<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1998
REGISTRATION NO. 333-65663
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEATHERFORD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 3498 04-2515019
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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BERNARD J. DUROC-DANNER
WEATHERFORD INTERNATIONAL, INC.
5 POST OAK PARK, SUITE 1760 5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027-3415 HOUSTON, TEXAS 77027-3415
(713) 297-8400 (713) 297-8400
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including number,
area code, of registrant's principal executive including area code, of agent for service)
offices)
</TABLE>
Copies to:
CURTIS W. HUFF
WEATHERFORD INTERNATIONAL, INC.
5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027-3415
(713) 297-8400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the merger described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
joint proxy statement/prospectus contained in this Registration Statement
relates to a previously filed Registration Statement on Form S-4, as amended
(Registration No. 333-58741).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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WEATHERFORD INTERNATIONAL, INC.
5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY -- , 1999
NOTICE IS HEREBY GIVEN that Weatherford International, Inc. will hold a
Special Meeting of Stockholders at The Luxury Collection Hotel of Houston, 1919
Briar Oaks, Houston, Texas, on January -- , 1999, at 9:00 a.m., Houston time,
for the following purposes:
1. To consider and vote on a proposal to acquire Christiana Companies,
Inc. pursuant to an Amended and Restated Agreement and Plan of Merger dated
October 14, 1998, among Weatherford, Christiana, C2, Inc. and Christiana
Acquisition, Inc., for shares of Weatherford common stock and cash as more
specifically described in the attached Joint Proxy Statement/Prospectus.
After the merger, Christiana will be a wholly owned subsidiary of
Weatherford.
2. To approve a postponement or adjournment of the special meeting to
solicit additional votes if there are not sufficient votes to approve
proposal number 1.
3. To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
The Board of Directors fixed the close of business on December 10, 1998, as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the special meeting or any adjournment or postponement
thereof. Only stockholders of record at the close of business on the record date
are entitled to notice of and to vote at the special meeting. A complete list of
these stockholders will be available for examination at the special meeting and
at Weatherford's offices at 5 Post Oak Park, Suite 1760, Houston, Texas, during
ordinary business hours, after December 10, 1998, for the examination of any
stockholder for any purpose germane to the special meeting.
By order of the Board of Directors,
/s/ CURTIS W. HUFF
CURTIS W. HUFF,
Corporate Secretary
December -- , 1998
------------------------
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. EVEN IF
YOU PLAN TO BE PRESENT, YOU ARE URGED TO MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
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CHRISTIANA COMPANIES, INC.
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700 N. WATER ST., SUITE 1200
MILWAUKEE, WISCONSIN 53202
TELEPHONE 414/291-9000
FACSIMILE 414/291-9061
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY -- , 1999
NOTICE IS HEREBY GIVEN that Christiana Companies, Inc. will hold a Special
Meeting of Shareholders on January -- , 1999, at 9:00 a.m., Milwaukee time, at
the Galleria Conference Room, Firstar Center, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin for the following purposes:
(1) To consider and vote upon a proposal to approve the Amended and
Restated Agreement and Plan of Merger, dated as of October 14, 1998, by and
among Christiana, Weatherford International, Inc., Christiana Acquisition,
Inc. and C2, Inc., the terms and conditions of which include an agreement
by and among Christiana, C2, Total Logistic Control, LLC and Weatherford,
pursuant to which Christiana will sell two-thirds of its interest in Total
Logistic Control for $10.67 million. The transactions contemplated by the
merger agreement are more fully described in the attached joint proxy
statement/prospectus.
(2) To approve an adjournment of the special meeting to solicit
additional proxies in the event that there are not sufficient votes to
approve the foregoing proposal.
(3) To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on December 10, 1998 has been fixed as a record date
for the determination of shareholders entitled to notice of, and to vote at, the
special meeting and any adjournment or postponement thereof.
Under Wisconsin law, approval and adoption of the transactions contemplated
by the merger agreement requires the approval of two-thirds of the votes
entitled to be cast at the special meeting excluding the 2,718,000 shares that
may be deemed under Wisconsin law to be beneficially owned by Sheldon B. Lubar,
which represent 52.8% of the issued and outstanding shares of Christiana common
stock.
If the transactions contemplated by the merger agreement are consummated,
holders of Christiana common stock who have complied with the requirements of
the Wisconsin Business Corporation Law will have certain dissenters' rights
under Wisconsin law. Such rights are described in more detail in the
accompanying joint proxy statement/prospectus. A copy of the dissenters' rights
provisions of the Wisconsin Business Corporation Law is attached to the joint
proxy statement/prospectus as Appendix H. Christiana will provide a copy of
Appendix H to any shareholder upon request.
By Order of the Board of Directors,
/s/ DAVID E. BECKWITH
David E. Beckwith
Secretary
December --, 1998
Your vote is important no matter how large or small your holdings may be.
To assure your representation at the meeting, please date the enclosed Proxy and
Election Form which is solicited by the Board of Directors of Christiana, sign
exactly as your name appears thereon and return immediately.
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THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
WEATHERFORD INTERNATIONAL, INC. CHRISTIANA COMPANIES, INC.
---------------------
JOINT PROXY STATEMENT/PROSPECTUS
SPECIAL MEETINGS OF STOCKHOLDERS TO BE HELD JANUARY -- , 1999
---------------------
WEATHERFORD INTERNATIONAL, INC.
(COMMON STOCK, $1.00 PAR VALUE PER SHARE)
Weatherford International, Inc. and Christiana Companies, Inc. are
providing this joint proxy statement/prospectus to their stockholders in
connection with a solicitation of proxies by the Boards of Directors of
Weatherford and Christiana for approval of a proposed acquisition of Christiana
by Weatherford.
Under the terms of the merger, Weatherford will issue to the Christiana
shareholders a combination of shares of Weatherford common stock and cash in
exchange for each share of Christiana common stock calculated as follows:
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CONSIDERATION FORMULA CURRENT ESTIMATE
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Weatherford Common Stock............. The number of shares of Weatherford .85191 of a share of Weatherford
common stock held by Christiana at the common stock, assuming Christiana
time of the merger divided by the makes no additional purchases of
number of shares of Christiana common Weatherford common stock
stock outstanding immediately prior to
the merger
Cash Consideration................... The amount of cash held by Christiana $3.50 to $4.00, assuming Christiana
in excess of its accrued unpaid taxes, makes no additional purchases of
without giving effect to the value of Weatherford common stock
certain tax deductions to be retained
by Christiana, and its fixed
liabilities at the time of the merger
divided by the number of shares of
Christiana common stock outstanding
immediately prior to the merger
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The consideration payable in the merger by Weatherford will in essence
come from Christiana's existing assets because the Weatherford share
consideration and the cash consideration will be based on and will not exceed
the Weatherford common stock and cash held by Christiana. As a result,
Weatherford will not be required to pay any consideration for the assets being
acquired by it through the merger other than its agreement to engage in the
merger and bear certain costs of the transaction.
PLEASE NOTE THAT THE ENCLOSED MATERIALS RELATE TO A PLAN OF MERGER THAT IS
DIFFERENT FROM THE PLAN THAT WAS APPROVED BY THE STOCKHOLDERS OF CHRISTIANA AND
WEATHERFORD ON AUGUST 17, 1998. THE PRIOR PLAN OF MERGER WAS NEVER COMPLETED
BECAUSE IT COULD NOT BE CLOSED ON A PARTIALLY TAX FREE BASIS. THE NEW PLAN OF
MERGER IS DESIGNED TO ALLOW FOR THE MERGER TO CLOSE ON A PARTIALLY TAX FREE
BASIS. YOU SHOULD READ THESE MATERIALS CAREFULLY TO UNDERSTAND THE REVISED TERMS
OF THE MERGER.
Weatherford common stock trades on the New York Stock Exchange, Inc. under
the symbol "WFT" and Christiana common stock trades on the New York Stock
Exchange, Inc. under the symbol "CST". On December 22, 1998, the closing sale
price of the Weatherford common stock was $17 1/16 and the closing sale price of
the Christiana common stock was $18 3/8, as reported by the New York Stock
Exchange.
This joint proxy statement/prospectus and the related materials are first
being mailed to the stockholders of Weatherford and Christiana on or about
December --, 1998.
---------------------
AN INVESTMENT IN WEATHERFORD COMMON STOCK AFTER THE MERGER INVOLVES CERTAIN
RISKS.
SEE "RISK FACTORS" ON PAGE 18.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION OR THE SHARES OF
WEATHERFORD COMMON STOCK TO BE ISSUED IN CONNECTION WITH THIS TRANSACTION OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DECEMBER -- , 1998.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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OBTAINING INFORMATION............................ 3
SUMMARY.......................................... 4
The Companies.................................. 4
Special Meetings and Record Dates.............. 4
Required Vote.................................. 4
Proposed Transactions.......................... 5
What Christiana Shareholders Will Receive...... 5
What Christiana Shareholders Will Receive in
the Merger For the Assets of Christiana...... 6
Related Party Transactions..................... 7
Organization of Weatherford, Christiana and TLC
Before and After the Transaction............. 8
Recommendation to Christiana Shareholders...... 9
Recommendation to Weatherford Stockholders..... 9
Opinion of Weatherford's Financial Advisor..... 9
Opinion of Christiana's Financial Advisor...... 10
Interests of Christiana Officers and Directors
in the Merger................................ 10
Conditions to the Merger and Related
Transactions................................. 10
Termination of the Merger Agreement............ 10
Certain Federal Income Tax Consequences........ 11
Appraisal Rights............................... 11
Comparative Rights............................. 11
Christiana Market Price Information............ 11
Weatherford Market Price Information........... 12
Listing of Weatherford Common Stock............ 12
Weatherford Unaudited Pro Forma Condensed
Consolidated Financial Data.................. 13
Weatherford Summary Historical Financial
Data......................................... 14
Christiana Summary Historical Financial Data... 15
Comparative Per Share Information.............. 17
RISK FACTORS..................................... 18
Unexpected Federal Income Tax Treatment of the
Merger May Have Adverse Consequences on
Weatherford.................................. 18
Low or Continued Low Prices of Oil and Natural
Gas May Adversely Affect Demand for
Weatherford Products......................... 18
Disruptions in Foreign Operations Could
Adversely Affect Weatherford's Income........ 18
Weatherford's Products and Services Are Subject
to Operational Hazards....................... 19
Weatherford's Common Stock Has Fluctuated
Historically................................. 19
WHERE YOU CAN FIND MORE INFORMATION.............. 20
FORWARD-LOOKING STATEMENTS....................... 21
QUESTIONS AND ANSWERS ABOUT THE MERGER........... 24
GENERAL INFORMATION ABOUT THE MEETINGS........... 27
Date, Time and Place of Special Meetings....... 27
Record Date and Outstanding Shares............. 27
Purposes of the Special Meetings............... 27
Weatherford.................................. 27
Christiana................................... 27
Vote Required.................................. 27
Weatherford.................................. 27
Christiana................................... 28
Voting and Revocation of Proxies............... 28
Solicitation of Proxies........................ 28
Dissenters' Rights............................. 28
Other Matters.................................. 29
BACKGROUND OF THE TRANSACTION.................... 30
WEATHERFORD'S REASONS FOR THE TRANSACTION........ 43
CHRISTIANA'S REASONS FOR THE TRANSACTION......... 44
OPINIONS OF FINANCIAL ADVISORS................... 50
Morgan Stanley Opinion......................... 50
Prudential Securities Opinion.................. 53
American Appraisal Opinion..................... 59
RELATED PARTY TRANSACTIONS....................... 60
The TLC Sale and Operating Agreement........... 60
Terms of the TLC Sale.......................... 60
General...................................... 60
Indemnification.............................. 61
Terms of the Operating Agreement............... 62
General...................................... 62
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Allocations.................................. 62
Distributions................................ 62
Management................................... 62
Assignment, Transfer and Repurchase of a
Member's Units............................. 63
Dissolution and Winding Up................... 63
THE MERGER....................................... 64
Terms of the Merger............................ 64
General Description of the Merger............ 64
Closing of the Merger........................ 65
Manner and Basis of Converting Shares........ 65
Conditions to the Merger..................... 66
Representations and Warranties of the Parties
to the Merger Agreement.................... 68
Conduct of Business of Christiana and
Weatherford Prior to the Merger............ 68
Expenses..................................... 70
Management Following the Merger.............. 70
Termination or Amendment of the Merger
Agreement.................................. 70
Governmental and Regulatory Approvals.......... 71
Accounting Treatment........................... 72
NYSE Listing of Weatherford Common Stock....... 72
Federal Securities Law Consequences............ 72
Dissenters' Rights............................. 72
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS....... 74
Federal Income Tax Consequences of the
Merger....................................... 75
Backup Withholding............................. 75
INTERESTS OF CERTAIN PERSONS IN THE
TRANSACTION.................................... 75
Christiana Ownership........................... 75
Indemnity...................................... 77
WEATHERFORD SELECTED CONDENSED CONSOLIDATED
FINANCIAL DATA................................. 78
CHRISTIANA SELECTED CONSOLIDATED FINANCIAL
DATA........................................... 79
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS..................................... 80
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS........................... 84
General........................................ 84
Pro Forma Adjustments.......................... 84
DESCRIPTION OF WEATHERFORD....................... 86
Management Stockholdings....................... 87
DESCRIPTION OF CHRISTIANA........................ 89
Business....................................... 89
General...................................... 89
TLC.......................................... 89
Revenues..................................... 89
Customers.................................... 89
Competition.................................. 90
Organization................................. 90
Intellectual Property........................ 90
Weatherford.................................. 91
Properties..................................... 91
Description of Properties...................... 92
Illinois Properties.......................... 92
Indiana Properties........................... 92
Michigan Properties.......................... 92
New Jersey Property.......................... 93
Wisconsin Properties......................... 93
Legal Proceedings.............................. 93
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 94
Three Months Ended September 30, 1998
Compared to Three Months Ended September
30, 1997................................... 94
Net Earnings for Past Three Fiscal Years..... 94
Fiscal 1998 Compared to Fiscal 1997.......... 95
Fiscal 1997 Compared to Fiscal 1996.......... 95
Financial Condition, Liquidity and Capital
Resources.................................. 96
Year 2000 Disclosure......................... 97
Directors and Executive Officers............... 98
Executive Compensation......................... 99
Certain Relationships and Related
Transactions................................. 100
</TABLE>
2
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DESCRIPTION OF C2................................ 102
General........................................ 102
Management..................................... 102
Description of TLC Credit Agreement............ 103
DESCRIPTION OF WEATHERFORD AND CHRISTIANA CAPITAL
STOCK.......................................... 106
Weatherford.................................... 106
Christiana..................................... 107
COMPARATIVE RIGHTS OF STOCKHOLDERS OF WEATHERFORD
AND CHRISTIANA................................. 109
Special Vote Required for Certain
Combinations................................. 109
Vote Required for Corporate Transactions and
Other Matters................................ 110
Disposition of Assets.......................... 110
Power to Amend By-laws......................... 110
Quorum Requirements for Directors' Meetings.... 111
Removal of Directors........................... 111
Director Elections, Qualifications and
Number....................................... 111
PRICE RANGE OF COMMON STOCK AND DIVIDEND
POLICY......................................... 112
STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS.... 113
Weatherford.................................... 113
Christiana..................................... 114
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LEGAL MATTERS.................................... 114
EXPERTS.......................................... 115
STOCKHOLDERS' PROPOSALS.......................... 115
CERTAIN DEFINED TERMS USED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS........................... 116
INDEX TO CHRISTIANA FINANCIAL STATEMENTS......... F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS......... F-2
CHRISTIANA CONSOLIDATED FINANCIAL STATEMENTS..... F-3
APPENDIX A: AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER
APPENDIX B: LOGISTIC SALE AGREEMENT
APPENDIX C: FIRST AMENDED AND RESTATED OPERATING
AGREEMENT
APPENDIX D: MORGAN STANLEY OPINION
APPENDIX E: PRUDENTIAL SECURITIES OPINION
APPENDIX G: AMERICAN APPRAISAL OPINION
APPENDIX H: DISSENTERS' RIGHTS PROVISIONS OF THE
WISCONSIN BUSINESS CORPORATION LAW
</TABLE>
OBTAINING INFORMATION
Weatherford filed with the Securities and Exchange Commission a
registration statement on Form S-4 to register the Weatherford common stock to
be issued in the merger. As allowed by Commission rules, this joint proxy
statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits thereto. This joint proxy
statement/prospectus is a part of the registration statement and is a prospectus
of Weatherford in addition to being a joint proxy statement of Weatherford and
Christiana for the special meetings.
Upon your written or oral request, we will provide you without charge a
copy of this joint proxy statement/prospectus and a copy of any or all of the
documents incorporated by reference herein, other than the exhibits to those
documents, unless the exhibits are specifically incorporated by reference into
the information that this joint proxy statement/prospectus incorporates. Your
written or oral requests for copies of this joint proxy statement/prospectus and
documents Weatherford has incorporated by reference should be directed to
Weatherford at 5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415,
Attention: Secretary (telephone number: (713) 297-8400). Your written or oral
requests for copies of this joint proxy statement/prospectus and documents
Christiana has incorporated by reference should be directed to Christiana at 700
North Water Street, Suite 1200, Milwaukee, Wisconsin 53202, Attention: Secretary
(telephone number: (414) 291-9000). TO OBTAIN TIMELY DELIVERY, YOU MUST MAKE A
WRITTEN OR ORAL REQUEST FOR A COPY OF SUCH INFORMATION BY JANUARY -- , 1999.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE STATEMENTS REGARDING THE MATTERS
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED
HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. YOU SHOULD NOT RELY
ON ANY UNAUTHORIZED STATEMENTS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES, NOR
DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM
ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN
SUCH JURISDICTION.
3
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger and related transactions more fully,
you should carefully read this entire document and the documents we refer to.
THE COMPANIES
Weatherford. Weatherford is a diversified international energy service and
manufacturing company that provides a variety of services and equipment for the
exploration, production and transmission of oil and gas. Weatherford's principal
products and services consist of the following:
- Drilling products.
- Products used for completing and servicing oil and gas wells.
- Rental tools used in the drilling and production of oil and gas wells.
- Products and services used to enhance the production of oil and gas.
- The manufacture, sale and rental of natural gas compressors.
- The provision of compression services to produce natural gas.
Christiana. Christiana owns Weatherford common stock and operates through
TLC. TLC assists companies in managing the physical movement of products and
materials. TLC provides refrigerated and a non-refrigerated warehousing and
transportation services to manage the distribution channel for a customer's
products from the point of manufacturing to the point of consumption. TLC
conducts its operations through 12 distribution warehouses, comprised of an
aggregate of 34 million cubic feet of refrigerated and frozen storage capacity.
TLC's facilities consist of seven refrigerated and five non-refrigerated
distribution centers, primarily in the upper Midwest. TLC provides its services
utilizing owned equipment as well as outside carrier management services.
SPECIAL MEETINGS AND RECORD DATES
Weatherford. Weatherford is holding its special meeting at 9:00 a.m.,
Houston time, on January -- , 1999, at The Luxury Collection Hotel of Houston,
1919 Briar Oaks, Houston, Texas. The purpose of the Weatherford special meeting
is for the Weatherford stockholders to consider and vote on the merger. Only
stockholders of record at the close of business on the record date will be
entitled to vote at the Weatherford special meeting.
Christiana. Christiana is holding its special meeting at 9:00 a.m.,
Milwaukee time, on January -- , 1999, at the Galleria Conference Room, Firstar
Center, 777 East Wisconsin Avenue, Milwaukee, Wisconsin. The purpose of the
Christiana special meeting is for the Christiana shareholders to consider and
vote on the merger. Only shareholders of record at the close of business on the
record date will be entitled to vote at the Christiana special meeting.
We have fixed the record date for the special meetings to be the close of
business on December 10, 1998.
REQUIRED VOTE
Weatherford. A majority of the shares of Weatherford common stock
represented at the Weatherford special meeting must vote in favor of the merger
for the Weatherford stockholders to approve the merger.
Christiana. Holders of at least 80% of the outstanding shares of Christiana
common stock and the holders of at least two-thirds of the outstanding shares of
Christiana common stock excluding the shares held by Sheldon Lubar and his
immediate family must vote in favor of the merger for the Christiana
shareholders to approve the merger. The Lubar family holds approximately 52.8%
of the issued and outstanding shares of Christiana common stock.
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PROPOSED TRANSACTIONS
Christiana is pursuing the transaction as a means of separating its
Weatherford shareholdings from its transportation and warehousing business to
provide its shareholders with more value for their holdings. The proposed
transactions are a means by which Christiana can accomplish this with no
corporate or individual tax, except tax on the cash payment that Weatherford
will pay to the Christiana shareholders. Christiana will transfer a one-third
interest in TLC to Weatherford as part of the transaction. The merger and
related transactions will be effected in three parts that will all occur at the
same time:
- First, C2, a new company formed by Sheldon Lubar, will offer shares of
its common stock to the Christiana shareholders on a pro rata basis for a
total consideration of up to $20.8 million. C2 will apply $10.67 million of
the proceeds of that offering to purchase a two-thirds interest in TLC.
- Second, Christiana will sell to C2 a two-thirds interest in TLC for
$10.67 million. As part of this transaction, C2 and TLC will assume all
historical liabilities of Christiana and indemnify Christiana and
Weatherford from them.
- Third, a Weatherford subsidiary will merge into Christiana with its
only assets being a one-third interest in TLC, its shares of Weatherford
common stock and cash. The cash held by Christiana will be equal to the
cash Weatherford will pay to the Christiana shareholders in the merger plus
an amount equal to Christiana's unassumed liabilities and certain tax
benefits.
WHAT CHRISTIANA SHAREHOLDERS WILL RECEIVE
CHRISTIANA SHAREHOLDERS.
In the merger, Weatherford will pay to the Christiana shareholders a
combination of Weatherford common stock and cash.
Weatherford Shares
If you approve the merger, Weatherford will issue shares of its common
stock to Christiana shareholders. We will calculate the number of shares of
Weatherford common stock Weatherford will issue in the merger by dividing the
number of shares of Weatherford common stock held by Christiana at the time of
the merger by the total number of Christiana shares outstanding immediately
prior to the merger. Currently, this would mean that each Christiana shareholder
would receive .85191 of a share of Weatherford common stock for each share of
Christiana common stock it owns. We plan to calculate the final number no later
than 10 days after the special meetings.
If the market price of Weatherford common stock is between $12.75 and
$18.30 per share at the time of the special meetings, Christiana is required to
purchase up to an additional $5.0 million in Weatherford common stock. These
purchases are intended to assure that the Christiana shareholders do not incur a
tax liability upon receipt of the Weatherford shares. If Christiana purchases
$5.0 million of these shares, Weatherford will issue to Christiana shareholders
between .9281 and .9050 of a share of Weatherford common stock for each share of
Christiana common stock that they own. If the price of Weatherford common stock
falls below $12.75 per share, it is unlikely that we will complete the merger.
On December 22, 1998, the closing sale price of the Weatherford common stock was
$17 1/16.
Cash Payment.
Formula for Determining Cash Payment. Weatherford will pay cash to the
Christiana shareholders as follows. Within 30 days following the merger,
Weatherford will calculate the amount of cash held by Christiana as of the date
of the merger and reduce from that amount the liabilities of Christiana as of
the date of the merger and its accrued unpaid taxes. The calculation of the
amount of cash will not give effect to the value of the tax deductions that
Christiana may have realized from the exercise or cancellation of stock
5
<PAGE> 9
options. Weatherford will divide this amount by the number of shares of
Christiana common stock outstanding immediately prior to the merger, with the
result being the cash consideration payable per share.
Per Share Cash Payment Ratio Based on Current Facts. Based on the number of
shares of Christiana common stock currently outstanding, the Christiana
shareholders would receive between $3.50 and $4.00 per share in cash for their
shares in the merger. The actual cash consideration could vary from these
amounts to the extent there are changes in Christiana's cash and liabilities.
Cash Payment in the Event Christiana Purchases Additional Shares of
Weatherford Common Stock. If the market price of Weatherford common stock is
between $12.75 and $18.30 per share at the time of the special meetings and
Christiana is required to use $5.0 million to purchase additional shares of
Weatherford common stock, Weatherford's cash payment to the Christiana
shareholders could decline by up to $1.00 per share. We will not know until
after the special meetings whether and to what extent this reduction will occur.
WEATHERFORD STOCKHOLDERS.
The merger will make no changes to the Weatherford common stock and the
Weatherford stockholders will continue to hold the same number of shares of
Weatherford common stock after the merger as they held before the merger.
The merger will also result in no change in the outstanding number of
shares of Weatherford common stock because the number of Weatherford shares to
be issued in the merger will equal the number of shares of Weatherford common
stock owned by Christiana at the time of the merger.
WHAT CHRISTIANA SHAREHOLDERS WILL RECEIVE IN THE MERGER FOR THE ASSETS OF
CHRISTIANA
The following chart sets forth a general allocation of the consideration to
be paid by Weatherford for the assets of Christiana that Weatherford will
acquire in the merger:
<TABLE>
<CAPTION>
CHRISTIANA ASSETS CONSIDERATION ALLOCATED BY WEATHERFORD TO CHRISTIANA'S
(AFTER THE TLC SALE AND PRIOR TO THE MERGER) ASSETS
- -------------------------------------------- ------------------------------------------------------
<S> <C>
Shares of Weatherford common stock held by Shares of Weatherford common stock equal to the number
Christiana at closing of shares of Weatherford common stock held by
Christiana at closing
Christiana cash less accrued unpaid taxes, Cash consideration, currently estimated to be between
without giving effect to the value of $3.50 and $4.00 per share of Christiana common
certain tax deductions to be retained by stock(1)
Christiana, and fixed liabilities of
Christiana not assumed by C2 and TLC at
closing
One-third interest in TLC and certain tax Agreement to enter into merger and bear certain costs
benefits(2) of the transaction
</TABLE>
- ---------------
(1) The estimate of the cash consideration is based on the balance sheet of
Christiana as of September 30, 1998 after giving effect to the estimated
expenses of the merger payable by Christiana and estimated cash flow through
the anticipated date of closing.
(2) Christiana will sell two-thirds of its interest in TLC to C2 prior to the
merger.
Under the terms of the merger agreement, Christiana is required to bear
significant transaction costs, which are estimated to be approximately $2.8
million, including approximately $0.3 million of costs of Weatherford. If the
actual costs to be paid by Christiana are higher than those currently estimated,
the cash consideration to be paid in the merger will be less than currently
estimated. Christiana is not required to pay approximately $1.5 million of the
expenses of Weatherford.
6
<PAGE> 10
RELATED PARTY TRANSACTIONS
TLC Sale. Christiana's sale of a two-thirds interest in TLC to C2 is an
important aspect of the merger. We structured the merger this way because
Weatherford did not want to obtain a controlling interest in TLC. Christiana
will sell two-thirds of its interest in TLC for $10.67 million. Mr. Sheldon
Lubar, who controls C2, suggested the purchase price. Weatherford considered the
purchase price C2 paid in determining the amount of cash Weatherford would pay
Christiana shareholders.
Indemnification. Christiana shareholders should be aware that C2 and TLC
will be obligated to indemnify Weatherford for various matters including, but
not limited to, the following:
- Historical liabilities of Christiana and its current and historical
subsidiaries and predecessors.
- Any liability relating to any claim or damage by any shareholder of
Christiana or Weatherford that relates to the merger, the sale of TLC to
C2 or any transaction relating to those transactions.
- Any taxes that may arise if the IRS determines that the merger is a
taxable transaction.
As a result, C2 and TLC could be subject to significant liabilities. Weatherford
would not enter into the merger without these indemnification requirements.
TLC Operating Agreement. The operating agreement will govern the
operations of TLC following the merger. Various actions of TLC will require the
approval of both C2 and Christiana. Christiana also will have the right to sell
its interest in TLC to C2 and TLC for $7.0 million in cash five years after the
closing of the merger as well as the right to participate in various
dispositions by C2 of its interest in TLC.
C2 and Christiana will each be entitled to Board representation
proportionate to their interests in TLC. Subject to certain exceptions,
Christiana will not be able to sell or transfer its interest in TLC without the
consent of the Board of Managers of TLC. This restriction will survive for a
period of five years. Christiana may transfer its interest in the event of
certain changes of control of C2.
C2 Offering. To finance its acquisition of TLC, C2 is offering to the
shareholders of Christiana the right to subscribe for their pro rata share of
the C2 common stock. The C2 offering is intended to allow the Christiana
shareholders to continue to participate and have an ownership interest in TLC.
The Lubar family has committed to purchase enough shares of C2 common stock so
that the net proceeds to C2, after deducting the expenses of the C2 offering,
are at least $10.67 million. This commitment will provide C2 with the ability to
purchase the two-thirds interest in TLC required under the merger agreement.
This joint proxy statement/prospectus is not being provided by Weatherford or C2
as part of the C2 offering.
The merger agreement, the TLC purchase agreement and the operating
agreement are attached as Appendices A, B and C to this joint proxy
statement/prospectus. We encourage you to read these documents carefully.
7
<PAGE> 11
ORGANIZATION OF WEATHERFORD, CHRISTIANA AND TLC BEFORE AND AFTER THE TRANSACTION
The following diagrams set forth the stock ownership and organizational
structure of Weatherford, Christiana and TLC, before and after the transaction:
[BEFORE AND AFTER TRANSACTION CHARTS]
* Percentage may change if Christiana makes additional purchases of Weatherford
common stock.
