5,991)
Income taxes......................................... 370 516 326
------- -------- -------
Loss from continuing operations before minority
interest and discontinued operations............... (5,344) (27,955) (6,317)
Loss attributed to minority interest................. 944 -- --
------- -------- -------
Loss from continuing operations before discontinued
operations......................................... (4,400) (27,955) (6,317)
Income (loss) from discontinued operations net of
income taxes....................................... 578 (1,537) (1,914)
------- -------- -------
Net loss............................................. (3,822) (29,492) (8,231)
Other comprehensive income (loss):
Foreign currency translation adjustment............ 46 (319) (10)
Unrealized loss on available for sale security..... -- -- (46)
------- -------- -------
Comprehensive loss................................... $(3,776) $(29,811) $(8,287)
======= ======== =======
</TABLE>
See accompanying notes to combined financial statements.
F-9
<PAGE> 66
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF OWNER'S DEFICIENCY
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OTHER COMPREHENSIVE
INCOME (LOSS)
------------------------
FOREIGN
CURRENCY UNREALIZED
ACCUMULATED TRANSLATION LOSS ON
CAPITAL EARNINGS ADJUSTMENT INVESTMENT TOTAL
------- ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Shares issued on acquisition of business
on April 17, 1997 (note 4(b))......... $ 721 $ -- $ -- $ -- $ 721
Net loss................................ -- (3,822) -- -- (3,822)
Dividends............................... -- (34) -- -- (34)
Foreign currency translation
adjustment............................ -- -- 46 -- 46
------- -------- ----- ---- --------
Balance, December 31, 1997.............. 721 (3,856) 46 -- (3,089)
Acquisition of shares from minority
interest (note 11(a))................. 10,120 -- -- -- 10,120
Capital contributions................... 2,478 -- -- -- 2,478
Net loss................................ -- (29,492) -- -- (29,492)
Dividends............................... -- (46) -- -- (46)
Foreign currency translation
adjustment............................ -- -- (319) -- (319)
------- -------- ----- ---- --------
Balance, December 31, 1998.............. 13,319 (33,394) (273) -- (20,348)
Capital contributed to acquire shares
held by minority interests............ 1,070 -- -- -- 1,070
Return of capital from FUMI parking
division.............................. (990) -- -- -- (990)
Net loss................................ (8,231) -- (8,231)
Dividends............................... (46) (46)
Foreign currency translation
adjustment............................ (10) (10)
Unrealized loss on available for sale
security.............................. -- (46) (46)
------- -------- ----- ---- --------
Balance, December 31, 1999.............. $13,399 $(41,671) $(283) $(46) $(28,601)
======= ======== ===== ==== ========
</TABLE>
See accompanying notes to combined financial statements.
F-10
<PAGE> 67
FUMI PARKING BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ -------------
<S> <C> <C> <C>
Cash flows provided by (used in)
operating activities:
Loss from continuing operations................... $(4,400) $(27,955) $ (6,317)
Adjustments to reconcile loss from continuing
operations to net cash provided by (used in)
continuing operations:
Depreciation and amortization.................. 3,854 5,398 4,984
Interest expense capitalized to notes payable
to related parties........................... 1,789 2,487 2,688
Amortization of financing costs................ -- 163 155
Write-down of assets........................... -- 14,976 --
Deferred income taxes.......................... 77 198 65
Loss attributable to minority interest......... (944) -- --
Other.......................................... -- 11 65
Changes in non-cash working capital items, net of
effects from companies purchased and divested:
Accounts receivable............................ (2,016) (71) 744
Inventory...................................... (790) (256) 264
Deposits and prepaid expenses.................. 433 (444) 379
Trade accounts payable and accrued
liabilities.................................. 86 1,346 1,407
Rents payable.................................. 1,065 (32) (42)
Deferred revenue............................... 581 (446) 1,078
------- -------- --------
Net cash provided by (used in) continuing
operations..................................... (265) (4,625) 5,470
Net cash provided by (used in) discontinued
operations..................................... (1,144) (1,109) (1,773)
------- -------- --------
Net cash provided by (used in) operating
activities..................................... (1,409) (5,734) 3,697
Cash flows provided by (used in)
investing activities:
Purchase of fixed assets....................... (1,335) (1,980) (1,431)
Purchase of minority interests................. 172 (10,120) (986)
Increase (decrease) in other assets............ -- 88 (1,826)
Acquisition of businesses, net of cash
acquired..................................... (40,309) (808) --
Proceeds from dispositions of businesses....... -- -- 1,624
Proceeds from disposition of real estate....... 8,616 -- --
------- -------- --------
Net cash used in investing activities from
continuing operations.......................... (32,856) (12,820) (2,619)
Net cash used in discontinued operations.......... (239) (174) (239)
------- -------- --------
Net cash as used in investing activities.......... (33,095) (12,994) (2,858)
</TABLE>
F-11
<PAGE> 68
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ -------------
<S> <C> <C> <C>
Cash flows provided by (used in)
financing activities:
Contributions of capital....................... 721 12,599 --
Equity contribution by minority interests...... 415 -- --
Increase in long-term debt..................... 1,795 1,336 --
Long-term debt repayments...................... (4,020) (3,408) (1,144)
Increase in payable to First Union Management,
Inc.......................................... 4,758 6,024 1,598
Bank indebtedness.............................. 538 2,206 (388)
Increase in notes payable to related parties... 30,342 -- --
Other.......................................... -- -- 611
------- -------- --------
Net cash provided by financing activities from
continuing operations.......................... 34,549 18,757 677
Net cash used in discontinued operations.......... (67) (147) --
------- -------- --------
Net cash provided by financing activities......... 34,482 18,610 677
Effect of exchange rate changes in cash............. 22 118 (122)
------- --------
Decrease (increase) in cash......................... -- -- 1,394
Cash, beginning of period........................... -- -- --
------- -------- --------
Cash, end of period................................. $ -- $ -- $ 1,394
======= ======== ========
Supplementary information:
Interest paid..................................... $ 2,193 $ 3,277 $ 2,616
Income taxes paid................................. 278 604 299
Non-cash transactions:
Interest capitalized to notes payable to
related parties.............................. 1,789 2,487 2,688
======= ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-12
<PAGE> 69
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
1. OPERATIONS:
These combined financial statements have been prepared solely for inclusion
in the registration statement of Imperial Parking Corporation ("Impark").
They present the parking related business activities that will be
contributed to Impark and have, for the periods presented, been carried on
directly and indirectly, through wholly-owned subsidiaries, of First Union
Management, Inc. ("FUMI"). Such business activities, collectively defined
as the "FUMI Parking Business", are to be acquired by Impark, pursuant to a
plan of acquisition and reorganization which is expected to be completed on
or before March 31, 2000. These activities will be combined with certain of
the parking operations of First Union Real Estate Equity and Mortgage
Investments ("First Union"), which activities are, for purposes of these
combined financial statements, referred to as the FUR Parking Business.
FUMI's indirect subsidiaries, Imperial Parking Limited ("Imperial Parking")
and Impark Services Ltd. ("Services"), operate and manage parking
facilities and carry on other activities related to the parking business in
Canada and the United States. The FUR Parking Business owns certain parking
facilities in Canada which it leases to the FUMI Parking Business for their
operation and management. First Union and FUMI are related parties for
accounting purposes, under a trust agreement, the shares of FUMI are held
for the benefit of shareholders of First Union.
FUMI and First Union purchased the parking business formerly carried on by
an unrelated party effective April 17, 1997 (the "Acquisition"). Generally,
the Acquisition was structured such that the real estate assets were
acquired by First Union and the other business activities, including
management contracts, were acquired by FUMI. These other business
activities included Imperial Parking and Services and their subsidiaries.
An entity within the FUR Parking Business has made loans to the business
operations of Imperial Parking and Services.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and
present only the assets, liabilities, revenues and expenses of the FUMI
Parking Business and do not present any other assets, liabilities,
revenues or expenses of FUMI. The carrying values of the assets and
liabilities included in the FUMI Parking Business include any
adjustments necessary to reflect the cost basis of FUMI. These combined
financial statements include expenses incurred by FUMI to the extent
that such expenses relate to the separate FUMI Parking Business.
These financial statements have been prepared on a combined basis to
reflect the parking business activities under a common parent, FUMI,
from the date of their acquisition from unrelated parties. These
combined financial statements exclude the assets, liabilities, revenues
and expenses of the parking business carried on through First Union. The
combined financial statements of the FUR Parking Business are separately
included in this Information Statement.
Specifically, these combined financial statements present the financial
position and results of operations of the FUMI Parking Business which
consists of the following:
(i) Imperial Parking and Services:
Imperial Parking was formed under the Canada Business Corporation
Act pursuant to the amalgamation on April 17, 1997 of 3357392
Canada Inc. ("Canco 1"), Imperial Parking
F-13
<PAGE> 70
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(a) Basis of presentation: (continued)
Ltd. and Impark Properties Limited. Canco 1 was formed to acquire
100% of the shares of Imperial Holdings No. 2 Inc. ("Holdco") (note
4(b)). Prior to the amalgamation, Holdco owned 100% of Imperial
Parking Ltd., a Canadian company with a principal business of
managing parking lots. Holdco was dissolved and its assets
transferred to Canco 1 immediately prior to the amalgamation.
Services was incorporated on April 11, 1997 under the New Brunswick
Business Corporations Act. Services' principal business activity is
the provision of ancillary services to the parking business.
(ii) Lease of First Union Canadian parking facilities:
Pursuant to a lease agreement, First Union leased sixteen parking
facilities in Canada to FUMI. Of these facilities, fifteen were
acquired effective from April 17, 1997 from Imperial Parking
Limited. Effective September 8, 1997, First Union purchased an
additional Canadian parking facility from an unrelated party. The
results of the operations of these facilities are included in these
combined financial statements from the date of the acquisition.
All significant balances and transactions between entities included in
these combined financial statements have been eliminated.
(b) 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 amounts may differ from the
estimates applied in the preparation of these combined financial
statements.
(c) Inventory:
Imperial Parking's inventory consists of equipment parts and supplies
and is recorded at the lower of cost, determined on a first-in,
first-out basis, and replacement cost.
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows:
<TABLE>
<CAPTION>
BASIS RATE
----------------- -----------
<S> <C> <C>
ASSET
Furniture and fixtures........................... declining-balance 20%
Equipment........................................ declining-balance 20% and 30%
Automotive equipment............................. declining-balance 30%
</TABLE>
F-14
<PAGE> 71
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(d) Fixed assets: (continued)
Leasehold improvements are depreciated straight-line over the shorter of
the lease term or the estimated useful life of the asset.
Routine maintenance and repairs are expensed as incurred.
(e) Management and lease agreements:
Management and lease agreements are recorded at cost and represent the
value assigned to parking lot agreements acquired from other parking
facility management companies. Amortization is provided over the lives
of the related agreements in amounts equal to the discounted future cash
flows used to measure their original cost. The remaining carrying value
of management and lease agreements terminated before the end of the
agreements is expensed at that time.
(f) Impairment of fixed assets and management and lease agreements:
The FUMI Parking Business accounts for long-lived assets (which include
fixed assets and management and lease agreements) in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. This Statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less cost to sell.
(g) Deferred financing costs:
The costs of obtaining long-term debt are initially capitalized and then
amortized over the term of the related debt. The amortization of these
charges is included in interest expense.
(h) Goodwill:
Goodwill represents the excess of cost over the value assigned to the
net assets acquired on business acquisitions. Goodwill is amortized on a
straight line basis over 20 years. Prior to the year ended December 31,
1999, acquired goodwill was amortized on a straight-line basis over 40
years. The effect of this change in amortization period increased net
loss for 1999 by $1.2 million. This change in estimated useful life of
the goodwill was made by management in accordance with its policy
described below.
The FUMI Parking Business assesses the recoverability of goodwill by
determining whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The remaining useful life is
estimated based on management's expectations and plans for the acquired
businesses. The amount of goodwill impairment, if any, is measured based
on projected discounted future
F-15
<PAGE> 72
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(h) Goodwill: (continued)
operating cash flows using a discount rate reflecting the FUMI Parking
Businesses average cost of funds. The assessment of the recoverability
of goodwill will be impacted if estimated future operating cash flows
are not achieved. Pursuant to such an assessment, the FUMI Parking
Business recorded a $15 million reduction in the carrying value of
goodwill at December 31, 1998.
(i) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(j) Revenue recognition:
Parking revenues consist of the parking revenues from managed and leased
locations. Management contract revenues represent revenues (both fixed
fees and additional payments based upon parking revenues) from
facilities managed for other parties and miscellaneous management fees
for accounting, insurance and other ancillary services such as
consulting and transportation management services. Parking and
management contract revenues are recognized when earned in accordance
with the applicable agreement. Revenues from leased locations are
recognized in accordance with the terms of the agreements. Deferred
revenue primarily represents revenue received in advance of its due
date. Net income from transit vending machine contracts are recognized
by the percentage of completion method.
(k) Research and development:
Research and development costs are expensed as incurred.
(l) Foreign currency translation:
The functional currency of the FUMI Parking Businesses operations in the
United States is the United States dollar. For facilities and operations
located in Canada, the functional currency is the Canadian dollar
("Cdn.").
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains or losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign currency translation account within
owners' equity. Other exchange gains and losses are included in the
determination of income.
F-16
<PAGE> 73
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(m) Comprehensive income:
On January 1, 1998, the FUMI Parking Business adopted SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in
a full set of financial statements. Comprehensive income consists of net
income and net unrealizable gains (losses) on securities and is
presented in the consolidated statements of owners' deficiency as other
comprehensive income. The Statement requires only additional disclosures
in the consolidated financial statements; it does not affect the FUMI
Parking Businesses financial position or results of operations. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS No. 130.
3. FUTURE OPERATIONS:
During the year ended December 31, 1999, the FUMI Parking Business incurred
a loss of $8.2 million. At December 31, 1999, the FUMI Parking Business has
a working capital deficiency of $33.2 million including $21.2 million in
long-term debt maturing in April 2000. In order to continue its operations
as a going concern, the FUMI Parking Business requires continued support
from their parent company or other equity financing to reduce long-term
debt to a level which can be supported by recurring operations. Failure to
achieve this support or otherwise commence to generate sufficient positive
cash flow could necessitate that the FUMI Parking Business dispose of
assets which may occur at values significantly less than their carrying
values.
During the 1999 fiscal year, management has taken various steps in
reviewing its business activities, including the discontinuance of certain
operations as described in note 12. In addition, management of First Union
and FUMI have approved a plan which will result in First Union combining
the FUMI Parking Business with the FUR Parking Business into a new company,
Imperial Parking Corporation ("Impark"), repaying or capitalizing all of
the FUMI Parking Businesses outstanding long-term debt and the notes and
advances payable to related parties, contributing $7.0 million cash and an
interest in a joint venture to develop a parking lot at the San Francisco
Giants new baseball stadium, indemnifying against certain existing claims
against Impark, and granting a $8.0 million line of credit. Management is
also evaluating additional alternatives for increasing future business
prospects.
Upon completion of these steps, First Union has indicated its intention to
distribute 100% of the common shares of Impark to First Union's
beneficiaries. If these steps had been completed at January 1, 1999, the
exclusion of interest expense related to the debt repaid or capitalized
results in the FUMI Parking Business generating substantially no loss and
having a significantly reduced working capital deficiency. In addition,
during the year ended December 31, 1999 the FUMI Parking Business has
generated positive cash flow from operations and this number would have
increased. As a result, management believes that the completion of these
steps are fundamental to Impark continuing to operate in the future as a
going concern.