8
<PAGE> 12
RECOMMENDATION TO CHRISTIANA SHAREHOLDERS
The Board of Directors of Christiana is of the opinion that the merger is
in the best interests of Christiana and its shareholders and recommends that
they vote "FOR" the merger proposal. There are four principal reasons for this
opinion:
- First, the use by Christiana of up to $15.0 million of its cash to
acquire Weatherford common stock comes at a time when the Weatherford
common stock is considered by the Christiana Board of Directors to be an
attractive investment and allows the Christiana shareholders to
essentially reinvest in a tax free manner the money that might otherwise
have been distributed to them in the merger.
- Second, Christiana shareholders who will become Weatherford stockholders
should be able to more easily sell their Weatherford common stock than
they were able to sell their Christiana common stock, because Weatherford
common stock has more liquidity in the public market than does Christiana
common stock.
- Third, the merger will allow the Christiana shareholders to receive the
shares of Weatherford common stock held by Christiana without (1)
Christiana incurring tax on a disposition of the Weatherford shares held
by it and (2) the Christiana shareholders incurring tax on their receipt
of the Weatherford shares.
- Fourth, the merger will allow for a better valuation of the businesses of
Christiana by separating Christiana's ownership of Weatherford common
stock from Christiana's ownership of TLC. The Christiana Board believes
that this separation should allow for a better valuation of TLC as a
division of C2 and will benefit the Christiana shareholders to the extent
they elect to invest in C2.
RECOMMENDATION TO WEATHERFORD STOCKHOLDERS
The Board of Directors of Weatherford is of the opinion that the merger is
in the best interests of Weatherford and its stockholders and recommends that
they vote "FOR" the merger proposal. There are three principal reasons for this
opinion:
- First, the merger will allow Weatherford to acquire a one-third interest
in TLC for no consideration other than agreeing to be a party to the
transaction. Weatherford believes that the business of TLC is an
attractive business for growth and that its investment in TLC should
increase in value with minimal investment of time and money by
Weatherford. In addition, at any time after the fifth anniversary of the
closing of the merger, Weatherford has the right to sell to C2 or TLC its
one-third interest in TLC for $7.0 million.
- Second, the merger will result in no dilution to Weatherford because the
number of its outstanding shares before and after the merger will not
change. Any income attributable to TLC also will be accretive to
Weatherford.
- Third, the merger will result in a better distribution of the Weatherford
common stock because the Christiana shareholders will hold shares of
Weatherford common stock directly rather than through Christiana.
OPINION OF WEATHERFORD'S FINANCIAL ADVISOR
In deciding to approve the merger, the Weatherford Board received and
considered the opinion dated October 9, 1998 of Morgan Stanley & Co.
Incorporated, its financial advisor, as to the fairness of the consideration to
be paid by Weatherford from a financial point of view as of such date. The
opinion is attached as Appendix D to this joint proxy statement/prospectus. You
should read the opinion in its entirety to understand the assumptions made,
matters considered and limits of the review undertaken by Morgan Stanley in
providing its opinion.
9
<PAGE> 13
OPINION OF CHRISTIANA'S FINANCIAL ADVISOR
In deciding to approve the merger, the Christiana Board received and
considered the opinion of Prudential Securities, its financial advisor, as to
the fairness of the merger consideration to the shareholders of Christiana from
a financial point of view. The opinion is attached as Appendix E to this joint
proxy statement/prospectus. You should read the opinion in its entirety to
understand the assumptions made, matters considered and limits of the review
undertaken by Prudential Securities in providing its opinion.
INTERESTS OF CHRISTIANA OFFICERS AND DIRECTORS IN THE MERGER
When considering the recommendations of the Christiana Board of Directors,
the Christiana shareholders should be aware that officers and directors of
Christiana have interests and arrangements that may be different from your
interests as shareholders, including the following:
- The executive officers and directors of Christiana will be executive
officers and directors of C2.
- The Lubar family will commit to purchase shares in the C2 offering and
will thereby obtain control of C2. If the Christiana shareholders do not
exercise their right to purchase a pro rata interest in C2, the Lubar
family's interest in C2 could increase from approximately 52% to 100%.
- Each officer and other holder of options to purchase Christiana common
stock will be entitled to receive cash for their options equal to the
difference between $40.00 and the option exercise price. This price was
fixed at the time the merger agreement was initially entered into and is
substantially greater than the current market price. Christiana's
officers who hold options to purchase Christiana common stock will in the
aggregate receive $1,716,000 for their options.
CONDITIONS TO THE MERGER AND RELATED TRANSACTIONS
We will complete the merger and related transactions only if certain
conditions, including the following, are satisfied or waived:
- Christiana and Weatherford stockholders approve the merger.
- We receive all required material governmental approvals and other
consents.
- Arthur Andersen LLP reconfirms at the closing that the merger will be
partially tax free.
- Christiana completes the sale of its two-thirds interest in TLC to C2.
- Christiana undergoes no material adverse change, financial or otherwise,
after the date of the merger agreement.
Each of Weatherford and Christiana may waive various conditions of the merger.
If either party waives any material conditions to closing the merger, we would
provide our stockholders supplemental disclosure of such waiver and a reasonable
opportunity to change their votes.
TERMINATION OF THE MERGER AGREEMENT
We may mutually agree to terminate the merger agreement without completing
the merger. The merger agreement also may be terminated in certain other
circumstances, including the following:
- By Weatherford or Christiana if the stockholders of either company do not
approve the merger.
- By Weatherford or Christiana if the merger is not effected on or before
January 31, 1999.
- By a non-breaching party in the event of a material breach by the other
party.
- By Weatherford or Christiana if a court or governmental authority has
acted to prevent the merger.
- By Weatherford's Board of Directors or Christiana's Board of Directors if
that Board determines in its good faith judgment that a termination of
the merger agreement is appropriate in complying with its fiduciary
duties.
10
<PAGE> 14
- By Weatherford or Christiana if the other party withdraws its
recommendation with respect to the merger in a manner adverse to it or
resolves to do the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The merger is conditioned on the receipt of opinions from Arthur Andersen
LLP that, among other things:
- The issuance of the shares of Weatherford common stock to the Christiana
shareholders will be tax free.
- No gain or loss for U.S. federal income tax purposes will be recognized
by Weatherford, Sub or Christiana as a result of the merger.
- Weatherford and Christiana are parties to a reorganization under federal
tax laws.
- No gain or loss will be recognized by the shareholders of Christiana upon
their receipt of shares of Weatherford common stock in exchange for their
shares of Christiana common stock.
Arthur Andersen has rendered an opinion as to the above matters for
purposes of this Joint Proxy Statement/Prospectus. This opinion is required to
be redelivered at closing. If the opinion to be delivered by Arthur Andersen is
waived, or if there are modifications to the opinion that would state that the
merger would be taxable in whole or in part to Weatherford, Christiana or the
stockholders of Weatherford or Christiana, we will provide additional disclosure
to our respective stockholders and provide you an opportunity to change your
vote on the merger.
Tax matters are complicated, and the tax consequences of the proposed
transactions to you will depend on the facts of your own situation. You should
consult your own tax advisors for a full understanding of the tax consequences
to you of the merger.
APPRAISAL RIGHTS
Under Wisconsin law, Christiana shareholders may dissent from the merger
and demand the "fair value" of their shares in cash. To exercise this right, you
may not vote your shares in favor of the merger and you must take certain other
actions that Wisconsin law requires.
Weatherford stockholders will have no right to an appraisal of the value of
their shares in connection with the merger under Delaware law.
COMPARATIVE RIGHTS
Weatherford is a Delaware corporation and Christiana is a Wisconsin
corporation. The laws of those jurisdictions vary. Following the merger,
Christiana shareholders will hold shares in Weatherford and Delaware law will
govern their rights instead of Wisconsin law. There also exist various
differences between Weatherford's certificate of incorporation and bylaws and
Christiana's articles of incorporation and bylaws.
CHRISTIANA MARKET PRICE INFORMATION
Christiana common stock is listed on the NYSE. On December 12, 1997, the
last full trading day before we publicly announced the proposed merger,
Christiana common stock closed at $40 3/4 on the NYSE. On October 13, 1998, the
last full trading day before we publicly announced the execution of the amended
merger agreement, Christiana common stock closed at $16 3/8 on the NYSE. On
December 22, 1998, Christiana common stock closed at $18 3/8 on the NYSE.
11
<PAGE> 15
WEATHERFORD MARKET PRICE INFORMATION
Weatherford common stock is listed on the NYSE. On December 12, 1997, the
last full trading day before we publicly announced the proposed merger,
Weatherford common stock closed at $46 3/8 on the NYSE. On October 13, 1998, the
last full trading day before we publicly announced the execution of the amended
merger agreement, Weatherford common stock closed at $16 13/16 on the NYSE. On
December 22, 1998, Weatherford common stock closed at $17 1/16 on the NYSE.
LISTING OF WEATHERFORD COMMON STOCK
Weatherford has applied to list the Weatherford common stock it will
deliver to Christiana shareholders pursuant to the merger agreement under the
ticker symbol "WFT" on the NYSE.
12
<PAGE> 16
WEATHERFORD UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables set forth certain summary pro forma condensed
consolidated financial data of Weatherford. The Unaudited Pro Forma Condensed
Consolidated Statements of Income give effect to the proposed merger of
Christiana as if the transaction had occurred on January 1, 1997. Because the
fiscal years of Weatherford and Christiana differ, Christiana's December 31,
1997 historical operating results are based on Christiana's last two fiscal
quarters of its fiscal year ended June 30, 1997, combined with the results for
the six months ended December 31, 1997. The Unaudited Pro Forma Condensed
Consolidated Balance Sheet gives effect to the merger as if this transaction had
occurred on September 30, 1998.
The unaudited pro forma information below is not necessarily indicative of
the results that actually would have been achieved if the transactions had been
consummated as of the dates reflected, or that may be achieved in the future.
You should also read the following:
- Weatherford's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended December
31, 1997.
- Weatherford's Quarterly Report on Form 10-Q for the period ended
September 30, 1998.
- Weatherford's Current Report on Form 8-K dated June 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated
July 20, 1998 and as amended by Amendment No. 2 to Current Report on Form
8-K on Form 8-K/A dated December 10, 1998.
- Weatherford's Selected Condensed Consolidated Financial Data.
- Weatherford's Pro Forma Condensed Consolidated Financial Statements and
related notes.
- Christiana's financial statements and related notes.
The above information is included or incorporated by reference in this
Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Operating Data:
Revenues.................................................. $1,586,747 $1,969,089
Income from continuing operations......................... 89,328 196,857
Earnings per share from continuing operations:
Basic.................................................. $ 0.92 $ 2.05
Diluted................................................ 0.91 2.02
Weighted average shares outstanding:
Basic.................................................. 96,973 96,052
Diluted................................................ 97,684 97,562
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
(IN THOUSANDS)
<S> <C>
Balance Sheet Data:
Total assets.............................................. $2,938,052
Long-term debt............................................ 244,552
5% Convertible Subordinated Preferred Equivalent
Debentures............................................. 402,500
Stockholders' equity...................................... 1,523,510
</TABLE>
13
<PAGE> 17
WEATHERFORD SUMMARY HISTORICAL FINANCIAL DATA
The following table contains certain summary historical condensed
consolidated financial data of Weatherford. You should also read the following:
- Weatherford's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended December
31, 1997.
- Weatherford's Quarterly Report on Form 10-Q for the period ended
September 30, 1998.
- Weatherford's Current Report on Form 8-K dated June 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated
July 20, 1998 and as amended by Amendment No. 2 to Current Report on Form
8-K on Form 8-K/A dated December 10, 1998.
- Weatherford's Selected Condensed Consolidated Financial Data.
- Christiana's financial statements and related notes.
The above information is included or incorporated by reference in this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................... $1,586,747 $1,417,970 $1,969,089 $1,467,270 $1,125,803 $858,993 $671,470
Cost of sales................ 1,078,704 995,631 1,371,126 1,090,814 831,231 630,850 482,878
Selling, general and
administrative expenses.... 213,330 189,117 264,553 209,433 195,747 155,860 127,966
Equity in earnings of
unconsolidated
affiliates................. (2,241) (1,754) (2,582) (2,078) (1,477) (1,169) (2,716)
Merger costs and other
charges.................... 120,000 -- -- -- 88,182 2,500 4,000
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income............. 176,954 234,976 335,992 169,101 12,120 70,952 59,342
Interest expense............. (40,482) (31,273) (43,273) (39,368) (33,504) (22,384) (11,601)
Other income, net............ 4,357 8,064 12,242 2,941 8,409 615 2,231
Income tax (provision)
benefit.................... (51,823) (74,397) (108,188) (40,513) 4,707 (13,137) (14,741)
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations................. $ 89,006 $ 137,370 $ 196,773 $ 92,161 $ (8,268) $ 36,046 $ 35,231
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share
from continuing operations:
Basic...................... $ 0.92 $ 1.44 $ 2.04 $ 1.03 $ (0.10) $ 0.53 $ 0.58
Diluted.................... 0.91 1.41 2.01 1.01 (0.10) 0.53 0.58
Weighted average shares
outstanding:
Basic...................... 96,973 95,703 96,052 89,842 77,595 67,672 60,628
Diluted.................... 97,684 97,194 97,562 90,981 77,595 68,032 60,894
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................... $2,924,220 $2,737,910 $2,243,633 $1,710,568 $1,464,804 $885,981
Long-term debt..................... 244,552 252,322 417,976 416,473 303,854 56,580
5% Convertible Subordinated
Preferred Equivalent
Debentures....................... 402,500 402,500 -- -- -- --
Stockholders' equity............... 1,523,510 1,458,549 1,292,704 958,337 845,287 582,187
Cash dividends per share........... -- -- -- -- -- --
</TABLE>
14
<PAGE> 18
CHRISTIANA SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth certain summary historical financial data of
Christiana. The historical financial data as of and for each of the five years
in the period ended June 30, 1998 was derived from the consolidated financial
statements of Christiana, which were audited by Arthur Andersen LLP, independent
public accountants. The historical financial data as of September 30, 1998 and
for the three month periods ended September 30, 1998 and 1997 have not been
audited. In the opinion of Christiana, the historical financial data as of
September 30, 1998 and for the three month periods ended September 30, 1998 and
1997 include all adjusting entries necessary to present fairly the information
set forth therein. The operating data for the three month period ended September
30, 1998 is not necessarily indicative of results that may be expected for the
year ending June 30, 1999. You should also read the following:
- Christiana's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended June 30,
1998.
- Christiana's Quarterly Report on Form 10-Q for the period ended September
30, 1998.
- Christiana's Selected Condensed Consolidated Financial Data.
The above information is included or incorporated by reference in this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------ -----------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............. $22,370 $23,047 $ 90,179 $ 84,208 $ 77,170 $126,881 $ 90,153
Direct operating
expense........... 18,633 19,201 76,057 70,973 65,418 104,818 74,976
Selling, general and
administrative
expenses.......... 2,365 2,229 8,364 8,656 7,531 11,739 8,755
------- ------- -------- -------- -------- -------- --------
Operating income..... 1,372 1,617 5,758 4,579 4,221 10,324 6,422
Interest expense..... (573) (752) (2,691) (3,166) (3,096) (4,842) (3,710)
Equity in earnings of
Weatherford....... --(1) 1,937 7,872 10,479 1,745 -- --
Other income
(expense), net.... 26 (364) (1,012) (923) 3,141 3,658 3,195
Income tax
expenses.......... 323 953 3,920 4,306 2,408 3,394 2,256
Minority interest.... -- -- -- -- -- (684) (530)
------- ------- -------- -------- -------- -------- --------
Net income........... $ 502 $ 1,485 $ 6,007 $ 6,663 $ 3,603 $ 5,062 $ 3,121
======= ======= ======== ======== ======== ======== ========
Earnings per
share(2):
Basic............. $ 0.10 $ 0.29 $ 1.17 $ 1.30 $ 0.69 $ 0.96 $ 0.59
Diluted........... 0.10 0.29 1.15 1.29 0.69 0.96 0.59
Weighted average
shares
outstanding....... 5,149 5,137 5,143 5,137 5,187 5,276 5,321
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, ----------------------------------------------------
1998 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................ $179,351 $239,241 $142,355 $131,018 $121,742 $147,565
Long-term debt.............. 26,275 27,122 36,149 44,013 38,256 53,458
Stockholder's equity........ 100,297(3) 136,229(3) 72,085 61,077 58,710 60,088
Cash dividends per share.... -- -- -- -- -- --
</TABLE>
15
<PAGE> 19
- ---------------
(1) On May 27, 1998, Weatherford acquired Weatherford Enterra, Inc., issuing
additional shares of Weatherford common stock and thereby reducing
Christiana's ownership percentage in Weatherford to approximately 4%. As a
result, on May 27, 1998, Christiana changed the manner in which it accounts
for its investment in Weatherford from the equity method to the cost method.
Under the cost method, only dividends paid by Weatherford will be reflected
in future earnings of Christiana.
(2) All earnings per share amounts have been restated to reflect the adoption of
Statement of Accounting Standards No. 128, "Earnings Per Share", effective
December 15, 1997.
(3) Includes $21.4 million and $57.8 million of unrealized holding gains on
securities available-for-sale as of September 30, 1998 and June 30, 1998,
respectively, resulting from a change in the method of accounting for
Christiana's investment in Weatherford.
16
<PAGE> 20
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain historical and pro forma earnings
per share and book value per share for the Weatherford common stock and the
Christiana common stock. The table also reflects the equivalent per share
earnings and book value with respect to one share of Christiana common stock on
a pro forma basis for the merger. You should also read the unaudited Pro Forma
Condensed Consolidated Financial Statements and the separate historical
consolidated financial statements of Weatherford and Christiana and the related
notes included or incorporated by reference in this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Basic Earnings Per Share:
Weatherford Historical Earnings Per Share from Continuing
Operations............................................. $0.92 $ 2.04
Christiana Historical Earnings Per Share(1)............... 0.81 0.82
Weatherford Pro Forma Earnings Per Share from Continuing
Operations for the Merger(2)........................... 0.92 2.05
Christiana Equivalent Pro Forma Earnings Per Share(3)..... 0.78 1.75
Diluted Earnings Per Share:
Weatherford Historical Earnings Per Share from Continuing
Operations............................................. $0.91 $ 2.01
Christiana Historical Earnings Per Share(1)............... 0.80 0.81
Weatherford Pro Forma Earnings Per Share from Continuing
Operations for the Merger(2)........................... 0.91 2.02
Christiana Equivalent Pro Forma Earnings Per Share(3)..... 0.78 1.72
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
<S> <C>
Book Value Per Share:
Weatherford Historical Book Value Per Share............... $15.63
Christiana Historical Book Value Per Share................ 19.48
Weatherford Pro Forma Book Value Per Share for the
Merger................................................. 15.63
Christiana Equivalent Pro Forma Book Value Per Share(3)... 13.32
</TABLE>
- ---------------
(1) Christiana's historical and pro forma earnings per share for the year ended
December 31, 1997 are based on Christiana's earnings for the six months
ended December 31, 1997, combined with Christiana's earnings for the last
two fiscal quarters of Christiana's fiscal year ended June 30, 1997.
Christiana's historical and pro forma earnings per share for the nine months
ended September 30, 1998 are based on Christiana's earnings for the last two
quarters of Christiana's fiscal year ended June 30, 1998 combined with
Christiana's earnings for the quarter ended September 30, 1998.
(2) Gives pro forma effect to the merger.
(3) Represents the pro forma earnings per share and pro forma book value per
share of .85191 of one share of Weatherford common stock issuable in the
merger. The pro forma ratio of .85191 of one share of Weatherford common
stock was calculated as follows:
<TABLE>
<S> <C>
Number of shares of Weatherford common stock held by
Christiana................................................ 3,897,462
Number of shares of Weatherford common stock purchased with
$10.0 million at an average per share market price of
Weatherford common stock of $20.44........................ 489,300
---------
Number of shares of Weatherford common stock currently held
by Christiana............................................. 4,386,762
Divided by the number of shares of Christiana common stock
outstanding............................................... 5,149,330
---------
Pro forma ratio............................................. .85191
</TABLE>
If the market price of the Weatherford common stock declines below $18.30
per share, Christiana is required to purchase up to $5.0 million of additional
shares of Weatherford common stock. These purchases, if made, would increase the
conversion rate, which will increase the amount of Weatherford common stock and
decrease the cash consideration.
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<PAGE> 21
RISK FACTORS
An investment in the Weatherford common stock offered by this joint proxy
statement/prospectus involves a high degree of risk. Before you decide to invest
in the Weatherford common stock offered by this joint proxy
statement/prospectus, you should carefully consider the following factors,
together with the information contained or incorporated by reference in this
joint proxy statement/prospectus.
Unexpected Federal Income Tax Treatment of the Merger May Have Adverse
Consequences on Weatherford
If the IRS determines that the issuance of the shares of Weatherford common
stock to be issued in the merger is not tax free, the Christiana shareholders
will be taxed based on the value of the shares of Weatherford common stock
received. The merger is conditioned on the receipt of an opinion of Arthur
Andersen LLP that the issuance of the shares of Weatherford common stock to be
issued to the Christiana shareholders will be tax free. While Arthur Andersen
LLP has rendered that opinion for this joint proxy statement/prospectus, that
opinion is not binding on the IRS. TLC and C2 have agreed to indemnify
Weatherford from any adverse tax consequences of the merger not being tax free.
See "Related Party Transactions -- Terms of the TLC Sale -- Indemnification" and
"The Merger -- Terms of the Merger -- Conditions to the Merger".
Low or Continued Low Prices of Oil and Natural Gas May Adversely Affect Demand
for Weatherford's Products
Generally, you can expect low oil prices to adversely affect demand
throughout the oil and natural gas industry, including the demand for
Weatherford's products. In this case, you also could expect Weatherford's
revenues and income to be adversely affected.
The price of oil and natural gas and the level of oil and natural gas
exploration activity strongly affects the demand for Weatherford's drilling
products, while oil production activity directly affects Weatherford's
production equipment and services.
Oil prices have declined significantly in recent months and over the last
year due to a worldwide oversupply and lower than expected demand. The recent
declines in the price of oil have affected Weatherford in various ways.
Weatherford's artificial lift segment has been materially affected by lower oil
prices and their effect on reduced production of heavy oil production that is
heavily dependent on price. Weatherford's drill pipe and drill stem products
have been affected by significant declines in backlog, with demand for 1999
expected to be down between 40% and 60% from 1998. Weatherford's completion and
rental business has experienced declines in line with the general reduction in
industry activity, with the greatest declines occurring in the United States
markets.
Weatherford's business will continue to be affected by industry conditions,
including those conditions and factors described above under "Uncertainty of
Forward-Looking Statements".
Disruptions in Foreign Operations Could Adversely Affect Weatherford's Income
Weatherford's operations in Singapore, Mexico, Brazil, Venezuela, Nigeria,
Algeria and Argentina are subject to various political and economic conditions
existing in such countries that could disrupt operations. Disruptions may occur
in Weatherford's foreign operations and losses may occur that will not be
covered by insurance.
Weatherford also has drill pipe and other products manufactured for it by
Oil Country Tubular Limited ("OCTL") in India under a long-term exclusive
manufacturing arrangement with OCTL. Although Weatherford has sought to minimize
the risks of this operation through its manufacturing arrangement and insurance,
Weatherford is providing OCTL with a substantial amount of raw materials and
inventory for the products manufactured by it. Weatherford's Indian operations
have been adversely affected by the downturn of the economies in the eastern
hemisphere. Operations in India are subject to various political and economic
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<PAGE> 22
risks as well as financial risks with respect to OCTL. A termination or shutdown
of this operation in light of current market conditions or political factors,
could have an adverse effect on Weatherford's income and results.
Weatherford's Products and Services Are Subject to Operational Hazards
Weatherford's products are used for the exploration and production of oil
and natural gas. These operations are subject to hazards inherent in the oil and
gas industry that can cause personal injury or loss of life, damage to or
destruction of property, equipment, the environment and marine life, and
suspension of operations. Such hazards include fires, explosions, craterings,
blowouts and oil spills. Litigation arising from an accident at a location where
Weatherford's products or services are used or provided may result in
Weatherford being named as a defendant in lawsuits asserting potentially large
claims.
Weatherford's Common Stock Has Fluctuated Historically
Christiana shareholders may face significant devaluation of the shares of
Weatherford common stock they receive in the merger if the price of Weatherford
common stock declines due to the volatility of the price of common stock of
companies engaged in the oil and gas industry. Historically, and in recent
months in particular, the market price of common stock of companies engaged in
the oil and gas industry has been highly volatile. Likewise, the market price of
Weatherford common stock has varied significantly in the past. News
announcements and changes in oil and natural gas prices, changes in the demand
for oil and natural gas exploration and changes in the supply and demand for oil
and natural gas have all been factors that have affected the price of
Weatherford common stock.
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<PAGE> 23
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission pursuant to the Exchange
Act. Those reports, proxy statements and other information that we file with the
Commission can be inspected at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the Regional Offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New
York, New York 10048. Please call the Commission at 1-800-SEC-0300 for further
information on the public reference rooms. Copies of those materials may also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding Weatherford and Christiana. Those reports, proxy and
information statements and other information concerning Weatherford and
Christiana also can be inspected and copied at the offices of the New York Stock
Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005, on which
the Weatherford common stock and Christiana common stock are listed.
For further information on Weatherford and the Weatherford common stock
being offered, please review the Registration Statement, including the exhibits
that are filed with it. Statements made in this joint proxy statement/prospectus
that describe documents may not necessarily be complete. We recommend that you
review the documents that Weatherford has filed with its registration statement
to obtain a more complete understanding of those documents.
The Commission allows us to "incorporate by reference" information into
this joint proxy statement/ prospectus, which means that we can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be part of this joint proxy statement/prospectus, except for any
information superseded by information in this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the documents
set forth below that Weatherford or Christiana previously filed with the
Commission. These documents contain important information about Weatherford or
Christiana, as applicable.
The following documents filed by Weatherford with the Commission (File No.
1-13086) are incorporated by reference into this joint proxy
statement/prospectus:
- Weatherford's Annual Report on Form 10-K for the year ended December 31,
1997 as amended by Amendment No. 1 and Amendment No. 2 to the Annual
Report on Form 10-K on Forms 10-K/A.
- Weatherford's Current Report on Form 8-K dated May 1, 1997, as amended by
Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated January
14, 1998.
- Weatherford's Current Report on Form 8-K dated November 5, 1997, as
amended by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A
dated March 26, 1998.
- Weatherford's Current Report on Form 8-K dated December 2, 1997, as
amended by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A
dated February 13, 1998.
- Weatherford's Current Report on Form 8-K dated January 28, 1998.
- Weatherford's Current Report on Form 8-K dated February 3, 1998.
- Weatherford's Current Report on Form 8-K dated February 19, 1998, as
amended by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A
dated April 21, 1998.
- Weatherford's Current Report on Form 8-K dated March 5, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated
March 9, 1998.
- Weatherford's Current Report on Form 8-K dated April 20, 1998.
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<PAGE> 24
- Weatherford's Current Report on Form 8-K dated April 22, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated
April 24, 1998.
- Weatherford's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
- Weatherford's Current Report on Form 8-K dated May 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated May
22, 1998.
- Weatherford's Current Report on Form 8-K dated May 27, 1998.
- Weatherford's Current Report on Form 8-K dated June 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated July
20, 1998 and as amended by Amendment No. 2 to Current Report on Form 8-K
on Form 8-K/A dated December 10, 1998.
- Weatherford's Current Report on Form 8-K dated July 16, 1998.
- Weatherford's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
- Weatherford's Current Report on Form 8-K dated August 17, 1998.
- Weatherford's Current Report on Form 8-K dated October 22, 1998.
- Weatherford's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
- The description of Weatherford common stock contained in Weatherford's
Registration Statement on Form 8-A (filed May 19, 1994) and as amended by
Weatherford's Registration Statement on Form S-4, as amended
(Registration No. 333-58741), including any amendment or report filed for
the purpose of updating such description.
The following documents filed by Christiana with the Commission (File No.
1-3846) are incorporated by reference into this joint proxy
statement/prospectus:
- Christiana's Annual Report on Form 10-K for the fiscal year ended June
30, 1998.
- Christiana's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
All documents that we file pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this joint proxy statement/prospectus and
prior to the date of the special meetings shall be deemed to be incorporated
herein by reference and shall be a part of this joint proxy statement/prospectus
from the date of the filing of such document. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this joint proxy
statement/prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes that statement. Any such statement so
modified or superseded shall not constitute a part of this joint proxy
statement/prospectus, except as so modified or superseded.
FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and Weatherford's other filings with
the Commission and public releases contain statements relating to future results
of Weatherford, including certain projections and business trends. Weatherford
believes these statements constitute "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995.
Certain risks and uncertainties may cause actual results to be materially
different from projected results contained in forward-looking statements in this
joint proxy statement/prospectus. Such risks and uncertainties include, but are
not limited to, the following:
Changes in Market Conditions Could Affect Projected Results. Any
unexpected material changes in oil and gas prices or other market trends
would likely affect the forward-looking information contained or
incorporated by reference in this joint proxy statement/prospectus.
Weatherford's
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<PAGE> 25
estimates as to future results and industry trends make assumptions
regarding the future prices of oil and gas and their effect on the demand
and pricing of Weatherford's products and services. Weatherford has made
the following assumptions:
- Average prices for oil in 1999 will be within the same general range
of prices as they were in 1998.
- Average natural gas prices for 1999 will remain at or near their
current levels.
- Client budgets will be down for most of 1999.
- World demand for oil will be up marginally or flat.
- Drilling activity will not begin recovering until the third or
fourth quarter of 1999.
These assumptions are based on various macro economic factors and actual
market conditions could vary materially from those assumed.
Decline in Rig Count Could Affect Demand for Weatherford's Products. A
material drop in the current worldwide rig count or drilling activity would
likely affect the demand for Weatherford's products that are related to the
worldwide rig count. Weatherford's forward-looking statements regarding its
drilling products, such as drill pipe and other drill stem products, assume
there will not be any further material declines in the worldwide rig count,
in particular the foreign rig count.
Market Conditions Could Affect Timing of Demand for Weatherford's
Products. The timing of the improved demand for Weatherford's premium
tubular products will be subject to the market conditions described above.
Forward-looking statements regarding such products assume customers have
deferred purchases of new products due to industry conditions and that
purchases will increase in mid 1999 as inventory levels decline.
Projected Merger Cost Savings Could Be Less than Weatherford Has
Projected. The ability of Weatherford to achieve cost savings from the
recent merger between EVI, Inc. and Weatherford Enterra, Inc. and from
actions taken to reduce overhead costs will be dependent on market
conditions becoming more stable. Weatherford's forward-looking statements
regarding cost savings and their impact on Weatherford assume savings from
the merger between EVI, Inc. and Weatherford Enterra, Inc. and from actions
taken to reduce overhead costs in light of current market conditions.
Benefits of Mergers and Acquisitions May Not Be Fully Realized. The
full benefits of integrating the operations of EVI, Inc. and Weatherford
Enterra, Inc., as well as integrating the various acquisitions that
Weatherford completed over the past years, in particular synergistic
growth, may not be fully realized until market conditions improve. The
benefits of these combinations also depend on Weatherford's ability to
penetrate new and existing markets with the new products and services
acquired in the transactions. Weatherford currently is integrating such
operations and acquisitions, which is a time consuming process that creates
various inefficiencies during implementation. Weatherford has assumed that
most of its 1997 and 1998 transactions will be substantially integrated by
mid 1999.
Weatherford's Success Is Dependent upon Technological
Advances. Weatherford's ability to succeed in its long-term growth strategy
is dependent on the technological competitiveness of its product offering.
A central aspect of Weatherford's growth strategy is to enhance the
technology of its products and services and to enter new markets and expand
in existing markets with technologically advanced value-added products.
Weatherford's forward-looking statements have not assumed any material
near-term growth from these products.
Unexpected Year 2000 Problems Could Have an Adverse Financial Impact
on Weatherford. Weatherford has not fully determined the impact of Year
2000 on its systems and products, and unexpected problems associated with
the Year 2000 could arise during the implementation of its Year 2000
program that could have a material adverse effect on Weatherford's
business, financial condition
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<PAGE> 26
and results of operations. Weatherford currently is in the assessment and
initial implementation phases of its Year 2000 program.
Economic Downturn in Asia Could Adversely Affect Demand for
Weatherford's Products and Services. If the economic downturn in Asia were
to cause the economies in the United States, Europe or South America to
materially decline, the demand and price for oil and gas and Weatherford's
products and services would fall and adversely affect the revenues and
income of Weatherford. Weatherford has assumed that a worldwide recession
will not occur as a result of the economic downturn in Asia. A material
decline in the Chinese economy or devaluation of its currency could cause
further deterioration to the Asian and world economies.
Worldwide Political Instability Could Adversely Affect Demand for
Weatherford's Products and Services. Any unexpected material political
event that would affect the industry or particular oil producing countries
in which Weatherford operates would change the base assumptions for
Weatherford's forward-looking statements regarding the industry and
Weatherford's position in it. Many of the world's oil and gas reserves are
located in countries or regions that are subject to political instability.
Weatherford has assumed in its forward-looking statements that there will
not be any material political event that would affect the demand and
pricing of oil and natural gas or the ability of Weatherford to provide its
products and services worldwide.
Currency Fluctuations Could Have a Material Adverse Financial Impact
on Weatherford. A material decline in currency rates could affect
Weatherford's future results as well as affect the carrying values of its
assets. World currencies have been subject to much volatility.
Weatherford's forward-looking statements assume no material impact from
changes in currencies in its markets because Weatherford's operations are
either dollar based, paid for in local currencies or hedged.
Changes in Global Trade Policies Could Adversely Impact Weatherford's
Operations. Changes in global trade policies in Weatherford's markets could
impact Weatherford's operations in that market. In addition, a removal of
currently existing anti-dumping duties in the United States with respect to
foreign drill pipe could adversely affect Weatherford's United States sales
of drill pipe. Weatherford has assumed that there will be no material
changes in global trading policies.
Unexpected Litigation and Legal Disputes Could Have a Material Adverse
Financial Impact on Weatherford. If Weatherford experiences unexpected
litigation or unexpected results in its existing litigation having a
material effect on results, the accuracy of the forward-looking statements
would be affected. Weatherford's forward-looking statements assume that
there will be no such unexpected litigation or results.
Finally, Weatherford's future results will depend upon various other risks
and uncertainties, including, but not limited to, those detailed in
Weatherford's filings with the Commission. For additional information regarding
risks and uncertainties relating to Weatherford and Christiana, see
Weatherford's filings with the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as
amended (the "Securities Act"), referenced under "Where You Can Find More
Information".
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<PAGE> 27
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers highlight selected information
regarding the merger and related transactions described in this joint proxy
statement/prospectus and may not contain all information that is important to
you as you consider the merits of the merger. For a more complete description of
the terms of the merger and the related transactions, please read this entire
joint proxy statement/prospectus and the documents to which we refer. See also
"Where You Can Find More Information".
Q: I THOUGHT THE CHRISTIANA AND WEATHERFORD STOCKHOLDERS HAD ALREADY APPROVED
THE MERGER. WHY ARE WE VOTING AGAIN?
A: You are right. The Weatherford and Christiana stockholders approved a merger
between Christiana and a subsidiary of Weatherford pursuant to the prior
merger agreement. We, however, were unable to complete that merger because
the merger would not have qualified as a partially tax free reorganization
for U.S. federal income tax purposes. As a result, we have changed the terms
of the merger with the objective of allowing the merger to be completed on a
partially tax free basis.
Q: COULD YOU EXPLAIN WHY THE PREVIOUSLY APPROVED MERGER WOULD NOT HAVE BEEN TAX
FREE?
A: For the merger to qualify as a partially tax free reorganization for U.S.
federal income tax purposes, the value of the Weatherford common stock at
the time of the merger must represent at least 80% of the value of the
consideration to be paid to the Christiana shareholders. Since the time we
first entered into the prior merger agreement, the market price of the
Weatherford common stock has declined by over 50%. This decline resulted in
the value of the Weatherford common stock being less than 80% of the total
consideration to be paid in the merger. As a result, the prior merger could
not have been consummated on a partially tax free basis.
Q: HOW WERE THE TERMS OF THE PRIOR MERGER AGREEMENT CHANGED TO ADDRESS THIS TAX
ISSUE?
A: We are increasing the number of shares of Weatherford common stock to be
issued in the merger and decreasing the cash component of the merger. To
make this change, Christiana agreed to spend up to $15.0 million to purchase
additional shares of Weatherford common stock to the extent necessary to
allow the merger to qualify as a partially tax free reorganization. In
exchange, Weatherford agreed to eliminate a $10.0 million five year cash
hold back.
Q: WHAT ARE THE TAX SAVINGS TO BE RECEIVED BY THE CHRISTIANA SHAREHOLDERS?
A: If the Weatherford common stock held by Christiana had been sold over the
last year, the taxes paid by Christiana would have ranged between $4.00 and
$21.00 per share of Christiana common stock.
Q: WHY IS CHRISTIANA GIVING WEATHERFORD A ONE-THIRD INTEREST IN TLC FOR WHAT
APPEARS TO BE NO CONSIDERATION?
A: The one-third interest in TLC is being provided to Weatherford as
consideration for entering into the transaction with Christiana. Although
this interest has a book value in excess of $7.0 million, the Christiana
Board believes that the benefits of the transaction, in particular the tax
savings to be realized by the Christiana shareholders in the transaction,
are greater than the value of the one-third interest in TLC.
Q: WHY IS WEATHERFORD ACQUIRING A COMPANY ENGAGED IN THE LOGISTICS BUSINESS?
WHAT SYNERGIES ARE THERE FOR WEATHERFORD IN THIS TRANSACTION?
A: Weatherford is acquiring Christiana and the one-third interest in Logistic
because Weatherford believes it to be a good passive investment for
Weatherford. Weatherford does not intend to take an active management role
in the day-to-day operations of TLC and expects the value of the TLC
business to increase. Any increase in value would further benefit the
Weatherford stockholders.
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<PAGE> 28
Q: WILL THE OUTSTANDING SHARES OF WEATHERFORD COMMON STOCK CHANGE AS A RESULT
OF THE MERGER?
A: No. The number of shares of Weatherford common stock to be issued in the
merger will equal the number of shares of Weatherford common stock held by
Christiana.
Q: WHAT IS THE RELATIONSHIP BETWEEN THE PUBLIC OFFERING BEING MADE BY C2 AND
THE MERGER?
A: The public offering by C2 is a separate transaction. It is being made to all
the shareholders of Christiana to allow them to participate in an investment
in TLC as part of the transaction. If you as a Christiana shareholder do not
invest in C2, your only remaining interest in TLC will be through the
one-third interest held by Weatherford. You will, however, receive cash that
may be utilized by you as you wish.
Q: WHY IS THE TWO-THIRDS INTEREST IN TLC BEING SOLD TO C2 AT A PRICE LESS THAN
BOOK VALUE?
A: The Christiana Board and Christiana Independent Committee have authorized
the sale of a two-thirds interest in TLC at a price less than book value for
the following reasons:
- First, the two-thirds interest will be restricted and subject to
certain rights of Christiana.
- Second, C2 will assume Christiana's historical and contingent
liabilities as part of the consideration for the purchase.
- Third, C2 will agree to give Christiana a $7.0 million put right for
its interest.
- Fourth, all Christiana shareholders will be entitled to invest in
TLC through C2 on the same basis.
Q: WHAT SHOULD I DO NOW?
A: After reading this document carefully, you should complete and sign your
proxy card and mail it in the enclosed return envelope as soon as possible,
so that your shares may be represented at the special meetings. The Board of
Directors of Christiana recommends that the Christiana shareholders vote for
adoption of the merger agreement and the merger. The Board of Directors of
Weatherford recommends that the Weatherford stockholders vote for adoption
of the merger agreement and the merger.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No action needs to be taken by the Weatherford stockholders. Christiana
shareholders should complete the letter of transmittal that accompanies this
joint proxy statement/prospectus and return it, along with their Christiana
stock certificates, to Firstar Bank Milwaukee, N.A. at the address listed in
the letter of transmittal by no later than 5:00 p.m., central standard time,
on -- , 1999. Christiana shareholders who submitted their Christiana
stock certificates in connection with the first special meeting of
Christiana shareholders to consider the merger need not take any action
regarding those certificates but should still complete and return the letter
of transmittal.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote by sending in a later-dated, signed proxy card
to the Secretary of your company before the special meetings or by attending
your special meeting and voting in person.
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<PAGE> 29
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?
A: You will also be asked to allow Christiana and Weatherford to adjourn the
special meetings to solicit additional votes if they have not received the
required votes by the time of the special meetings. We do not expect to ask
you to vote on any other matters at the special meetings.
Q: WHO SHOULD I CALL WITH QUESTIONS?
A: If you have any questions about the merger, or if you would like copies of
any of the documents referred to or incorporated by reference in this joint
proxy statement/prospectus, please call Georgeson & Company Inc. at (800)
223-2064. See also "Where You Can Find More Information".
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<PAGE> 30
GENERAL INFORMATION ABOUT THE MEETINGS
DATE, TIME AND PLACE OF SPECIAL MEETINGS
Weatherford will hold its special meeting to approve the merger at 9:00
a.m., Houston time, on January -- , 1999, at The Luxury Collection Hotel of
Houston, 1919 Briar Oaks, Houston, Texas. Christiana will hold its special
meeting to approve the merger at 9:00 a.m., Milwaukee time, on January -- ,
1999, at the Galleria Conference Room, Firstar Center, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin.
RECORD DATE AND OUTSTANDING SHARES
The only people who are entitled to notice of and may vote at the special
meetings are those who are stockholders according to the Weatherford and
Christiana stock records at the close of business on December 10, 1998.
At the close of business on the record date, there were 3,004 holders of
record of Weatherford common stock with 97,264,318 shares issued and outstanding
and 890 holders of record of Christiana common stock with 5,149,330 shares
issued and outstanding. Each share of Weatherford common stock and Christiana
common stock entitles the holder thereof to one vote on each matter submitted
for stockholder approval.
PURPOSES OF THE SPECIAL MEETINGS
Weatherford. At its special meeting, Weatherford will ask its shareholders
to consider and vote on the merger proposal and to transact such other business
as may properly come before the Weatherford special meeting.
Christiana. At its special meeting, Christiana will ask its shareholders to
consider and vote on the merger proposal and to transact such other business as
may properly come before the Christiana special meeting.
If both the Weatherford and Christiana shareholders approve the merger
proposal, and the other conditions necessary to consummate the merger are
satisfied or waived, TLC and C2 will assume the C2/TLC assumed liabilities,
which generally include all the debts, liabilities and other obligations of
Christiana, TLC and their current and historical subsidiaries and predecessors
other than liabilities arising out of the certain assets that will be retained
by Christiana after the closing of the merger. See "Related Party Transactions".
VOTE REQUIRED
Weatherford. Weatherford's Amended and Restated By-laws provide that if a
majority of Weatherford's outstanding shares entitled to vote are present at its
special meeting, in person or by proxy, then there will be a quorum to transact
business. Under Weatherford's listing agreement with the NYSE, a majority of
Weatherford shares present, in person or by proxy, and entitled to vote must
approve the merger proposal.
At the close of business on the record date, there were 97,264,318 shares
of Weatherford common stock outstanding and entitled to vote at the Weatherford
special meeting. As of the close of business on the record date, Christiana held
4,386,762 shares of Weatherford common stock, representing an aggregate of
approximately 4.5% of the outstanding shares. In addition, directors and
officers of Weatherford and their affiliates, excluding Christiana, held
7,671,393 shares of Weatherford common stock, representing an aggregate of
approximately 7.8% of the outstanding shares. These directors and officers have
indicated that they intend to vote their shares to approve and adopt the merger
proposal. In addition, Christiana intends to vote its 4,386,762 shares of
Weatherford common stock to approve the merger.
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Christiana. Under Wisconsin law, both the holders of 80% of the outstanding
shares of Christiana common stock and two-thirds of the shares of Christiana
common stock other than shares held by the Lubar family must approve and adopt
the merger proposal. This means at least 31.6% of the shares of Christiana
common stock other than shares held by the Lubar family must approve the merger.
At the close of business on the record date, there were 5,149,330 shares of
Christiana common stock outstanding and entitled to vote at the Christiana
special meeting. At the close of business on the record date, the directors and
officers of Christiana and their affiliates held 3,445,932 shares of Christiana
common stock, representing an aggregate of approximately 67% of the outstanding
shares. These directors and officers indicate they will vote their shares to
approve the merger proposal.
VOTING AND REVOCATION OF PROXIES
Management will vote all properly executed proxies that are not revoked at
the special meetings in accordance with the instructions contained therein. If
you execute and return a proxy and do not specify otherwise, the shares
represented by your proxy will be voted "FOR" approval and adoption of the
merger proposal in accordance with the recommendation of the Weatherford Board
of Directors and the Christiana Board of Directors, as applicable. If you check
the abstention box on the proxy card or fail to return the proxy card, it has
the same effect as voting against the merger proposal and the proposal relating
to any adjournments of the respective special meeting. You may revoke your proxy
at any time before it is voted at the respective special meeting by executing
and returning a proxy bearing a later date, by filing written notice of such
revocation with the Secretary of Weatherford or Christiana, as appropriate,
stating that you revoke the proxy or by attending the special meeting and voting
in person.
Under NYSE rules, brokers may not submit proxies authorizing a vote on the
merger proposal without specific instructions from beneficial owners. An
abstention will have the effect of a vote against the merger proposal. A broker
nonvote will have the effect of a vote against the merger proposal. Under
Delaware law and Wisconsin law, both abstentions and broker nonvotes contained
on a returned proxy card will be considered present for purposes of determining
the existence of a quorum at the Weatherford special meeting or the Christiana
special meeting.
SOLICITATION OF PROXIES
Weatherford retained Georgeson & Company, Inc., to help it solicit proxies
at a cost of $6,500 plus expenses. Christiana retained D.F. King & Co. to help
it solicit proxies at a cost of $7,500 plus expenses. In addition to
solicitation by mail, the directors, officers and employees of Weatherford and
Christiana may solicit proxies from their respective stockholders by personal
interview, telephone, facsimile or otherwise.
Christiana will bear the costs incurred in soliciting the proxies from both
the Weatherford and Christiana stockholders. We will both arrange for brokerage
firms and other custodians, nominees and fiduciaries who hold the voting
securities of record to forward the solicitation materials to the beneficial
owners of those securities. We will reimburse such brokers, custodians, nominees
and fiduciaries for the reasonable out-of-pocket expenses they incur in
forwarding these solicitation materials.
DISSENTERS' RIGHTS
Under Delaware law, the holders of Weatherford common stock who object to
the merger proposal or abstain from voting in favor of the merger proposal will
not have any appraisal rights or right to receive cash for their shares of
Weatherford common stock and Weatherford does not intend to make any such rights
available to its stockholders.
Under the provisions of Wisconsin law, any Christiana shareholder who
dissents from the merger will have a statutory right to demand the "fair value"
of such shareholder's Christiana common stock in cash. To exercise this right,
such shareholder must not vote its shares in favor of the merger and must take
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certain other actions required by the provisions of Subchapter XIII of the
Wisconsin Business Corporation Law. See "The Merger -- Dissenters' Rights".
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the Weatherford
Board of Directors and the Christiana Board of Directors do not know of any
business to be presented at their respective special meetings other than as
stated in the notices accompanying this Joint Proxy Statement/Prospectus. If any
other matters should properly come before the respective special meetings,
including a proposal to adjourn such special meetings, management intends to
vote the shares represented by the proxies with respect to such matters
according to its judgement as to the merits of such matters.
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BACKGROUND OF THE TRANSACTION
On June 30, 1995, Weatherford acquired Prideco, Inc. ("Prideco") from
Christiana and other stockholders of Prideco in consideration for the issuance
of approximately 4.5 million shares of Weatherford common stock. As part of this
acquisition, Christiana received 3,897,462 shares of Weatherford common stock
and Sheldon Lubar, Chairman of the Board of Christiana, was appointed to the
Board of Directors of Weatherford. Christiana also was given the right to name a
nominee for election to the Board of Directors of Weatherford as long as
Christiana's interest in Weatherford was equal to at least 8% of the outstanding
shares of Weatherford common stock.
In earlier years, Christiana developed commercial and residential
properties, including projects in California, Nevada, Georgia and Texas. In
1987, the Christiana Board of Directors decided that the Company should be
involved in other businesses, because of the opportunity for more favorable
returns. Consequently, Christiana began a program of disposing of its real
estate properties and reinvesting its available cash into other businesses,
including TLC's warehousing and logistics business. As a result of this internal
restructuring, Christiana consisted primarily of two unrelated assets:
- Its warehousing and logistics business.
- Its Weatherford shareholdings.
Christiana's Board of Directors considered it desirable to separate the two
operations in order that Christiana be viewed as either a warehousing and
logistics business or a company involved in the engineered oilfield tools and
equipment business by virtue of its Weatherford shareholdings. Over the past
year, the value of Christiana stock in the market reflected primarily the
underlying asset value of its Weatherford shareholdings and did not adequately
reflect the value of its warehousing and logistics business. The Christiana
Board was aware that a sale of the warehousing and logistics business would
likely result in Christiana becoming a single business holding company and
subjecting Christiana to investment company regulations, which was not an
objective of the Christiana Board. Further, if the shares of Weatherford common
stock were sold or distributed to the Christiana shareholders, significant taxes
would be incurred at the corporate level and further at the shareholder level.
The Christiana Board considered, but rejected, an outright sale of Christiana,
because this would transfer ownership, but not separate the two businesses. The
Board considered, but rejected, a sale of TLC's warehousing and logistics
business, because the result would leave Christiana as a nonoperating holding
company. The Christiana Board also considered, but rejected, a sale of the
Weatherford shareholdings, because of Christiana's view as to the future
potential for increase in the value of the asset and the substantial
corporate-level tax that would result from such a sale. The Christiana Board
ultimately determined that a tax free merger would accomplish many of the
objectives described above.
In early June 1997, Mr. Lubar informally advised Christiana Board members
that he intended to approach Weatherford to inquire as to Weatherford's interest
in acquiring Christiana. The Christiana Board members informally concurred that
this was appropriate and requested that Mr. Lubar keep them advised and schedule
a formal meeting at an appropriate date to discuss such matter. At this time
there was no intention on the part of Mr. Lubar or any other officer or director
of Christiana or TLC to purchase TLC. Christiana, however, was not certain that
Weatherford would be willing to acquire Christiana with a controlling management
interest in TLC. In considering a possible acquisition of Christiana by
Weatherford, the Christiana Board of Directors took into account that if
Weatherford were not willing to acquire a controlling management interest in
TLC, Christiana would be required to dispose of a controlling interest in TLC
prior to the acquisition. In such case, the Lubar family and members of
Christiana and TLC management were willing to consider purchasing such portion
if that became necessary to complete a merger with Weatherford.
On June 19, 1997, Messrs. Sheldon Lubar and Donovan sent a memorandum to
Messrs. Brady, Nicholas and David Lubar describing in more detail the
restructuring of Christiana focusing on providing shareholders with enhanced
value in a tax efficient manner. The valuation of the components of Christiana,
as well as tax liabilities and the basis of Christiana's assets, were
considered. Messrs. Brady, Nicholas,
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D. Lubar, S. Lubar and Donovan conferred by telephone on June 20, 1997 and
concurred that a tax free merger with Weatherford was desirable. Messrs. S.
Lubar and Donovan advised the other directors that a meeting was scheduled with
Mr. Bernard Duroc-Danner, President of Weatherford, on June 23, 1997, in
Milwaukee, Wisconsin, and discussed with them the basis upon which a merger with
Weatherford would be most beneficial to Christiana shareholders.
In early June 1997, Mr. Lubar approached Mr. Duroc-Danner to inquire as to
Weatherford's interest in acquiring Christiana in a tax free merger. At a
meeting held in Milwaukee on June 23, 1997, at which Messrs. Lubar, Donovan and
Duroc-Danner were present, the parties discussed the possible acquisition.
Messrs. Lubar and Donovan expressed flexibility from Christiana's standpoint as
to the structure of the transaction and the mix of the consideration between
stock and cash that would be received by the Christiana shareholders. Following
that meeting, Weatherford and Christiana directed their legal and tax advisors
to review the possibility of an acquisition of Christiana by Weatherford and any
issues relating thereto.
Following a review of issues involved in an acquisition by Weatherford of
Christiana, in July 1997, Mr. Duroc-Danner advised Mr. Lubar of Weatherford's
management's interest in Weatherford pursuing a possible acquisition of
Christiana on appropriate terms, including, specifically, an acquisition that
would not be dilutive to Weatherford's per share earnings or cash flow and that
would not involve Weatherford's full ownership and management of Christiana's
warehousing and logistics business, and that the ownership and management of
Christiana's warehousing and logistics business would be inconsistent with the
operations of Weatherford and Weatherford's focus on the oilfield manufacturing
and service business. Weatherford also advised Christiana that Weatherford would
need to receive confirmation that an acquisition of Christiana by Weatherford
would not adversely affect Weatherford's ability to consummate any future
acquisition that would be accounted for as a pooling of interests, in particular
Weatherford's then pending acquisition of XLS Holding, Inc. ("XL").
Following these discussions, Messrs. Duroc-Danner and Lubar agreed that the
most appropriate structure for an acquisition by Weatherford of Christiana would
involve a transaction in which a controlling interest in TLC's business would be
sold to another entity for cash prior to Weatherford's acquisition and the
consideration that would be paid to the Christiana shareholders in the
acquisition would consist solely of a number of shares of Weatherford common
stock equal to the number of shares of Weatherford common stock held by
Christiana and an amount of cash not greater than the amount of cash held by
Christiana in excess of its existing obligations.
During discussions with Weatherford, Mr. Lubar routinely advised Christiana
directors regarding such discussions. Informal Christiana Board communications
consisted primarily of individual telephone calls between Mr. Sheldon Lubar and
Messrs. Nicholas F. Brady and Albert O. Nicholas, Christiana directors. Messrs.
Sheldon Lubar, David Lubar, a Christiana director, and William T. Donovan,
Christiana's President and a director, had extensive discussions on a daily
basis during these periods. Mr. Donovan also had telephone conversations with
the other Christiana directors, Messrs. Brady and Nicholas, and with John R.
Patterson and Gary R. Sarner, to discuss progress and solicit input in the
evaluation process and to update the Christiana Board on negotiations with
Weatherford. Although members of the Christiana Board were consulted during this
process, Christiana did not hold any meetings of the Board in person or
telephonic meetings of the Board relating to the merger at this time.
During the course of the negotiations, Weatherford imposed additional
requirements in connection with any proposed transaction, including the
following:
- The entity that would acquire a controlling interest in TLC must be a
creditworthy entity acceptable to Weatherford, because such an entity
must assume significant liabilities in connection with Christiana's and
TLC's present and prior businesses.
- The acquiring entity must agree to certain operational restraints in
order to increase the likelihood that such an entity would be able to
satisfy all assumed liabilities.
- A substantial holdback be available as security for such assumption of
liabilities.
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The imposition of each of the foregoing decreased the desirability of the
transaction to Christiana. In periodic telephone conversations with Messrs.
Nicholas and Brady and in frequent conversations with Messrs. Patterson and
Sarner, Messrs. Lubar and Donovan advised them of the increasing requirements of
Weatherford. On numerous occasions the directors were asked their opinion of
whether the conditions imposed by Weatherford were decreasing the desirability
of Christiana's completing a proposed transaction. The conclusion reached in the
discussions with the directors was that Messrs. Lubar and Donovan should
continue the negotiations, making as few concessions as possible.
During this interaction with Christiana Board members, Messrs. Lubar and
Donovan gave special attention to the views of Messrs. Nicholas and Brady,
because each owned a significant interest in Christiana, but were not employees.
While neither director was directly involved in negotiations with Weatherford,
they were advised as to the increasing conditions required by Weatherford as the
basis for a contemplated transaction. The views of Messrs. Nicholas and Brady of
the negotiations was important for Christiana, because, without their
concurrence, Messrs. Lubar and Donovan decided that they would not proceed with
a transaction with Weatherford.
In conversations with the other Christiana directors, Messrs. Lubar and
Donovan specifically discussed the appropriateness of a payment of $10.67
million to be paid to Christiana for a two-thirds interest in TLC. In
particular, Messrs. Donovan, Sarner and Patterson considered the operations of
TLC and the impact on its liabilities, including the liabilities that it would
have to assume in order to satisfy Weatherford's requirements and the
operational restrictions under which it would have to operate in order to
satisfy Weatherford. Messrs. Lubar and Donovan concluded that it was highly
unlikely that any outside party would be willing to enter into a transaction on
a basis acceptable to Weatherford. For these reasons they concluded that $10.67
million cash for a two-thirds interest in TLC was appropriate. The
appropriateness of the $10.67 million payment by C2 for a two-thirds interest in
TLC and the adequacy and fairness of that payment was discussed and approved by
the full Christiana Board of Directors at its meeting held on November 21, 1997.
No alternative acquisition structures were discussed or considered in that
the above form of transaction was the only form of transaction that would meet
the objectives of Weatherford in the transaction. The specific amount of cash
that would be provided to the Christiana shareholders in such a transaction was
not agreed to at that time. Because of Mr. Lubar's interest in both Christiana
and Weatherford, as well as Christiana's ownership interest in Weatherford, Mr.
Duroc-Danner advised Mr. Lubar that he believed that the review of the
transaction and the determination of the consideration to be received should be
approved and considered by a special committee of Weatherford.
The Christiana Board of Directors did not consider a sale of all of TLC to
facilitate Weatherford's desire not to acquire a controlling interest in TLC
because:
- Such a sale could have impacted the ability to effect the merger as a
partially tax free reorganization.
- Weatherford required Christiana to have assets other than Weatherford
common stock at the time of the merger in order to proceed with the
proposed transactions.
The Christiana Board also did not consider an auction of the two-thirds
interest in TLC that Weatherford did not wish to acquire because of the
perceived difficulty that would be involved in selling only a portion of the
ownership interest in TLC. In particular, the Christiana Board of Directors
believed that the indemnification requirements, the distribution, operation and
management restrictions and the tag-along and change in control provisions and
Weatherford put rights would materially reduce the desire of a third party to
acquire an interest in TLC and would affect materially the consideration that
would be received. Accordingly, the Christiana Board of Directors concluded that
a sale of a two-thirds interest in TLC to Mr. Lubar or one or more of his
affiliates at a fair price reflecting these restrictions would be in the best
interest of Christiana in that it would allow Christiana to effect the merger
with Weatherford and receive a fair value for the interest in TLC that
Weatherford was not willing to acquire. Mr. Lubar, in his
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capacity both as a director of Christiana and a potential interested party
through his agreement to assist in the funding of C2, took part in these
discussions with the Christiana Board.
To facilitate the consideration of a possible acquisition of Christiana by
Weatherford, Messrs. Lubar and Donovan on behalf of Christiana proposed to
Weatherford that the consideration to be paid by Weatherford in the acquisition
would consist of the following:
- A number of shares of Weatherford common stock equal to the number of
shares of Weatherford common stock held by Christiana.
- An amount of cash equal to the amount of cash of Christiana in excess of
Christiana's fixed liabilities, including $20.0 million from a cash
dividend that would be paid by TLC to Christiana prior to the sale of a
two-thirds interest in TLC and approximately $10.67 million cash to be
paid to Christiana for such two-thirds interest in TLC.