4. ACQUISITION OF BUSINESSES:
(a) Prairie Parking Limited and PI Parking Systems Limited:
On February 9, 1998 and July 31, 1998 respectively, the FUMI Parking
Business purchased 100% of the common shares of Prairie Parking Limited
and PI Parking Systems Limited for total cash consideration, including
costs, of $1.2 million. The purchase price was allocated $800,000 to
goodwill and $400,000 to management agreements. The acquisitions are
accounted
F-17
<PAGE> 74
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. ACQUISITION OF BUSINESSES: (CONTINUED)
(a) Prairie Parking Limited and PI Parking Systems Limited: (continued)
for by the purchase method with the results of operations included in
these combined financial statements from the dates of acquisition.
The fair value assigned to the management agreements acquired equalled
their tax basis at date of acquisition.
(b) Imperial Holdings No. 2 Inc.:
On April 17, 1997, Canco 1 purchased 100% of Holdco (note 2(a)) for net
cash of $36.2 (Cdn.$50.6) million and the issuance of 16,947,598 common
shares having an assigned value of $12.1 (Cdn.$16.9) million (note 11).
Expenses related to the acquisition amounting to $3.9 (Cdn.$5.6) million
have been included in the cost of the acquisition. Holdco was then
dissolved and its assets transferred to Canco 1.
This acquisition of Holdco, and therefore of Imperial Parking, was
accounted for by the purchase method and accordingly the aggregate
purchase price, including related costs, was assigned to assets acquired
and liabilities assumed based on their fair values as of the acquisition
date as follows:
<TABLE>
<S> <C>
Net working capital......................................... $ (9,716)
Other assets................................................ 1,214
Fixed assets................................................ 13,226
Future tax asset............................................ 224
Management and lease agreements............................. 6,032
Goodwill.................................................... 68,966
Long-term debt.............................................. (27,728)
--------
$ 52,218
========
Purchase price, including costs............................. $ 52,218
========
</TABLE>
The tax basis of the deductible acquired assets was greater than the
fair values assigned at the date of acquisition. No value has been
assigned to the acquired deferred tax asset in the purchase equation
above due to uncertainty as to its realizability. See note 13. Any
ultimate realization of the acquired temporary difference will be
accounted for as a reduction in goodwill.
Certain of the fixed assets were subsequently sold to a subsidiary of
First Union (note 14).
Financing for the acquisition included the amount of $39.3 million which
was lent to the FUMI Parking Business by an entity within the FUR
Parking Business (note 10).
The net working capital deficiency acquired of $9.7 million includes
$1.6 million (Cdn. $2.3 million) accrued for employee terminations and
relocation costs. Such costs reflect plans initiated by management at or
prior to the time of the acquisition and substantially completed prior
to December 31, 1997. As indicated below, certain acquisition related
accruals are unpaid at December 31, 1999. These amounts primarily relate
to employee termination agreements that, by contract, are payable over a
period of years.
F-18
<PAGE> 75
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. ACQUISITION OF BUSINESSES: (CONTINUED)
(b) Imperial Holdings No. 2 Inc.: (continued)
The activity impacting the accrual for employee terminations and
relocation costs in the periods presented is as follows:
<TABLE>
<CAPTION>
EMPLOYEE RELOCATION
TERMINATION COSTS TOTAL
----------- ---------- ------
<S> <C> <C> <C>
Balance, April 17, 1997............................. $1,112 $ 518 $1,630
Charges utilized.................................... (147) (209) (356)
------ ----- ------
Balance, December 31, 1997.......................... 965 309 1,274
Charges utilized.................................... (237) (205) (442)
Accruals reversed................................... (238) -- (238)
------ ----- ------
Balance, December 31, 1998.......................... 490 104 594
Charges utilized.................................... (35) -- (35)
Accruals reversed................................... (20) (68) (88)
------ ----- ------
Balance, December 31, 1999.......................... $ 435 $ 36 $ 471
====== ===== ======
</TABLE>
5. FIXED ASSETS:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1998
Furniture and fixtures................................... $ 652 $ 193 $ 459
Equipment................................................ 4,859 1,066 3,793
Automotive equipment..................................... 330 148 182
Leasehold improvements................................... 1,513 617 896
------ ------ ------
$7,354 $2,024 $5,330
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1999
Furniture and fixtures................................... $ 569 $ 125 $ 444
Equipment................................................ 5,874 2,356 3,518
Automotive equipment..................................... 320 204 116
Leasehold improvements................................... 1,879 973 906
------ ------ ------
$8,642 $3,658 $4,984
====== ====== ======
</TABLE>
6. MANAGEMENT AND LEASE AGREEMENTS:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ -------------
<S> <C> <C>
Cost........................................................ $5,750 $6,120
Less accumulated amortization............................... 3,898 5,212
------ ------
$1,852 $ 908
====== ======
</TABLE>
F-19
<PAGE> 76
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
7. OTHER ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ -------------
<S> <C> <C>
Deferred financing costs.................................... $ 410 $ 436
Accumulated amortization.................................... 260 436
------ ------
150 --
Note receivable(a).......................................... -- 2,157
Note receivable(b).......................................... -- 520
Investments................................................. 242 1,629
Other....................................................... 197 441
------ ------
$ 589 $4,747
====== ======
</TABLE>
(a) During the year ended December 31, 1999, the FUMI Parking Business
sold a subsidiary parking services company to the former president of
Imperial Parking for proceeds of $2.1 (Cdn.$3.1) million. As
consideration for the sale, a promissory note receivable of $2.1
million, repayable to May 2010, was received.
(b) During the year ended December 31, 1999, the FUMI Parking Business
sold its security business to the former president of that business
for proceeds of $1.8 (Cdn.$2.8) million. As partial consideration for
the sale, a promissory note receivable repayable to June 2001 was
received.
(c) Included in investments at December 31, 1999 are marketable securities
which are held as available-for-sale having an original cost of
$75,000 and a market value of $29,000. The net unrealized loss of
$46,000 has been recorded as an adjustment to owner's equity.
8. GOODWILL:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Cost, beginning of year..................................... $66,560 $51,269
Acquisition............................................... -- 400
Dispositions of businesses................................ -- (2,895)
Accumulated write-down.................................... (14,976) --
Acquisition accruals extinguished......................... (315) (84)
------- -------
Cost, end of year........................................... 51,269 48,690
Effect of changes in foreign currency exchange rates...... (3,125) (54)
Accumulated amortization.................................... 2,765 (5,292)
------- -------
$45,379 $43,344
======= =======
</TABLE>
In December 1998, the FUMI Parking Business recorded a $15 million
write-down of goodwill that originally arose on the acquisition of Holdco.
This write-down is as a result of management's annual review of the
recoverability of the net book value of the FUMI Parking Business which
review is based on estimated undiscounted future cash flows of the FUMI
Parking Business and applying a multiple of earnings of similar companies
to determine a value of the entire operations, including goodwill. As this
calculated value was less than the net book value, a discount factor was
applied to the estimated future cash flows to estimate fair value, with the
fair value difference recognized as an impairment in goodwill. The
estimates used for future cash flows may differ from actual performance
F-20
<PAGE> 77
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
8. GOODWILL: (CONTINUED)
due to the number of variables having an effect on daily operations and
markets in which these operations are located.
During 1998 and 1999, management reviewed the remaining liabilities
recognized on the acquisition described in note 4(b) relative to final
settlements and actual costs incurred. As a result of these reviews,
management determined that certain specific accrued obligations of the FUMI
Parking Business had been contractually extinguished. Extinguished
liabilities in the amount of $315,000 in the year ended December 31, 1998
and $84,000 in the year ended December 31, 1999 have been recorded as a
reduction in goodwill.
9. LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Term facility............................................... $20,473 $21,229
Acquisition facility........................................ 586 --
----------- -----------
21,059 21,229
Less current portion of long-term debt...................... -- 21,229
----------- -----------
$21,059 $ --
=========== ===========
Long-term debt is repayable in Canadian dollars as
follows:.................................................. Cdn.$32,340 Cdn.$30,640
=========== ===========
</TABLE>
The FUMI Parking Business has bank credit facilities consisting of
operating, term and acquisition facilities. The revolving operating
facility is available to a maximum of Cdn.$6.5 million under which, at
December 31, 1999, Cdn.$3.4 million had been drawn on the facility.
Pursuant to the second amendment to the credit facility agreement, no
further accommodations may be obtained by the FUMI Parking Business under
either the term facility or the acquisition facility.
The term facility and revolving acquisition facility are repayable in
mandatory prepayments of 50% of excess cash flow with the balance due on
April 16, 2000. Funds advanced under the term and revolving acquisition
facilities are available at rates of interest based on Canadian prime rate
plus 0.75% per annum or bankers' acceptance rates plus 1.75%. The FUMI
Parking Business is also required to pay a fee on maturity equal to 0.55%
per annum on the aggregate amounts outstanding under all credit facilities.
The bank credit facilities are secured by a general assignment by the FUMI
Parking Business in favor of the bank, debentures over certain real
property, assignment of rents and leases, securities pledge agreements and
assignment of insurance. The terms of the bank credit facilities require
that certain financial and non-financial covenants be met by the FUMI
Parking Business including the maintenance of specified financial ratios
and tests. These covenants allow for the deduction of certain non-recurring
charges for determining earnings before interest, taxes, depreciation and
amortization for covenant purposes. First Union has granted security on the
long-term debt including granting cash collateral of $15.0 million and has
provided the lender with put rights whereby the lender can require First
Union to purchase the amounts outstanding under the credit facilities
during the 30-day period which runs from November 18, 1999 to December 17,
1999 or on the occurrence of an event of default or breach of covenants.
All of the long-term debt is repayable on April 16, 2000 and is intended to
be extinguished through the transactions described in note 17.
F-21
<PAGE> 78
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
10. PAYABLE TO RELATED PARTIES:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Notes payable(a)............................................ $31,592 $36,329
Advances(b)................................................. 10,401 11,607
Other....................................................... -- 356
------- -------
$41,993 $48,292
======= =======
</TABLE>
(a) The notes payable are due to an entity within the FUR Parking Business
and represent senior subordinated partial payment-in-kind notes
secured, in part, by guarantees provided by certain entities within
the FUMI Parking Business and which, as at the dates indicated, were
payable in Canadian dollars as follows:
<TABLE>
<S> <C>
December 31, 1998........................................... Cdn.$48,441
December 31, 1999........................................... Cdn.$52,434
</TABLE>
These notes bear interest at 12.0% per annum, of which 4% is payable
quarterly in cash and the balance is payable on April 17, 2009 when the
principal outstanding on the notes is repayable in full. The notes are
secured by the assets of the FUMI Parking Business. Interest expense
incurred during the periods indicated has been capitalized to the
balance of notes payable as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $1,789 (Cdn.$2,551)
Year ended December 31, 1998................................ $2,487 (Cdn.$4,029)
Year ended December 31, 1999................................ $2,688 (Cdn.$3,993)
</TABLE>
(b) The advances due to FUMI are unsecured, non-interest bearing and have
no specific terms of repayment. As FUMI has confirmed that repayment
will not be requested before December 31, 2000, the advances have been
classified as non-current.
11. CAPITAL:
(a) At the time of the acquisition (note 4(b)), First Union entered into
an agreement whereby the holders of 14.7 million class A non-voting
common shares could require First Union to purchase their shares for
the issue price plus specified accretions. During 1998, First Union
assigned its right to repurchase these non-voting common shares from
the holders to FUMI and FUMI repurchased the shares.
(b) The class B and C preferred shares of Imperial Parking are redeemable
by Imperial Parking at its option at a price of $1.00 per share and
are entitled to receive cumulative dividends at a rate of $0.045 per
share per annum.
12. DISCONTINUED OPERATIONS:
Prior to the issuance of its financial statements for the year ended
December 31, 1999, the FUMI Parking Business entered into a formal plan to
discontinue activities related to the manufacturing and sale of metered
equipment for public transit systems and parking lots. As these activities
will not form part of the business activities of Impark, to which the FUMI
Parking Business is considered to be a predecessor entity, they have been
accounted for as discontinued operations in these combined
F-22
<PAGE> 79
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
12. DISCONTINUED OPERATIONS: (CONTINUED)
financial statements. This disposition is scheduled to be completed by
March 31, 2000 through the distribution to FUMI of all of the shares of the
company in which these activities are undertaken. This disposition will be
at the cost basis of the FUMI Parking Business.
In addition, during 1999 the FUMI Parking Business sold its security
business for consideration equal to cash of $1.3 million and notes
receivable of approximately $500,000. No gain or loss was recognized on
this sale.
Income (loss) from discontinued operations for the periods presented is
calculated as follows:
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ ------------
<S> <C> <C> <C>
Revenues........................................ $11,497 $15,838 $12,639
Direct costs.................................... 9,071 13,573 11,010
General and administrative...................... 1,712 3,572 3,367
Depreciation and amortization................... 136 230 176
------- ------- -------
10,919 17,375 14,553
------- ------- -------
Income (loss) from discontinued operations...... $ 578 $(1,537) $(1,914)
======= ======= =======
</TABLE>
Interest expense has not been allocated to discontinued operations.
13. INCOME TAXES:
Total income taxes for the years presented were allocated as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Income from continuing operations............... $ 370 $ 516 $ 326
Discontinued operations......................... 6 1 (20)
-------- -------- --------
$ 376 $ 517 $ 306
======== ======== ========
</TABLE>
F-23
<PAGE> 80
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
13. INCOME TAXES: (CONTINUED)
Income tax expense attributable to continuing operations consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
Period from April 17, 1997 to December 31, 1997:
Canada............................................. $ 321 $ -- $ 321
United States...................................... 49 -- 49
-------- -------- --------
$ 370 $ -- $ 370
======== ======== ========
Year ended December 31, 1998:
Canada............................................. $ 534 $ (74) $ 460
United States...................................... 28 28 56
-------- -------- --------
$ 562 $ (46) $ 516
======== ======== ========
Year ended December 31, 1999:
Canada............................................. $ 217 $ 113 $ 330
United States...................................... 35 (39) (4)
-------- -------- --------
$ 252 $ 74 $ 326
======== ======== ========
</TABLE>
Income tax expense attributable to income from continuing operations
differed from the amounts computed by applying the U.S. federal income tax
rate of 35% to pretax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
--------------- ------------ ------------
<S> <C> <C> <C>
Computed "expected" tax expense................. $(1,741) $(9,604) $(2,097)
Increase (reduction) in income taxes resulting
from:
Write-down of non-deductible goodwill......... -- 5,242 --
Loss carryforwards not recognized............. 1,741 4,362 2,229
Capital and state taxes....................... 370 516 194
------- ------- -------
$ 370 $ 516 $ 326
======= ======= =======
</TABLE>
F-24
<PAGE> 81
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
13. INCOME TAXES: (CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards........................ $ 5,122 $ 7,539
Net capital loss carry forwards.......................... -- 2,363
Fixed assets............................................. 937 1,894
Trade accounts payable................................... 1,722 632
Management and lease agreements.......................... 461 438
Other.................................................... 82 124
------- -------
Total gross deferred tax assets............................ 8,324 12,990
Less: valuation allowance.................................. (8,194) (12,990)
------- -------
130 --
------- -------
Deferred tax liabilities:
Inventory................................................ (132) --
Goodwill................................................. (10) --
Other.................................................... (34) --
------- -------
Total deferred tax liabilities............................. (176) --
------- -------
Net deferred tax assets (liabilities)...................... $ (46) $ --
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of April 17, 1997 and
January 1, 1998 and 1999 was $8.3, $6.5 million and $8.1 million,
respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. In order to fully realize
the deferred tax asset at December 31, 1999, the FUMI Parking Business will
need to generate future taxable income of approximately $16.7 million prior
to the expiration of the net operating loss carry forwards in 2005. Based
upon the level of historical taxable income deductible, management does not
believe that it is more likely than not that the FUMI Parking Business will
realize the benefits of these deductible differences.