This proposal also contemplated that, following the acquisition, Christiana's
only assets would consist of the shares of Weatherford common stock then
currently held by Christiana, a one-third interest in TLC following the $20.0
million distribution and cash equal to the amount of cash payable by Weatherford
to the Christiana shareholders in the merger. Mr. Lubar also advised Weatherford
and Christiana that to facilitate the transaction, he and his affiliates would
be willing to acquire the two-thirds interest in TLC at the $10.67 million price
and cause the acquiring entity and TLC to assume certain obligations of
Christiana.
Mr. Lubar decided that $10.67 million for a two-thirds interest in TLC was
a fair price. This price for a two-thirds interest would correspond to a price
for 100% of the equity interest in TLC of $16.0 million. Christiana's management
and Board determined the $16.0 million equity value principally by employing a
multiple of "operating cash flow" produced by the business of TLC. "Operating
cash flow" was generally considered to be earnings before interest, taxes,
depreciation and amortization. In fiscal 1997, TLC produced $13.1 million in
"operating cash flow". The multiple employed to determine the total enterprise
value was six, which was based on the assessment of Christiana's management and
Board of the various components of TLC's earnings, i.e., transportation, dry
public warehousing, public refrigerated warehousing and international services.
No financial analysts were consulted in determining such price. This produced an
enterprise value for TLC of $78.6 million from which the anticipated level of
debt of $63.0 million was subtracted, giving an equity value of TLC of $15.8
million (rounded up to $16.0 million). Two-thirds of this value is $10.67
million. The consideration as to the appropriate cash flow multiple of six for
purposes of the calculation of the purchase price for a two-thirds interest in
TLC and the anticipated level of debt was determined by Mr. Donovan on behalf of
Christiana and C2 and conveyed to the full Christiana Board of Directors.
Afterward, the Christiana Board of Directors took into account the advice of Mr.
Donovan with respect to such cash flow multiple when it approved the transaction
at the meeting held on November 21, 1997. The Board of Directors of Christiana
concluded that a higher price for TLC would not be warranted for a number of
reasons, including the following:
- TLC would be required to assume debt of approximately $63.0 million, in
part to pay a cash dividend of $20.0 million to Christiana.
- While the proposed sale price of the two-thirds interest in TLC was
approximately $4.54 million less than its book value as of June 30, 1997,
the Christiana Board of Directors believed that the liability assumption
obligations and restrictions imposed by Weatherford supported a sale below
book value. The Christiana Board of Directors, however, also believed that
the cost to Christiana for disposing of such interest at that price
represented a fair discount for the assumption of obligations and
restrictions imposed by Weatherford. The Christiana Board of Directors
further believed that any lower amount of consideration that would be
received by the Christiana shareholders from the proposed sale of the
two-thirds interest in TLC in the manner contemplated was more than offset
by the benefits to be realized by the Christiana shareholders in the
merger and their receipt of Weatherford common stock in a tax free manner.
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- The purchasing entity and TLC would be required to assume various
contingent and unquantifiable liabilities, including liabilities related
to the historical operations of Christiana, TLC and other companies
formerly owned by Christiana.
- TLC would be required to restrict its operational activities for the
benefit of Weatherford and consequently would not have complete freedom in
connection with its business operations. Such restrictions were expected
to include prohibitions on any of the following without approval by
Weatherford: cash distributions, noncash distributions, acquisitions,
liquidation and compensation. These restrictions were eventually agreed
upon in the operating agreement to govern TLC following the transaction.
See "Related Party Transactions -- Terms of the Operating Agreement".
- No right was available to acquire the remaining one-third interest in
TLC.
- It was contemplated that Weatherford would have the ability to put its
one-third interest to TLC, thereby decreasing the value of TLC.
Weighing the above factors, the price of $10.67 million for a two-thirds
interest in TLC was the highest price Mr. Lubar thought appropriate.
Furthermore, considering that the purchasing entity would have to be acceptable
to Weatherford, Mr. Lubar felt it highly unlikely that a transaction could be
concluded with any other entity paying the same or higher price for the
two-thirds interest in TLC. Mr. Lubar reached this conclusion because, in order
to conclude a transaction on such a basis, any acquirer would have to meet the
following criteria:
- Be acceptable to Weatherford from a financial and operational standpoint.
- Be willing to assume indemnity obligations to Weatherford relating to the
historical operations of TLC, Christiana and other companies formerly
owned by Christiana.
- Be willing to acquire less than a 100% interest in TLC.
- Be willing to accept a put obligation on the one-third interest retained
by Christiana.
- Be willing to accept restricted operational activities.
Mr. Lubar considered the chances of fulfilling the above conditions remote. As a
result, no consideration was given by the Christiana Board of Directors to a
sale of TLC to a bidder other than Weatherford.
The Christiana Board of Directors also determined that a discount of $4.54
million off the then existing book value for a two-thirds interest in TLC was an
appropriate discount for a sale of a two-thirds interest in TLC to C2 (and Mr.
Lubar through his proposed interest in C2) due to the fact that a two-thirds
interest in TLC would be generally illiquid and the factors considered by Mr.
Lubar described in second through fifth clauses in the prior paragraph. Although
the impact of these factors was not subject to precise quantification, the
Christiana Board of Directors believed that the discount, which was in large
part reflective of the six times cash flow multiple discussed and suggested by
Mr. Donovan as described above, was fair to the Christiana shareholders.
In July 1997, Mr. Donovan commenced discussions with investment bankers
regarding potential financial advisory roles. These discussions culminated with
the retention of Prudential Securities on November 24, 1997 as financial advisor
to Christiana.
On August 14, 1997, Mr. Lubar advised the Christiana Board of Directors of
the potential for a merger with Weatherford. The Christiana Board determined
that it was not necessary to appoint a special committee at that time, even
though Mr. Lubar was expected to own a significant interest in an entity that
would purchase TLC in connection with the merger. The Christiana Board noted
that the outside directors, Messrs. Nicholas and Brady, were in favor of the
prior merger agreement and that the prior
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merger agreement would not be approved without their concurrence. The views of
Messrs. Nicholas and Brady were especially important for two reasons. First,
unlike the other directors, they were not employed by Christiana or TLC. Second,
each held a significant interest in Christiana (9.9% in the aggregate) and
therefore their interests would be aligned with other shareholders. The
directors decided that it was important for all shareholders to know how each
director voted on this issue. Each director voted in favor of continuing the
negotiations. Because the two unaffiliated directors, Messrs. Nicholas and
Brady, voted in favor of continuing the negotiations, Messrs. Lubar and Donovan
had sufficient authority under applicable Wisconsin law to proceed even though
the "affiliated" directors voted. During this period and until the November 21,
1997 Christiana Board meeting at which the Board of Directors of Christiana
approved the merger, Messrs. Lubar and Donovan kept the Christiana Board advised
of the progress of negotiations, including specifically the outside directors,
Messrs. Nicholas and Brady.
After having been advised by Weatherford that Weatherford would be
interested in owning only a one-third interest in TLC, Christiana and its Board
of Directors began to consider what entity would own the remaining two-thirds
interest in TLC.
On August 21, 1997, at the recommendation of Mr. Duroc-Danner, the Board of
Directors of Weatherford appointed a special committee of the Board of Directors
of Weatherford consisting of Sheldon S. Gordon, a former director of
Weatherford, and Robert A. Rayne (the "Weatherford Special Committee") to review
the Christiana proposal. Following that appointment, the Weatherford Special
Committee directed Fulbright & Jaworski L.L.P., Weatherford's outside counsel
("Fulbright & Jaworski"), to begin negotiations with Christiana of an
acquisition on terms satisfactory to Weatherford.
In early September, Fulbright & Jaworski and Foley & Lardner, outside
counsel to Christiana, began negotiations for the acquisition. In late
September, Weatherford advised Christiana that in light of a number of
transactions that Weatherford was then pursuing, in particular, its proposed
acquisitions of BMW Monarch (Lloydminster) Ltd. and BMW Pump, Inc.
(collectively, "BMW") and Trico Industries, Inc. ("Trico"), Weatherford was not
in a position at that time to devote the time and resources necessary to pursue
the acquisition of Christiana and that further negotiations would need to be
delayed until a later date.
On October 1, 1997, Mr. Donovan was approached by another entity inquiring
about a potential interest in TLC. This entity was an entity known to Mr.
Donovan to have recently acquired a majority interest of a company involved in
the public refrigerated warehousing and logistics industry. Mr. Donovan
discussed with representatives of this entity the key elements of the
contemplated transactions with Weatherford. Such potential purchaser indicated
that it was not interested in considering such a transaction, primarily because
of the indemnification provisions, the lack of a right to acquire the minority
interest to be held by Weatherford and the operating restrictions imposed on
TLC.
On October 8, 1997, following the execution of definitive agreements for
the acquisitions of Trico and BMW, Mr. Duroc-Danner met in Milwaukee with
Messrs. Lubar and Donovan to discuss the status and expected timing of
Weatherford's review of the Christiana acquisition. Mr. Duroc-Danner
subsequently contacted the members of the Weatherford Special Committee and
suggested a November 11, 1997, meeting to review and discuss the terms and
structure of the proposed transactions. Weatherford and Christiana then directed
their advisors to resume negotiations of documentation.
On November 7, 1997, Weatherford engaged Morgan Stanley to provide
Weatherford with a fairness opinion on the proposed transactions.
On November 11, 1997, the Weatherford Special Committee met in London with
Mr. Duroc-Danner, James G. Kiley, Vice President and Chief Financial Officer of
Weatherford, and representatives of Fulbright & Jaworski and Morgan Stanley to
review the status and structure of the proposed transactions. At this meeting,
the Weatherford Special Committee reviewed the outstanding issues with respect
to the proposed transactions and the financial impact to Weatherford thereof as
well as drafts of documents for the proposed transactions. The Weatherford
Special Committee also reviewed various due diligence matters relating to
Christiana and TLC, including the historical businesses of Christiana, various
matters
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relating to the prior ownership of real property by Christiana in California,
the status of various lawsuits then pending against Christiana, including a
class action lawsuit involving a prior real estate development in California
that has since been settled, and other customary matters involving the
historical business and operations of Christiana and its subsidiaries.
Following the conclusion of the November 11, 1997 meeting of the
Weatherford Special Committee, the members of the Weatherford Special Committee
contacted Mr. Lubar to discuss proposed changes in the terms of the proposed
transactions. Weatherford and Christiana advisers then continued negotiation of
the terms of the proposed transactions, including the following:
- That $10.0 million cash be retained by Christiana to be available to pay
any unpaid indemnity claims under the TLC purchase agreement.
- That $10.0 million of the cash consideration proposed by Christiana to be
paid in the merger be deferred for five years without interest and be
subject to reduction for any liabilities or unpaid indemnity claims that
may be paid by Weatherford or Christiana.
- That Christiana pay all printing and proxy solicitation costs as well as
Weatherford's filing fees with the Commission and under the HSR Act and
all costs and expenses for blue sky and state securities law filings.
- That the value of various tax benefits associated with the exercises and
termination of options by Christiana prior to the merger be provided to
Weatherford without offset for other income by Christiana.
- That Christiana obtain a solvency opinion with respect to the proposed
transactions.
- That various protections be incorporated in the operating agreement to
protect Christiana's minority interest in TLC following the merger.
- That C2 be responsible for the indemnification of the historical
liabilities and obligations of Christiana and its current and historical
subsidiaries and predecessors under the TLC purchase agreement as well as
be responsible to purchase Christiana's one-third interest in TLC if
Christiana were to elect to sell its one-third interest in TLC five years
after the closing.
The Weatherford Special Committee requested a solvency opinion because of
the various loans that were anticipated to be made to TLC to fund a portion of
the cash dividend to be made by TLC to Christiana as a condition to the merger
and given that the TLC sale involved a transaction among affiliated parties, an
independent third-party solvency opinion would provide support that the TLC sale
would not constitute a fraudulent transfer. Weatherford also conducted various
additional due diligence regarding the litigation described above. Except for
the class action lawsuit, which was subsequently settled, no known material
liabilities or contingencies were identified during the due diligence process.
Further negotiations between the representatives of Weatherford and
Christiana with respect to open points under the agreements continued through
the month of November.
On November 21, 1997, the Board of Directors of Christiana met to consider
the proposed transactions. At this meeting, representatives of Foley & Lardner
and Christiana management provided presentations to the full Board of Directors
describing the proposed transactions and the financial, legal and other effects
of the proposed transactions on Christiana. The Board considered the advantages
of the following:
- A separation of Christiana's two principal assets, its 3,897,462 shares
of Weatherford common stock and TLC, including permitting Christiana
shareholders to make more focused investment decisions based on the
specific attributes of Weatherford and Christiana, as discussed more
fully under "Christiana's Reasons For the Transaction".
- The fair value Christiana shareholders would receive in the merger in the
form of the Weatherford share consideration, the cash consideration and
the $10.0 million contingent cash payment.
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- The tax free nature of the Weatherford share consideration to Christiana
shareholders.
- The right of each Christiana shareholder to purchase his or her pro rata
interest in C2 and thereby maintain an ownership interest in TLC. The
Board also determined that a fairness opinion from Prudential Securities,
based on the terms described at the meeting, would be necessary.
The Christiana Board also considered the cost to the Christiana
shareholders in connection with the merger, including, specifically, that the
merger would preclude other alternatives in the future, that the $10.0 million
contingent cash payment would not bear interest, that Christiana (which
following the merger will be a wholly owned subsidiary of Weatherford) would
retain a one-third interest in TLC and the cost associated with converting the
TLC business to the business of C2. The Christiana Board further considered that
the proposed transactions would increase the exposure of Christiana shareholders
to fluctuations in the price of Weatherford common stock, as described more
fully in "Christiana's Reasons For the Transaction". The Christiana Board,
nevertheless, considered that the advantages outweighed such disadvantages. In
considering the proposed transactions, the Christiana Board of Directors also
noted that the potential tax benefits that could be realized by Christiana (and
therefore accruing to the benefit of Christiana's shareholders through the
elimination of double taxation) through the merger (versus other alternatives)
ranged from $57.8 million on August 14, 1997, the date of the Christiana Board's
first meeting to consider the potential for a merger with Weatherford, to $72.0
million on November 21, 1997, the date the Christiana Board approved the merger,
and, based on its favorable outlook on Weatherford common stock, the Christiana
Board expected these tax benefits to increase. Except for the quantification of
these tax benefits and its analysis of the potential value of TLC as described
above, the Christiana Board of Directors did not assign values or quantify
further its analysis of the transaction. Following these presentations and
discussions at the November 21, 1997 Board meeting, the Board of Directors of
Christiana unanimously approved the prior merger agreement and related
transactions (including, specifically, the sale of two-thirds of TLC to C2) and
determined that the prior merger agreement and related transactions were in the
best interest of Christiana and fair to the Christiana shareholders, including
the unaffiliated shareholders.
A special committee of the Christiana Board was not established at the time
of the November 21, 1997 Board meeting because the Christiana Board noted that
the two outside directors, Messrs. Nicholas and Brady, who were present and
voting, approved the prior merger agreement and related transactions and
concluded that the merger pursuant to the prior merger agreement and related
transactions were in the best interest of Christiana. The views of Messrs.
Nicholas and Brady were especially important to Christiana for two reasons.
First, unlike the other directors, they were not employed by Christiana or TLC.
Second, each held significant interest in Christiana (9.9% in the aggregate) and
therefore their interests would be aligned with other shareholders. Because the
two unaffiliated directors, Messrs. Nicholas and Brady, voted in favor of the
merger pursuant to the prior merger agreement and related transactions, Messrs.
Lubar and Donovan had sufficient authority under applicable Wisconsin law to
proceed even though the "affiliated" directors voted. This approval was subject
to the finalization of the documentation relating to the proposed transactions,
the receipt of the opinion of Prudential Securities as to the fairness, from a
financial point of view, of the proposed transactions to the shareholders of
Christiana (the "Prudential Securities Opinion"), satisfaction of other closing
conditions and approval of the final documentation for the merger pursuant to
the prior merger agreement by the President of Christiana.
The Christiana Board of Directors did not believe that it was necessary to
engage an independent third party to conduct an analysis as to the appropriate
valuation of the two-thirds interest in TLC proposed to be sold to C2 on the
basis that the Board was familiar with the business of TLC and had historical
expertise and knowledge as to financial matters. In addition, the Board of
Directors believed that, by providing the Christiana shareholders with the right
to invest in C2, the need and expense of obtaining a third party independent
valuation of TLC was not in the interest of the Christiana shareholders and
would not have provided any additional meaningful basis for determining the
fairness of the transaction to Christiana.
To assure the fairness of the proposed sale of TLC to C2 at the price
contemplated by the TLC purchase agreement, Christiana required C2 to offer to
the Christiana shareholders the right to participate
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and invest in C2 on the same terms and conditions as the Lubar family.
Christiana also required Weatherford to agree to procedural terms relating to
the payment of the cash consideration that would allow the Christiana
shareholders to apply the cash consideration payable to them directly toward the
purchase of shares of C2 common stock. The Christiana Board of Directors
believes that this right to participate in the ownership of C2 common stock
provides substantial procedural fairness to the proposed sale of TLC and allows
the Christiana shareholders to continue to participate in the ownership of TLC
if they so desire.
On December 1, 1997, the Weatherford Special Committee met to review the
prior merger agreement. At this meeting, representatives of Fulbright & Jaworski
and Morgan Stanley provided to the Weatherford Special Committee an updated
summary of the financial, legal and other effects of the proposed transactions.
The terms of the documentation were also reviewed. Morgan Stanley further
advised the Weatherford Special Committee that it was prepared to deliver its
fairness opinion if the proposed transactions were to be effected on the terms
described at the meeting. A draft of the fairness opinion was provided and
reviewed by the Weatherford Special Committee. After discussion, the Weatherford
Special Committee determined that the proposed transactions were desirable for
Weatherford and that it would recommend to the full Board of Directors of
Weatherford that the prior merger agreement be approved.
Later on December 1, 1997, the Board of Directors of Weatherford met to
consider the prior merger agreement. At this meeting, representatives of
Fulbright & Jaworski and Morgan Stanley provided presentations to the full Board
of Directors describing the proposed transactions and the financial, legal and
other effects of the proposed transactions on Weatherford. The Weatherford
Special Committee also provided a report to the Weatherford Board of Directors
outlining its findings and recommendations. Morgan Stanley further advised the
Weatherford Board of Directors that it was prepared to deliver its opinion as to
the fairness, from a financial point of view, of the consideration to be paid by
Weatherford pursuant to the Prior merger agreement (the "Morgan Stanley
Opinion"), if the proposed transactions were to be effected on the terms
described at the meeting. A draft of that opinion was provided to the Board of
Directors. Following these presentations, the Board of Directors of Weatherford,
with Mr. Lubar abstaining from voting, unanimously approved the merger pursuant
to the prior merger agreement and determined that the merger pursuant to the
prior merger agreement was in the interest of Weatherford. This approval was
subject to the finalization of the documentation relating to the proposed
transactions, the receipt of the Morgan Stanley opinion, satisfaction of certain
other conditions and approval of the final documentation for the proposed
transactions by the Weatherford Special Committee.
From December 1, 1997, through December 12, 1997, the final terms of the
prior merger agreement were negotiated between Weatherford and Christiana.
On or about December 11, 1997, C2 was formed for the purpose of acquiring
the two-thirds interest in TLC.
On December 12, 1997, the Weatherford Special Committee approved the final
terms of the prior merger agreement and Morgan Stanley delivered its oral
opinion to the Weatherford Special Committee with respect to the prior merger
agreement, which was subsequently confirmed in writing.
On December 12, 1997, the President of Christiana approved the final terms
of the prior merger agreement and Prudential Securities advised the President
that it was in a position to deliver its opinion to the effect that the
transaction was fair, from a financial point of view, to the shareholders of
Christiana. For the purposes of the Prudential Securities Opinion, the
transaction is defined as the merger, the TLC sale and the C2 offering.
On December 15, 1997, we executed the prior merger agreement and TLC
purchase agreement.
On April 9, 1998, Mr. Duroc-Danner advised Mr. Lubar that Weatherford would
be unable to consummate the merger until mid July 1998 because of an accounting
requirement that would not allow Weatherford to account for the merger of EVI,
Inc., the predecessor of Weatherford, with Weatherford Enterra, Inc. as a
"pooling of interests" if the merger were to close prior to Weatherford's
publication of 30 days of combined results with Weatherford Enterra, Inc. This
delay would have allowed both Christiana and Weatherford to terminate the prior
merger agreement after June 30, 1998. Messrs. Duroc-Danner and
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Lubar agreed that it would be desirable to amend the prior merger agreement to
extend the termination date. In connection with such amendment, Christiana
requested that other modifications be made to the prior merger agreement and the
TLC purchase agreement to provide for the payment of the $10.0 million
contingent cash payment after four years, greater operational flexibility and
certain clarifying changes.
On April 29, 1998, the Weatherford Special Committee considered the
requests by Christiana and approved an amendment to the prior merger agreement
and the TLC purchase agreement that:
- Extended the termination date of the prior merger agreement to October
31, 1998.
- Allowed for the payment of the $10.0 million contingent cash payment on
the earlier of:
- The fifth anniversary of the closing of the merger.
- The date that Christiana received consideration with a fair market
value of $20.0 million or more in connection with a sale of its
one-third interest in TLC.
The inclusion of the early $10.0 million contingent cash payment provision
was agreed to in order to allow the Christiana shareholders to receive such
funds if Weatherford has received sufficient funds in respect of Christiana's
interest in TLC that is substantially in excess of the $10.0 million cash
required to be retained by Christiana after the merger. The amendment also
clarified certain provisions of the TLC purchase agreement, in particular
Christiana's "participation rights" in the event of a "change of control" of C2.
The principal change was that no "change in control" would be deemed to occur if
the Lubar family retains at least a 25% voting and ownership interest in C2 or
the resulting entity.
On May 12, 1998, Mr. Donovan telephoned the Christiana directors to advise
them of the proposed amendment. On May 13, 1998, Mr. Donovan substantively
described in writing the proposed amendment to the Christiana Board of
Directors. Directors approving the amendment were requested to sign and return a
consent action. The directors unanimously approved the amendment, which approval
was effective on May 15, 1998.
The amendment to the prior merger agreement and the TLC purchase agreement
was approved by the Weatherford Board of Directors upon the recommendation of
the Weatherford Special Committee by written consent, with Mr. Lubar executing
the consent only to comply with the requirements of Delaware law, but
effectively abstaining from voting. On May 25, 1998, the amendments to the prior
merger agreement and the TLC purchase agreement were executed.
On or about July 17, 1998, we mailed to our respective stockholders proxy
materials to vote upon the approval of the prior merger agreement. Subsequent to
the mailing of those materials, the market price of the Weatherford common stock
declined below $30 per share, the price at which Christiana shareholders could
receive shares of Weatherford common stock in a tax free manner. The impact of
this decline was that the shares of Weatherford common stock that would have
been issued in the merger could no longer be received by the Christiana
shareholders in a tax free manner. During the first week of August,
representatives of Christiana and Weatherford discussed various possible
amendments to the prior merger agreement that would have allowed the Weatherford
shares to be received in a tax free manner. The alternatives that were discussed
included a purchase of Weatherford common stock by Christiana, a purchase of
Weatherford common stock by Weatherford and a corresponding adjustment to the
cash and stock components of the merger, a dividend or distribution by
Christiana of some or all of its cash to its shareholders and a combination of
the foregoing. In reviewing these alternatives, we determined that these
alternatives would require new approvals by our shareholders and that there was
not sufficient time to obtain these approvals prior to the shareholder meetings
of Weatherford and Christiana that were scheduled to be held on August 17, 1998.
On August 7, 1998, the Board of Directors of Weatherford held a special
telephonic meeting to consider possible changes to the prior merger agreement to
allow the Weatherford shares to be received in a tax free manner. After
discussion of these matters and at the request of Christiana, no action was
taken by the Weatherford Board. The Weatherford and Christiana Boards also
determined that it would be in the best interest of their respective companies
to proceed with a vote of their stockholders on the prior
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merger agreement and to monitor the market price of the Weatherford common stock
to see if the price of the Weatherford common stock would rise to above $29 per
share so as to allow the merger to be completed on its original terms.
On August 17, 1998, the special meetings of the stockholders of Weatherford
and Christiana were held to consider and act upon the prior merger agreement. At
those meetings, the stockholders of Weatherford and Christiana overwhelmingly
approved the prior merger agreement with approximately 71% and 89% of the total
outstanding shares of Weatherford common stock and Christiana common stock,
respectively, voting in favor of the proposal. The percentage of Christiana
shares that voted in favor of the merger that were not held by the Lubar family
was approximately 98%.
Following the approval of the prior merger agreement, we agreed to continue
to monitor the market price of the Weatherford common stock to see whether or
not the price of the Weatherford common stock would rise to above $29 per share
so as to allow the merger to be completed on its original terms.
Given the overwhelming support of the Christiana shareholders in favor of
the merger, on or about September 11, 1998, Mr. Donovan met with Mr. Lubar to
explore modifications that would permit the transaction to close, but still on a
partially tax free basis. They agreed that any restructuring would have to have
a high degree of certainty that the transaction, as modified, would close. Mr.
Donovan and Mr. Lubar consulted with Christiana's legal counsel and accountants
concerning this matter. The alternatives considered by Messrs. Lubar and Donovan
were primarily focused on a purchase of shares of Weatherford common stock by
Christiana using Christiana's funds. They also considered the following:
- An alternative that would have had Weatherford purchase its own shares
prior to the merger with the cost of the purchase to be reduced from the
cash consideration.
- An alternative of a special dividend by Christiana.
They did not pursue the first alternative because of Weatherford's statements
that it would not agree to that type of transaction. They did not pursue the
second alternative because the special dividend would have been taxable to a
Christiana shareholder at ordinary income tax rates.
After giving consideration to the impact on Christiana of not pursuing a
merger with Weatherford, Mr. Donovan determined that the transaction would still
be partially tax free if Christiana used its cash to purchase additional shares
of Weatherford common stock, for which Christiana shareholders would receive
newly issued Weatherford common stock on a one-for-one basis. Mr. Donovan
concluded that, if Christiana made such purchases, Weatherford might be willing
to eliminate the $10.0 million contingent cash component of the original merger
proposal. This would benefit Christiana shareholders because these funds would
no longer be subject to contingent claims and because Christiana shareholders
would have more control over when they were taxed. Cash is taxed when received,
but Weatherford common stock is not taxed until sold, which is in a
shareholder's discretion. Christiana also determined that if a portion of its
cash were to be utilized to purchase shares of Weatherford common stock, the use
of that cash would enhance the likelihood that the merger could be effected on a
partially tax free basis in that the common stock component of the consideration
to be paid in the merger would increase and the cash component would decrease.
Christiana concluded that if it were to acquire Weatherford common stock with
the $10.0 million cash that was to be retained by Weatherford pursuant to the
original merger proposal, then the merger could be consummated even if the
market price of the Weatherford common stock at closing was lower. Christiana
also determined that if it spent an additional $5.0 million to purchase
Weatherford common stock, the price of Weatherford common stock could be even
lower and the merger could still be consummated.
Mr. Donovan and Mr. Lubar also concluded that the original reasons for the
merger as described in "Christiana's Reasons for the Merger" were still valid,
including, specifically, Christiana's interest in separating the large
Weatherford holdings from TLC and significantly increasing the marketability and
liquidity of the holdings of the Christiana shareholders.
On September 17, 1998, Mr. Donovan presented this matter to the Christiana
Board. The Christiana Board considered three courses of action:
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- Continue the present course of monitoring Weatherford common stock, then
close the existing transaction if the Weatherford common stock price rose
to approximately $30 or higher per share.
- Request that we mutually terminate the transaction.
- Restructure the transaction in a way that would increase the assurance
that the transaction could close at a lower per share Weatherford common
stock price.
Mr. Donovan described the modifications discussed with Mr. Lubar.
Considering that over 89% of the outstanding shares of Christiana common stock
were voted in favor of the merger, the advantages gained by the elimination of
the contingent cash consideration, that the original reasons for the transaction
were still valid and that there was increased assurance that the modified
transaction would close, the Christiana Board agreed that Weatherford should be
contacted regarding an amendment to the existing transaction on the terms
proposed by Messrs. Donovan and Lubar.
On September 24, 1998, the Christiana Board appointed an independent
committee consisting of Messrs. Nicholas and Brady (the "Christiana Independent
Committee"). In approving the prior merger terms, the Christiana Board adopted
internal procedures to assure the procedural fairness of the merger in light of
the interest of Mr. Lubar and his family in the transaction. The Christiana
Board decided to appoint the Christiana Independent Committee to consider the
amended merger agreement because the Christiana Board concluded that the
appointment of the independent committee would more formally reflect the
internal procedures followed by the Christiana Board in approving the prior
terms. In so doing, the Christiana Board empowered the Christiana Independent
Committee with the authority to:
- Review all aspects of the merger including any proposed amendment to the
prior merger agreement.
- Approve any amendments to the prior merger agreement and recommend such
amendments to the full Christiana Board.
- Have a telephonic meeting with Prudential Securities regarding the
opinion of Prudential Securities as to the fairness of the transaction as
amended.
- Negotiate or oversee the negotiation of any amendments to the prior
merger agreement.
- Take such further action as necessary to amend the prior merger agreement
consistent with interests of Christiana and its shareholders.
The Christiana Independent Committee instructed Mr. Donovan to communicate
with Weatherford and then report to the Christiana Independent Committee.
On September 18, 1998, Mr. Donovan contacted Curtis Huff, General Counsel
for Weatherford, regarding Christiana's position. Mr. Huff advised Mr. Donovan
that he would present the Christiana proposal to the Board of Directors of
Weatherford.
On September 19, 1998, members of the Board of Directors of Weatherford
were contacted by management of Weatherford to discuss the general proposal by
Christiana.
Because the composition of the Weatherford Board had changed since its
approval of the prior merger agreement and there remained only one member of the
Weatherford Special Committee (Robert Rayne), it was the consensus of the
Weatherford Board that approval of amendments to the prior merger agreement
should be approved by the full Board of Directors without the participation of
Mr. Lubar. Based on this conclusion, on September 21, 1998, Messrs. Duroc-Danner
and Huff met with Philip Burguieres and Robert Moses, two new independent
directors of Weatherford, to discuss with them in detail the historical terms
and rationale for the merger and the general terms of the new proposal by
Christiana.
On September 22, 1998, the Weatherford Board of Directors met. At that
meeting, the Weatherford Board of Directors was provided a presentation on the
proposed amendments to the prior merger agreement. After discussion and review
of the proposal, the Weatherford Board of Directors, with Mr. Lubar not
participating in the vote, approved the amended merger agreement. The amended
merger agreement provided for the release of the $10.0 million holdback in
consideration for Christiana's
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commitment to spend up to $15.0 million cash for the acquisition of Weatherford
common stock if necessary to allow for the merger to be consummated. The
Weatherford Board of Directors also required Christiana to commit to spend $10.0
million of the cash prior to the date of mailing of the Joint Proxy
Statement/Prospectus for such purchases regardless of the market price of the
Weatherford common stock. The Weatherford Board of Directors also conditioned
its approval on the receipt of another fairness opinion from Morgan Stanley to
the effect that the consideration to be paid pursuant to the amended merger
agreement is fair to Weatherford from a financial point of view. In approving
the amended merger agreement, the Weatherford Board gave particular weight to
the desire to obtain certainty for the consummation of the merger and agreed to
the release of the $10.0 million holdback in exchange for the greater certainty
provided by the commitment by Christiana to purchase additional shares of
Weatherford common stock.
Following this meeting, representatives of Weatherford and Christiana
negotiated the final terms of the amended merger agreement.
On October 12, 1998, Prudential Securities delivered to Christiana a new
opinion that the transaction was fair to the shareholders of Christiana from a
financial point of view. For the purposes of the Prudential Securities Opinion,
the transaction is defined as the merger, the TLC sale and the C2 offering.
The Christiana Independent Committee met twice, on October 9 and 12, 1998,
to consider whether to recommend the amended merger agreement to the Christiana
Board. At the October 12, 1998 meeting, Prudential Securities met telephonically
with the Christiana Independent Committee to discuss in detail the analysis of
Prudential Securities and its opinion regarding the fairness of the transaction
to the Christiana shareholders from a financial point of view, which consisted
of a comparable transactions analysis, a transaction consideration analysis and
a stock trading history analysis, all of which are summarized below under
"Opinions of Financial Advisors -- Prudential Securities Opinion". On October
12, 1998, the Christiana Independent Committee considered such analysis and
opinion, along with the proposed terms of the amended merger agreement. At both
meetings, the Christiana Independent Committee concluded that the amended
transaction was fair from a financial point of view and in the best interests of
Christiana and all of its shareholders, including those shareholders who are
unaffiliated with the Lubar family. As a result on October 12, 1998, the
Christiana Independent Committee recommended the amendment to the full
Christiana Board.
On October 12, 1998, the Christiana Board met to review the Christiana
Independent Committee's recommendations. The Board reviewed the proposed text of
the amended merger agreement and considered the opinion of Prudential
Securities. The Board specifically considered that, if Christiana made the
purchases of Weatherford common stock, the possibility existed that the stock
price could nevertheless decrease and, if it decreased below approximately $13
per share, the transaction would still not be able to close because it would be
a taxable transaction. Nevertheless, the Board considered that the proposed
amendment provided significant advantages to Christiana shareholders, namely,
the elimination of the $10.0 million holdback, an increased certainty that the
transaction would close because, without the amendment, the transaction would
not be able to close unless the Weatherford common stock price was $30.00 or
higher, which was deemed unlikely to occur before the October 31, 1998
termination date, and the advantages of being able to defer taxes on a higher
portion of the consideration. The Christiana Board, with Mr. Lubar abstaining
from voting, then approved the transaction.
On October 12, 1998, Morgan Stanley delivered to Weatherford a new opinion
that the consideration to be paid by Weatherford pursuant to the merger
agreement was fair from a financial point of view to Weatherford.
We executed the amended merger agreement on October 14, 1998.
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WEATHERFORD'S REASONS FOR THE TRANSACTION
The Board of Directors of Weatherford, with Mr. Lubar abstaining, has
approved the merger proposal and recommends that the stockholders of Weatherford
approve the merger proposal. The Weatherford Board of Directors believes that
the merger is in the interest of Weatherford and its stockholders for the
following reasons:
- The merger will provide Weatherford a one-third interest in TLC with a
pro forma book value in excess of $7.0 million, and certain tax
benefits, all without any consideration other than transaction costs and
the exposure to certain contingent liabilities for which indemnity is
being provided by C2 and TLC.
- The merger is expected to further improve the liquidity of the
Weatherford common stock by placing the equivalent number of shares of
Weatherford common stock that are held by Christiana directly in the
hands of the Christiana shareholders.
The Weatherford Board of Directors believes that the transaction is beneficial
to Weatherford because of the favorable financial terms provided to Weatherford
for effecting the transaction. Except for the exposure to certain contingent
liabilities for which indemnity is being provided by C2 and TLC, the Board of
Directors of Weatherford does not believe that there exists any material
negative aspects of the transaction to the stockholders of Weatherford. Such a
transaction would not be available to Weatherford other than pursuant to the
terms of the merger.
In considering the approval of the merger, the Weatherford Special
Committee and the Board of Directors of Weatherford noted that Weatherford,
through its ownership in Christiana, would be provided with an option to dispose
of Christiana's one-third interest in TLC five years from the date of the merger
for a cash consideration of $7.0 million. The Weatherford Special Committee and
Weatherford Board of Directors also noted that pursuant to the transaction,
Weatherford would be entitled to various tax benefits having a potential value
of up to approximately $600,000. The Weatherford Board of Directors also
specifically took into consideration the impact of the recent amendment to the
merger agreement on Weatherford and its stockholders. In particular, the Board
of Directors noted that the release of the $10.0 million cash holdback that
would have been available for payment of unpaid indemnification claims would no
longer be available to Weatherford. The Board of Directors, however, determined
the potential benefits to Weatherford of receiving a one-third interest in TLC
without providing any consideration other than the agreement to pursue the
transaction with Christiana outweighed the detriments to Weatherford of being
exposed to contingent liabilities for which there would not be a cash holdback.
The Board of Directors of Weatherford also considered the potential value of TLC
in the future and the benefit that a one-third interest in TLC would provide to
Weatherford.
The Weatherford Special Committee and the Weatherford Board of Directors
also considered a number of other factors in approving the merger. Principal
among these additional factors was the fact that under the terms of the merger
agreement and the TLC purchase agreement, TLC and C2 are required to indemnify
Weatherford and Christiana for all current and historical fixed and contingent
liabilities relating to the businesses of Christiana, TLC and their respective
current and historical subsidiaries and predecessors. In addition, the Board of
Directors of Weatherford considered the fact that Christiana, C2 and Weatherford
would receive an opinion from American Appraisal to the effect that the
transaction would not render Christiana, TLC or C2 insolvent and that the value
of the assets of C2 and TLC would be sufficient to satisfy the liabilities of
Christiana, C2 and TLC after giving effect to the transaction. See "Opinions of
Financial Advisors -- American Appraisal Opinion". The Board of Directors of
Weatherford further considered the fact that another fairness opinion beyond the
date of the amended merger agreement would not be provided in the transaction
and that the other conditions to the closing of the transaction provided
appropriate protection to Weatherford for changes in circumstances between the
date of the opinion and the consummation of merger. The Weatherford Board of
Directors also placed considerable weight and reliance on the opinion of Arthur
Andersen LLP to the effect that the merger would be tax free to Weatherford and
Christiana and on the fact that even if the merger were subsequently found not
to be tax free, the merger would only be considered to be a taxable purchase of
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stock of Christiana from the shareholders of Christiana and therefore would not
trigger any material tax liabilities to Weatherford or Christiana. The Board of
Directors of Weatherford also noted that, under the terms of the TLC purchase
agreement, TLC and C2 will be fully responsible for, and will indemnify
Christiana and Weatherford against, any and all tax liabilities that may arise
in connection with the merger. Finally, the Weatherford Special Committee and
the Weatherford Board of Directors considered the opinion of Morgan Stanley
dated October 9, 1998 that the consideration to be paid by Weatherford pursuant
to the amended merger agreement was fair from a financial point of view to
Weatherford.
In approving the amended merger agreement, the Weatherford Board further
took into account the fact that the stockholders of Weatherford had approved the
prior merger agreement and that a substantial portion of the benefits that were
contemplated to be realized by the prior merger agreement would continue to be
realized by the amended merger agreement.
Although no specific weight was given to any one of the above described
reasons or factors by the Weatherford Board in approving the merger, the ability
of Weatherford to acquire a one-third interest in TLC without any significant
cost to Weatherford other than transactional costs and with a complete indemnity
from TLC and C2 for prior liabilities of Christiana, TLC and their respective
current and historical subsidiaries and predecessors was considered to be the
most important factor by both the Weatherford Special Committee and the
Weatherford Board of Directors. The foregoing factors were all the material
factors considered by Weatherford's Board of Directors.
CHRISTIANA'S REASONS FOR THE TRANSACTION
The Board of Directors of Christiana has approved the merger proposal and
recommends that the shareholders of Christiana approve the merger proposal. The
Christiana Board of Directors believes that the merger is in the interest of
Christiana and its shareholders. Christiana's Board of Directors has had for
some time a strategic interest to separate the company's large Weatherford
shareholdings from its operating business, TLC, in order to achieve a more
representative company valuation today and into the future. The Board has not
been interested in liquidating the Weatherford shareholdings given Christiana's
view as to the future potential for increase in the value of this asset and the
substantial corporate-level tax that would result from such a liquidation.
Various alternative transactions were considered in order to accomplish these
objectives, as described more fully under "Background of the Transaction". In
addition, as described under "Background of the Transaction", Weatherford had
advised Christiana that Weatherford was not interested in pursuing an
acquisition of Christiana if the transaction would be dilutive to Weatherford's
per share earnings or cash flow or would involve Weatherford's full ownership
and management of Christiana's warehousing and logistics business. Accordingly,
the Christiana Board of Directors did not believe an alternative transaction was
feasible. The proposed structure allows Christiana shareholders to exchange
their shares of Christiana common stock for newly issued shares of Weatherford
common stock in a tax efficient manner. Specifically, the Christiana Board noted
that the proposed structure would avoid the substantial corporate-level tax that
would result if Christiana sold the Weatherford shareholdings. This proposed
structure will give maximum flexibility to each Christiana shareholder to
determine whether retention of Weatherford shares is desirable.
The Christiana Board of Directors also considered the advantages of a
separation of Christiana's two principal assets, its shares of Weatherford
common stock and TLC. These advantages include permitting Christiana
shareholders to make more focused investment decisions based on the specific
attributes of Weatherford and TLC. Specifically, a Christiana shareholder may,
after the merger, elect to:
- Retain the Weatherford share consideration and acquire stock in C2,
thereby owning an interest in Weatherford and a warehousing and
logistics business.
- Sell the Weatherford share consideration and acquire an interest in C2.
- Retain the Weatherford share consideration and not acquire an interest
in C2.
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- Sell the Weatherford share consideration and not acquire an interest in
C2. Christiana's Board believes that the merger also will enable the
financial markets to better understand and recognize the merits of TLC
as a stand-alone entity.
Prior to the merger, investors interested in Christiana's warehousing and
logistics business could only participate in such business by purchasing
Christiana common stock, but a significant value of the Christiana common stock
was based upon its Weatherford shareholdings. After the merger, investors
interested in the logistics and warehousing business can acquire stock in C2,
whose only principal asset immediately after the merger will be its interest in
TLC.
The Christiana Board concluded that the transaction would permit Christiana
shareholders to receive fair value for Christiana's Weatherford shareholdings.
Specifically, each shareholder would receive a pro rata portion of the
Weatherford shareholdings represented by each share of Christiana common stock.
The Christiana Board also concluded that the transaction would permit Christiana
shareholders to receive fair value for Christiana's ownership of TLC. C2 will
acquire a two-thirds interest in TLC. All Christiana shareholders will have the
same right to acquire his or her pro rata interest in TLC by subscribing for
shares in C2, so that a Christiana shareholder, if deemed desirable, could
continue to own an interest in TLC through C2. The reduction of direct ownership
right in TLC from 100% to 66.66% was fair to the Christiana shareholders in
light of the financial benefit to be realized by the Christiana shareholders in
receiving the Weatherford common stock in a tax free manner. The Christiana
Board believed that the value of the benefit of a tax free exchange more than
outweighed the loss of the one-third interest in TLC. They also noted that the
Christiana shareholders would benefit to a lesser extent in the one-third
interest in TLC through their ownership of Weatherford common stock.
The Christiana Board has a long-standing familiarity with Weatherford, its
management and its operations, dating back to its ownership of Prideco, Inc.,
which Christiana sold to Weatherford in 1995. In reviewing the amended merger
agreement, the Christiana Board considered the recent declines in the
Weatherford common stock. In general, the Christiana Board viewed those declines
as being primarily associated with short-term market factors relating to the
pricing in the oil and gas industry. The Christiana Board felt that the stock
market declines in the Weatherford common stock were essentially the same as the
declines that other oilfield service companies were experiencing and were not
reflective of the long-term prospects of the industry in general and Weatherford
in particular. The Christiana Board reviewed various public information and
research reports regarding the industry and Weatherford and representatives of
Christiana met with representatives of Weatherford to discuss Weatherford's view
of the industry and its long-term prospects. Christiana believes that the
performance of Weatherford, which is one of the world's largest oilfield service
and equipment companies, should improve with a recovery in world oil prices.
Weatherford's views were similar to those of Christiana.
Based on Christiana's review of the industry and Weatherford's prospects in
the industry, the Christiana Board concluded that an investment in Weatherford
was an attractive investment and a reasonable use of its funds, in particular if
a purchase by it of additional shares would allow for the merger to be
consummated. The Christiana Board did not consider a maximum price at which a
purchase of Weatherford common stock would not be beneficial because it believed
any price within the recent trading ranges would be desirable. The Christiana
Board also noted that the benefits of the tax free merger to Christiana
described below ceased to outweigh the potential cost of the loss of the future
benefit of a one-third interest in TLC at a Weatherford common stock price of
approximately $13.00 per share. As a result, the terms of the amended merger
agreement do not require Christiana to purchase additional shares of Weatherford
common stock at a price less than $13.00 per share.
The Christiana Board also considered the substantial corporate-level tax
that would result from a sale of its Weatherford holdings. On August 14, 1997,
the date of the Christiana Board approval of the prior merger agreement,
Christiana's gain on the Weatherford holdings if it had sold such holdings would
have been approximately $165.0 million. A sale of such stock would have incurred
a corporate-level general income tax of approximately $57.8 million. Using the
market price of the Weatherford common stock as of October 12, 1998, the date of
the Christiana Board approval of the amended merger agreement,
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Christiana's gain on a sale of its holdings of Weatherford common stock would
have been approximately $49.0 million. A sale of such stock would have incurred
a corporate-level general income tax of approximately $19.3 million. The
Christiana Board also noted that the cash consideration would be determined
based on the amount of cash of Christiana as of the effective time of the
merger, less Christiana's accrued unpaid taxes (without giving effect to the
value of certain tax deductions to be retained by Christiana) and fixed
liabilities not otherwise assumed by C2. In approving the amended merger
agreement, the Christiana Board took into consideration the beneficial and
detrimental aspects of the amendment. As for the beneficial aspects, the
Christiana Board noted that the amended merger agreement released the $10.0
million contingent cash holdback that was contemplated under the prior merger
agreement.
The amended merger agreement also increases the tax free portion of the
consideration to be paid in the merger by increasing the number of shares of
Weatherford common stock to be issued in the merger and decreasing the cash
component to be paid in the merger. The increased tax free nature of the
transaction occurs by switching Weatherford common stock, which may be received
tax free, for a portion of the cash consideration, which will be taxable when
received. From a detrimental side, the Christiana Board noted that the amended
merger agreement would expose the Christiana shareholders to greater volatility
through the receipt of Weatherford common stock and that there would exist the
possibility that there could be a decline in the market price of the Weatherford
common stock from the date on which Christiana purchased the Weatherford common
stock as required by amended merger agreement and the time at which the shares
of Weatherford common stock are issued in the merger. Nevertheless, the
Christiana Board concluded that because of the release of the $10.0 million
holdback and because more of the consideration in the merger would be in the tax
free form of Weatherford common stock, the benefits of the merger more than
outweighed the detriment of the increased volatility associated with the
Weatherford common stock. The Christiana Board further noted that it believed
that the Weatherford common stock represented an attractive investment at its
current prices and that at the current prices it would present an opportunity
for gain in the future. The Christiana Board also noted that any Christiana
shareholder who desired to receive cash in lieu of the Weatherford common stock
would be able to do so merely by selling the shares of Weatherford common stock
received in the merger, following the merger. Finally, the Christiana Board gave
particular weight to the recommendation and approval of the amended merger
agreement by the Christiana Independent Committee.
In approving the amended merger agreement, the Christiana Board took into
account the fact that the amended merger agreement contained a fixed formula for
determining the Weatherford share and cash consideration, but noted that the
stock and conversion ratios could change. The Christiana Board, however, did not
view the absence of a fixed exchange ratio as a detriment because the amended
merger agreement contains a mechanism for fixing the ratio that is solely
dependent on the assets of Christiana. As a result, the Christiana Board
considered the provisions fixing the exchange ratio as favorable to Christiana
in that it assured the Christiana shareholders with the right to realize the
entire benefit of its operations up to and through the closing. In addition,
because a substantial portion of Christiana's assets consist of Weatherford
common stock, the Christiana Board did not believe that changes in the market
price of the Weatherford common stock presented any material uncertainty or risk
to the Christiana shareholders that does not already exist.
The Christiana Board also considered the costs to the shareholders in
connection with the merger, including, specifically, that the merger would
preclude other alternatives in the future and that Christiana (which following
the merger will be a wholly owned subsidiary of Weatherford) would retain a
one-third interest in TLC. The Christiana Board also considered potential
disadvantages of the transaction. The transaction would result in the increased
exposure of Christiana shareholders to fluctuations in the price of Weatherford
common stock. While an ownership of Christiana common stock provided balance
between Christiana's holdings in Weatherford and TLC, the merger would result in
Christiana shareholders owning Weatherford common stock directly, thereby
increasing reliance on the performance of Weatherford and on the oil and gas
industry and the level of domestic and international drilling activities
generally. Additionally, as part of and as an inducement to Weatherford to enter
into the merger, Weatherford
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through Christiana would receive a one-third ownership interest in TLC for no
cash consideration. Christiana would have the ability to "put" this interest to
TLC for cash consideration of $7.0 million after five years from the date of the
merger. Christiana shareholders would benefit from this part of the transaction
only indirectly through their ownership of approximately 4.5% of outstanding
Weatherford common stock received in connection with the merger. Otherwise,
Christiana shareholders will receive no direct benefit from this aspect of the
transaction. The Christiana Board nevertheless considered that the advantages
outweighed such disadvantages.
In considering the approval of the merger pursuant to the amended merger
agreement, the Christiana Board of Directors considered the opinion of
Prudential Securities that the transaction is fair to Christiana shareholders
from a financial point of view. For the purposes of the Prudential Securities
Opinion, the transaction is defined as the merger, the TLC sale and the C2
offering. The Prudential Securities Opinion will not be updated beyond the date
of the amended merger agreement or as of the closing of the transaction. The
Christiana Board believed that receipt of the Prudential Securities Opinion
prior to the execution of the amended merger agreement was sufficient for its
approval of the transaction. The Christiana Board understood that a change in
circumstances between the date of the Prudential Securities Opinion and the
consummation of the transaction could impact the fairness of the transaction,
but the Christiana Board believed that the protections afforded in the amended
merger agreement and its familiarity with Weatherford rendered an update of the
Prudential Securities Opinion unnecessary.
The Christiana Board of Directors also placed considerable weight and
reliance on the opinion of Arthur Andersen LLP to the effect that the merger
would be tax free to Weatherford and Christiana.
The Christiana Board of Directors also considered the potential adverse
implications of continuing to be subject to the costly regulatory requirements
relating to Christiana's status as a public company. Total expenses associated
with Christiana being a public company in fiscal 1998 were approximately
$150,000. A Christiana shareholder interested in Weatherford could, after the
merger, hold its interest in Weatherford directly without having to hold its
interest in one public entity, Christiana, which in turn held a significant
interest in another public entity, Weatherford.
Although the pro forma book value of TLC was approximately $22.8 million at
December 31, 1997 and $23.4 million at September 30, 1998, the Christiana Board
believes that the sale of a two-thirds interest in TLC to C2 for approximately
$10.67 million is fair to Christiana shareholders, based on the following:
- Christiana's view as to the value of such interest after giving effect to
restrictions and obligations applicable to TLC and C2 after the sale and
on the opinion of Prudential Securities that the transaction (which for
purposes of the Prudential Securities Opinion is defined as the merger,
the TLC sale and the C2 offering) was fair from a financial point of view
to Christiana shareholders.
- The fact that any Christiana shareholder who wishes to retain an interest
in TLC may do so by electing to purchase his or her pro rata portion of
C2 common stock at a price of $4.00 per share, the same price offered to
all Christiana shareholders including the Lubar family and all directors
and officers of Christiana.
The Christiana Board acknowledged that the value of Weatherford
shareholdings for Christiana was the major determinant in Christiana's share
price in the market. Hence, if Weatherford's share price increased, Christiana's
share price increased too. Accordingly, if Weatherford's share price declined,
Christiana's share price declined as well. Christiana's Board, however, did not
and does not control Weatherford and for this reason decided that it was better
to manage operations that it could control, rather than have the Christiana
stock price dependent upon an entity (Weatherford) that it did not control. The
Christiana Board did not favor selling its shares of Weatherford common stock,
but rather wanted to provide the investment decision directly to the Christiana
shareholders through the merger.
As previously stated, the price to be paid by the purchasing entity,
ultimately determined to be C2, was determined unilaterally by Mr. Lubar in
connection with his negotiations with Weatherford. The Christiana Board believes
this to be procedurally fair for the following reasons. First, Mr. Lubar did not
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think it appropriate to pay more than $10.67 million for the two-thirds interest
in TLC, because TLC, at the insistence of Weatherford, would be assuming
significant liabilities. TLC, at Weatherford's insistence, would also be
required to restrict its operational activities, in order to assure, to
Weatherford's satisfaction, that TLC would be able to satisfy its obligations.
Finally, the Christiana Board concluded that if a Christiana shareholder
concurred that the price was appropriate, the Christiana shareholder could
continue his indirect ownership in TLC by acquiring stock in C2, along with the
Lubar family. If the Christiana shareholder concluded that the price was too
low, the Christiana shareholder could vote against the merger and elect
dissenters' rights. If the Christiana shareholder concluded that the price for
TLC was too high, the Christiana shareholder could vote in favor of the merger
and not elect to purchase stock in C2.
The Christiana Board believes it to be fair for C2 to pay $10.67 million
for a two-thirds interest in TLC and C2 to pay Weatherford $7.0 million for its
one-third interest, if Weatherford elects to put its interest in TLC at such
price, because of the difference in the time value of money. The $10.67 million
for the two-thirds interest in TLC will be paid to the Christiana shareholders
at the closing of the merger, whereas Weatherford will not receive its $7.0
million until it exercises its put, which will not be for at least five years.
The Christiana Board determined the $7.0 million put value by allocating $5.34
million to a one-third interest in TLC, which is consistent with selling a
two-thirds interest for $10.67 million, and then increasing such amount by a
modest compound rate of return on such amount of approximately 5 1/2% for five
years, resulting in a put price of $7.0 million.
The Christiana Board noted that the price of the Christiana common stock
immediately prior to the execution of the amended merger agreement was $16 3/8
and recognized that, depending upon the price of Weatherford common stock at the
closing of the merger relative to the price of the Christiana common stock at
such time, the consideration to be received could be less than the then current
market price of the Christiana common stock. The Board considered whether to
recommend the merger, even though the total consideration could be less than the
current market price of Christiana common stock. Christiana currently estimates
that the Weatherford share consideration will be .85191 of a share of
Weatherford common stock, and the cash consideration will be between $3.50 and
$4.00, for each share of Christiana common stock. If Christiana is required to
make additional purchases of Weatherford common stock of $5.0 million,
Christiana estimates that the cash consideration will be between $2.50 and $3.00
per share of Christiana common stock. The Christiana Board noted the significant
appreciation in the Weatherford common stock at the time it approved the merger
in August 1997 and, based upon its assessment of favorable long-term
appreciation of the Weatherford common stock, felt it advisable that each
Christiana shareholder have the opportunity to decide whether such stock should
be held or sold. As long as Christiana held the Weatherford common stock, the
Christiana shareholders could not individually make such a decision.
Consequently, even though it was possible that the total consideration to be
received by the Christiana shareholders was less than the current price of the
Christiana common stock, the Christiana Board determined that the merger was in
the best interest of all of its shareholders.
Christiana recognized that costs would be incurred to establish C2. While
such costs will not be paid by Christiana, they will be paid by C2 from funds
raised in connection with C2's public offering. The costs incurred in connection
with establishing C2 are expected to be as follows: legal fees and expenses
($140,000), accounting and tax services ($75,000), filing fees with the
Commission ($6,140), printing costs, expenses for state securities laws filings
and transfer agent fees and expenses ($36,000), Nasdaq listing fee ($10,000) and
miscellaneous ($8,000).
Christiana common stock traded at $40 3/4 immediately prior to the
execution of the prior merger agreement and traded at $16 3/8 immediately prior
to the execution of the amended merger agreement. On the day of the announcement
and execution of the amended merger agreement, the price closed at $17 3/8, but
as of December 22, 1998, it closed at $18 3/8. The Christiana Board does not
consider the decline in its stock price to be relevant for two reasons. First,
the Weatherford common stock held by Christiana is a significant Christiana
asset, so Christiana's stock price is substantially dependent on the Weatherford
common stock price. Second, the Christiana Board believes it important that each
Christiana shareholder make an independent decision to retain or sell the
Weatherford common stock. Such independent decision can only be made if the
Weatherford common stock is distributed to Christiana shareholders.
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Consequently, even if the total consideration to be received by Christiana
shareholders is less than its price prior to the merger, the Christiana Board
considers the transaction still to be in the best interest of all Christiana
shareholders.
The Christiana Board (including Mr. Lubar) and the board of directors and
management of C2 believe the transaction is fair to the unaffiliated
shareholders of Christiana. In arriving at this conclusion, these entities
considered the structure of the transaction and how such structure rendered
immaterial traditional valuation analysis such as current and historical market
prices, net book value, going concern value, liquidation value and discounted
cash flow value. While the Christiana Board took into account its view of the
value of TLC and Christiana in approving the transaction, the Christiana Board
believed that the benefits to be derived from the transaction combined with the
right of the Christiana shareholders to participate in TLC through Weatherford
and C2 rendered in their view the need to perform traditional valuation analyses
immaterial. In this regard, the Christiana Board noted that Christiana had two
principal assets, its holdings in Weatherford common stock and its ownership of
TLC. The transaction essentially results in each Christiana shareholder
receiving his or her pro rata share of Weatherford common stock held by
Christiana on a tax free basis and a right to purchase such Christiana
shareholder's pro rata interest in C2, the entity that will acquire a two-thirds
interest in TLC as part of the transaction. Finally, the cost to Christiana in
allowing Weatherford to receive a one-third interest in TLC in the transaction
was more than offset by the expected economic benefits to be realized by
Christiana in the transaction.
The Christiana Board also considered the fact that each unaffiliated
shareholder of Christiana will be able to participate in the purchase of TLC
through C2 on the same basis as Mr. Lubar and all other affiliates of
Christiana. The Christiana Board of Directors believes that treating
unaffiliated shareholders of Christiana in a similar way to Mr. Lubar supports
the fairness of the consideration to the unaffiliated shareholders in that it
provides the unaffiliated shareholders with the same rights as any affiliated
shareholder, including family members of Mr. Lubar.
In connection with the consideration of the amended merger agreement, the
Christiana Board of Directors appointed a special committee consisting of
Messrs. Nicholas and Brady and authorized the Christiana Independent Committee
to have the power to consider and approve the amended merger agreement. The
Christiana Independent Committee reviewed the terms of the amended merger
agreement and concurred with the various reasons for pursuing the merger as
described above. The Christiana Independent Committee also concluded that the
terms of the merger were in the best interest of Christiana and its shareholders
and recommended approval of the amended merger agreement by the full Christiana
Board. The Christiana Board of Directors, with Mr. Lubar abstaining, approved
the amended merger agreement on October 12, 1998.
The merger has been structured to require approval of at least 80% of the
votes entitled to be cast at the Christiana special meeting and two-thirds of
the votes entitled to be cast at the Christiana special meeting other than the
Lubar Shares, which are shares beneficially owned by the Lubar family, both as a
result of a desire by the Christiana Board to assure fairness and as required by
Wisconsin law. Because of this supermajority voting requirement, the Christiana
Board did not believe that a separate vote of a majority of the unaffiliated
shareholders of Christiana would be necessary to insure fairness.