The companies which comprise the FUMI Parking Business had total income tax
losses and deductions available in Canada of approximately $16.7 million
available at December 31, 1999 to reduce future income taxes payable. These
losses are available and expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2000........................................................ 538
2001........................................................ 1,686
2002........................................................ 1,352
2003........................................................ 5,785
2004........................................................ 1,917
2005........................................................ 5,474
</TABLE>
F-25
<PAGE> 82
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
14. RELATED PARTY TRANSACTIONS:
In addition to those discussed elsewhere in these combined financial
statements, the following significant related party transactions occurred
during the periods presented.
During the year ended December 31, 1999 the FUMI Parking Business earned
asset management fee income of $1.1 million (1998 -- $nil; period from
April 17, 1997 to December 31, 1997 -- $nil) from First Union.
During the year ended December 31, 1998, First Union made a loan to FUMI
which reimbursed the FUMI Parking Business for expenditures in the amount
of $3.5 million (period from April 17 to December 31, 1997 -- $nil)
incurred in relation to a discontinued plan of expansion.
During the year ended December 31, 1999, included in direct costs is a
charge of $56,000 (1998 -- $94,000; period from April 17 to December 31,
1997 -- $93,000) paid to a company partly owned by then management of the
FUMI Parking Business relating to contracts to sweep parking lots under
terms that are estimated to be consistent with others in the parking
industry.
Effective May 8, 1997, the FUMI Parking Business sold certain real estate
assets to a subsidiary of First Union for proceeds of Cdn$11.8 million,
being the estimated fair value of the assets at the time of the acquisition
(note 4(b)).
During the year ended December 31, 1999 the FUMI Parking Business sold its
security business to a former executive officer of Imperial Parking for
consideration equal to cash of $1.3 million and notes receivable of
approximately $500,000 (Cdn. $750,000). During the same period the FUMI
Parking Business sold a subsidiary with parking lot operations on Vancouver
Island, British Columbia Canada to the former president and chief executive
officer of Imperial Parking for consideration equal to notes receivable of
$2.1 million. Termination benefit claims and related costs were settled at
the same time. Termination benefit costs aggregating $2.4 million had been
accrued at December 31, 1998 and, on settlement, $1.8 million of the
provision was reversed. These amounts are included in general and
administrative expenses.
During the fourth quarter of 1998, management of FUMI decided to terminate
the contract of the then President and Chief Executive Officer of Imperial
Parking. Upon the termination, the Company and the individual commenced
negotiations towards a settlement of the termination provisions of the
employment contract. As the negotiations were not complete at the time of
finalization of the December 31, 1998 accounts of First Union, an accrual
was recorded for the estimated settlement costs based on the status of the
negotiation and the terms of the employment contract. The amount of the
1998 accrual and charge was $2.4 million. In the second quarter of 1999, a
final settlement agreement was reached. This settlement included asset
transfers as discussed in the last two sentences to the last paragraph in
note 14 to the FUMI Parking Business financial statements. As the fair
value of the consideration on the settlement was $1.8 million less than the
amount previously accrued, a recovery was recorded in 1999.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments to the FUMI Parking Business include cash, accounts
receivable, accounts payable and accrued liabilities, long-term debt and
indebtedness to related parties. The fair values of those items included in
current assets and liabilities are estimated to equal their carrying value
due to their short-term to maturity or ability for prompt liquidation. The
fair value of long-term debt is not considered to differ materially form
its carrying value as the FUMI Parking Business pays interest at a floating
rate and management does not consider there to have been a significant
change in its risk
F-26
<PAGE> 83
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
15. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
premium since the FUMI Parking Business entered into the bank credit
facilities agreements. The fair value of the notes payable to related
parties is estimated to be $17.3 million. The fair value of the amount
payable to FUMI is not readily determinable due to the nature of the
relationship between the FUMI Parking Business and the other party.
16. COMMITMENTS AND CONTINGENCIES:
(a) Operating lease commitments:
The FUMI Parking Business leases certain of its office premises,
automobiles and office equipment under long-term operating leases. At
December 31, 1999, the aggregate annual minimum lease payments required
under operating leases in each of the next five years are as follows:
<TABLE>
<S> <C>
2000........................................................ $1,059
2001........................................................ 910
2002........................................................ 505
2003........................................................ 300
2004........................................................ 10
------
$2,784
======
</TABLE>
(b) Development commitment:
The FUMI Parking Business and First Union are members of a limited
liability company which is committed to develop 37 acres of property in
San Francisco, California. The development provides for construction of
approximately 4,900 paved surface parking stalls for the new Pacific
Bell Park for the San Francisco Giants baseball team.
It is anticipated the construction will complete in the first quarter of
fiscal 2000 at an estimated cost of $7.8 million, which includes an
estimated $6.7 million to be contributed to the limited liability
company by First Union and an estimated $1.1 million to be contributed
to the limited liability company by the FUMI Parking Business.
(c) Contingencies:
(i) Canada Customs and Revenue Agency:
The FUMI Parking Business was subject to a series of audits by
Canada Customs and Revenue Agency primarily regarding its treatment
of goods and services tax with respect to customer receipts for
parking violation notices. The FUMI Parking Business appealed all
assessments to the Tax Court of Canada and during 1998 it lost its
case before the Court. Management intends to appeal the Tax Court
of Canada decision and has accrued amounts owed pursuant to the
assessed amounts.
As part of its regular operations, the FUMI Parking Business
periodically becomes involved with legal claims or potential claims
related to damage to vehicles or personal injuries for which the
FUMI Parking Business carries insurance, or disagreements with
individual employees or on the interpretation of management or
lease agreements. In the
F-27
<PAGE> 84
FUMI PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
16. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
(c) Contingencies: (continued)
opinion of management, the resolution of these matters will not
have a material effect on the financial condition, results of
operations or cash flows of the FUMI Parking Business.
(ii) Performance bond:
First Union has provided performance guarantees for the
manufacturing and installation of transit ticket vending equipment
totalling $11.5 million which expires in February 2001 and 2002.
17. SUBSEQUENT EVENT:
On January 20, 2000, the board of trustees of First Union approved a series
of transactions that will result in:
(a) the cancellation of an existing lease agreement between the FUMI
Parking Business and First Union under which certain U.S. properties
owned by First Union are leased to FUMI;
(b) the funding and indemnification by First Union with respect to all
costs related to an existing legal dispute regarding a previously
cancelled software contract;
(c) the acquisition of all holdings of minority interests in entities
comprising of FUMI Parking Business;
(d) the purchase by an entity within the FUR Parking Business of
outstanding credit facilities by virtue of a cash contribution by
First Union;
(e) the effective transfer of the continuing business operations of the
FUMI Parking Business from FUMI to First Union;
(f) the issuance of common shares of the combined entity, Impark, to
members of its Board of Directors;
(g) the contribution by First Union to Impark of up to $7.0 million cash,
of which $2.0 million will be restricted cash to be utilized solely
towards the settlement of the goods and services tax contingency
described in note 16(c)(i);
(h) the contribution by First Union of its interest in the limited
liability company described in note 16(b);
(i) the capitalization of Impark resulting in it having issued and
outstanding 2.1 million common shares with a par value of $0.01 per
share; and
(j) the distribution of all shares of Impark by First Union to First
Union's beneficiaries.
F-28
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
First Union Real Estate Equity and Mortgage Investments
We have audited the accompanying combined balance sheets of the FUR Parking
Business (note 2(a)) as at December 31, 1999 and 1998 and the related combined
statements of operations, owner's equity and cash flows for the years ended
December 31, 1999 and 1998 and the period from April 17, 1997 to December 31,
1997. These financial statements are the responsibility of the management of the
Business. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the FUR Parking
Business as at December 31, 1999 and 1998 and the results of its operations and
its cash flows for the years ended December 31, 1999 and 1998 and the period
from April 17, 1997 to December 31, 1997 in conformity with generally accepted
accounting principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
February 4, 2000
F-29
<PAGE> 86
FUR PARKING BUSINESS
COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,128 $ 1,984
Accounts receivable....................................... 8 30
Rents receivable from First Union Management Inc., a
related party.......................................... 716 1,360
Interest receivable on notes receivable from related
parties................................................ -- 356
Current portion of receivable from sale of parking
facility............................................... -- 1
------- -------
1,852 3,731
Notes receivable from related parties (note 4).............. 31,592 17,330
Long-term receivable from sale of parking facility (note
9)........................................................ -- 331
Fixed assets (note 5)....................................... 8,558 8,721
------- -------
$42,002 $30,113
======= =======
LIABILITIES AND OWNER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ -- $ 14
Income and withholding taxes payable...................... 290 240
Payable to First Union Management, Inc., a related
party.................................................. 390 403
------- -------
680 657
Note payable to First Union Real Estate Equity and Mortgage
Investments, parent company (note 6)...................... 23,759 28,061
Deferred income taxes (note 7).............................. 12 24
------- -------
24,451 28,742
Owner's equity.............................................. 17,551 1,371
------- -------
Subsequent event (note 10) $42,002 $30,113
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-30
<PAGE> 87
FUR PARKING BUSINESS
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM YEAR YEAR
APRIL 17, 1997 TO ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ ------------
<S> <C> <C> <C>
Parking facilities lease revenue from related
party............................................. $ 302 $ 454 $ 582
Other operating expenses:
Direct costs...................................... -- 12 2
Depreciation...................................... 31 45 43
------ ------- --------
31 57 45
------ ------- --------
Operating income.................................... 271 397 537
Other income (expense):
Interest income on notes receivable from related
companies (note 4)............................. 2,672 3,725 4,032
Interest expense on note payable to First Union
Real Estate Equity and Mortgage Investments
(note 6)....................................... (904) (2,757) (3,044)
Allowance for credit losses....................... -- -- (19,000)
Other............................................. -- -- 66
------ ------- --------
1,768 968 (17,946)
------ ------- --------
Income (loss) before income taxes................... 2,039 1,365 (17,409)
Income taxes (note 7):
Current (recovery)................................ 673 380 (97)
Deferred.......................................... -- 12 11
------ ------- --------
673 392 (86)
------ ------- --------
Net income (loss)................................... 1,366 973 (17,323)
Other comprehensive income (loss):
Foreign currency translation adjustment........... (527) (1,278) 1,143
------ ------- --------
Comprehensive income (loss)......................... $ 839 $ (305) $(16,180)
====== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-31
<PAGE> 88
FUR PARKING BUSINESS
COMBINED STATEMENTS OF OWNER'S EQUITY
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
-------------
FOREIGN
CURRENCY
ACCUMULATED TRANSLATION
CAPITAL EARNINGS ADJUSTMENT TOTAL
------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Issuance of shares in Nominee for cash
consideration.................................. $ 7,580 $ -- $ -- $ 7,580
Issuance of shares in Ontario Holdings for cash
consideration.................................. 336 -- -- 336
Capital contributions to purchase Canadian
properties..................................... 9,101 -- -- 9,101
Net income....................................... -- 1,366 -- 1,366
Foreign currency translation adjustment.......... -- -- (527) (527)
------- -------- ------- -------
Balance, December 31, 1997....................... 17,017 1,366 (527) 17,856
Net income....................................... -- 973 -- 973
Foreign currency translation adjustment.......... -- -- (1,278) (1,278)
------- -------- ------- -------
Balance, December 31, 1998....................... 17,017 2,339 (1,805) 17,551
Net income (loss)................................ -- (17,323) -- (17,323)
Foreign currency translation adjustment.......... -- -- 1,143 1,143
------- -------- ------- -------
Balance, December 31, 1999....................... $17,017 $(14,984) $ (662) $ 1,371
======= ======== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-32
<PAGE> 89
FUR PARKING BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 TO YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
----------------- ------------ -------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income (loss).................................. $ 1,366 $ 973 $(17,323)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation.................................... 31 45 43
Deferred income taxes........................... -- 12 11
Allowance for credit losses..................... -- -- 19,000
Interest income capitalized........................ (1,789) (2,487) (2,688)
Changes in non-cash working capital items:
Accounts receivable............................. -- 6 (21)
Rents receivable from First Union Management,
Inc........................................... (304) (469) (582)
Interest receivable on notes receivable from
related parties............................... -- -- (346)
Trade accounts payable.......................... 10 (9) 13
Income and withholding taxes payable............ 762 (416) (66)
Accrued interest added to note payable to First
Union......................................... 753 2,469 2,740
-------- ------ --------
Net cash provided by (used in) operating
activities...................................... 829 124 781
Cash flows provided by (used in) financing
activities:
Capital contribution............................... 30,342 -- --
Redemption of capital stock........................ (22,047) -- --
Increase in amount due to FUMI..................... 75 333 (11)
Initial issue and increase in note payable to First
Union Real Estate Equity and Mortgage
Investments..................................... 22,774 -- --
-------- ------ --------
Net cash provided by financing activities.......... 31,144 333 (11)
Cash flows used in investing activities:
Purchase of fixed assets........................... (734) (141) (5)
Increase in notes receivable from related
parties......................................... (30,342) -- --
-------- ------ --------
Net cash used in investing activities.............. (31,076) (141) (5)
Effect of exchange rate changes on cash.............. (15) (70) 91
-------- ------ --------
Increase in cash..................................... 882 246 856
Cash, beginning of period............................ -- 882 1,128
-------- ------ --------
Cash, end of period.................................. $ 882 $1,128 $ 1,984
======== ====== ========
Supplementary information:
Interest paid...................................... $ 241 $ 288 $ 408
Income taxes paid.................................. -- 1,159 --
Non-cash transactions:
Interest income capitalized to notes
receivable.................................... 1,789 2,487 2,688
======== ====== ========
</TABLE>
See accompanying notes to combined financial statements.
F-33
<PAGE> 90
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
1. OPERATIONS:
These combined financial statements have been prepared solely for inclusion
in the registration statement of Imperial Parking Corporation ("Impark").
They present the parking related business activities that will be
contributed to Impark and have, for the periods presented, been carried on
directly and indirectly, through wholly-owned subsidiaries, of First Union
Real Estate Equity and Mortgage Investments ("First Union"). Such business
activities, collectively defined as the "FUR Parking Business", are to be
acquired by Impark pursuant to a plan of acquisition and reorganization
which is expected to be completed on or before March 31, 2000. These
activities will be combined with the parking operations of First Union
Management, Inc. ("FUMI"), which activities are, for the purpose of these
combined financial statements, referred to as the FUMI Parking Business.
The FUR Parking Business owns certain parking facilities in Canada which it
leases to FUMI for their operation and management. In addition, an entity
within the FUR Parking Business has made loans to the business operations
of Imperial Parking Limited ("Imperial Parking") and Impark Services Ltd.
("Services"), Canadian companies which operate and manage parking
facilities and carry on other related activities. Imperial Parking and
Services are indirect subsidiaries of First Union Management Investments
Inc., a wholly-owned subsidiary of FUMI. First Union and FUMI are related
parties for accounting purposes as, under a trust agreement, the shares of
FUMI are held for the benefit of shareholders of the Trust.
First Union and FUMI purchased the parking business formerly carried on by
an unrelated party effective April 17, 1997 (the "Acquisition"). Generally,
the Acquisition was structured such that the real estate assets were
acquired by First Union and the other business activities, including
management contracts, were acquired by FUMI. These other business
activities included Imperial Parking and Services and their subsidiaries.