Although no specific weight was given to any one of the above-described
reasons or factors by the Christiana Board in approving the merger, the
placement of the Weatherford common stock currently held by Christiana directly
in the hands of the Christiana shareholders, thereby giving each shareholder
maximum flexibility with regard to such shares without any significant cost, was
considered to be the most important factor by the Christiana Board of Directors.
The foregoing factors were all the material factors considered by Christiana's
Board of Directors.
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OPINIONS OF FINANCIAL ADVISORS
MORGAN STANLEY OPINION
In a letter agreement effective November 7, 1997 (the "Engagement Letter"),
Weatherford engaged Morgan Stanley to provide a financial fairness opinion in
connection with the merger. Morgan Stanley was selected by the Weatherford Board
of Directors to provide this financial fairness opinion based on Morgan
Stanley's qualifications, expertise and reputation, as well as Morgan Stanley's
investment banking relationship and familiarity with Weatherford. On December
15, 1997, Morgan Stanley delivered to the Weatherford Board of Directors an
opinion to the effect that, on and as of the date of such opinion, and based on
assumptions made, matters considered and limits of review, as set forth in such
opinion, the consideration to be paid by Weatherford pursuant to the prior
merger agreement was fair from a financial point of view to Weatherford.
Subsequent to the delivery of Morgan Stanley's opinion, however, the prior
merger agreement and certain related documents were further amended.
Consequently, Morgan Stanley delivered to the Weatherford Board of Directors an
updated written opinion dated October 9, 1998 (the "Morgan Stanley Opinion") to
the effect that, on and as of the date of the Morgan Stanley Opinion, and based
upon assumptions made, matters considered and limits of review, as set forth in
such opinion, the consideration to be paid by Weatherford pursuant to the
amended merger agreement was fair from a financial point of view to Weatherford.
The full text of the Morgan Stanley Opinion, dated October 9, 1998, which
sets forth, among other things, assumptions made, procedures followed, matters
considered and limitations on the review undertaken by Morgan Stanley in
rendering its opinion, is attached as Appendix D to this Joint Proxy
Statement/Prospectus and incorporated herein by reference. Weatherford
stockholders are urged to, and should, read the Morgan Stanley Opinion carefully
and in its entirety. The Morgan Stanley Opinion is directed to the Weatherford
Board of Directors, addresses only the fairness of the consideration to be paid
by Weatherford pursuant to the amended merger agreement from a financial point
of view to Weatherford and does not address any other aspect of the merger or
constitute a recommendation to any holder of Weatherford common stock as to how
to vote at the Weatherford special meeting. The following summary of the Morgan
Stanley Opinion is qualified in its entirety by reference to the full text of
the Morgan Stanley Opinion attached as Appendix D to this Joint Proxy
Statement/Prospectus. Morgan Stanley has consented to the use of the Morgan
Stanley Opinion as an appendix to this Joint Proxy Statement/ Prospectus.
In rendering the Morgan Stanley Opinion, Morgan Stanley, among other
things:
- Reviewed certain publicly available financial statements and other
information of Weatherford and Christiana.
- Reviewed certain internal financial statements and other financial and
operating data concerning Weatherford, Christiana and TLC prepared by the
managements of Weatherford, Christiana and TLC, respectively.
- Analyzed certain financial projections concerning Weatherford, Christiana
and TLC prepared by the managements of Weatherford, Christiana and TLC,
respectively.
- Discussed the past and current operations and financial condition and the
prospects of Weatherford, Christiana and TLC with senior executives of
Weatherford, Christiana and TLC, respectively.
- Analyzed the pro forma impact of the merger on Weatherford's earnings per
share.
- Reviewed the reported prices and trading activity for the Weatherford
common stock and Christiana common stock.
- Reviewed the amended merger agreement, the TLC purchase agreement and
certain related documents.
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- Reviewed a draft letter dated as of October 7, 1998 substantially similar
to the letter to be provided to the Boards of Directors of Weatherford
and Christiana by Arthur Andersen LLP, regarding the tax treatment of the
merger.
- Discussed and reviewed with Weatherford and Fulbright & Jaworski L.L.P.
the results of their legal and environmental due diligence.
- Performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering the Morgan Stanley Opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and completeness of the
information reviewed by it for the purposes of the Morgan Stanley Opinion. With
respect to the financial projections, Morgan Stanley assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performances of Weatherford, Christiana
and TLC. Morgan Stanley did not make any independent valuation or appraisal of
the assets or liabilities of Weatherford, Christiana or TLC, except that Morgan
Stanley received the draft letter of Arthur Andersen LLP referred to above and
the verbal report concerning certain legal and environmental due diligence
analyses performed by Weatherford and Fulbright & Jaworski L.L.P. referred to
above, and Morgan Stanley relied, without independent verification, upon such
items for purposes of the Morgan Stanley Opinion. In addition, Morgan Stanley
has assumed the TLC sale will be consummated prior to or simultaneously with the
merger in accordance with the terms set forth in the TLC purchase agreement,
including any terms and conditions relating to indemnification, and that the
merger will be consummated in accordance with the terms set forth in the amended
merger agreement, including that all material conditions to closing have been
satisfied and not waived. Morgan Stanley also has assumed that the merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Code. In
arriving at the Morgan Stanley Opinion, Morgan Stanley was not authorized to
consider, and did not consider, any alternative transaction or transaction
structure. The Morgan Stanley Opinion was necessarily based on economic, market
and other conditions as in effect on, and the information made available to
Morgan Stanley as of, the date thereof.
The following is a brief summary of certain analyses performed by Morgan
Stanley in preparation of the Morgan Stanley Opinion:
Discounted Cash Flow Analysis. Morgan Stanley analyzed certain financial
projections prepared by the management of TLC for the fiscal years 1999 through
2003 (the "Projections") and performed a discounted cash flow analysis of TLC
based on the Projections. Morgan Stanley discounted the unlevered free cash
flows of TLC at a range of discount rates of 10.0% to 12.0%, representing an
estimated weighted average cost of capital range for TLC, and terminal values
based on a range of multiples of 5 to 7 times estimated 2003 earnings before
interest, taxes, depreciation and amortization ("EBITDA") to arrive at a range
of present values for TLC. Such present values were then adjusted for TLC's
debt, net of cash, all pro forma for the TLC sale as of June 30, 1998, to arrive
at a net asset value. Based on this analysis, Morgan Stanley calculated values
representing one-third of TLC's equity value ranging from approximately $9.4
million to $18.6 million.
Morgan Stanley also performed certain sensitivity analyses on the
Projections (the "Adjusted Projections"). Specifically, Morgan Stanley assumed
that TLC projected sales revenue from 1999 through 2003, with the exception of
sales revenue related to government contracts, remained the same as actual 1998
sales revenue. Morgan Stanley also assumed that TLC's gross margin from 1999
through 2003 remained the same as actual 1998 gross margin. The Adjusted
Projections assume that TLC would have more long-term debt in 2003 than the
Projections show. Morgan Stanley performed a discounted cash flow analysis of
TLC based on the Adjusted Projections. Morgan Stanley discounted the unlevered
free cash flows of TLC at a range of discount rates of 10.0% to 12.0%,
representing an estimated weighted average cost of capital range for TLC, and
terminal values based on a range of multiples of 5 to 7 times estimated 2003
EBITDA to arrive at a range of present values for TLC. Such present values were
then adjusted for TLC's debt, net of cash, all pro forma for the TLC sale as of
June 30, 1998, to arrive at a net asset value.
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Based on this analysis, Morgan Stanley calculated values representing one-third
of TLC's equity value ranging from approximately $1.2 million to $7.2 million.
Projected Credit Statistics Analysis. Based on the Projections, Morgan
Stanley calculated financial ratios including EBITDA/Interest, (EBITDA-Capital
Expenditures)/Interest and Total Debt/EBITDA (collectively, the "Ratios") for
every year from 1999 through 2003. Morgan Stanley calculated a range for
EBITDA/Interest of 3.3 times in fiscal 1999 to 7.3 times in fiscal 2003, a range
for (EBITDA-Capital Expenditures)/Interest of 2.4 times in fiscal 1999 to 5.3
times in fiscal 2003 and, a range for Total Debt/ EBITDA of 3.4 times in fiscal
1999 to 1.4 times in fiscal 2003. Morgan Stanley also calculated the Ratios
assuming that TLC borrows an additional $7.0 million in 2003 in order to meet
its obligation pursuant to the purchase obligation of TLC of Christiana's
one-third interest in TLC under the TLC purchase agreement. Based on this
assumption, Morgan Stanley calculated values for EBITDA/Interest of 6.5 times,
(EBITDA-Capital Expenditures)/Interest of 4.8 times and Total Debt/EBITDA of 1.9
times, all in fiscal 2003.
Based on the Adjusted Projections, Morgan Stanley calculated a range for
EBITDA/Interest of 2.6 times in fiscal 1999 to 3.6 times in fiscal 2003, a range
for (EBITDA-Capital Expenditures)/Interest of 1.7 times in fiscal 1999 to 2.4
times in fiscal 2003 and, a range for Total Debt/EBITDA of 4.3 times in fiscal
1999 to 3.1 times in fiscal 2003. Morgan Stanley also calculated the Ratios
assuming that TLC borrows an additional $7.0 million in 2003 in order to meet
its obligation pursuant to the purchase obligation of TLC of Christiana's
one-third interest in TLC under the TLC purchase agreement. Based on this
assumption, Morgan Stanley calculated values for EBITDA/Interest of 3.3 times,
(EBITDA-Capital Expenditures)/Interest of 2.2 times and Total Debt/EBITDA of 3.8
times, all in fiscal 2003.
Selected Precedent TLC/Warehousing Acquisitions Analysis. Using publicly
available information, Morgan Stanley reviewed recent precedent transactions
involving companies which provide services comparable to those of TLC such as
refrigerated warehousing, logistic services and transportation. The companies
which were selected for inclusion in Morgan Stanley's analysis provide services
which Morgan Stanley believes are comparable to those provided by TLC.
Morgan Stanley analyzed the purchase prices and implied transaction
multiples paid in the following publicly announced logistic/warehousing
transactions: the acquisition of Heijden Logistics and France Distribution
System from Mayne Nickless Limited by Hayes plc, the acquisition of Caliber
System, Inc. by Federal Express Corporation, the acquisition of AmeriCold
Corporation and URS Logistics, Inc. by JV -- Vornado Realty Trust and Crescent
Real Estate Equities Company, and the acquisition of Intertrans Corporation by
Fritz Companies, Inc. (collectively, the "Precedent Transactions"). Morgan
Stanley reviewed publicly available financial information including the
aggregate value to latest twelve month ("LTM") EBITDA. Morgan Stanley observed
an aggregate value to LTM EBITDA range of 6.4 to 14.0 times for the Precedent
Transactions.
Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the merger on Weatherford's earnings per share for the fiscal years
1999 and 2000. Such analysis was based on earnings projections for Weatherford
prepared by the management of Weatherford and on the Projections. Morgan Stanley
noted that the merger would be slightly accretive to Weatherford shareholders in
1999 and in 2000.
In connection with the review of the merger by the Weatherford Board of
Directors, Morgan Stanley performed a variety of financial and comparative
analyses for purposes of the Morgan Stanley Opinion given in connection
herewith. While the foregoing summary describes the analyses and factors
reviewed by Morgan Stanley in connection with the Morgan Stanley Opinion, it
does not purport to be a complete description of all the analyses performed by
Morgan Stanley in arriving at its opinion. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. In arriving at the Morgan Stanley Opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Furthermore,
selecting any portion of its analyses, without considering all analyses, would
create an incomplete view of the process underlying the Morgan Stanley Opinion.
In addition, Morgan Stanley may
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have given various analyses and factors more or less weight than other analyses
or factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of Christiana or TLC. In performing its analyses,
Morgan Stanley made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Weatherford, Christiana or TLC. Any estimates contained
herein are not necessarily indicative of future results or actual values, which
may be significantly more or less favorable than those suggested by such
estimates. The analyses performed were prepared solely as part of Morgan
Stanley's analysis of the fairness of the consideration to be paid by
Weatherford pursuant to the amended merger agreement from a financial point of
view to Weatherford and were conducted in connection with the delivery of the
Morgan Stanley Opinion. The analyses do not purport to be appraisals or to
reflect the prices at which Christiana or TLC might actually be sold. Morgan
Stanley did not recommend the consideration to be paid by Weatherford or that
any consideration to be paid by Weatherford constituted the only appropriate
consideration for the merger.
In addition, Morgan Stanley's opinion to the Weatherford Board of Directors
and the Weatherford Special Committee was one of the many factors taken into
consideration by the Weatherford Board of Directors and the Weatherford Special
Committee in making their determination to recommend approval of the merger.
Consequently, the Morgan Stanley analyses described above should not be viewed
as determinative of the opinion of the Weatherford Board of Directors and the
Weatherford Special Committee with respect to the consideration to be paid in
connection with the merger. The consideration to be paid by Weatherford pursuant
to the amended merger agreement was determined through arm's-length negotiations
between Weatherford and Christiana and was approved by the Weatherford Board of
Directors.
Weatherford engaged Morgan Stanley to provide the Morgan Stanley Opinion
because of its experience and expertise. Morgan Stanley is an internationally
recognized investment banking and advisory firm. Morgan Stanley, as part of its
investment banking business, is regularly engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the course of its market-making and other trading activities,
Morgan Stanley may, from time to time, have a long or short position in, and buy
and sell, securities of, Weatherford or Christiana. In the past, Morgan Stanley
and its affiliates have provided financial advisory services to Weatherford and
have received customary fees in connection with these services.
Weatherford has paid Morgan Stanley a fee of $250,000 in connection with
the delivery of the Morgan Stanley Opinion. In addition, Weatherford has agreed
to indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates against certain liabilities and expenses,
including liabilities under federal securities laws, in connection with Morgan
Stanley's engagement.
Morgan Stanley has provided investment banking services for Weatherford in
the past, including serving as joint lead manager in Weatherford's private
placement of its 5% Convertible Subordinated Preferred Equivalent Debentures due
2027 (the "Debentures"), and may provide such services in the future. In
addition, Prudential Securities has provided investment banking services to
Weatherford in the past, including serving as a co-manager of Weatherford's
private placement of the Debentures, and may provide such services in the
future.
PRUDENTIAL SECURITIES OPINION
On October 12, 1998, Prudential Securities delivered the Prudential
Securities Opinion to the Christiana Independent Committee and the Christiana
Board to the effect that, as of such date, the transaction was fair, from a
financial point of view, to the shareholders of Christiana. For the purposes of
the Prudential Securities Opinion, the transaction is defined as the merger, the
TLC sale and the C2
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offering. In requesting the Prudential Securities Opinion, the Christiana
Independent Committee and the Christiana Board did not give any special
instructions to Prudential Securities or impose any limitation upon the scope of
the investigation that Prudential Securities deemed necessary to enable it to
deliver its opinion.
The full text of the Prudential Securities Opinion, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken, is set forth as Appendix E to this joint proxy statement/prospectus
and is incorporated herein by reference and should be read in its entirety in
connection with this Joint Proxy Statement/Prospectus. The Prudential Securities
Opinion is directed only to the fairness of the transaction to the shareholders
of Christiana from a financial point of view and does not address any other
terms of the transaction or the Christiana Board of Directors' underlying
business decision to effect the transaction. The Prudential Securities Opinion
was delivered for the information of Christiana's Board and the Christiana
Independent Committee and does not constitute a recommendation to any
shareholder of Christiana as to how such shareholder should vote such
shareholder's shares at the Christiana special meeting. The summary of the
Prudential Securities Opinion set forth in this joint proxy statement/prospectus
is qualified in its entirety by reference to the full text of the Prudential
Securities Opinion attached as Appendix E. Prudential Securities has consented
to the use of the Prudential Securities Opinion as an appendix to this joint
proxy statement/prospectus.
In conducting its analysis and arriving at its opinion dated October 12,
1998, Prudential Securities reviewed such information and considered such
financial data and other factors as Prudential Securities deemed relevant under
the circumstances, including, among others, the following:
- The Lubar/C2 agreement, the TLC purchase agreement, a draft dated October
10, 1998 of the amended merger agreement and a draft dated October 10,
1998 of Amendment No. 2 to the TLC purchase agreement ("Amendment No.
2").
- Certain publicly available historical financial and operating data
concerning Christiana, including, but not limited to, (a) the Annual
Report to Shareholders and Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, and (b) the Joint Proxy Statement/Prospectus for the
special meeting of Christiana shareholders held on August 17, 1998; and
certain pro forma financial data prepared by Christiana management.
- Certain publicly available historical financial and operating data for
Weatherford including, but not limited to, (a) the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, (b) the Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998, (c) the Current
Report on Form 8-K dated March 4, 1998, and (d) the Joint Proxy
Statement/Prospectus for the special meeting of Weatherford stockholders
held on August 17, 1998.
- Certain information relating to TLC, including historical financial data
for the fiscal years ended June 30, 1993 through June 30, 1998, provided
by the management of TLC.
- Certain information relating to TLC, including financial forecasts for
the fiscal years ending June 30, 1999 through June 30, 2002, prepared by
the management of TLC.
- The financial terms of certain recent transactions Prudential Securities
deemed relevant to Prudential Securities' inquiry.
- The historical stock prices and trading volumes of Christiana common
stock and Weatherford common stock.
- Such other financial studies, analyses and investigations that Prudential
Securities deemed appropriate.
Prudential Securities assumed, with Christiana's consent, that the draft of the
amended merger agreement and the draft of Amendment No. 2 that Prudential
Securities reviewed (both, as referred to above) will
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conform in all material respects to the definitive form of the amended merger
agreement and Amendment No. 2. Prudential Securities met with the senior
management of Christiana and TLC to discuss:
- The prospects for Christiana's business.
- Their estimates of the future financial performance of Christiana.
- The financial impact of the merger on Christiana.
- Such other matters that Prudential Securities deemed relevant. Prudential
Securities also visited selected Christiana and TLC facilities.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities assumed and relied upon the accuracy and completeness of
the financial and other information provided to it by Christiana and TLC and did
not undertake any independent verification of such information or any
independent valuation or appraisal of any of the assets or liabilities of
Christiana or TLC. With respect to the financial forecasts provided to
Prudential Securities by Christiana for Christiana and by TLC for TLC,
Prudential Securities assumed that such forecasts (and the assumptions and bases
therefor) were reasonably prepared and represent the respective management's
best currently available estimate as to the future financial performance of
Christiana and TLC. In addition, the Prudential Securities Opinion assumes that:
- The merger will qualify as a reorganization within the meaning of Section
368(a) of the Code.
- Neither Christiana nor Sub will recognize any gain or loss for federal
income tax purposes as a result of the receipt by Weatherford of
Christiana common stock in exchange for Weatherford common stock in the
merger.
- The holders of Christiana common stock will not recognize any gain or
loss for federal income tax purposes as a result of the receipt of
Weatherford common stock as partial consideration for their Christiana
common stock in the merger.
Prudential Securities has assumed that such taxes are the only relevant
taxes for purposes of the Prudential Securities Opinion other than taxes that
may be applicable to the cash consideration as set forth in such opinion.
Furthermore, for purposes of the Prudential Securities Opinion, Prudential
Securities has assumed that the shareholders of Christiana at the closing of the
merger would be legally entitled to compel performance by C2 of the Lubar/C2
agreement in accordance with its terms in a legal proceeding brought by such
shareholders and Prudential Securities further assumed that the Lubar/C2
agreement would not be amended or modified. In addition, Prudential Securities
has assumed that all purchases of Weatherford common stock by Christiana will be
executed in open market transactions on a nationally recognized securities
exchange or in such other transactions having terms that are at least as
favorable as would have been obtained in such open market purchases at the time
of such other transactions.
Prudential Securities' engagement by Christiana was limited to reviewing
the financial terms of the transaction, and accordingly, the Prudential
Securities Opinion does not address nor should it be construed to address the
relative merits of the transaction or alternative business strategies that may
be available to Christiana. In addition, the Prudential Securities Opinion does
not in any manner address the prices at which Weatherford common stock or C2
common stock will trade following consummation of the merger or the liquidity of
the market that may exist for the C2 common stock. Further, the Prudential
Securities Opinion is necessarily based on economic, financial and market
conditions as they exist and can only be evaluated as of October 12, 1998. For
purposes of rendering the Prudential Securities Opinion, Prudential Securities
assumed that Christiana will not consummate the transaction under circumstances
where the closing price of Weatherford common stock is less than $13.00 per
share on the closing date of the merger.
In addition, the Prudential Securities Opinion was one of the many factors
taken into consideration by the Christiana Board in making their determination
to recommend approval of the transaction. Consequently, the Prudential
Securities Opinion should not be viewed as determinative of the opinion of
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the Christiana Board with respect to the fairness, from a financial point of
view, of the transaction to the shareholders of Christiana. The consideration to
be received by the shareholders of Christiana was determined through
negotiations between Christiana and Weatherford and was approved by the
Christiana Board.
In arriving at the Prudential Securities Opinion, Prudential Securities
performed a variety of financial analyses, including those summarized herein.
The summary set forth below does not purport to be a complete description of the
analyses performed. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analyses and the application of these methods to the
particular circumstance and, therefore, such an opinion is not necessarily
susceptible to partial analysis or summary description. Prudential Securities
believes that its analyses must be considered as a whole and that selecting
portions thereof or portions of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying the Prudential Securities Opinion. Prudential
Securities made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Christiana and Weatherford. Estimates of
the values of businesses and securities do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities may be sold. In
addition, Prudential Securities reviewed the following operating projections for
TLC in connection with Prudential Securities' overall analysis of the
transaction:
<TABLE>
<CAPTION>
1999 2000 2001 2002
------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C>
TLC stand-alone revenues.................... $106.7 $112.6 $118.2 $124.3
TLC stand-alone EBITDA...................... $ 15.5 $ 17.3 $ 18.0 $ 18.8
TLC stand-alone net income.................. $ 2.2 $ 3.8 $ 4.8 $ 5.8
</TABLE>
As a matter of policy, Christiana does not publicly disclose internal
management forecasts, projections or estimates of the type furnished to
Prudential Securities in connection with its analysis of the transaction, and
such forecasts, projections and estimates were not prepared with a view towards
public disclosure. These forecasts, projections and estimates were based on
numerous variables and assumptions which are inherently uncertain and which may
not be within the control of management of Christiana, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
Any estimates contained in Prudential Securities' analyses are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the values of businesses and securities do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Subject to the foregoing, the
following is a summary of the material financial analyses conducted by
Prudential Securities in arriving at the Prudential Securities Opinion.
Comparable Transactions Analysis. Prudential Securities analyzed the
consideration paid in several recent merger and acquisition transactions deemed
by Prudential Securities to be reasonably similar to the TLC sale and considered
the ratios of the unlevered purchase price ("UPP") to the acquired entities' LTM
earnings before interest and taxes ("EBIT") and LTM EBITDA, based upon
publicly-available information. The transactions considered (the "Comparable
Transactions") were the combinations of:
- AmeriCold Corporation with JV-Vornado Realty Trust, Crescent Real Estate
Equities Company ("JV-Vornado").
- URS Logistics Inc. with JV-Vornado.
- Christian Salvensen Inc. with CS Integrated LLC.
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The Comparable Transactions analysis resulted in a range of ratios of UPP
to LTM EBIT of 17.1x to 11.0x and a range of ratios of UPP to LTM EBITDA of 9.9x
to 6.8x. Applying such ratios for the Comparable Transactions to TLC's LTM EBIT
($7.1 million) and LTM EBITDA ($13.5 million) resulted in a range of implied
unlevered market values of $121.2 million to $78.0 million and $133.2 million to
$91.6 million, respectively, or a combined range of implied unlevered market
value based on the Comparable Transactions of $133.2 million to $78.0 million.
The assumed unlevered market value of TLC used by Prudential Securities was
$68.8 million (based upon estimated debt as of June 30, 1998, of $32.8 million,
estimated additional debt of $20.0 million to be incurred immediately prior to
the closing of the merger, and $16.0 million, the implied aggregated equity
value of TLC, based upon a purchase price of $10.7 million for a two-thirds
interest in TLC). Prudential Securities then adjusted the high, low and mean
implied unlevered market values for TLC's LTM EBIT and LTM EBITDA by calculating
the difference between the average level of the Morgan Stanley REIT Index (the
"Index") on the effective date of the Comparable Transactions (332.78) and the
current level of the Index (271.62) and applying the percentage decrease (18.4%)
to the high, low and mean implied unlevered market values for TLC's LTM EBIT and
LTM EBITDA (the "Adjusted Implied Unlevered Market Value") in order to
compensate for the substantial decrease in the multiples of valuation ascribed
to the sector since the effective dates of the Comparable Transactions. The
Adjusted Implied Unlevered Market Values resulted in a range of $98.9 million to
$63.7 million and $108.7 million to $74.8 million, respectively, or a combined
range of Adjusted Implied Unlevered Market Value based on the Comparable
Transactions of $108.7 million to $63.7 million. Prudential Securities observed
that the assumed $68.8 million unlevered market value of TLC falls within the
combined range of Adjusted Implied Unlevered Market Values based on the
Comparable Transactions, which, when considered in conjunction with the C2
offering, supports the Prudential Securities Opinion.
None of the acquired entities utilized in the above analysis for
comparative purposes is, of course, identical to TLC. Accordingly, a complete
analysis of the results of the foregoing calculations cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the acquired entities and other factors that could affect the consideration paid
for each of the acquired entities as well as that of TLC.
Projected financial and other information concerning Christiana, TLC and
Weatherford and the impact of the merger upon the holders of Christiana common
stock are not necessarily indicative of future results. All projected financial
information is subject to numerous contingencies, many of which are beyond the
control of management of Christiana, TLC and Weatherford.
Transaction Consideration Analysis. Prudential Securities calculated a
total value of $20.22 per share of Christiana common stock for the total
consideration offered in the transaction, representing a premium to Christiana's
closing price as of October 7, 1998 of 12.3%. Prudential Securities did not
perform any analysis with respect to premium/discount paid in comparable
transactions. The value of the total consideration offered per share of
Christiana common stock was based on:
- 0.76 (based on the shares of Weatherford common stock owned by Christiana
as of October 7, 1998) of a share of Weatherford common stock (the
"Current Share Exchange Ratio") having a closing price of $18.75 as of
October 7, 1998.
- An additional $1.94 in Weatherford common stock based on the purchase by
Christiana of $10.0 million of Weatherford common stock prior to the date
the proxy statement is mailed (the "Weatherford Common Stock Purchases").
- An anticipated $4.00 per share cash distribution (or $3.00 per share cash
distribution assuming consummation of $5.0 million additional purchases
of Weatherford common stock by Christiana), net of taxes and anticipated
transaction-related expenses.
- Approximately $1.00 in Weatherford common stock only in the event of $5.0
million additional purchases of Weatherford common stock by Christiana.
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The Current Share Exchange Ratio of .76 of a share of Weatherford common
stock per share of Christiana common stock and the approximate $4.00 or
approximate $3.00 cash distribution number based on the Weatherford Common Stock
Purchases alone and $5.0 million additional purchases of Weatherford common
stock by Christiana, respectively, utilized by Prudential Securities were based
on financial calculations performed by Christiana as of September 30, 1998 and
provided to Prudential Securities. The Current Share Exchange Ratio was derived
by dividing the amount of shares of Weatherford common stock held by Christiana
at September 30, 1998 (3,897,462) by the total outstanding shares of Christiana
on a fully-diluted basis (5,149,330). Based on material supplied by Christiana
as of September 30, 1998, the anticipated approximate $4.00 or approximate $3.00
cash distribution amount (net of taxes and expenses) was derived by subtracting
estimated cash expenses to be paid on, prior to or following the closing of the
merger ("Estimated Cash Expenses") from the anticipated amount of cash held by
Christiana as of the closing of the merger ("Estimated Aggregate Cash"). The
Estimated Aggregate Cash was based on the following items:
- Cash and accrued interest through closing ($5.9 million).
- The dividend from TLC ($20.0 million).
- The repayment of a promissory note ($3.3 million).
- The proceeds from the sale of a two-thirds interest in TLC ($10.7
million), which items yielded a total amount of Estimated Aggregate Cash
of $39.9 million.
Estimated Cash Expenses consisted of:
- $5.7 million for anticipated taxes due.
- $1.7 million for contractual payments on option agreements.
- $1.3 million for anticipated transactional expenses expected to be paid
prior to closing that are not reflected in the cash balances as of
September 30, 1998.
- The Weatherford Common Stock Purchases.
Total anticipated cash available for distribution equaled approximately $21.0
million or an anticipated distribution of $4.00 per share (or approximately
$3.00 per share assuming $5.0 million of additional purchases of Weatherford
common stock by Christiana) of Christiana common stock on a fully-diluted basis.
Stock Trading History. Prudential Securities also analyzed the history of
the volume and trading prices for the Christiana common stock and the
Weatherford common stock. Prudential Securities observed that between October 8,
1997 and October 7, 1998, Christiana common stock had an average daily trading
volume of 3,370 shares, with trading prices in the range of $46.38 and $16.88
per share. Between October 8, 1997 and October 7, 1998, Weatherford common stock
had an average daily trading volume of 850,116 shares, with trading prices in
the range of $73.00 and $15.00 per share. Prudential noted that the receipt of
Weatherford common stock in the merger provides Christiana shareholders with a
security of substantially greater liquidity. Prudential Securities also noted
that, as described above under "-- Transaction Consideration Analysis", based on
the market prices of the Weatherford common stock and the Christiana common
stock and the assumed cash consideration, the implied "total" value to be
received by the holders of the Christiana common stock in the merger as of
October 7, 1998, exceeded the closing price of the Christiana common stock on
that date by 12.3%. The combination of the increased liquidity and market
premium as of October 7, 1998, supports the Prudential Securities Opinion.