An entity within the FUR Parking Business has made loans to the business
operations of Imperial Parking and Services.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and
present only the assets, liabilities, revenues and expenses of the FUR
Parking Business and do not present any other assets, liabilities,
revenues or expenses of First Union. The carrying values of the assets
and liabilities included in the FUR Parking Business include any
adjustments necessary to reflect the cost basis of First Union. These
combined financial statements include expenses incurred by First Union
to the extent that such expenses relate to the separate FUR Parking
Business.
These financial statements have been prepared on a combined basis to
reflect the parking business activities of the FUR Parking Business
being under a common parent, First Union, from the date of their
acquisitions from unrelated parties. These combined financial statements
exclude the assets, liabilities, revenues and expenses of the parking
business carried on through FUMI, including through its direct and
indirect subsidiaries. The combined financial statements of the FUMI
Parking Business are separately included in this Information Statement.
F-34
<PAGE> 91
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(a) Basis of presentation: (continued)
Specifically, these combined financial statements present the financial
position and results of operations of the FUR Parking Business which
consists of the following:
(i) Canadian properties:
The FUR Parking Business includes sixteen parking facilities and
one office building in Canada owned through First Union's
wholly-owned subsidiaries, 3006712 Nova Scotia Company ("Nominee")
and 3006714 Nova Scotia Company ("Ontario Holdings"), respectively.
Of these facilities, fifteen were acquired from Imperial Parking,
effective from April 17, 1997 for Cdn.$11.8 million, which price
reflected the fair values assigned to the fixed assets on the
Acquisition. Nominee acquired its facilities beneficially for First
Union. During the periods presented, First Union leased the
facilities to FUMI. Effective September 8, 1997, First Union
purchased an additional Canadian parking facility for $844,000
(Cdn.$1.2 million) from an unrelated party. The results of
operations of these facilities are included in these combined
financial statements from the date of acquisition.
(ii) Imperial Parking and Services financing:
The FUR Parking Business includes the financial position and
results of operations of 3006302 Nova Scotia Company ("Finance
Entity"), a wholly-owned subsidiary of First Union. Finance Entity
is a Canadian incorporated company which commenced operations on
April 17, 1997 by making loans to finance the acquisition of
Imperial Parking and Services by First Union, FUMI and their
wholly-owned subsidiaries.
All significant balances and transactions between entities included in
these combined financial statements have been eliminated.
(b) 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 amounts may differ from the
estimates applied in the preparation of these combined financial
statements.
(c) Notes receivable from affiliated companies:
Notes receivable from affiliated companies are recorded at cost less an
allowance for credit loss if required. Management, considering current
information and events, considers a note receivable to be impaired when
it is probable that the FUR Parking Business will be unable to collect
all amounts due according to the contractual terms of the note
agreement. When a note is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future
cash flows discounted at the note's effective interest rate. Impairment
losses are included in the allowance for credit losses as a charge to
operations. Interest arising subsequent to the recording of an
impairment loss is recognized on a cost-recovery basis.
F-35
<PAGE> 92
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation is provided by the
straight-line method. Buildings are depreciated over their estimated
useful lives of 25 to 40 years, based on the property's age, overall
physical condition and type of construction materials. Improvements to
buildings are depreciated over the remaining useful life of the building
at the time the improvement is completed. Leasehold improvements are
depreciated over five years. Routine maintenance and repairs are
expensed as incurred.
The FUR Parking Business accounts for fixed assets in accordance with
the provisions of SFAS No. 121 -- Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying value of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds its fair value. Assets
to be disposed of are reported at the lower of their carrying value or
fair value less costs to sell.
(e) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(f) Revenue recognition:
The FUR Parking Business earns revenues from its owned facilities
pursuant to agreements whereby it has leased the facility to FUMI, which
entered into agreements with Imperial Parking to manage their
operations. The FUR Parking Business does not manage facilities on
behalf of other parties. Revenues are recognized as earned in accordance
with the individual lease agreements.
(g) Foreign currency translation:
The functional currency of the operations of FUR Parking Business in the
United States is the United States dollar. For facilities and operations
located in Canada, the functional currency is the Canadian dollar
("Cdn.").
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains and losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign
F-36
<PAGE> 93
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(g) Foreign currency translation: (continued)
currency translation account within owners' equity. Other exchange gains
and losses are included in the determination of income.
(h) Comprehensive income:
On January 1, 1998, the FUR Parking Business adopted SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in
a full set of financial statements. To the FUR Parking Business,
comprehensive income consists of net income and unrecognized foreign
currency translation adjustments and is presented in the consolidated
statements of owners' equity as other comprehensive income. SFAS No. 130
requires only additional disclosures in the consolidated financial
statements; it does not affect the FUR Parking Business's financial
position or results of operations. Prior year financial statements have
been reclassified to conform to the requirements of SFAS No. 130.
3. ACQUISITIONS:
Acquisitions of parking facilities have been accounted for by the purchase
method with the consideration paid assigned to the fair value of the assets
acquired as follows:
<TABLE>
<CAPTION>
CANADIAN PARKING FACILITIES
-------------------------------
ACQUIRED ON SUBSEQUENTLY
THE ACQUISITION ACQUIRED TOTAL
--------------- ------------ ------
(NOTE 2(A)(I))
<S> <C> <C> <C>
Net assets acquired at assigned values:
Fixed assets................................... $8,436 $844 $9,280
====== ==== ======
Consideration paid:
Cash........................................... $8,436 $844 $9,280
====== ==== ======
</TABLE>
The fair value assigned equalled the tax basis of the assets acquired at
the date of acquisition.
4. NOTES RECEIVABLE FROM RELATED PARTIES:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31
1998 1999
------------ -------------
<S> <C> <C>
Imperial Parking............................................ $24,749 $28,460
Services.................................................... 6,843 7,870
------- -------
31,592 36,330
Allowance for credit loss................................... -- (19,000)
------- -------
$31,592 $17,330
======= =======
</TABLE>
F-37
<PAGE> 94
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
4. NOTES RECEIVABLE FROM RELATED PARTIES: (CONTINUED)
The notes receivable from related parties represent senior subordinated
partial payment-in-kind notes secured, in part, by guarantees provided by
certain entities within the FUMI Parking Business and which as at the dates
indicated, were receivable in Canadian dollars as follows:
<TABLE>
<S> <C>
December 31, 1998........................................... Cdn. $48,441
December 31, 1999, (prior to the allowance for credit
losses)................................................... Cdn. $52,434
</TABLE>
These notes bear interest at 12.0% per annum, of which 4% is receivable
quarterly in cash and the balance is receivable on April 17, 2009 when the
principal outstanding on the notes is repayable in full. Interest income
earned during the periods indicated has been capitalized to the balance of
notes receivable from related parties as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $1,789 (Cdn. $2,551)
Year ended December 31, 1998................................ $2,487 (Cdn. $4,029)
Year ended December 31, 1999................................ $2,688 (Cdn. $3,993)
</TABLE>
The notes are subordinate to bank indebtedness of FUMI Parking Business in
the amount of $21.2 million at December 31, 1999.
5. FIXED ASSETS:
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1998
Land................................................... $6,878 $ -- $6,878
Buildings and improvements............................. 1,752 72 1,680
------ ---- ------
$8,630 $ 72 $8,558
====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------ ------------ --------
<S> <C> <C> <C>
DECEMBER 31, 1999
Land................................................... $7,114 $ -- $7,114
Buildings and improvements............................. 1,722 115 1,607
------ ---- ------
$8,836 $115 $8,721
====== ==== ======
</TABLE>
6. NOTE PAYABLE TO FIRST UNION:
The promissory note payable to First Union is unsecured, bears interest
payable on December 31st each year at 11.875% per annum, matures on April
17, 2009 and, as at the dates indicated, was repayable in Canadian dollars
as follows:
<TABLE>
<S> <C>
December 31, 1998........................................... Cdn.$36,430
December 31, 1999........................................... Cdn.$40,500
</TABLE>
F-38
<PAGE> 95
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
6. NOTE PAYABLE TO FIRST UNION: (CONTINUED)
Interest expense incurred during the periods indicated has been included to
the note payable to First Union as follows:
<TABLE>
<S> <C> <C>
Period from April 17, 1997 to December 31, 1997............. $ 753 (Cdn.$1,074)
Year ended December 31, 1998................................ $2,469 (Cdn.$3,796)
Year ended December 31, 1999................................ $2,740 (Cdn.$3,954)
</TABLE>
7. INCOME TAXES:
Income tax expense is attributable to the Canadian operations of the FUR
Parking Business.
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 35% to income before income taxes as a result of
the following:
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 17, 1997 YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
--------------- ------------ -------------
<S> <C> <C> <C>
Computed "expected" tax expense.............. $ 714 $ 486 $(6,093)
Increase (reduction) in income taxes
resulting from:
Difference between U.S. federal and
Canadian effective tax rates.......... 82 57 (786)
Deductions allocated to the FUR Parking
Business by First Union............... (123) (151) (190)
Allowance for credit losses............. -- -- 7,095
Other................................... -- -- (112)
----- ----- -------
$ 673 $ 392 $ (86)
===== ===== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at the
balance sheet dates are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- $ 6,825
Other..................................................... -- --
---- -------
Total deferred tax assets................................... -- 6,825
Less: valuation allowance................................... -- (6,825)
---- -------
-- --
---- -------
Deferred tax liabilities:
Fixed assets, principally due to differences in
depreciation........................................... (11) (24)
Other..................................................... (1) --
---- -------
Total deferred tax liabilities.............................. (12) (24)
---- -------
Net deferred tax asset (liability).......................... $(12) $ (24)
==== =======
</TABLE>
F-39
<PAGE> 96
FUR PARKING BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Financial instruments to the FUR Parking Business include cash, accounts
receivable, notes receivable from related companies, trade accounts payable
and accrued liabilities, long-term debt and the note payable to First
Union. The fair values of those items included in current assets and
liabilities are estimated to equal their carrying value due to the
shorter-term to maturity or ability for prompt liquidation. At December 31,
1999, the fair value of the notes receivable from related parties is
estimated to be equal to the carrying value after giving effect to the
allowance for credit losses. The fair value of notes payable to First Union
are not readily determinable due to the nature of the relationship between
the FUR Parking Business and the other party.
9. RELATED PARTY TRANSACTIONS:
In addition to related party transactions disclosed elsewhere in these
combined financial statements, during the year ended December 31, 1999, the
FUR Parking Business sold a parking facility to the former president and
chief executive officer of Imperial Parking for proceeds equal to the
facility's net book value of $326,000 (Cdn.$480,000). The remaining
consideration is receivable over the period to May 2010.
10. SUBSEQUENT EVENT:
On January 20, 2000, the board of trustees approved a series of
transactions that will result in the combination of the FUR Parking
Business and the FUMI Parking Business under First Union and the
distribution of the all shares of the combined entity by First Union to
First Union's beneficiaries.
F-40
<PAGE> 97
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Impark Holdings Inc.
We have audited the consolidated statements of operations and retained
earnings (deficit) and cash flows of Impark Holdings Inc. for the period from
January 1, 1997 to April 16, 1997 and the nine months ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the results of the Company's operations and its cash
flows for the period from January 1, 1997 to April 16, 1997 and the nine months
ended December 31, 1996 in accordance with generally accepted accounting
principles in the United States.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
January 12, 2000
F-41
<PAGE> 98
IMPARK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Revenues (note 2(j))........................................ $35,755 $14,065
Direct costs................................................ 25,209 11,724
------- -------
Gross margin................................................ 10,546 2,341
Other operating expenses:
General and administrative................................ 7,568 3,547
Depreciation and amortization............................. 2,567 1,066
------- -------
10,135 4,613
------- -------
Operating income (loss)..................................... 411 (2,272)
Other income (expenses):
Gain on sale of investment................................ 993 --
Write-down of asset....................................... -- (236)
Interest expense:
Long-term debt......................................... (541) (453)
Other.................................................. (46) --
------- -------
406 (689)
------- -------
Income (loss) from continuing operations before income taxes
and discontinued operations............................... 817 (2,961)
Income taxes (recovery) (note 5):
Current................................................... 73 50
Deferred.................................................. 246 (353)
------- -------
319 (303)
------- -------
Income (loss) from continuing operations before discontinued
operations................................................ 498 (2,658)
Income (loss) from discontinued operations (note 6)......... 33 (30)
------- -------
Net income (loss)........................................... 531 (2,688)
Retained earnings, beginning of period...................... -- 531
------- -------
Retained earnings (deficit), end of period.................. $ 531 $(2,157)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE> 99
IMPARK HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Cash provided by (used in) operating activities:
Income (loss) from continuing operations.................. $ 498 $(2,658)
Adjustments to reconcile income (loss) from continuing
operations to cash provided by (used in) operating
activities:
Gain on sale of investments............................ (993) --
Depreciation and amortization.......................... 2,567 1,066
Deferred income taxes (recovery)....................... 246 (353)
Changes in non-cash working capital items:
Accounts receivable.................................... (2,067) 886
Inventory.............................................. (388) 9
Deposits and prepaid expenses.......................... (240) 127
Rents payable.......................................... 342 387
Trade accounts payable and other accrued liabilities... 404 682
Deferred revenue....................................... 74 (111)
-------- -------
Operating cash flows from continuing operations........ 443 35
Operating cash flows from discontinued operations...... (146) (217)
-------- -------
Net cash provided by (used in) operating activities....... 297 (182)
Cash flows provided by (used in) investing activities:
Additions to other assets................................. (650) (469)
Purchase of fixed assets.................................. (2,575) --
Additions to management agreements........................ (55) --
Acquisition of businesses, net of cash acquired (note
3)..................................................... (42,441) --
Proceeds on sale of investments........................... 1,085 --
Proceeds on disposal of assets............................ -- 131
-------- -------
Investing cash flows from continuing operations........... (44,636) (338)
Investing cash flows from discontinued operations......... (404) (61)
-------- -------
Net cash used in investing activities..................... (45,040) (399)
Cash flows provided by (used in) financing activities:
Issue of share capital, net............................... 24,662 --
Long-term debt issued..................................... 20,698 --
Bank indebtedness......................................... -- 30
Repayment of long-term debt............................... -- (34)
-------- -------
Financing cash flows from continuing operations........... 45,360 (4)
Financing cash flows from discontinued operations......... -- (32)
-------- -------
Net cash provided by (used in) financing activities....... 45,360 (36)
-------- -------
Increase (decrease) in cash................................. 617 (617)
Cash, beginning of period................................... -- 617
-------- -------
Cash, end of period......................................... $ 617 $ --
======== =======
Supplementary information:
Interest paid............................................. $ 406 $ 689
Income taxes paid......................................... 12 38
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE> 100
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
1. OPERATIONS:
Impark Holdings Inc. (the "Company") was incorporated on February 23, 1996
under the Ontario Business Corporations Act, and was inactive until the
commencement of operations upon the acquisition of Imperial Parking Ltd.
(see below) The Company's principal business activity during the periods
presented was the management of parking lots in Canada, the United States
and Asia.
Effective March 4, 1996, Onex Corporation, a Canadian public company,
through wholly-owned subsidiaries (the "Group") acquired all of the issued
and outstanding shares of Imperial Parking Ltd. ("Imperial") from existing
shareholders. Information with respect to the acquisition by the Group of
Imperial is set out in note 3(a). During the period ended December 31,
1996, 99.2% of the shares of Imperial were sold from the Group to the
Company. The remaining 0.8% was sold to companies controlled by the
existing management of Imperial.