Christiana selected Prudential Securities to provide a fairness opinion
because it is a nationally recognized investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions and for other purposes and has substantial experience in
transactions similar to the merger. The engagement letter with Prudential
Securities provides that Christiana will pay Prudential Securities an advisory
fee equal to (1) $50,000, (2) $150,000 upon delivery of the Prudential
Securities Opinion and (3) $250,000 upon consummation of the transaction. In
addition,
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the engagement letter with Prudential Securities provides that Christiana will
reimburse Prudential Securities for its out-of-pocket expenses and will
indemnify Prudential Securities and certain related persons against certain
liabilities, including liabilities under securities laws, arising out of the
transaction or its engagement. In the ordinary course of business, Prudential
Securities may actively trade the shares of Christiana common stock and
Weatherford common stock for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
AMERICAN APPRAISAL OPINION
In connection with the prior merger agreement, which included as a part
thereof the TLC sale, American Appraisal delivered a written opinion (the
"American Appraisal Opinion") to the Board of Directors of each of Christiana,
Weatherford and C2, dated December 1, 1997, that given certain assumptions and
assuming further that the merger pursuant to the prior merger agreement and the
TLC sale are consummated as proposed, immediately after giving effect to
consummation of the TLC sale:
- The fair value of the aggregate assets of TLC will exceed its respective
total liabilities, including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities.
- The present fair saleable value of the aggregate assets of TLC will be
greater than its respective probable liabilities on its debts as such
debts become absolute and mature.
- TLC will be able to pay its debts and other liabilities, including
contingent liabilities and other commitments, as they mature.
- TLC will not have unreasonably small capital for the business in which it
is engaged, as managements of TLC and Christiana have indicated such
business is now conducted and proposed to be conducted following the
consummation of the merger pursuant to the prior merger agreement, the
TLC sale and certain related transactions.
The full text of the American Appraisal Opinion, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken, is set forth as Appendix G to this joint proxy statement/prospectus
and is incorporated herein by reference and should be read in its entirety in
connection with this joint proxy statement/prospectus. The American Appraisal
Opinion is directed only to the solvency of TLC and does not address any other
terms of the merger, the TLC sale or the underlying business decision of
Christiana's Board of Directors or Weatherford's Board of Directors to effect
the merger. The American Appraisal Opinion does not constitute a recommendation
to any stockholder of Christiana or Weatherford as to how any such stockholder
should vote such stockholder's shares of Christiana or Weatherford, as the case
may be. The summary of the American Appraisal Opinion set forth in the joint
proxy statement/prospectus is qualified in its entirety by reference to the full
text of the American Appraisal Opinion attached as Appendix G. American
Appraisal has consented to the use of the American Appraisal Opinion as an
appendix to this joint proxy statement/prospectus.
The amended merger agreement provides that, as a condition to closing the
transaction, American Appraisal is required to deliver a similar opinion, dated
as of the closing date of the merger, that relates to the revised terms of the
transaction and that applies to C2 and Christiana in addition to TLC. See "The
Merger -- Terms of the Merger -- Conditions to the Merger".
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RELATED PARTY TRANSACTIONS
The following description of the material terms and conditions to the
consummation of the TLC sale is qualified by, and made subject to, the more
detailed terms and conditions set forth in the TLC purchase agreement and the
operating agreement, which are attached as Appendix B and Appendix C to this
joint proxy statement/prospectus and incorporated herein by reference.
THE TLC SALE AND OPERATING AGREEMENT
Under the terms of the merger agreement, Christiana is required to a sell a
two-thirds interest in TLC to C2 as a condition to Weatherford's obligations to
consummate the merger. In addition, upon the disposition of the two-thirds
interest in TLC to C2, Christiana and C2 are required to enter into the
operating agreement defining their respective rights and obligations with
respect to TLC following the TLC sale.
TERMS OF THE TLC SALE
General. Immediately prior to the merger, C2 will purchase two-thirds of
TLC for an aggregate purchase price of $10.67 million. As an inducement to
Weatherford to complete the merger, C2 and TLC agreed to assume the Assumed
Liabilities (as defined below). In addition, at any time after the fifth
anniversary of the merger, Christiana will have the option to sell to C2 or TLC
Christiana's one-third interest in TLC for $7.0 million. If there is a proposed
merger or sale of the stock or assets of C2 or if the Lubar family proposes to
sell its interest in C2 so that they would hold less than a 25% interest in C2
or the resulting entity or if C2 proposes to sell its interest in TLC to an
unrelated third party, Christiana will have the right to participate in such
sale with respect to its interest in TLC for the same equivalent consideration.
For other provisions regarding the transfer of interests in TLC, see "-- Terms
of the Operating Agreement -- Assignment, Transfer and Repurchase of a Member's
Units". The TLC sale will take place immediately prior to the closing of the
merger.
Concurrently with the transaction, C2 will offer 5,202,664 shares of its
common stock pursuant to the C2 prospectus. Immediately prior to the merger,
Christiana shareholders will have the ability to purchase shares of C2 common
stock in an amount up to their pro rata share of Christiana common stock. The
Lubar family has committed to purchase such number of shares of C2 common stock
as is necessary for the net proceeds to C2 of the C2 offering to equal $10.67
million. This will insure that C2 has sufficient funds to complete the TLC sale.
"Assumed Liabilities" means any and all liabilities and environmental
liabilities, other than the Retained Liabilities (as defined below), to which
Christiana or C2's interest in TLC is or may become subject, whether directly or
indirectly, including, but not limited to, liabilities that result from, arise
out of or relate to:
- Any Christiana Company (other than TLC).
- The business, operations or assets of Christiana or any Christiana
Company on or prior to the closing of the merger.
- Any taxes to which Christiana or any Christiana Company may be obligated
for periods ending on or before the closing of the merger, except for
Christiana taxes expressly retained by Christiana pursuant to the merger
agreement.
- Any obligation, matter, fact, circumstance or action or omission by any
person in any way relating to or arising from the business, operations or
assets of Christiana or a Christiana Company that existed on or prior to
the closing of the merger.
- Any product or service provided by Christiana or any Christiana Company
prior to the closing of the merger.
- The merger, the TLC sale or any related transactions.
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- Previously conducted operations of Christiana or any Christiana Company.
- C2's interest in TLC.
"Retained Liabilities" means, and is limited solely to:
- Accounts payable relating to Christiana that are reflected on the balance
sheet of Christiana at the closing of the merger.
- Accounts payable reflected on the balance sheet of Christiana at the
closing of the merger and agreed to by Weatherford prior to the closing
of the merger.
- The obligations of Christiana that arise after the closing of the merger.
- Tax liability for income of Weatherford attributable to Christiana under
the equity method of accounting either before or after the closing of the
merger.
Indemnification. TLC and C2 have agreed to indemnify, defend and hold
harmless Christiana, Weatherford and their respective officers, directors,
employees, agents and assigns from and against any and all liabilities or
environmental liabilities, including, without limitation, reasonable fees and
expenses of attorneys, accountants, consultants and experts, that such parties
incur, are subject to a claim for or are subject to, that relate to any of a
number of matters, including the following:
- Any breach of any covenant or agreement of TLC or C2 contained in the TLC
purchase agreement or any related agreement.
- The acts or omissions of Christiana or any of its current or past
subsidiaries or affiliated companies (a "Christiana Company") on or
before the closing of the merger.
- The acts or omissions of any Christiana Company, TLC, C2 or TLC's or C2's
affiliates or the conduct of any business by them on or after the closing
of the merger.
- The Assumed Liabilities and including, without limitation, any and all
liabilities and environmental liabilities other than the Retained
Liabilities to which Christiana or C2's interest in TLC is or may become
subject resulting from, arising out of or relating to the following:
- The business or operations of Christiana or any Christiana Company on
or prior to the closing of the merger.
- The merger, the TLC sale or any other transactions contemplated
thereby.
- Any taxes to which Christiana or any Christiana Company may be
obligated for periods ending on or before the closing of the merger
(except for Christiana taxes expressly retained by Christiana pursuant
to the merger agreement).
- Any taxes as a result of the merger subsequently being determined to be a
taxable transaction.
- Any and all amounts for which Christiana or Weatherford may be liable on
account of any insurance-related liabilities arising from claims by their
affiliates, employees or insurance carriers for indemnity arising from or
out of claims by or against Christiana or any Christiana Company.
- Any liability under the Consolidated Omnibus Budget Reconciliation Act of
1986 with respect to any employees of Christiana or any Christiana
Company who become employees of TLC or C2 after the TLC sale.
- Any settlements or judgments in any litigation commenced by one or more
insurance carriers against Christiana or Weatherford on account of claims
by TLC, C2 or any Christiana Company or their employees.
- Any and all liabilities incurred by Christiana or Weatherford pursuant to
its obligations to seek to obtain or obtaining any consent or approval to
assign, transfer or lease any interest in any asset or instrument,
contract, lease, permit or related benefit.
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- The on-site or off-site handling, storage, treatment or disposal of any
waste materials generated by Christiana or any Christiana Company on or
prior to the closing of the merger or any Christiana Company at any time.
- Any and all environmental conditions on or prior to the closing of the
merger, known or unknown, existing on, at or underlying any of the
properties owned, leased or operated by Christiana on or after the
closing of the merger.
- Any acts or omissions on or prior to the closing of the merger of
Christiana or any Christiana Company relating to the ownership or
operation of their business or the properties currently or previously
owned or operated by them.
- Any liability relating to any claim or demand by any stockholder of
Christiana or Weatherford with respect to the merger, the TLC sale or
related transactions.
- Any liability relating to employee benefit or welfare plans of Christiana
or any Christiana Company arising out of circumstances occurring on or
prior to the closing of the merger.
TERMS OF THE OPERATING AGREEMENT
General. Christiana's and C2's interests in TLC will be governed by the
operating agreement. After giving effect to the TLC sale, C2 and Christiana will
be the only members of TLC, which is a Delaware limited liability company.
Additional members may be admitted to TLC only with the unanimous vote or
written consent of the members.
Allocations. All items of income, gain, loss or deduction of TLC will be
allocated between the members in proportion to their respective ownership
interests and in compliance with the Treasury Regulations promulgated under the
federal tax laws.
Distributions. To permit the members to make their required estimated
income tax payments arising from their ownership interests in TLC, TLC will make
mandatory distributions to the members in amounts sufficient to cover the
members' respective tax liabilities. TLC may make additional distributions to
the members in proportion to their respective ownership interests upon the
agreement of C2 and Christiania.
Management. The management of TLC will be vested in a board of managers
with six managers. The initial board of managers will be comprised of William T.
Donovan, Bernard J. Duroc-Danner, Curtis W. Huff, Sheldon B. Lubar, John R.
Patterson and Gary R. Sarner. Each manager is elected by the vote or written
consent of the members holding at least a majority of the ownership interests in
TLC; provided, however, that Christiana and C2 will each be entitled to elect,
without the consent of the other member, a number of managers that is
proportionate to its respective ownership interest in TLC. The operating
agreement provides that certain significant or extraordinary actions or
transactions may be taken or entered into only with the approval of all members.
TLC will generally indemnify the managers to the fullest extent permitted
under the Delaware law against any losses incurred by reason of any act or
omission in connection with the business of TLC. The board of managers may
appoint officers of TLC to perform such duties as are set forth in the operating
agreement or as specified by the board of managers. The board of managers may
authorize TLC to pay the officers any reasonable fees for their services.
Neither the members nor the managers are required to devote their full time and
efforts to TLC. TLC will pay C2 an annual management fee of $250,000.
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Assignment, Transfer and Repurchase of a Member's Units. Generally, neither
Christiana nor C2 may transfer its interest in TLC without the prior written
consent of the board of managers. Notwithstanding the foregoing:
- C2 may transfer its interest in TLC if it complies with the TLC purchase
agreement.
- C2 may pledge and assign its interest in TLC to Christiana and Christiana
may effect a transfer of C2's interest in TLC pursuant to any action
taken with respect to any security interest granted to Christiana by C2.
- Christiana may transfer its interest in TLC if the transferee is an
affiliate of Christiana or C2 and the transferee agrees to be bound by
the provisions of the operating agreement.
- At any time after the fifth anniversary of the date of the operating
agreement, Christiana has the option to sell to C2 or TLC its one-third
interest in TLC for $7.0 million.
- At any time after the fifth anniversary of the date of the operating
agreement, Christiana may transfer any or all of its interest in TLC to
any person; provided, however, that C2 shall have a right of first
refusal to purchase such interest for the same price and at the same
terms as such interest was offered to the transferee.
In the event of any attempted involuntary transfer of an interest in TLC,
TLC will have the option to purchase the interest subject to the involuntary
transfer at an amount equal to the book value of such interest. An involuntary
transferee receiving an interest in TLC will not be considered a member of TLC
unless all of the members consent in writing to treat the involuntary transferee
as a member. In addition, if there is a proposed merger, consolidation or share
exchange involving C2 or if the Lubar family proposes to sell their interest in
C2 or if C2 proposes to sell its interest in TLC to an unrelated third party,
Christiana will have the right to participate in such sale with respect to its
interest in TLC for the same equivalent consideration.
Dissolution and Winding Up. TLC will be dissolved upon:
- The unanimous vote or written consent of the Members to dissolve TLC.
- TLC being adjudicated insolvent or bankrupt.
- An entry of a decree of judicial dissolution relating to TLC.
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THE MERGER
The detailed terms and conditions to the consummation of the merger are
contained in the merger agreement. The following description of the material
terms and conditions to the consummation of the merger is qualified by, and made
subject to, the more detailed terms and conditions set forth in the merger
agreement which is attached as Appendix A to this joint proxy
statement/prospectus and is incorporated in this joint proxy
statement/prospectus by reference.
TERMS OF THE MERGER
General Description of the Merger. At the closing of the merger, Sub will
merge with Christiana and Christiana will be the surviving corporation. Pursuant
to the merger, each outstanding share of Christiana common stock will be
converted into the right to receive the Weatherford share consideration and the
cash consideration. Each holder of a share of Christiana common stock as of the
closing of the merger will be entitled to receive from Weatherford with respect
to each share of Christiana common stock the Weatherford share consideration and
the cash consideration. Based on the current capitalization of Christiana and
the assets and liabilities of Christiana as of September 30, 1998, and after
giving effect to the estimated expenses of the merger payable by Christiana,
Christiana currently expects that, if Christiana makes no additional purchases
of Weatherford common stock, the Weatherford share consideration and the cash
consideration will be .85191 of a share of Weatherford common stock and between
$3.50 and $4.00 in cash, respectively. The specific number of shares of
Weatherford common stock and the exact amount of cash consideration per share of
Christiana common stock payable in the merger will be determined after the
special meetings and could vary from that which would be payable had the merger
been effective on September 30, 1998. If Christiana uses $5.0 million to make
additional purchases of Weatherford common stock, the cash consideration would
drop by approximately $1.00 per share to an estimated $2.50 to $3.00 per share
of Christiana common stock. In addition, Weatherford will determine the cash
consideration following the closing of the merger based on a 30-day post closing
review by Weatherford of the assets and liabilities of Christiana at the closing
of the merger. Weatherford will distribute the cash consideration to the
Christiana shareholders promptly following the calculation of such amount.
Christiana will be obligated to spend up to $15.0 million to purchase
additional shares of Weatherford common stock in order for the merger to qualify
as a "tax free" reorganization under the federal tax laws. Of this money,
Christiana committed to spend $10.0 million to purchase additional shares of
Weatherford common stock prior to the mailing of this joint proxy
statement/prospectus. Christiana purchased 489,300 shares of Weatherford common
stock at an average price per share of $20.44. Christiana is required to spend
up to an additional $5.0 million cash to purchase additional shares of
Weatherford common stock within one week following the vote at the Christiana
special meeting if necessary to allow the stock component of the consideration
to be paid in the merger to equal at least 80% of the total consideration to be
paid in the merger. In addition, Christiana may, but is not obligated to, make
additional purchases of Weatherford common stock in excess of $5.0 million. If
the market price of the Weatherford common stock is less than $18.30 per share
following the Christiana special meeting, it is expected that it will be
necessary for Christiana to make additional purchases of Weatherford common
stock.
For each $1.00 drop in the price of the Weatherford common stock below
$18.30 per share, Christiana will have to effect approximately $900,000 in
additional purchases of Weatherford common stock for the merger to qualify as a
partially tax free reorganization. Because Christiana has committed to a maximum
of $5.0 million of additional purchases of Weatherford common stock, the lowest
price for Weatherford common stock at which the merger will be partially tax
free is approximately $12.75 per share. If the price of Weatherford common stock
declines below approximately $12.75 and does not increase above that level prior
to January 31, 1999, the condition that the merger be a partially tax free
reorganization under the Code would not be satisfied and the merger would not be
completed unless Christiana purchased additional shares of Weatherford common
stock to qualify the merger as a partially tax free reorganization. The
following table shows to what extent additional purchases of Weatherford
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common stock will be necessary and the effect of such additional purchases on
the Weatherford share consideration and the cash consideration.
ADDITIONAL PURCHASES
<TABLE>
<CAPTION>
AMOUNT OF
ADDITIONAL WEATHERFORD
PRICE PER SHARE OF PURCHASES SHARE APPROXIMATE CASH
WEATHERFORD NECESSARY TO CONSIDERATION PER CONSIDERATION PER
COMMON STOCK AS QUALIFY MERGER AS SHARE OF SHARE OF
OF THE CHRISTIANA PARTIALLY TAX FREE CHRISTIANA CHRISTIANA
SPECIAL MEETING REORGANIZATION COMMON STOCK COMMON STOCK
- --------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C>
$17.00 $1,419,578 .86812 $3.62
$15.00 $3,005,277 .89075 $3.31
$13.00 $4,702,584 .92197 $2.98
$12.75 $4,939,665 .92715 $2.93
</TABLE>
As of the record date, there were 97,264,318 shares of Weatherford common
stock outstanding, including the 4,386,762 shares of Weatherford common stock
held by Christiana. Based upon the number of shares of Christiana common stock
outstanding as of the record date, and after giving effect to the conversion of
the 4,386,762 shares of Weatherford common stock held by Christiana into
treasury shares, the number of shares of Weatherford common stock outstanding
after the merger will be the same as prior to the merger.
Closing of the Merger. The merger will become effective when the Articles
of Merger are duly filed with the Department of Financial Institutions of the
State of Wisconsin or at such later time (not to exceed 90 days from the date
the Articles of Merger are filed) as is specified in the Articles of Merger
pursuant to the mutual agreement of Weatherford and Christiana. It is
anticipated that, if the merger proposal is approved at the special meetings and
all other conditions to the merger have been satisfied or waived, the closing of
the merger will occur as soon as practicable after the special meetings.
Manner and Basis of Converting Shares. At the closing of the merger, each
share of Christiana common stock issued and outstanding immediately prior to the
closing of the merger not owned directly or indirectly by Christiana shall be
converted into a right to receive the Weatherford share consideration and the
cash consideration. No fractional shares of Weatherford common stock will be
issued, and, in lieu thereof, all fractional shares of Weatherford common stock
that would otherwise be issuable in the merger will be rounded to the nearest
whole share of Weatherford common stock.
A letter of transmittal is provided to Christiana shareholders with this
joint proxy statement/prospectus for use in exchanging Christiana common stock
certificates for Weatherford common stock certificates and the cash
consideration. Christiana shareholders should complete the letter of transmittal
in accordance with its instructions and return it to Firstar Bank Milwaukee,
N.A. on or before 5:00 p.m. Central Standard Time on -- , 1998.
Christiana common stock certificates should be submitted with the letter of
transmittal. If such certificates were submitted in connection with the prior
special meeting, no further action need be taken with respect to such
certificates. Christiana shareholders may receive their certificates back at any
time upon request.
As soon as possible after the closing of the merger, but no later than 30
days thereafter (the "Payment Date"), the parties to the merger agreement shall
calculate and agree upon the cash consideration (anticipated to be between $3.50
and $4.00 per share of Christiana common stock, or between $2.50 and $3.00 if
Christiana uses $5.0 million to make additional purchases of Weatherford common
stock, based upon the terms of the merger agreement as described more fully in
this joint proxy statement/prospectus). On the Payment Date, Weatherford will
pay the cash consideration due each Christiana shareholder who completed the
letter of transmittal and submitted his or her Christiana common stock
certificates therewith to Firstar Bank Milwaukee, N.A., Milwaukee, Wisconsin
(the "Escrow Agent"), which shall promptly distribute the cash consideration to
each such Christiana
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shareholder unless such shareholder has elected in the letter of transmittal to
apply all or a portion of the cash consideration to the purchase of shares of C2
common stock as described in the C2 prospectus, in which case the cash
consideration shall be so applied. The Escrow Agent shall, following
instructions from the Christiana shareholders, either transmit such funds to C2
to purchase shares of C2 common stock or transmit such funds to the Christiana
shareholders.
Contemporaneously with this joint proxy statement/prospectus, C2 will
deliver to each Christiana shareholder the C2 prospectus regarding the proposed
issuance of C2 common stock. If the merger is approved, each Christiana
shareholder is entitled to purchase shares of C2 common stock and may use the
cash consideration for such purpose by following the procedures described in the
C2 prospectus. The letter of transmittal provided to Christiana shareholders
with this joint proxy statement/prospectus is the means by which Christiana
shareholders may elect to purchase shares of C2 common stock.
The rights of the Christiana shareholders regarding the purchase of C2
common stock and the terms upon which the cash consideration may be used to
purchase such shares are governed by the C2 prospectus. Christiana shareholders
should only rely upon that document with regard to the purchase of those shares.
Until such time as a holder of Christiana common stock surrenders such
shareholder's outstanding stock certificate to the Escrow Agent, together with
an appropriately completed and executed letter of transmittal, such shareholder
will have no rights as a stockholder of Weatherford. Such certificate shall
represent only the right to receive upon surrender thereof the number of shares
of Weatherford common stock and the cash consideration into which the shares of
Christiana common stock theretofore represented by such certificate shall be
converted pursuant to the merger agreement. Unless and until such outstanding
certificates are surrendered, no dividends or other distributions payable to the
holders of Weatherford common stock, as of any time on or after the closing of
the merger, will be paid to the holders of such outstanding certificates. Upon
surrender of the certificate previously representing Christiana common stock,
the holder thereof will receive certificates representing the number of shares
of Weatherford common stock to which such shareholder is entitled, the cash
consideration to which such shareholder is entitled and the amount of any
dividends or other distributions, if any, payable to holders of Weatherford
common stock on or after the closing of the merger with respect to such shares,
without interest thereon. Christiana shareholders who submitted their Christiana
common stock certificates in connection with the prior Christiana special
meeting need not take further action with respect to their stock certificates. A
Christiana shareholder may upon request, receive their certificates back at any
time.
Conditions to the Merger. Weatherford's and Christiana's obligations to
effect the merger are subject to the fulfillment of, at or prior to the closing
date, the following conditions:
- The merger proposal shall have been approved and adopted by the requisite
vote of the stockholders of Christiana and Weatherford.
- No order shall have been entered and remain in effect in any action or
proceeding before any foreign, federal or state court or governmental
agency that would prevent or make illegal the consummation of the TLC
sale and the merger.
- The registration statement of which this joint proxy statement/prospectus
forms a part and the registration statement under the Securities Act to
be filed by C2 in connection with the C2 offering shall be effective on
the closing date, and all post-effective amendments filed shall have been
declared effective or shall have been withdrawn and no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the
knowledge of the parties, threatened by the Commission.
- There shall have been obtained any and all material permits, approvals
and consents of any governmental body or agency, that reasonably may be
deemed necessary so that the consummation of the merger and the
transactions contemplated thereby will be in compliance with applicable
laws, the failure to comply with which would have:
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- A material adverse effect on the financial condition of Christiana
after giving effect to the TLC sale or prevent or adversely affect the
ability of Christiana, TLC or C2 to perform and comply with their
respective obligations under the merger agreement, the TLC purchase
agreement or any other agreement to be executed and delivered in
connection with the transactions contemplated thereby (collectively, a
"Christiana MAE").
- A material adverse effect on the financial condition of Weatherford
and its subsidiaries, taken as a whole (a "Weatherford MAE").
- The shares of Weatherford common stock issuable upon consummation of the
merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
- We shall have received a solvency opinion from American Appraisal, in
form and substance satisfactory to them.
- We shall have received all material third party consents.
Weatherford's obligation to effect the merger is, at the option of
Weatherford, also subject to the fulfillment at or prior to the closing date of
the following conditions:
- The representations and warranties of Christiana contained in the merger
agreement shall be accurate as of the date of the merger agreement and,
except to the extent such representations and warranties speak
specifically as of an earlier date, as of the closing date as though such
representations and warranties had been made at and as of that time, and
all of the terms, covenants and conditions of the merger agreement to be
complied with and performed by Christiana on or before the closing date
shall have been duly complied with and performed in all material
respects.
- There shall not have occurred or exist any fact or condition that would
reasonably result in a Christiana MAE or would constitute a material
fixed or contingent liability to Christiana.
- The Morgan Stanley Opinion shall not have been withdrawn.
- All stock options of Christiana under its various stock option plans
shall have been terminated or such options shall have been exercised.
- Christiana shall have received, and furnished written copies to
Weatherford of, the Christiana affiliates' agreements required by the
merger agreement.
- Weatherford shall have received from Foley & Lardner, counsel to
Christiana, an opinion dated the closing date covering customary matters
relating to the merger agreement, the merger and other corporate and
securities law matters related to Christiana.
- Weatherford shall have received a written opinion from Arthur Andersen
LLP, in form and substance satisfactory to Weatherford, covering the
matters described under "Material Federal Income Tax
Considerations -- Federal Income Tax Consequences of the Merger".
- C2 shall have executed and delivered to Christiana and Weatherford the
TLC purchase agreement and agreement among members, in form and
substance, including schedules, acceptable to Weatherford.
- The TLC sale shall have been consummated.
- Weatherford shall have received from Arthur Andersen LLP an opinion, in
form and substance satisfactory to Weatherford, dated as of the closing
date, to the effect that the merger would not adversely affect the
ability of Weatherford to account for any prior or future business
combination as a pooling of interest.
- Christiana shall have delivered to Weatherford a pro forma balance sheet
after giving effect to the TLC sale, including a full accrual for taxes
thereon without regard to any tax credits or tax
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deductions that Christiana may have in connection with the exercise of
any stock options, reflecting Christiana Net Cash (as defined in the
merger agreement) in an amount not less than $13.0 million.
- Except for certain liabilities agreed to by Weatherford, all outstanding
indebtedness, including guarantees thereof, of Christiana and its
subsidiaries (other than TLC) shall have been paid in full or Christiana
shall have been released therefrom.
- The assets of Christiana shall consist only of cash of at least $13.0
million, at least 3,897,462 shares of Weatherford common stock and
333.333 units of TLC representing one-third of the outstanding interests
of TLC.
- There shall not be any pending litigation involving Christiana or any of
its subsidiaries that Weatherford, in its sole discretion, considers to
be a material liability for which adequate security has not been provided
Weatherford. See "Description of Christiana -- Legal Proceedings".
Christiana's obligation to effect the merger is, at the option of
Christiana, also subject to the fulfillment at or prior to the closing date of
the following conditions:
- The representations and warranties of Weatherford and Sub contained in
the merger agreement shall be accurate as of the date of the merger
agreement and, except to the extent such representations and warranties
speak specifically as of an earlier date, as of the closing date as
though such representations and warranties had been made at and as of
that time, and all the terms, covenants and conditions of the merger
agreement to be complied with and performed by Weatherford on or before
the closing date shall have been duly complied with and performed in all
material respects.
- The Prudential Securities Opinion shall not have been withdrawn.
- Christiana and C2 shall have received from Fulbright & Jaworski L.L.P.,
counsel to Weatherford, an opinion dated the closing date covering
customary matters relating to the merger agreement and the merger.
- Christiana and C2 shall have received a written opinion from Arthur
Andersen LLP, in form and substance satisfactory to Christiana, covering
the matters described under "Material Federal Income Tax
Considerations -- Federal Income Tax Consequences of the Merger".
- The TLC sale shall have occurred.
Representations and Warranties of the Parties to the Merger Agreement.
Weatherford, Sub, Christiana and C2 have made various representations and
warranties in the merger agreement relating to, among other things, their
respective businesses and financial conditions, the accuracy of their various
filings with the Commission and their financial statements contained therein,
the status of various employee benefit plans and environmental matters, the
satisfaction of certain legal requirements for the merger and the existence of
certain litigation. The representations and warranties of each of the parties to
the merger agreement other than C2 will expire upon consummation of the merger.
The representations and warranties of C2 will survive the closing of the merger
without limitation.
Conduct of Business of Christiana and Weatherford Prior to the Merger.
Christiana is prohibited from taking various actions prior to the closing of the
merger without the prior consent of Weatherford. In this regard, Christiana has
agreed that, unless otherwise expressly contemplated by the merger agreement or
the TLC purchase agreement:
- Its business and its subsidiaries' business would be conducted only in,
and it and its subsidiaries would not take any action except in, the
ordinary course of business and consistent with past practice.
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- It would not directly or indirectly do any of the following:
- Issue, sell, pledge, dispose of or encumber any capital stock of
Christiana except upon the exercise of Christiana stock options.
- Split, combine or reclassify any outstanding capital stock, or
declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to its capital stock outstanding
at any time.
- Redeem, purchase or acquire or offer to acquire any of its capital
stock.
- Acquire, agree to acquire or make any offer to acquire for cash or
other consideration any equity interest in or assets of any
corporation, partnership, joint venture or other entity in an amount
greater than $500,000.
- Enter into any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this clause.
- It would not transfer, dispose or otherwise convey any of the shares of
Weatherford common stock held by it or grant or permit there to exist any
lien or other encumbrance on such shares.