As the shareholders of the Group also controlled the Company, this transfer
represented a transaction between companies under common control and has
been accounted for in these consolidated financial statements by a method
similar to the pooling of interests method. Under this method, the assets
and liabilities are recorded in the accounts of the Company at the carrying
amounts recorded by the Group. In addition, under this method, the
operations and cash flows of Imperial are reflected from the date that the
Group acquired Imperial.
The Company sold its investment in Imperial effective April 17, 1997 to
3357392 Canada Inc., an unrelated party. The Company's business was
subsequently carried on under First Union Real Estate Equity and Mortgage
Investments ("First Union") and First Union Management, Inc. ("FUMI"),
which are related entities. The operations carried on under FUMI are herein
defined as the "FUMI Parking Business". As allowed by the rules and
regulations of the Securities and Exchange Commission, the business
activities carried on by entities consolidated in these financial
statements subsequent to April 16, 1997 are included in separate financial
statements included in this Information Statement.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
The consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles and in
United States dollars. They include the accounts of the Company, its
99.2% owned subsidiary Imperial Holdings No. 2 Inc. ("Holdings") and
Holdings subsidiaries all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated.
These consolidated financial statements have been prepared solely to
comply with the rules and regulations of the Securities and Exchange
Commission for the presentation of information with respect to a
predecessor entity to a registrant. In accordance with these rules and
regulations, no consolidated balance sheet is required to be or has been
presented.
(b) Use of estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the recognized amounts of revenues and expenses
during the reporting period. Actual amounts may differ from the
estimates applied in the preparation of these consolidated financial
statements.
F-44
<PAGE> 101
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(c) Inventory:
Inventory consists of equipment parts and supplies and is recorded at
the lower of cost, determined on a first-in, first-out basis, and
replacement cost.
(d) Fixed assets:
Fixed assets are recorded at cost. Depreciation and amortization is
provided as follows:
<TABLE>
<CAPTION>
ASSET BASIS RATE
----- ----------------- -----------
<S> <C> <C>
Buildings........................................ declining-balance 3%
Furniture and fixtures........................... declining-balance 20%
Equipment........................................ declining-balance 20% and 30%
Automotive equipment............................. declining-balance 30%
</TABLE>
Leasehold improvements are depreciated straight-line over the shorter of
the lease term or the estimated useful life of the asset.
Routine maintenance and repairs are expensed as incurred.
(e) Management and lease agreements:
Management and lease agreements are recorded at cost and represent the
Company's investment in parking lot agreements acquired from other
parking facility management companies. Amortization is provided on a
straight-line basis over the agreements expected useful lives of twenty
years. The remaining carrying value of management and lease agreements
that are terminated before the end of the agreements are expensed at
that time.
(f) Impairment of fixed assets and management and lease agreements:
The Company accounts for long-lived assets (which include fixed assets
and management and lease agreements) in accordance with the provisions
of SFAS No. 121 -- Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. This Statement requires
that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
value of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount
of the asset exceeds its fair value. Assets to be disposed of are
reported at the lower of their carrying value or fair value less costs
to sell.
(g) Deferred financing costs:
The costs of obtaining long-term debt are initially capitalized and then
amortized over the term of the related debt. The amortization of these
charges is included in interest expense.
(h) Goodwill:
Goodwill represents the excess of cost over the fair values assigned to
the net assets acquired on the business acquisitions (note 3). Goodwill
is amortized on a straight line basis over 40 years.
F-45
<PAGE> 102
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(h) Goodwill: (continued)
The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(i) Income taxes:
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to (i) differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and (ii) operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(j) Revenue recognition:
Parking revenues consist of the revenues from managed and leased
locations. Management agreement revenues represent revenues (both fixed
fees and additional payments based upon parking revenues) from
facilities managed for other parties and miscellaneous management fees
for accounting, insurance and other ancillary services such as
consulting and transportation management services. Parking and
management contract revenues are recognized when earned in accordance
with the applicable agreement. Revenues from leased locations are
recognized in accordance with the terms of the lease agreements.
Deferred revenue is derived primarily for revenue received in advance of
its due date.
(k) Research and development:
Research and development costs are expensed as incurred.
(l) Foreign currency translation:
The functional currency of the Company's operations in Canada is the
Canadian dollar ("Cdn."). For facilities and operations located in the
United States, the functional currency is the United States dollar.
The assets and liabilities of the Canadian operations are translated
into United States dollars at exchange rates in effect at the balance
sheet date. Revenue and expense items are translated at the rates of
exchange prevailing during the period. The gains or losses resulting
from these translations are excluded from the determination of income
and included in the separate foreign currency translation account within
owners' equity. Other exchange gains and losses are included in the
determination of income.
F-46
<PAGE> 103
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
3. ACQUISITION OF BUSINESSES:
(a) Imperial Parking Ltd.:
Effective March 4, 1996, through a series of share purchase
transactions, the Group acquired 100% of the outstanding common shares
of Imperial from unrelated parties for aggregate consideration
(including costs) of $44.6 (Cdn.$60.6) million. The Group subsequently
sold its shares in Imperial to the Company (note 1). The acquisition by
the Group was accounted for by the purchase method and accordingly, the
aggregate purchase price, including related costs paid by the Group, was
assigned to Imperial's assets acquired and liabilities assumed based on
their fair values as of the acquisition date as follows:
<TABLE>
<S> <C>
Net working capital......................................... $(6,863)
Other assets................................................ 2,501
Fixed assets................................................ 9,453
Management and lease agreements............................. 13,225
Goodwill.................................................... 32,385
Long-term debt.............................................. (6,101)
-------
Consideration paid.......................................... $44,600
=======
Cash........................................................ $44,600
=======
</TABLE>
The tax basis of the deductible acquired assets was greater than the
fair values assigned at the date of acquisition. No value has been
assigned to the acquired deferred tax asset in the purchase equation
above due to uncertainty as to its realizability. See note 5.
The net working capital deficiency acquired of $6.9 million includes
$1.4 (Cdn.$1.9) million accrued for employee terminations and relocation
costs. Such costs reflect plans initiated by management of the Group at
the time of the acquisition and completed prior to December 31, 1996. As
indicated below, certain acquisition related accruals are unpaid at
April 16, 1997. These amounts relate to employee termination agreements
that, by contract, are payable over a period of years.
The activity impacting the accrual for employee terminations and
relocation costs in the periods presented is as follows:
<TABLE>
<CAPTION>
EMPLOYEE RELOCATION
TERMINATION COSTS TOTAL
----------- ---------- ------
<S> <C> <C> <C>
Balance, April 1, 1996.............................. $1,342 $74 $1,416
Charges utilized.................................... (319) (74) (393)
------ --- ------
Balance, December 31, 1996.......................... 1,023 -- 1,023
Charges utilized.................................... (125) -- (125)
------ --- ------
Balance, April 16, 1997............................. $ 898 $-- $ 898
====== === ======
</TABLE>
(b) Parking Services, Inc.:
On April 1, 1996, Imperial acquired the parking lot management and lease
agreements of Parking Services, Inc. from an unrelated party for cash
consideration, including costs, of $1.1 million. The acquisition is
accounted for by the purchase method with the results of operations
under the agreements included in these consolidated financial statements
from the
F-47
<PAGE> 104
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
3. ACQUISITION OF BUSINESSES: (CONTINUED)
(b) Parking Services, Inc.: (continued)
date of acquisition. The purchase price was assigned to management and
lease agreements, the identifiable asset acquired.
The fair values assigned equalled the tax basis of the assets acquired
at the date of acquisition.
(c) Century Security Limited:
On November 1, 1996, Imperial acquired 100% of the issued shares of
Century Security Limited from an unrelated party for cash consideration,
including costs, of approximately $210,000 (Cdn.$282,000). The
acquisition was accounted for by the purchase method with the results of
operations of Century included in these consolidated financial
statements from the date of acquisition. The purchase price was assigned
to management and lease agreements, the identifiable asset acquired.
The fair values assigned equalled the tax basis of the assets acquired
at the date of acquisition.
4. DEBT:
At April 16, 1997, the Company had outstanding debt and bank credit
facilities as follows:
(a) Term loan of $23.9 (Cdn.$33.5) million, repayable in semi-annual
installments of principal and interest commencing on June 30, 1997
with the balance to be repaid in full by October 31, 2003. The
semi-annual installments commence at $750,000 (Cdn.$1.05 million)
increasing annually to semi-annual installments of $3.0 (Cdn.$4.2)
million in the year 2003.
(b) Revolving acquisition loan of $1.1 (Cdn.$1.5) million, repayable in
semi-annual installments of principal and interest commencing on June
30, 1998 with the balance to be repaid in full by October 31, 2003.
The semi-annual installments commence at $285,000 (Cdn.$400,000)
increasing annually to semi-annual installments of $900,000 (Cdn.$1.3
million) in the year 2003.
Funds advanced under the term loan and revolving acquisition loan are
available at variable rates of interest based on Canadian prime, U.S. base,
Eurodollar and bankers' acceptances rates plus an applicable margin. The
applicable margin will vary to a maximum of 1.75% depending upon the type
of advance and the Company's compliance with certain financial ratios. The
average interest rate on long-term debt at April 16, 1997 was 4.90% (at
December 31, 1996 -- 5.00%).
(c) Loans payable:
Loans payable of $2.1 (Cdn.$2.9) million, repayable based on a 15 year
amortization period in equal monthly blended principal and interest
payments of Cdn.$34,514, and bearing interest at 8.2% per annum.
(d) Mortgage payable:
First mortgage payable of $140,000 (Cdn.$200,000), repayable in equal
monthly blended principal and interest payments of Cdn.$2,070 to
maturity on July 1, 1998, and bearing interest at 9.25% per annum.
F-48
<PAGE> 105
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
5. INCOME TAXES:
Income tax expense for the periods presented is substantially attributable
to continuing operations in Canada.
Income tax expense attributable to continuing operations differed from
amounts completed by applying the Canadian combined statutory income tax
rate to income (loss) from continuing operations before income taxes as
follows:
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Combined Canadian federal and provincial statutory rate..... 45.0% 45.0%
Income tax expense is comprised of:
At statutory rate......................................... $368 $(1,332)
Increase in losses carried forward........................ -- 979
Large corporations tax.................................... 38 48
Other..................................................... (87) 2
---- -------
$319 $ (303)
==== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and April 16, 1997 are presented below:
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 16,
1996 1997
------------ ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards......................... $ 1,065 $1,726
Research and development costs............................ 797 637
Fixed assets.............................................. 1,445 1,342
Accrued liabilities....................................... 686 1,181
Other..................................................... 284 331
------- ------
Total deferred tax assets................................... 4,277 5,217
Less: valuation allowance................................... (1,011) (1,947)
------- ------
3,266 3,270
------- ------
Deferred tax liabilities:
Management and lease agreements........................... (3,127) (3,270)
Other..................................................... (139) --
------- ------
Total deferred tax liabilities.............................. (3,266) (3,270)
------- ------
Net deferred tax assets (liabilities)....................... $ -- $ --
======= ======
</TABLE>
As of April 16, 1997, the Company has total income tax losses and
deductions carry forward of $3.9 (Cdn. -- $5.4) million which are available
to reduce taxable income otherwise calculated to 2003.
F-49
<PAGE> 106
IMPARK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(TABULAR DOLLAR AMOUNTS STATED IN THOUSANDS OF UNITED STATES DOLLARS)
6. DISCONTINUED OPERATIONS:
Prior to the issuance of its financial statements for the period ended
September 30, 1999, the FUMI Parking Business entered into a formal plan to
discontinue activities related to the manufacturing and sale of metered
equipment for public transit systems and parking lots. As these activities
will not form part of the business activities of Imperial Parking
Corporation, to which the Company is considered to be a predecessor entity,
they have been accounted for as discontinued operations in these
consolidated financial statements. This disposition is scheduled to be
completed by March 31, 2000 through the distribution to FUMI of all of the
shares of the company in which these activities are undertaken.
In addition, during 1999, the FUMI Parking Business sold all of its
security business for consideration equal to cash of $625,000 (Cdn.
$950,000) and notes receivable of $500,000 (Cdn. $750,000). No gain or loss
was recognized on this sale.
For the nine months ended December 31, 1996 and the period from January 1,
1997 to April 16, 1997 these activities were undertaken in subsidiaries of
the Company.
Loss from discontinued operations for the periods presented is calculated
as follows:
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM
ENDED JANUARY 1, 1997
DECEMBER 31, TO APRIL 16,
1996 1997
------------ ---------------
<S> <C> <C>
Revenues.................................................... $8,866 $3,494
Direct costs................................................ 6,733 2,556
General and administrative.................................. 1,958 910
Depreciation and amortization............................... 142 58
------ ------
8,833 3,524
------ ------
Income (loss) from discontinued operations.................. $ 33 $ (30)
====== ======
</TABLE>
Interest expense has not been allocated to discontinued operations.
F-50
<PAGE> 107
INFORMATION NOT INCLUDED IN THE INFORMATION STATEMENT
ITEM 15. FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
(a) Financial Statement Schedules
Financial Statement Schedules for the FUMI Parking Business and the FUR
Parking Business and the Report of Independent Public Accountants on
such Schedules are included in this Registration Statement as of January
12, 2000. All other financial statement schedules have been omitted
either because they are not required, are not applicable or the
information is otherwise set forth in the Financial Statement and Notes
thereto.
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1** Form of Memorandum of Understanding regarding the
Distribution between First Union Real Estate Equity and
Mortgage Investments ("First Union") and the Registrant.
3.1** Form of Amended and Restated Certificate of Incorporation of
the Registrant.
3.2** Form of Amended and Restated By-Laws of the Registrant.
4.1** Specimen certificate for shares of common stock of the
Registrant.
10.1** Form of 2000 Stock Incentive Plan of the Registrant.
10.2** Form of Credit Agreement.
10.3** Form of Guarantee.
10.4** Form of Indemnification Agreement.
10.6 Form of Huntzinger Employment Agreement.
10.7 Form of Wallner Employment Agreement.
10.8** Newsome Employment Agreement.
10.9** Form of Debenture.
21.1 Subsidiaries of the Registrant.
27.1** Financial Data Schedule for FUMI Parking Business for year
ending December 31, 1999.
27.2** Financial Data Schedule for FUMI Parking Business for year
ending December 31, 1998.
27.3** Financial Data Schedule for FUR Parking Business for year
ending December 31, 1999.
27.4** Financial Data Schedule for FUR Parking Business for year
ending December 31, 1998.
</TABLE>
- ---------------
*To be filed by amendment.
**Previously filed
A-1
<PAGE> 108
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Amendment No. 3 to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Vancouver, British Columbia on this 21st day of March, 2000.
IMPERIAL PARKING CORPORATION
By: /s/ CHARLES HUNTZINGER
------------------------------------
Charles Huntzinger
President and Chief Executive
Officer
A-2
<PAGE> 109
(LOGO)
PRINTED IN CANADA
O04278
<PAGE> 1
EXHIBIT 10.6
FORM OF
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made this day of March,
2000, by and between Imperial Parking Corporation, a Delaware corporation with
its principal place of business at 601 West Cordova Street, Vancouver, British
Columbia V6B1G1 (the "Company") and Charles Huntzinger, an individual residing
at 4123 Burkehill Road, West Vancouver, British Columbia, V7V3M3 ("Executive").
WHEREAS, Executive is experienced in managing significant business
enterprises in the parking industry; and
WHEREAS, the Company desires to retain the services of Executive as
President and Chief Executive Officer of the Company.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and undertakings stated herein, Executive and the Company hereby agree as
follows.
1. PERIOD OF EMPLOYMENT. Subject to all of the terms and conditions hereof
including without limitation, the termination provisions of this Agreement, the
term of this Agreement shall commence on the date on which is consummated the
distribution (the "Distribution") by First Union Real Estate Equity and Mortgage
Investments ("First Union") of substantially all of the Company's common stock,
par value $.01 per share, to the beneficiaries of First Union (the "Commencement
Date") and end on the fifth anniversary thereof (sometimes referred to as the
"Term" or the "Employment Period"). By executing this Agreement, the Company and
Executive represent that neither (i) the negotiation or execution of this
Agreement nor (ii) the performance of their respective duties and obligations
hereunder, shall violate any other agreement or law to which such parties are
bound or subject.
2. DUTIES AND POWERS OF EXECUTIVE. Subject to all of the terms and
conditions hereof, during the Employment Period, the Company shall employ
Executive as Chief Executive Officer and President of the Company. In addition,
during the Employment Period, Executive shall also serve in such capacity for
any and all subsidiaries of the Company, unless Executive waives such
assignment. During the Employment Period, Executive shall be responsible for the
management and operation of the Company and its subsidiaries, will have full
authority to manage, operate and take all acts, do all things and execute all
documents or assurances as he, in his discretion, deems necessary, desirable or
useful, including, but not limited to, the (i) hiring, terminating and
supervising decisions with respect to all employees of the Company and its
subsidiaries; (ii) coordinating the management team for the Company and its
subsidiaries, including instructing all Company and subsidiary officers as to
their working role in the daily affairs of the Company and its subsidiaries; and
(iii) attending to all matters requiring legal attention and instituting all
legal action or proceedings with regard to the ordinary course of the routine
affairs of the Company and its subsidiaries, all subject to the direction and
control of the Board of Directors of the Company (the "Board"). During the
Employment Period, Executive shall report and be accountable only to the Board.
Executive shall also serve on the Board for no additional compensation. During
the Employment Period, Executive shall exclusively devote his professional and
business time (other than absences due to illness or vacation) to Executive's
duties hereunder, except that Executive may serve on boards of
<PAGE> 2
directors or advisory boards of charitable organizations for reasonable amounts
of time and make reasonable personal investments provided that such activities
do not interfere with his services to the Company.
3. COMPENSATION.
(a) During the Employment Period, the Company shall pay Executive an
annual base compensation of $425,000 (U.S.) in approximately equal
installments in accordance with the Company's customary payroll practices
("Base Salary"). During the Employment Period, Executive's Base Salary
shall not be reduced.
(b) Stock Options.
(i) Thirty (30) trading days following the Commencement Date, the
Board or the compensation committee of the Board shall cause the Company
to grant Executive a stock option to acquire 95,625 shares of the
Company's common stock which is intended to represent 4.5% of the issued
and outstanding shares of the Company's common stock on a fully diluted
basis (calculated without giving effect to the grant contemplated
hereunder) as of the date of grant (the "Option"). To the extent
necessary to carry out the intended terms of this paragraph (b)(i), the
Option shall be adjusted as is necessary to take into account any change
in the common stock of the Company in a manner consistent with
adjustments made to other option holders and/or shareholders of the
Company generally. In addition, in the event that a rights offering of
the Company's common stock is made by the Company to its shareholders,
Executive shall be entitled to an additional option grant to acquire
4.5% of the shares of common stock issued pursuant to such offering on
the first $30,000,000 raised (the "Additional Option"). The Additional
Option shall be granted under substantial similar terms as those set
forth herein and with an exercise price per share equal to the fair
market value per share of the common stock upon the date of grant. The
Additional Option shall vest (or be vested) at the same time (and in the
same proportion) as the Option (if partially unvested) or shall be fully
vested if the Option is fully vested.
(ii) The Option described in paragraph (i) above shall be granted
subject to the following terms and conditions: (A) except as provided
below, the Option shall be granted under and subject to the Company's
stock option plan; (B) the exercise price per share of each Option shall
be equal to the greater of the (1) the last reported sales price of a
share of the common stock on the day which is the thirtieth (30th)
trading date following the Commencement Date or (2) the average closing
price of a share of common stock for the ten (10) day trading period
ending on the date which is the thirtieth (30th) trading date following
the Commencement Date, in either case, as reported on such principal
trading market for the Company's common stock where quotes are readily
available; provided, that, the exercise price of the Option shall be
adjusted at least monthly, but not below zero, by an increase of 0.8333%
per month (less all dividends and distributions (including non-cash
distributions) made to common shareholders on a per share basis) (C) the
Option shall vest and be exercisable as to 2.0833% of the shares subject
thereto on each of the forty-eight (48) monthly anniversaries of the
grant date; (D) unless earlier terminated or forfeited, the Option shall
be exercisable for the ten (10) year period following the date of grant;
(E) the Option shall become immediately vested and exercisable in full
upon a Change in Control (as defined below) or upon Executive's
termination
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<PAGE> 3
of employment by the Company without Cause (as defined below) or due to
his death or Disability (as defined below) or upon Executive's
termination of employment by him for Good Reason (as defined below); (F)
the Option shall provide that upon Executive's termination of employment
due to his death, Disability, by the Company without Cause or by
Executive for Good Reason, such Option will remain exercisable by
Executive (or his beneficiaries or estate in the event of his death) for
six (6) months following his termination of employment and in the event
Executive's employment is terminated for any other reason, ninety (90)
days following such termination of employment, but, in either case, in
no event beyond the ten (10) year term and (G) the Option shall be
evidenced by, and subject to, a stock option agreement whose terms and
conditions are consistent with the terms hereof. In addition, the
Company shall take all action necessary such that the shares of common
stock issuable upon exercise of the Option are registered on Form S-4 or
Form S-8 (or any successor or other appropriate forms) to the extent
such shares are eligible for registration thereon.
4. BENEFITS.
(a) During the Employment Period, the Company shall provide to
Executive all such health insurance, dental insurance, life insurance,
disability insurance, retirement savings, pension, and other fringe
benefits as are provided from time to time by the Company to its senior
executives generally, in accordance with the Company's general benefits
practices then in effect, in addition to any fringe benefits provided for
expressly in this Agreement without regard to eligibility restrictions
contained therein.
(b) During the Employment Period and upon appropriate documentation,
the Company shall reimburse Executive for all reasonable business and
travel expenses incurred by Executive in performing his duties hereunder in
accordance with the Company's reimbursement policy for senior executive
officers. During the Term, if Executive relocates to the Metro Area (as
defined below), the Company shall reimburse Executive for the cost of round
trip air tickets from his current working location to Columbus, Ohio once
every week.
(c) During the Employment Period, Executive shall be entitled to a
minimum of three (3) weeks paid vacation per year and such other paid
absences whether for holidays, sick days, personal time or any similar
purposes in accordance with the plans, policies and practices of the
Company in effect from time to time for senior executive officers
generally; provided, however, if less than three (3) weeks vacation is
taken by Executive in any year, the balance of vacation time may be taken
in whole or in part in any later year or years in addition to that year's
vacation time.
(d) During the Employment Period, the Company shall provide Executive,
at the Company's sole cost and expense, a new midsize automobile to be
selected by Executive which shall be replaced by the Company at the end of
its lease term which shall not exceed three (3) years. In addition to the
aggregate leasing or purchase costs, the Company shall bear all expenses
relating to the automobile, including, but not limited to insurance, fuel,
garaging and maintenance for such vehicle; provided, that, such amounts
will not exceed $10,000 (U.S.) annually. Upon termination of Executive's
employment for any reason,
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<PAGE> 4
Executive may purchase from the Company or its agent, at its depreciated
value, the automobile or assume any lease obligations with respect thereto.
(e) During the Employment Period, the Company shall contribute (or
credit on its books) $10,000 (U.S.) annually to an unfunded non-qualified
deferred compensation plan for the benefit of Executive under terms and
conditions that are mutually agreed to by the Company and Executive.
(f) If during the Term Executive relocates his family to Columbus,
Ohio (the "Metro Area"), the Company shall reimburse Executive, on an after
tax basis, for all relocation expenses incurred in connection with
Executive's move, including without limitation, reasonable costs for
Executive and his family to visit the Metro Area once in order to procure a
residence (including, related travel expenses), reasonable transportation
costs for Executive and his family to move to the Metro Area, all real
estate brokerage and related fees, closing costs, and legal expenses
incurred in connection with the purchase or leasing of a new home and sale
of Executive's current residence, and the actual cost of moving Executive's
and his family's household goods and personal effects. In addition, the
Company shall reimburse Executive, on an after tax basis, for any equity
losses Executive incurred on the sale of his current residence. In
addition, Company shall reimburse Executive, on an after tax basis, the
cost of temporary housing (not to exceed three (3) months) suitable for
Executive and his family during the period from his family's relocation to
the Metro Area until the closing date on the purchase or lease of the
family's permanent residence. Notwithstanding the foregoing, if Executive
so relocates to the Metro Area at his election, the Company's obligations
under this Section 4(f) shall be limited to $25,000. If the Company should
require Executive to relocate to any location during the Employment Period,
the Company shall fully reimburse Executive for his relocation expenses in
a manner consistent with this clause (f) without regard to the $25,000
limitation set forth therein.
(i) As soon as administratively feasible following the execution of
this Agreement, the Company shall pay directly to Executive's legal
counsel(s) the reasonable attorneys' fees and costs that Executive incurred
in connection with the negotiation and preparation of this Agreement,
provided that such legal fees do not exceed $12,500 (U.S.), such cap to be
exclusive of any costs (including cost associated with Canadian counsel
retained by Executive's U.S. counsel).
5. TERMINATION. Executive's employment by the Company hereunder shall end
immediately upon:
(a) Receipt by the Company of Executive's resignation from the Company
on no less than forty-five (45) days prior written notice;
(b) Executive's receipt of written notice from the Company of
termination of Executive's employment on no less than forty-five (45) days
prior written notice;
(c) Executive's death or Disability; or
(d) Expiration of the Employment Period, and the date on which any of
the foregoing terminations shall occur shall be the "Termination Date"
hereunder.
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<PAGE> 5
6. PAYMENTS UPON TERMINATION.
(a) If Executive's employment hereunder ends by reason of:
(i) Resignation by Executive without Good Reason;
(ii) The termination by the Company for Cause; or
(iii) Death;
then the Company shall pay Executive's Base Salary through the Termination Date,
accrued, but unpaid bonus for completed performance periods, and any other
payments or benefits due to Executive under any plan or policy of the Company or
as otherwise set forth in this Agreement. In addition, if Executive's employment
is terminated due to his death, then the Company shall pay to his beneficiaries
or estate, as the case may be, a prorated bonus for the year of termination.
(b) If Executive's employment hereunder ends by reason of Disability,
then the Company shall continue to pay Executive's Base Salary and
pro-rated bonus for six (6) months offset by any payments Executive should
receive under a long-term disability plan maintained by the Company or its
affiliates. In addition, Executive shall be paid any accrued, but unpaid
Bonus for completed performance periods and any other payments or benefits
due to Executive under any plan or policy of the Company or as otherwise
set forth in this Agreement including any benefits that Executive may be
entitled to under any disability insurance maintained for the benefit of
Executive during the term of his employment.
(c) If Executive's employment hereunder ends by reason of:
(i) Termination by the Company without Cause, or
(ii) Resignation by Executive for Good Reason
then the Company shall, within 15 days after the Termination Date, pay Executive
a lump sum payment in cash equal to two times the sum of (i) his then annual
Base Salary and (ii) his annual bonus paid for the year prior to the year his
termination, but in no event shall the sum of Base Salary and annual bonus be
less than $500,000 (U.S.) for this purpose ("Severance"), together with any
other amounts that he is owed under any incentive plans or other benefit plans
(including, without limitation, severance or bonus plans) in which he is then
participating. In addition, the Company shall continue to provide Executive and
his family with fully paid health and dental insurance coverage for a period of
two years following such termination.
(d) Termination by the Company for Cause shall mean termination for:
(i) An act or acts of dishonesty or fraud, knowingly and
intentionally undertaken by Executive, and intended to result in
enrichment of Executive at the expense of the Company;
5
<PAGE> 6
(ii) Failure to perform the duties and obligations of Executive's
employment which are willful and deliberate on Executive's part and
which are not remedied in a reasonable period of time after receipt of
written notice from the Company;
(iii) The final conviction of Executive of, or plea by Executive of
guilty or nolo contendere to, a felony involving moral turpitude; or
(iv) A breach of any material provision of this Agreement which
Executive has failed to cure within thirty (30) days of written notice
thereof by the Company.
For purposes of this paragraph, no act by Executive shall be considered
"willful" or "intentional" unless committed in bad faith or without a reasonable
belief that the act or omission was in the best interests of the Company. Cause
shall not exist under this paragraph unless and until the Company has delivered
to Executive a copy of a resolution duly adopted by a majority of the Board
(excluding Executive for purposes of determining such majority) at a meeting of
the Board called and held for such purpose (after reasonable (but in no event
less than twenty (20) days) notice to Executive and an opportunity for
Executive, together with the counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, Executive was guilty of the conduct
set forth in this paragraph and specifying the particulars thereof in detail.
This shall not prevent Executive from challenging in any court of competent
jurisdiction the Board's determination that Cause exists.
(e) Good Reason for resignation by Executive shall mean resignation
because of:
(i) a voluntary termination of employment by Executive that occurs
within twelve (12) months following the first anniversary of a Change in
Control (as defined below);
(ii) without the express written consent of Executive, the
assignment to Executive of duties materially adverse and inconsistent in
any substantial respect with Executive's position, authority and
responsibilities at the Company or any other material change in
authority;
(iii) any material failure by the Company to comply with the
provisions of this Agreement other than any failure remedied by the
Company, within thirty (30) days following receipt of notice thereof
given by Executive; or
(iv) any failure of the Company to pay Executive his Base Salary
when otherwise due or any action taken by the Company or the Company to
reduce such Base Salary, other than an inadvertent failure which is
immediately remedied by the Company after notice thereof given by
Executive.
6
<PAGE> 7
(f) Change of Control shall mean the occurrence of one or more of the
following:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the " 1934
Act")) immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
thirty-five percent (35%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a Change
in Control. A "Non-Control Acquisition" shall mean an acquisition by (1)
an employee benefit plan (or a trust forming a part thereof) maintained
by (x) the Company or any of its affiliates or (y) any corporation or
other Person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by the
Company (a "Subsidiary"), (2) the Company or any of its affiliates or
(3) any Person in connection with a "Non-Control Transaction" (as
defined below).
(ii) The individuals who are members of the Board on the
Commencement Date (the then "Incumbent Board"), cease for any reason to
constitute at least majority of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of the
then Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result
of either an actual or threatened "Election Contest" (as described in
Rule 14a-II promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board (a "Proxy Contest") including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) The consummation of-
(a) A merger, consolidation or reorganization involving the
Company, unless
1. the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation or
reorganization, at least sixty percent of the combined voting
power of the outstanding Voting Securities of the corporation
resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization,
and
2. the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least
a majority of the members of the board of
7
<PAGE> 8
directors of the Surviving Corporation or a corporation
beneficially owning, directly or indirectly, a majority of the
Voting Securities of the Surviving Corporation, and
3. no Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
thirty-five percent (35%) or more of the then outstanding Voting
Securities) owns, directly or indirectly, thirty percent or more
of the combined voting power of the Surviving Corporation's then
outstanding voting securities (a transaction described in clauses
1. through 3. shall herein be referred to as a "Non-Control
Transaction"); or
(b) A complete liquidation or dissolution of the Company; or
(c) The sale or other disposition of all or substantially all of
the assets of the Company to any Person.
A Change in Control shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur. In addition, notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated prior to a Change in
Control and Executive reasonably demonstrates that such termination (i) was at
the request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a Change
in Control (a "Third Party") or (ii) otherwise occurred in connection with, or
in anticipation of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control with respect to
Executive shall mean the date immediately prior to the date of such termination
of the Executive's employment.
Notwithstanding the foregoing, the consummation of the Distribution shall not be
a Change in Control for purposes of this Agreement.
(g) Disability means the determination by a physician mutually
agreeable to the Company and Executive that Executive is unable to perform
Executive's duties hereunder by reason of illness or other physical or
mental impairment or condition for 182 days in any 365 day period.
(h) In the event that any payment or benefit made to Executive
pursuant to this Agreement or otherwise (the "Payments") becomes subject to
an excise taxes ("Excise Tax") under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), then the
8
<PAGE> 9
amounts payable to Executive under this Agreement shall be the greater of
(A) the Payments, if the result of subtracting the Excise Tax from the
Payments is more than the Safe Harbor Cap and (B) the Payments, reduced to
the maximum amount as will result in no portion of the Payments being
subject to the Excise Tax (the "Safe Harbor Cap"). For purposes of reducing
the Payments to the Safe Harbor Cap, only amounts payable to Executive
under this Agreement (and no other Payments) shall be reduced, unless
consented to by Executive. The determination of amounts required to be paid
under this Section 6(h) shall be made by an independent auditor selected
and paid by the Company. Such independent auditor shall be a nationally
recognized accounting firm used by the Company to audit its financial
statements.
7. CONFIDENTIALITY; NON-COMPETITION; AND NON-SOLICITATION.
(a) Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data
relating to the Company or its affiliates ("Confidential Information"),
which shall have been obtained by Executive during Executive's employment
by the Company and which shall not be or become public knowledge (other
than by acts by Executive or representatives of Executive in violation of
this Agreement). After termination of Executive's employment with the
Company, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it.
(b) In consideration of the benefits to be provided to Executive
hereunder, Executive covenants that he will not, without the prior written
consent of the Company, during the Employment Period and the eighteen (18)
month period immediately following a termination of his employment to which
Section 6(c) of this Agreement applies ("Restriction Period") engage in any
way, directly or indirectly, in the Business (as defined below) within any
geographic location in which the Company is conducting the Business, other
than as an employee of the Company. For purposes of this Section 7,
Business means all activities of the Company relating to (i) acquiring,
owning, leasing, managing or operating parking facilities; (ii) providing
consulting services in connection with the development and operation of
parking facilities; (iii) manufacturing, assembling, selling and
distributing parking meters and parking facility operation and control
equipment; and (iv) printing and selling parking tickets.
(c) Executive hereby covenants and agrees that, at all times during
the Restriction Period, Executive shall not employ or seek to employ any
person employed during such period by the Company, or otherwise encourage
or entice such person or entity to leave such employment, except with
respect to the individuals in that certain letter from Executive to the
Company dated as of the date hereof, as such letter may be amended from
time to time with the express written consent of the Company which shall
not be unreasonably withheld.
(d) Notwithstanding any other provision contained herein, at the
Company's election delivered to the Executive within ten (10) business days
following Executive's termination of employment for any reason (other than
those to which Section 6(c) apply which shall be governed by Section 7(b)
hereof) the Company may elect to have the Executive comply with the
covenants set forth in Sections 7(b) and 7(c) during the eighteen (18)
9
<PAGE> 10
month period immediately following his termination of employment by paying
Executive an amount equal to the Severance contemplated under Section 6(c)
without regard to the reason for Executive's termination.
8. NO SET-OFF. The Company's obligations to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, or other right which the Company or the Company may
have against Executive or others. In no event, shall Executive be obligated to
seek other employment by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement is binding on Executive and the
Company and its successors and assigns; provided, however, that the rights and
obligations of the Company under this Agreement may not be assigned to a
successor without the prior written consent of Executive which consent shall not
be unreasonably withheld. No rights or obligations of Executive hereunder may be
assigned by Executive to any other person or entity.
10. GOVERNING LAW. This Agreement shall be construed under and governed by
the laws of the State of New York without regard to the conflicts or choice of
law provisions thereof.
11. SEVERABILITY. Each section and provision of this Agreement shall be
considered severable and any invalidity of any provision shall not render
invalid or impair to any extent any other section or provision hereof, all of
which shall be interpreted to carry out the intent of the parties to the fullest
extent permissible under the law.
12. ARBITRATION. If any dispute arises between the parties with respect to
the application, interpretation, or termination of this Agreement, then such
dispute shall be submitted to arbitration for resolution in New York City. The
arbitrator shall be selected and the arbitration shall be conducted pursuant to
the Employment Dispute Resolution Rules of the American Arbitration Association
("AAA"). Any request for arbitration must be made in writing by the party
seeking arbitration and must be delivered by hand or sent by registered or
certified mail, return receipt requested, postage prepaid, to both the other
party and the AAA within 90 days after the date on which the dispute between the
parties first arose. The decision of the arbitrator regarding any such dispute
shall be final and binding on both parties, and any court of competent
jurisdiction may enter judgment upon the award. The Company shall reimburse
Executive for all reasonable legal fees and out-of-pocket expenses attributable
to the dispute, unless the position taken by the Company is found to be correct
in all material respects.
13. NOTICES. All notices hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand or sent by registered or certified
mail, return receipt requested, postage prepaid, to the party to receive the
same at the address set forth on the first page of this Agreement or at such
other address as may have been furnished to the sender by notice hereunder. All
notices shall be deemed given on the date on which delivered or, if mailed, 2
days after the date postmarked.
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<PAGE> 11
14. SURVIVAL OF RIGHTS AND OBLIGATIONS. All rights and obligations of
Executive and the Company arising during the term of this Agreement shall
continue to have full force and effect after the termination of the Agreement
unless otherwise provided herein.
15. MISCELLANEOUS. This Agreement shall be effective upon consummation of
the Distribution. If the Distribution does not occur, this Agreement shall be
null and void and Executive's Prior Agreement (as defined below) shall remain in
full force and effect without regard to this Section 15. Upon its effectiveness,
this Agreement shall contain the entire understandings of the parties hereto
with respect to the employment of Executive by the Company, and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto in respect of such subject matter,
including, without limitation, as of the Commencement Date, the Employment
Agreement, by and between, First Union Management Inc., Imperial Parking Limited
and Executive, dated November 6, 1998 (the "Prior Agreement"). No provision
thereof may be altered, amended, modified, waived, or discharged in any way
whatsoever except by written agreement executed by the parties. No delay or
failure of either party to insist, in any one or more instances, upon
performance of any of the terms and conditions of this Agreement or to exercise
any rights or remedies thereunder shall constitute a waiver or a relinquishment
of such rights or remedies or any other rights or remedies hereunder.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first above written.
<TABLE>
<S> <C>
Charles Huntzinger IMPERIAL PARKING CORPORATION
- -------------------------------- --------------------------------
By: ----------------------------
</TABLE>
Only with respect to the termination of the Prior Agreement as provided in
Section 15 of the Agreement.
FIRST UNION MANAGEMENT, INC.
- --------------------------------
IMPERIAL PARKING LIMITED
- --------------------------------
11
<PAGE> 1
EXHIBIT 10.7
FORM OF EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made this day of March,
2000, by and between Imperial Parking Corporation, a Delaware corporation with
its principal place of business at 601 West Cordova Street, Vancouver, British
Columbia V6B1G1 (the "Company") and Bryan Wallner, an individual residing at
5683 Westport Road, West Vancouver, British Columbia, V7V1M3 ("Executive").
WHEREAS, the Company desires to retain the services of Executive as Senior
Vice President--Operations and Executive desires to serve in that capacity.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and undertakings stated herein, Executive and the Company hereby agree as
follows.
1. PERIOD OF EMPLOYMENT. Subject to all of the terms and conditions hereof
including without limitation, the termination provisions of this Agreement, the
term of this Agreement shall commence on the date on which is consummated the
distribution (the "Distribution") by First Union Real Estate Equity and Mortgage
Investments ("First Union") of substantially all of the Company's common stock,
par value $.01 per share, to the beneficiaries of First Union (the "Commencement
Date") and end on the fifth anniversary thereof (sometimes referred to as the
"Term" or the "Employment Period"). By executing this Agreement, the Company and
Executive represent that neither (i) the negotiation or execution of this
Agreement nor (ii) the performance of their respective duties and obligations
hereunder, shall violate any other agreement or law to which such parties are
bound or subject.
2. DUTIES AND POWERS OF EXECUTIVE. Subject to all of the terms and
conditions hereof, the Company shall employ Executive as Senior Vice
President--Operations of the Company. During the Employment Period, Executive
shall have these powers and duties normally associated with the position of
Senior Vice President--Operations and such other powers and duties as may be
prescribed by the Company; provided, that, such powers and duties are consistent
with Executive's position. During the Employment Period, Executive shall
exclusively devote his professional and business time (other than absences due
to illness or vacation) to Executive's duties hereunder, except that Executive
may serve on boards of directors or advisory boards of charitable organizations
for reasonable amounts of time and make reasonable personal investments;
provided, that, such activities do not interfere with his services to the
Company.
3. COMPENSATION.
(a) During the Employment Period, the Company shall pay Executive an
annual base compensation of $237,000 (U.S.) in approximately equal
installments in accordance with the Company's customary payroll practices
("Base Salary"). During the Employment Period, Executive's Base Salary
shall not be reduced.
(b) For every fiscal year during the Employment Period, Executive
shall be paid an annual bonus no later than sixty (60) days following the
close of the Company's fiscal year equal to 1.75% of the increase in the
Company's EBITDA over the Company's
<PAGE> 2
EBITDA for 1998 ("1998 EBITDA"), calculated in accordance with generally
accepted accounting principles (the "Bonus"). For purposes of calculating
EBITDA, all nonrecurring extraordinary expenses and any impact on EBITDA of
any acquisitions or dispositions shall be excluded. In addition, EBITDA
shall be adjusted to reflect the amount of Company capital (including an
interest charge on such capital at a rate of not more than 10% per annum)
utilized in connection with acquiring, leasing and development of new
Company operated parking facilities.
(c) Stock Options.
(i) Thirty (30) trading days following the Commencement Date, the
Board or the compensation committee of the Board shall cause the Company
to grant Executive a stock option to acquire 21,250 shares of the
Company's common stock which is intended to represent 1.0% of the issued
and outstanding shares of the Company's common stock on a fully diluted
basis (calculated without giving effect to the grant contemplated
hereunder) as of the date of grant (the "Option"). To the extent
necessary to carry out the intended terms of this paragraph (c)(i), the
Option shall be adjusted as is necessary to take into account any change
in the common stock of the Company in a manner consistent with
adjustments made to other option holders and/or shareholders of the
Company generally. In addition, in the event that a rights offering of
the Company's common stock is made by the Company to its shareholders,
Executive shall be entitled to an additional option grant to acquire
1.0% of the shares of common stock issued pursuant to such offering on
the first $30,000,000 raised (the "Additional Option"). The Additional
Option shall be granted under substantial similar terms as those set
forth herein and with an exercise price per share equal to the fair
market value per share of the common stock upon the date of grant. The
Additional Option shall vest (or be vested) at the same time (and in the
same proportion) as the Option (if partially unvested) or shall be fully
vested if the Option is fully vested.
(ii) The Option described in paragraph (i) above shall be granted
subject to the following terms and conditions: (A) except as provided
below, the Option shall be granted under and subject to the Company's
stock option plan; (B) the exercise price per share of each Option shall
be equal to the greater of the (1) the last reported sales price of a
share of the common stock on the day which is the thirtieth (30th)
trading date following the Commencement Date or (2) the average closing
price of a share of common stock for the ten (10) day trading period
ending on the date which is the thirtieth (30th) trading date following
the Commencement Date, in either case, as reported on such principal
trading market for the Company's common stock where quotes are readily
available; provided, that, the exercise price of the Option shall be
adjusted at least monthly, but not below zero, by an increase of 0.8333%
per month (less all dividends and distributions (including non-cash
distributions) made to common shareholders on a per share basis) (C) the
Option shall vest and be exercisable as to 2.0833% of the shares subject
thereto on each of the forty-eight (48) monthly anniversaries of the
grant date; (D) unless earlier terminated or forfeited, the Option shall
be exercisable for the ten (10) year period following the date of grant;
(E) the Option shall become immediately vested and exercisable in full
upon a Change in Control (as defined below) or upon Executive's
termination of employment by the Company without Cause (as defined
below) or due to his death or Disability (as defined below) or upon
Executive's termination of employment by him for Good Reason (as defined
below); (F) the Option shall provide that upon Executive's termination
of
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employment due to his death, Disability, by the Company without Cause or
by Executive for Good Reason, such Option will remain exercisable by
Executive (or his beneficiaries or estate in the event of his death) for
six (6) months following his termination of employment and in the event
Executive's employment is terminated for any other reason, ninety (90)
days following such termination of employment, but, in either case, in
no event beyond the ten (10) year term and (G) the Option shall be
evidenced by, and subject to, a stock option agreement whose terms and
conditions are consistent with the terms hereof. In addition, the
Company shall take all action necessary such that the shares of common
stock issuable upon exercise of the Option are registered on Form S-4 or
Form S-8 (or any successor or other appropriate forms) to the extent
such shares are eligible for registration thereon.
4. BENEFITS.
(a) During the Employment Period, the Company shall provide to
Executive all such health insurance, dental insurance, life insurance,
disability insurance, retirement savings, pension, and other fringe
benefits as are provided from time to time by the Company to its senior
executives generally, in accordance with the Company's general benefits
practices then in effect, in addition to any fringe benefits provided for
expressly in this Agreement without regard to eligibility restrictions
contained therein.
(b) During the Employment Period and upon appropriate documentation,
the Company shall reimburse Executive for all reasonable business and
travel expenses incurred by Executive in performing his duties hereunder in
accordance with the Company's reimbursement policy for senior executive
officers.
(c) During the Employment Period, Executive shall be entitled to a
minimum of three (3) weeks paid vacation per year and such other paid
absences whether for holidays, sick days, personal time or any similar
purposes in accordance with the plans, policies and practices of the
Company in effect from time to time for senior executive officers
generally; provided, however, if less than three (3) weeks vacation is
taken by Executive in any year, the balance of vacation time may be taken
in whole or in part in any later year or years in addition to that year's
vacation time.
(d) During the Employment Period, the Company shall provide Executive,
at the Company's sole cost and expense, a new midsize automobile to be
selected by Executive which shall be replaced by the Company at the end of
its lease term which shall not exceed three (3) years. In addition to the
aggregate leasing or purchase costs, the Company shall bear all expenses
relating to the automobile, including, but not limited to insurance, fuel,
garaging and maintenance for such vehicle; provided, that, such amounts
will not exceed $10,000 (U.S.) annually. Upon termination of Executive's
employment for any reason, Executive may purchase from the Company or its
agent, at its depreciated value, the automobile or assume any lease
obligations with respect thereto.
(e) By March 31 of each year during the Employment Period, the Company
shall pay to Executive an additional cash payment to make Executive whole
for any additional taxes owed by Executive on all cash and non-cash
benefits provided under this Agreement (including this clause (e)) due to
residing in Vancouver, British Columbia and being
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<PAGE> 4
subject to Canadian national and local taxes at any time during such year
over such obligations if Executive had resided solely in Cincinnati, Ohio
during such year.
(f) If the Company requires that Executive relocate and Executive
agrees to such relocation, prior to the date Executive relocates his family
to such region or area so requested by the Company (the "Metro Area"), the
Company shall reimburse Executive, on an after tax basis, (i) the cost of
temporary housing for a period of up to one year for a furnished
one-bedroom apartment in a first class rental building located within the
Metro Area and (ii) for a period of one year, the cost of reasonable travel
expenses for Executive and his family to visit the Metro Area once.
(g) If Executive relocates his family to the Metro Area as provided in
clause (g) above, the Company shall reimburse Executive, on an after tax
basis, for all relocation expenses incurred in connection with Executive's
move, including without limitation, reasonable costs for Executive and his
family to visit the Metro Area once in order to procure a residence
(including, related travel expenses), reasonable transportation costs for
Executive and his family to move to the Metro Area, all real estate
brokerage and related fees, closing costs, and legal expenses incurred in
connection with the purchase or leasing of a new home and sale of
Executive's current residence, the actual cost of moving Executive's and
his family's household goods and personal effects. In addition, the Company
shall reimburse Executive, on an after tax basis, for any equity losses
Executive incurred on the sale of his current residence. In addition,
Company shall reimburse Executive, on an after tax basis, the cost of
temporary housing (not to exceed three (3) months) suitable for Executive
and his family during the period from his family's relocation to the Metro
Area until the closing date on the purchase or lease of the family's
permanent residence.
(i) As soon as administratively feasible following the execution of
this Agreement, the Company shall pay directly to Executive's legal
counsel(s) the reasonable attorneys' fees and costs that Executive incurred
in connection with the negotiation and preparation of this Agreement,
provided that such legal fees do not exceed $5,000 (U.S.), such cap to be
exclusive of any costs (including cost associated with Canadian counsel
retained by Executive's U.S. counsel).
5. TERMINATION. Executive's employment by the Company hereunder shall end
immediately upon:
(a) Receipt by the Company of Executive's resignation from the Company
on no less than forty-five (45) days prior written notice;
(b) Executive's receipt of written notice from the Company of
termination of Executive's employment on no less than forty-five (45) days
prior written notice;
(c) Executive's death or Disability; or
(d) Expiration of the Employment Period, and the date on which any of
the foregoing terminations shall occur shall be the "Termination Date"
hereunder.
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6. PAYMENTS UPON TERMINATION.
(a) If Executive's employment hereunder ends by reason of:
(i) Resignation by Executive without Good Reason;
(ii) The termination by the Company for Cause; or
(iii) Death;
then the Company shall pay Executive's Base Salary through the Termination Date,
accrued, but unpaid Bonus for completed performance periods, and any other
payments or benefits due to Executive under any plan or policy of the Company or
as otherwise set forth in this Agreement. In addition, if Executive's employment
is terminated due to his death, then the Company shall pay to his beneficiaries
or estate, as the case may be, a pro-rated Bonus for the year of termination.
(b) If Executive's employment hereunder ends by reason of Disability,
then the Company shall continue to pay Executive's Base Salary and
pro-rated Bonus for six (6) months offset by any payments Executive should
receive under a long-term disability plan maintained by the Company or its
affiliates. In addition, Executive shall be paid any accrued, but unpaid
Bonus for completed performance periods and any other payments or benefits
due to Executive under any plan or policy of the Company or as otherwise
set forth in this Agreement including any benefits that Executive may be
entitled to under any disability insurance maintained for the benefit of
Executive during the term of his employment.
(c) If Executive's employment hereunder ends by reason of:
(i) Termination by the Company without Cause, or
(ii) Resignation by Executive for Good Reason
then the Company shall, within 15 days after the Termination Date, pay Executive
a lump sum payment in cash equal to two times the sum of (i) his then annual
Base Salary and (ii) his annual Bonus paid for the year prior to the year his
termination, but in no event shall the sum of Base Salary and annual Bonus be
less than $237,000 (U.S.) for this purpose ("Severance"), together with any
other amounts that he is owed under any incentive plans or other benefit plans
(including, without limitation, severance or bonus plans) in which he is then
participating and any amounts that may become due under Section 4(e) for the
year of termination, taken into account the Severance. In addition, the Company
shall continue to provide Executive and his family with fully paid health and
dental insurance coverage for a period of two years following such termination.
(d) Termination by the Company for Cause shall mean termination for:
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<PAGE> 6
(i) An act or acts of dishonesty or fraud, knowingly and
intentionally undertaken by Executive, and intended to result in
enrichment of Executive at the expense of the Company;
(ii) Failure to perform the duties and obligations of Executive's
employment which are willful and deliberate on Executive's part and
which are not remedied in a reasonable period of time after receipt of
written notice from the Company;
(iii) The final conviction of Executive of, or plea by Executive of
guilty or nolo contendere to, a felony involving moral turpitude; or
(iv) A breach of any material provision of this Agreement which
Executive has failed to cure within thirty (30) days of written notice
thereof by the Company.
For purposes of this paragraph, no act by Executive shall be considered
"willful" or "intentional" unless committed in bad faith or without a reasonable
belief that the act or omission was in the best interests of the Company. Cause
shall not exist under this paragraph unless and until the Company has delivered
to Executive a copy of a resolution duly adopted by a majority of the Board
(excluding Executive for purposes of determining such majority) at a meeting of
the Board called and held for such purpose (after reasonable (but in no event
less than twenty (20) days) notice to Executive and an opportunity for
Executive, together with the counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, Executive was guilty of the conduct
set forth in this paragraph and specifying the particulars thereof in detail.
This shall not prevent Executive from challenging in any court of competent
jurisdiction the Board's determination that Cause exists.
(e) Good Reason for resignation by Executive shall mean resignation
because of:
(i) a voluntary termination of employment by Executive that occurs
within twelve (12) months following the first anniversary of a Change in
Control (as defined below);
(ii) without the express written consent of Executive, the
assignment to Executive of duties materially adverse and inconsistent in
any substantial respect with Executive's position, authority and
responsibilities at the Company or any other material change in
authority;
(iii) any material failure by the Company to comply with the
provisions of this Agreement other than any failure remedied by the
Company, within thirty (30) days following receipt of notice thereof
given by Executive; or
(iv) any failure of the Company to pay Executive his Base Salary
when otherwise due or any action taken by the Company or the Company to
reduce such
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<PAGE> 7
Base Salary, other than an inadvertent failure which is immediately
remedied by the Company after notice thereof given by Executive.
(f) Change of Control shall mean the occurrence of one or more of the
following:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the " 1934
Act")) immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
thirty-five percent (35%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however, that in
determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a Change
in Control. A "Non-Control Acquisition" shall mean an acquisition by (1)
an employee benefit plan (or a trust forming a part thereof) maintained
by (x) the Company or any of its affiliates or (y) any corporation or
other Person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by the
Company (a "Subsidiary"), (2) the Company or any of its affiliates or
(3) any Person in connection with a "Non-Control Transaction" (as
defined below).
(ii) The individuals who are members of the Board on the
Commencement Date (the then "Incumbent Board"), cease for any reason to
constitute at least majority of the Board; provided, however, that if
the election, or nomination for election by the Company's stockholders,
of any new director was approved by a vote of at least two-thirds of the
then Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result
of either an actual or threatened "Election Contest" (as described in
Rule 14a-II promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board (a "Proxy Contest") including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) The consummation of-
(a) A merger, consolidation or reorganization involving the
Company, unless
1. the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or indirectly,
immediately following such merger, consolidation or reorganization,
at least sixty percent of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger,
consolidation or reorganization, and
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2. the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least a
majority of the members of the board of directors of the Surviving
Corporation or a corporation beneficially owning, directly or
indirectly, a majority of the Voting Securities of the Surviving
Corporation, and
3. no Person (other than the Company, any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
thirty-five percent (35%) or more of the then outstanding Voting
Securities) owns, directly or indirectly, thirty percent or more of
the combined voting power of the Surviving Corporation's then
outstanding voting securities (a transaction described in clauses 1.
through 3. shall herein be referred to as a "Non-Control
Transaction"); or
(b) A complete liquidation or dissolution of the Company; or
(c) The sale or other disposition of all or substantially all of the
assets of the Company to any Person.
A Change in Control shall not be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Person, provided that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur. In addition, notwithstanding anything contained in this Agreement
to the contrary, if Executive's employment is terminated prior to a Change in
Control and Executive reasonably demonstrates that such termination (i) was at
the request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a Change
in Control (a "Third Party") or (ii) otherwise occurred in connection with, or
in anticipation of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control with respect to
Executive shall mean the date immediately prior to the date of such termination
of the Executive's employment.
Notwithstanding the foregoing, the consummation of the Distribution shall not be
a Change in Control for purposes of this Agreement.
(g) Disability means the determination by a physician mutually
agreeable to the Company and Executive that Executive is unable to perform
Executive's duties hereunder by reason of illness or other physical or
mental impairment or condition for 182 days in any 365 day period.
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(h) In the event that any payment or benefit made to Executive
pursuant to this Agreement or otherwise (the "Payments") becomes subject to
an excise taxes ("Excise Tax") under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), then the amounts payable to
Executive under this Agreement shall be the greater of (A) the Payments, if
the result of subtracting the Excise Tax from the Payments is more than the
Safe Harbor Cap and (B) the Payments, reduced to the maximum amount as will
result in no portion of the Payments being subject to the Excise Tax (the
"Safe Harbor Cap"). For purposes of reducing the Payments to the Safe
Harbor Cap, only amounts payable to Executive under this Agreement (and no
other Payments) shall be reduced, unless consented to by Executive. The
determination of amounts required to be paid under this Section 6(h) shall
be made by an independent auditor selected and paid by the Company. Such
independent auditor shall be a nationally recognized accounting firm used
by the Company to audit its financial statements.
7. CONFIDENTIALITY; NON-COMPETITION; AND NON-SOLICITATION.
(a) Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or data
relating to the Company or its affiliates ("Confidential Information"),
which shall have been obtained by Executive during Executive's employment
by the Company and which shall not be or become public knowledge (other
than by acts by Executive or representatives of Executive in violation of
this Agreement). After termination of Executive's employment with the
Company, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it.
(b) In consideration of the benefits to be provided to Executive
hereunder, Executive covenants that he will not, without the prior written
consent of the Company, during the Employment Period and the twelve (12)
month period following his termination of employment for any reason (the
"Restriction Period") engage in any way, directly or indirectly, in the
Business (as defined below) of the Company anywhere within Canada OR
LOCATIONS IN THE U.S. IN WHICH THE COMPANY IS CONDUCTING BUSINESS AS OF THE
EXECUTIVE'S DATE OF TERMINATION,other than as an employee of the Company.
For purposes of this Section 7, Business means all activities of the
Company relating to (i) acquiring, owning, leasing, managing or operating
parking facilities; (ii) providing consulting services in connection with
the development and operation of parking facilities; (iii) manufacturing,
assembling, selling and distributing parking meters and parking facility
operation and control equipment; and (iv) printing and selling parking
tickets. Notwithstanding any other provision contained herein, Executive
shall not be deemed to have breached this covenant if he engages in the
Business with any Canadian entity outside of Canada.
(c) Executive hereby covenants and agrees that, at all times during
the Restriction Period, Executive shall not employ or seek to employ any
person employed during such period by the Company, or otherwise encourage
or entice such person or entity to leave such employment.
8. NO SET-OFF. The Company's obligations to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by
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any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, or other right which the Company or the Company may have against
Executive or others. In no event, shall Executive be obligated to seek other
employment by way of mitigation of the amounts payable to Executive under any of
the provisions of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement is binding on Executive and the
Company and its successors and assigns; provided, however, that the rights and
obligations of the Company under this Agreement may not be assigned to a
successor without the prior written consent of Executive which consent shall not
be unreasonably withheld. No rights or obligations of Executive hereunder may be
assigned by Executive to any other person or entity.
10. GOVERNING LAW. This Agreement shall be construed under and governed by
the laws of the State of New York without regard to the conflicts or choice of
law provisions thereof.
11. SEVERABILITY. Each section and provision of this Agreement shall be
considered severable and any invalidity of any provision shall not render
invalid or impair to any extent any other section or provision hereof, all of
which shall be interpreted to carry out the intent of the parties to the fullest
extent permissible under the law.
12. ARBITRATION. If any dispute arises between the parties with respect to
the application, interpretation, or termination of this Agreement, then such
dispute shall be submitted to arbitration for resolution in New York City. The
arbitrator shall be selected and the arbitration shall be conducted pursuant to
the Employment Dispute Resolution Rules of the American Arbitration Association
("AAA"). Any request for arbitration must be made in writing by the party
seeking arbitration and must be delivered by hand or sent by registered or
certified mail, return receipt requested, postage prepaid, to both the other
party and the AAA within 90 days after the date on which the dispute between the
parties first arose. The decision of the arbitrator regarding any such dispute
shall be final and binding on both parties, and any court of competent
jurisdiction may enter judgment upon the award. The Company shall reimburse
Executive for all reasonable legal fees and out-of-pocket expenses attributable
to the dispute, unless the position taken by the Company is found to be correct
in all material respects.
13. NOTICES. All notices hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand or sent by registered or certified
mail, return receipt requested, postage prepaid, to the party to receive the
same at the address set forth on the first page of this Agreement or at such
other address as may have been furnished to the sender by notice hereunder. All
notices shall be deemed given on the date on which delivered or, if mailed, 2
days after the date postmarked.
14. SURVIVAL OF RIGHTS AND OBLIGATIONS. All rights and obligations of
Executive and the Company arising during the term of this Agreement shall
continue to have full force and effect after the termination of the Agreement
unless otherwise provided herein.
15. MISCELLANEOUS. This Agreement shall be effective upon consummation of
the Distribution. If the Distribution does not occur, this Agreement shall be
null and void and Executive's Prior Agreement (as defined below) shall remain in
full force and effect without
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regard to this Section 15. Upon its effectiveness, this Agreement shall contain
the entire understandings of the parties hereto with respect to the employment
of Executive by the Company, and supersede all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto
in respect of such subject matter, including, without limitation, as of the
Commencement Date, the Employment Agreement, by and between, First Union
Management Inc., Imperial Parking Limited and Executive, dated January 15, 1999
(the "Prior Agreement"). No provision thereof may be altered, amended, modified,
waived, or discharged in any way whatsoever except by written agreement executed
by the parties. No delay or failure of either party to insist, in any one or
more instances, upon performance of any of the terms and conditions of this
Agreement or to exercise any rights or remedies thereunder shall constitute a
waiver or a relinquishment of such rights or remedies or any other rights or
remedies hereunder.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly
executed on the date and year first above written.
<TABLE>
<S> <C>
Bryan Wallner IMPERIAL PARKING CORPORATION
- -------------------------------- --------------------------------
By:
--------------------------------
</TABLE>
Only with respect to the termination of the Prior Agreement as provided in
Section 15 of the Agreement.
FIRST UNION MANAGEMENT, INC.
- --------------------------------
IMPERIAL PARKING LIMITED
- --------------------------------
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Exhibit 21.1
SUBSIDIARIES
3006712 Nova Scotia Company
Advanced Parking Systems Ltd.
P1 Parking Systems Inc.
Prairie Parking Ltd.
Impark Management Ltd.
City Collection Company Ltd.
Citation Collection Company Ltd.
Imperial Parking Canada Corporation
IPK Holdings, LLC
IPK Subsidiary, Inc.