- Subject to certain procedures relating to approvals of new contracts, it
would not enter into any contract regarding its business having a term
greater than 120 days or involving an amount in excess of $50,000 or
commit to do the same.
- It would not become bound by any agreement or obligation in an amount in
excess of $500,000 in the aggregate for all such agreements and
obligations.
- It would not pledge or encumber any of the assets to be held by it
following the TLC sale.
- Neither it nor its subsidiaries would enter into any employment or
consulting contracts.
- Neither it nor its subsidiaries would enter into any contract or
agreement that if effective on the date of the merger agreement would be
required to be identified to Weatherford under the terms of the merger
agreement.
- It would not sell, lease, mortgage, pledge, grant a lien or other
encumbrance on or otherwise encumber or otherwise dispose of any of its
subsidiaries' properties or assets, except sales of inventory in the
ordinary course of business consistent with past practice, provided that
Christiana may liquidate, in a manner acceptable to Weatherford, CST
Financial, Inc., Martinique Holdings, Inc. and Christiana Community
Builders, Inc.
- Subject to certain exceptions, neither it nor its subsidiaries would
directly or indirectly incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
Christiana or its subsidiaries or guarantee any debt securities of
another person.
- Neither it nor any of its subsidiaries would make any election relating
to taxes except for those elections to be made in connection with its
1997 tax returns that are consistent with the 1996 tax returns.
- Neither it nor any of its subsidiaries would change any accounting
principle used by it.
- It would use its reasonable efforts to preserve intact the business
organization and goodwill of Christiana and TLC.
- It would cause there to exist, immediately prior to the closing of the
merger, Christiana Net Cash (as defined in the merger agreement) of not
less than $13.0 million, including $10.67 million to be paid by C2 under
the TLC purchase agreement.
- Subject to certain exceptions, neither it nor any of its subsidiaries
would settle or compromise any litigation.
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- It would cause the TLC sale to be effected prior to the closing of the
merger.
- It would not authorize any of, or commit or agree to take any of, or
permit any of its subsidiaries to take any of the foregoing actions to
the extent prohibited by the foregoing.
- It shall cause TLC to pay to Christiana a distribution in the amount of
$20.0 million cash prior to the closing of the merger.
- It shall cause TLC to pay in full the entire principal amount of a
promissory note dated September 1, 1992 in the principal amount of $3.0
million together with all accrued interest thereon.
- Except as set forth in the disclosure schedule to the merger agreement,
or agreed to in writing by Weatherford prior to the closing, Christiana
shall cause all of its obligations (1) relating to TLC or any other
historical business of Christiana or its subsidiaries and (2) under any
and all agreements relating to the borrowing of funds, including all
guarantees and other similar arrangements relating thereto, to be fully
released or otherwise satisfied in a manner acceptable to Weatherford.
Pursuant to the merger agreement, Weatherford agreed that, from the date of
the merger agreement until the closing of the merger, unless Christiana
otherwise agrees in writing or as otherwise expressly contemplated by the merger
agreement, it would not take any action that would, or that reasonably could be
expected to, result in any of the representations and warranties set forth in
the merger agreement becoming untrue or any of the conditions to the merger set
forth above not being satisfied.
Expenses. Christiana is required to bear significant transaction costs,
which costs and the estimates thereof are as follows: Prudential Securities
Opinion ($450,000), legal fees and expenses ($450,000), accounting and tax
services ($250,000), American Appraisal Opinion ($75,000), lease cancellation
($327,000), Weatherford's filing fees with the Commission ($50,000), filing fees
under the HSR Act ($90,000), reimbursement for certain costs incurred by
Weatherford ($900,000), including all printing and proxy solicitation costs and
expenses for blue sky and state securities law filings, and miscellaneous
($208,000). Weatherford is required to pay its own legal and financial advisory
fees. Such costs are estimated as of the date of this joint proxy
statement/prospectus and may be higher. If higher, the cash consideration
available for distribution may be lower. See "Related Party Transactions".
Management Following the Merger. No changes in the directors or officers of
Weatherford will be effected as a result of the merger. As of the closing of the
merger, the directors and officers of Sub will become the directors and officers
of Christiana.
Termination or Amendment of the Merger Agreement. The merger agreement
provides that it may be terminated and the merger and the other transactions
contemplated therein may be abandoned at any time prior to the closing of the
merger, whether prior to or after approval by the stockholders of Weatherford or
the shareholders of Christiana, by mutual written consent of Weatherford and
Christiana.
Weatherford or Christiana may also terminate the merger agreement if:
- The merger has not been consummated on or before January 31, 1999,
provided that the right to terminate the merger agreement under this
provision is not available to any party whose breach of any
representation or warranty or failure to fulfill any covenant or
agreement under the merger agreement is the cause of or resulted in the
failure of the merger to occur on or before such date.
- Any court of competent jurisdiction, or some other governmental body or
regulatory authority, shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting
the merger.
- The shareholders of Christiana do not approve the merger proposal at the
Christiana special meeting or at any adjournment thereof.
- The stockholders of Weatherford do not approve the merger proposal at the
Weatherford special meeting or any adjournment thereof.
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<PAGE> 74
- In the exercise of its good faith judgment as to its fiduciary duties to
its stockholders imposed by law, as advised by outside counsel, the Board
of Directors of Christiana or Weatherford determines that such
termination is appropriate in complying with its fiduciary obligations.
Christiana may terminate the merger agreement if:
- Weatherford fails to comply in any material respect with any of the
covenants or agreements contained in the merger agreement to be complied
with or performed by Weatherford or Sub at or prior to such date of
termination, provided such breach is not cured within 30 days following
receipt by Weatherford of written notice from Christiana of such breach
and is existing at the time of termination of the merger agreement.
- Any representation or warranty of Weatherford contained in the merger
agreement shall not have been true in all respects when made, provided
such breach has not been cured within 30 days following receipt by
Weatherford of written notice from Christiana of such breach and is
existing at the time of termination of the merger agreement or on and as
of the closing of the merger as if made on and as of the closing of the
merger, except to the extent it relates to a particular date, except for
such failures to be so true and correct which would not, individually or
in the aggregate, reasonably be expected to have a Weatherford MAE,
assuming the effectiveness of the merger.
- The Board of Directors of Weatherford withdraws, modifies or changes its
recommendation of the merger proposal in a manner adverse to Christiana
or shall have resolved to do any of the foregoing.
Weatherford may terminate the merger agreement if:
- Christiana fails to comply in any material respect with any of the
covenants or agreements contained in the merger agreement to be complied
with or performed by it at or prior to such date of termination (provided
such breach is not cured within 30 days following receipt by Christiana
of written notice from Weatherford of such breach and is existing at the
time of termination of the merger agreement).
- Any representation or warranty of Christiana contained in the merger
agreement shall not have been true in all respects when made, provided
such breach has not been cured within 30 days following receipt by
Christiana of written notice from Weatherford of such breach and is
existing at the time of termination of the merger agreement or on and as
of the closing of the merger as if made on and as of the closing of the
merger, except to the extent it relates to a particular date, except for
such failures to be so true and correct which would not, individually or
in the aggregate, reasonably be expected to have a Christiana MAE,
assuming the effectiveness of the merger.
- The Board of Directors of Christiana withdraws, modifies or changes its
recommendation of the merger proposal in a manner adverse to Weatherford
or shall have resolved to do any of the foregoing.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the provisions of the HSR Act, the merger may not be consummated
until such time as the specified waiting period requirements of the HSR Act have
been satisfied. We have filed notification reports, together with requests for
early termination of the waiting period, with the Department of Justice and the
Federal Trade Commission ("FTC") and the applicable waiting period has expired.
At any time before or after the closing of the merger, the Department of
Justice, the FTC or a private person or entity could seek under the antitrust
laws, among other things, to enjoin the merger or to cause Weatherford to divest
itself, in whole or in part, of Christiana or of other businesses conducted by
Weatherford. Although neither Weatherford nor Christiana knows of any reason
that a challenge to the merger would be made under the antitrust laws, there can
be no assurance that a challenge to the merger will not be made.
Weatherford and Christiana are aware of no other governmental or regulatory
approvals required for consummation of the merger, other than compliance with
applicable securities laws of the various states.
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<PAGE> 75
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase under generally accepted
accounting principles.
NYSE LISTING OF WEATHERFORD COMMON STOCK
Pursuant to the merger agreement, Weatherford is required to use reasonable
efforts to obtain listing on the NYSE of the shares of Weatherford common stock
to be issued in connection with the merger. An application for a listing of such
shares on the NYSE, subject to the approval of the merger by the stockholders of
Weatherford, is expected to be filed and approved prior to the closing of the
merger. Approval of the listing on the NYSE of the shares of Weatherford common
stock to be issued in the merger is a condition to the respective obligations of
Weatherford, Christiana and Sub to consummate the merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Weatherford common stock issued in connection with the merger
will be freely transferable, except that any shares of Weatherford common stock
received by persons who are deemed to be "affiliates" (as that term is defined
under the Securities Act) of Christiana prior to the merger may be resold by
them only in transactions registered under the Securities Act, permitted by the
resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144
if such persons are or become affiliates of Weatherford) or otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of
Weatherford generally include individuals or entities that control, are
controlled by or are in common control with such party, and may include certain
officers and directors of such party, as well as principal stockholders of such
party.
DISSENTERS' RIGHTS
Under Delaware law, the holders of Weatherford common stock who object to
the merger proposal or abstain from voting in favor of the merger proposal will
not have any appraisal rights or right to receive cash for their shares of
Weatherford common stock, and Weatherford does not intend to make any such
rights available to its stockholders.
The following discussion of dissenters' rights under the Wisconsin Business
Corporation Law (the "WBCL") does not purport to be complete and is qualified in
its entirety by reference to the provisions of Section 180.1301 to 180.1331 of
the WBCL. Christiana undertakes to supply a complete copy of the dissenters'
rights provisions upon written request of its respective shareholders to
Christiana Companies, Inc., William T. Donovan, President and Chief Financial
Officer, 700 North Water Street, Suite 1200, Milwaukee, Wisconsin 53202.
Any holder of Christiana common stock who is entitled to vote at the
Christiana special meeting and who objects to the merger may demand payment of
his or her shares of Christiana common stock. Any such shareholder who elects to
exercise such rights and wishes to do so must do the following:
- Before the vote is taken at the Christiana special meeting regarding
approval of the merger, deliver to Christiana written notice that
complies with Section 180.0141 of the WBCL of such shareholder's intent
to demand payment for such shareholder's shares.
- Not vote such shares in favor of approval of the merger.
A shareholder may assert dissenters' rights as to fewer than all the shares
registered in such shareholder's name only if such shareholder dissents with
respect to all shares beneficially owned by any one person and notifies
Christiana in writing of the name and address of each person on whose behalf
such record shareholder asserts dissenters' rights. The rights of a shareholder
asserting dissenters' rights as to fewer than all shares registered in such
shareholder's name are determined as if the shares as to which such shareholder
dissents and such shareholder's other shares were registered in the names of
different shareholders. Similarly, a beneficial owner of Christiana common stock
may assert dissenters' rights as to
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<PAGE> 76
shares held on the beneficial owner's behalf only if the beneficial owner
submits to Christiana the record shareholder's written consent to the dissent
not later than the time the beneficial shareholder asserts dissenters' rights
and the beneficial owner does so with respect to all shares of which it is the
beneficial owner or over which it has power to direct the vote. All notices to
Christiana should be sent or delivered to its address at the end of the
immediately preceding paragraph.
Not more than ten days after approval of the merger by Christiana
shareholders, Christiana must send to each person who has satisfied the
foregoing requirements for asserting dissenters' rights a notice that complies
with Section 180.0141 of the WBCL which must, among other things:
- State where the demand for payment must be sent.
- State where and when share certificates must be deposited.
- State the extent to which the transfer of the shares will be restricted
after the demand for payment is received.
- Supply a form for demanding payment that includes the date of the first
announcement to news media, which date was December 15, 1997, or to
shareholders of the terms of the proposed merger and requires that the
shareholder or beneficial shareholder asserting dissenters' rights
certify whether such shareholder acquired beneficial ownership of its
shares before that date.
- Set a date (which must be at least 30 but not more than 60 days after the
date the dissenters' notice is delivered) by which Christiana must
receive a demand for payment.
- Be accompanied by a copy of the dissenters' rights provisions of the
WBCL.
A shareholder or beneficial shareholder who receives a dissenters' notice
and wishes to exercise dissenters' rights must submit a written demand for
payment, must certify whether beneficial ownership was acquired prior to
December 15, 1997, and must deposit the applicable share certificates in
accordance with the terms of the dissenters' notice. A shareholder or beneficial
shareholder who does not demand payment in the foregoing manner will not be
entitled to payment for his or her shares under Sections 180.1301 to 180.1331 of
the WBCL. Upon receipt of an appropriate demand for payment and the share
certificates from a dissenting shareholder who certified that beneficial
ownership was acquired before December 15, 1997, Christiana will pay the
dissenting shareholder, provided such shareholder has complied with Section
180.1323 of the WBCL, Christiana's estimate of the fair value of the dissenting
shareholder's shares plus interest, if any, from the date the merger is
consummated. Upon receipt of such demand for payment and the share certificates
from a dissenting shareholder who did not certify that beneficial ownership was
acquired prior to December 15, 1997, Christiana may choose to withhold payment
required by Section 180.1325 of the WBCL from such dissenting shareholder. If
Christiana elects to withhold payment in the foregoing manner, it must offer to
purchase the dissenting shareholder's shares at a price based upon Christiana's
estimate of the fair value of the dissenting shareholder's shares plus accrued
interest, if any.
The payment must be accompanied by all of the following:
- Christiana's latest available financial statements, audited and including
footnote disclosure, if available, including a balance sheet as of the
end of a fiscal year ended not more than 16 months before the date of
payment, an income statement for that year, a statement of changes in
shareholders' equity for that year and the latest available interim
financial statements, if any.
- Christiana's estimate of the fair value of shares.
- An explanation of how interest was calculated.
- A statement of the dissenting shareholder's right to demand payment under
Section 180.1328 of the WBCL if dissatisfied with the payment.
- A copy of Sections 180.1301 to 180.1331 of the WBCL.
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<PAGE> 77
Within 30 days after receipt of such payment or offer, the dissenting
shareholder either must accept the payment or offer or must notify Christiana in
writing of the shareholder's estimate of the fair value of the shares plus
accrued interest and demand payment of the shareholder's estimate, less any
payment previously received. In the event Christiana fails to make payment to a
person within 60 days after the date set for demanding payment, such person may
notify Christiana in writing of his or her own estimate of the fair value of his
or her shares (and accrued interest) and demand payment of such shareholder's
estimate. If a dissenting shareholder and Christiana cannot agree as to the fair
value of such dissenter's shares, Christiana must, within 60 days after
receiving the demand for payment, commence a special proceeding in the Circuit
Court of Milwaukee County, Wisconsin to determine the fair value of such shares
and accrued interest. If Christiana fails to commence such a proceeding within
such 60-day time period, Christiana must pay to each dissenting shareholder
whose demand remains unsettled the amount each such dissenting shareholder
demands as fair value.
Shareholders contemplating exercising dissenters' rights under Wisconsin
law are urged to read carefully the dissenters' rights provisions of the WBCL.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States Federal income tax
consequences of the merger is based in part on an opinion of Arthur Andersen LLP
dated December 23, 1998, and on the current federal tax laws and regulations and
judicial and administrative interpretations thereof. No rulings have been
requested from the Internal Revenue Service (the "IRS") regarding these matters.
Additionally, the opinion of Arthur Andersen LLP is based on various
representations and assumptions, including representations by Weatherford and
Christiana regarding the reasons for the transaction described in "Weatherford's
Reasons for the Transaction" and "Christiana's Reasons for the Transaction", and
is not binding on the IRS or the courts. The conclusions set forth in the
discussion may change as a result of changes in applicable laws or
interpretations thereof occurring after the date hereof. The discussion does not
address the effects of any state, local or foreign tax laws on the merger.
THE OPINION OF ARTHUR ANDERSEN LLP ALSO IS REQUIRED TO BE DELIVERED TO
WEATHERFORD AND CHRISTIANA AS A CONDITION TO THE CLOSING OF THE MERGER.
WEATHERFORD AND CHRISTIANA MAY WAIVE THE RECEIPT OF THE OPINION AS A CONDITION
TO CLOSING. EXCEPT FOR MODIFICATIONS TO THE OPINIONS WHICH WOULD NOT CHANGE THE
CONCLUSIONS OF THE OPINIONS DESCRIBED BELOW OR WHICH WEATHERFORD AND CHRISTIANA
DO NOT BELIEVE WILL MATERIALLY CHANGE THE SUBSTANCE OF SUCH OPINIONS, NO WAIVER
OF THE REQUIRED OPINIONS OF ARTHUR ANDERSEN LLP WILL BE EFFECTED BY WEATHERFORD
OR CHRISTIANA WITHOUT DISCLOSURE TO THEIR STOCKHOLDERS OF THE WAIVER, INCLUDING
THE RISKS THEREOF, AND PROVIDING STOCKHOLDERS WITH AN OPPORTUNITY TO CHANGE
THEIR VOTE ON THE TRANSACTION.
The tax treatment of a shareholder may vary depending upon his or her
particular situation, and certain shareholders that have a special status may be
subject to special rules not discussed below. Persons that may be subject to
such special rules include individuals who hold restricted Christiana common
stock, individuals who acquired Christiana common stock as a result of the
exercise of an employee stock option, pursuant to an employee stock purchase
plan or otherwise as compensation, insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, persons who do not hold
Christiana common stock as a capital asset and persons who are neither citizens
nor residents of the United States, or who are foreign corporations, foreign
partnerships or foreign estates or trusts not subject to United States Federal
income tax on income regardless of source.
EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE TRANSACTION, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES
IN APPLICABLE TAX LAWS.
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<PAGE> 78
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Arthur Andersen LLP:
- The merger of Sub will constitute a partially tax free reorganization
under the federal tax laws and Christiana, Weatherford and Sub will be
parties to the reorganization.
- Neither Weatherford nor Sub will recognize any gain or loss as a result
of the merger.
- No gain or loss will be recognized by Christiana on the consummation of
the merger.
- Except for the cash consideration to be received in the merger, a holder
of Christiana common stock will not recognize any income, gain or loss as
a result of the receipt of Weatherford common stock in the merger.
- A holder's tax basis in his or her shares of Weatherford common stock to
be received in the merger will equal such holder's basis in his or her
shares of Christiana common stock to be surrendered in exchange therefor
(as determined immediately following the merger) less the cash
consideration to be received for the holder's shares of Christiana common
stock and increased by the gain recognized in the merger by the holder.
- A holder's holding period for his or her shares of Weatherford common
stock to be received in the merger will include the period for which the
shares of Christiana common stock were held if the shares were held as
capital assets at the time of the merger.
- Holders of Christiana common stock will recognize gain for the cash
consideration to be received in the merger. The gain recognized by the
holders of Christiana common stock in the merger will be a capital gain
provided the Christiana common stock to be exchanged is a capital asset
in the hands of the shareholder and provided it is not essentially
equivalent to a dividend.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of Weatherford common stock
may be subject to backup withholding at the rate of 31% with respect to
dividends and proceeds of redemption, unless such holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (b) provides a correct taxpayer identification number, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under these rules will be credited against the holder's United States Federal
income tax liability. Weatherford may require holders of Weatherford common
stock to establish an exemption from backup withholding or to make arrangements
satisfactory to Weatherford with respect to the payment of backup withholding. A
holder who does not provide Weatherford with his or her current taxpayer
identification number may be subject to penalties imposed by the IRS.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
CHRISTIANA OWNERSHIP
Christiana currently owns 4,386,762 shares of Weatherford common stock,
which in the aggregate represents approximately 4.5% of the total outstanding
shares of Weatherford common stock. Sheldon B. Lubar is a member of the Board of
Directors of Weatherford and the Chairman of Christiana. Mr. Lubar in his
capacity as a director of Weatherford did not participate in any business of the
Weatherford Board of Directors relating to the merger or any transactions
related to the merger. As of the date of this joint proxy statement/prospectus,
Mr. Lubar beneficially owns, together with his wife (who owns 433,705 shares)
and as trustee of certain trusts for the benefit of his grandchildren, 968,615
shares of Christiana common stock (18.8% of the outstanding shares of Christiana
common stock) and options to purchase an aggregate of 30,000 shares of
Weatherford common stock. In addition, certain members of Mr. Lubar's immediate
family own shares of Christiana common stock in the following amounts: David J.
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<PAGE> 79
Lubar, his son, 427,403 shares (8.2% of the outstanding shares of Christiana
common stock); Joan P. Lubar, his daughter, 448,551 shares (8.6% of the
outstanding shares of Christiana common stock); Kristine L. Thomson, his
daughter, 430,478 shares (8.3% of the outstanding shares of Christiana common
stock); and Susan Solvang, his daughter, 442,953 shares (8.5% of the outstanding
shares of Christiana common stock). As a result of the transaction and assuming
Christiana makes no additional purchases of Weatherford common stock, Sheldon B.
Lubar, David J. Lubar, Joan P. Lubar, Kristine L. Thomson and Susan Solvang,
will own 825,173, 364,109, 382,125, 366,729 and 377,356 shares of Weatherford
common stock, respectively.
In addition, other directors and executive officers beneficially own shares
of Christiana common stock in the following amounts: Albert O. Nicholas, a
Christiana director, 310,700 shares (6.0% of the outstanding shares of
Christiana common stock); Nicholas F. Brady, a Christiana director, 200,000
shares (3.8% of the outstanding shares of Christiana common stock); William T.
Donovan, President, Chief Financial Officer and a director of Christiana,
167,532 shares (3.3% of the outstanding shares of Christiana common stock); Gary
R. Sarner, Chairman of TLC, 61,000 shares (less than 1.0% of the outstanding
shares of Christiana common stock); and John R. Patterson, President and Chief
Executive Officer of TLC, 45,000 shares (less than 1.0% of the outstanding
shares of Christiana common stock). The amounts reflected for Messrs. Donovan,
Sarner and Patterson include options to purchase 14,000, 55,000 and 32,500
shares of Christiana common stock, respectively. As a result of the merger and
assuming there are no additional purchases of Weatherford common stock, Messrs.
Nicholas, Brady, Donovan, Sarner and Patterson will own 264,688, 170,382,
142,722, 51,967 and 38,336 shares of Weatherford common stock, respectively.
Christiana's executive officers and directors, like all other Christiana
shareholders, will be entitled to purchase one share of C2 common stock for each
share of Christiana common stock held immediately prior to the completion of the
merger. In addition, the Lubar family agreed to purchase enough shares of C2
common stock as are necessary for the net proceeds of the C2 offering to equal
$10.67 million to fund C2's purchase of two-thirds of TLC. This will insure that
C2 has sufficient funds to complete the TLC sale, after deducting the expenses
of the C2 offering.
Certain executive officers and directors of Christiana will be executive
officers and directors of C2, and, to the extent such officers and directors are
Christiana shareholders, they will have the ability to purchase their pro rata
interest in C2 pursuant to the C2 offering. Assuming all shareholders of
Christiana exercise their ability to purchase their pro rata interest in C2
pursuant to the C2 offering, the Lubar family and the other officers and
directors of C2 would beneficially own approximately 66% of the outstanding
shares of C2 common stock. To the extent Christiana shareholders do not exercise
their ability to purchase their pro rata interest in C2, the beneficial
ownership interest in C2 of the Lubar family and the other directors and
officers of C2 will increase, and such persons could potentially own up to 100%
of C2 common stock.
Under the terms of the merger agreement, all employee stock options of
Christiana are required to be exercised or cancelled prior to the merger. As a
result, the executive officers and other individuals who hold options to
purchase shares of Christiana common stock were given a choice of either of the
following:
- Cancel, in whole or in part, their options in exchange for an amount
equal to the (1) difference between $40.00 and the option exercise price,
multiplied by (2) the number of shares subject to the cancelled option.
This price was fixed at the time the merger agreement initially was
entered into and is substantially greater than the current market price.
Christiana's cash payments to such persons will be reduced to the extent
necessary to allow Christiana to deduct the full amount of the payments
for federal income tax purposes.
- Exercise their options prior to the closing of the merger.
Mr. Sarner has elected to cancel options to purchase 75,000 shares of Christiana
common stock, in exchange for $531,685. Mr. Patterson has elected to cancel
options to purchase 92,300 shares of Christiana common stock, in exchange for
$845,915.
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INDEMNITY
Under the agreement providing for C2's purchase of two-thirds of TLC, TLC
and C2 are obligated to indemnify Christiana, Weatherford and their respective
affiliates and agents for various liabilities relating to historical operations
of Christiana, TLC and their current and historical subsidiaries and
predecessors. Among the matters for which TLC and C2 are required to indemnify
Christiana and Weatherford are:
- Any liability relating to any claim or damage by any stockholder of
Christiana or Weatherford with respect to the merger, the TLC sale or the
transactions relating thereto.
- Any taxes as a result of the merger subsequently being determined to be a
taxable transaction for foreign, federal, state or local law purposes
regardless of the theory or reason for the merger being subject to tax
and any taxes as a result of the TLC sale. This indemnity includes claims
and liabilities arising under the securities laws and claims with respect
to this joint proxy statement/ prospectus.
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WEATHERFORD SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical condensed
consolidated financial data of Weatherford. You should also read the following:
- Weatherford's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended December
31, 1997.
- Weatherford's Quarterly Report on Form 10-Q for the period ended
September 30, 1998.
- Weatherford's Current Report on Form 8-K dated June 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated July
20, 1998 and Amendment No. 2 to Current Report on Form 8-K on Form 8-K/A
dated December 10, 1998.
- Christiana's financial statements and related notes.
The above information is included or incorporated by reference in this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................... $1,586,747 $1,417,970 $1,969,089 $1,467,270 $1,125,803 $858,993 $671,470
Cost of sales.............. 1,078,704 995,631 1,371,126 1,090,814 831,231 630,850 482,878
Selling, general and
administrative
expenses................. 213,330 189,117 264,553 209,433 195,747 155,860 127,966
Equity in earnings of
unconsolidated
affiliates............... (2,241) (1,754) (2,582) (2,078) (1,477) (1,169) (2,716)
Merger costs and other
charges.................. 120,000 -- -- -- 88,182 2,500 4,000
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income........... 176,954 234,976 335,992 169,101 12,120 70,952 59,342
Interest expense........... (40,482) (31,273) (43,273) (39,368) (33,504) (22,384) (11,601)
Other income, net.......... 4,357 8,064 12,242 2,941 8,409 615 2,231
Income tax (provision)
benefit.................. (51,823) (74,397) (108,188) (40,513) 4,707 (13,137) (14,741)
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from
continuing operations.... $ 89,006 $ 137,370 $ 196,773 $ 92,161 $ (8,268) $ 36,046 $ 35,231
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share
from continuing
operations:
Basic.................... $ 0.92 $ 1.44 $ 2.04 $ 1.03 $ (0.10) $ 0.53 $ 0.58
Diluted.................. 0.91 1.41 2.01 1.01 (0.10) 0.53 0.58
Weighted average shares
outstanding:
Basic.................... 96,973 95,703 96,052 89,842 77,595 67,672 60,628
Diluted.................. 97,684 97,194 97,562 90,981 77,595 68,032 60,894
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets....................... $2,924,220 $2,737,910 $2,243,633 $1,710,568 $1,464,804 $885,981
Long-term debt..................... 244,552 252,322 417,976 416,473 303,854 56,580
5% Convertible Subordinated
Preferred Equivalent
Debentures....................... 402,500 402,500 -- -- -- --
Stockholders' equity............... 1,523,510 1,458,549 1,292,704 958,337 845,287 582,187
Cash dividends per share........... -- -- -- -- -- --
</TABLE>
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<PAGE> 82
CHRISTIANA SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical financial data
of Christiana. The historical financial data as of and for each of the five
years in the period ended June 30, 1998 was derived from the consolidated
financial statements of Christiana, which were audited by Arthur Andersen LLP,
independent public accountants. The historical financial data as of September
30, 1998 and for the three month periods ended September 30, 1998 and 1997 have
not been audited. In the opinion of Christiana, the historical financial data as
of September 30, 1998 and for the three month periods ended September 30, 1998
and 1997 include all adjusting entries necessary to present fairly the
information set forth therein. The operating data for the three month period
ended September 30, 1998 is not necessarily indicative of results that may be
expected for the year ending June 30, 1999. You should also read the following:
- Christiana's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended June 30,
1998.
- Christiana's Quarterly Report on Form 10-Q for the period ended September
30, 1998.
The above information is included or incorporated by reference in this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------- ------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
-------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues...................... $22,370 $23,047 $90,179 $84,208 $77,170 $126,881 $90,153
Direct operating expenses..... 18,633 19,201 76,057 70,973 65,418 104,818 74,976
Selling, general and
administrative expenses.... 2,365 2,229 8,364 8,656 7,531 11,739 8,755
------- ------- ------- ------- ------- -------- -------
Operating income.............. 1,372 1,617 5,758 4,579 4,221 10,324 6,422
Interest expense.............. (573) (752) (2,691) (3,166) (3,096) (4,842) (3,710)
Equity in earnings of
Weatherford................ --(1) 1,937 7,872 10,479 1,745 -- --
Other income (expense), net... 26 (364) (1,012) (923) 3,141 3,658 3,195
Income tax expenses........... 323 953 3,920 4,306 2,408 3,394 2,256
Minority interest............. -- -- -- -- -- (684) (530)
------- ------- ------- ------- ------- -------- -------
Net income.................... $ 502 $ 1,485 $ 6,007 $ 6,663 $ 3,603 $ 5,062 $ 3,121
======= ======= ======= ======= ======= ======== =======
Earnings per share(2):
Basic...................... $ 0.10 $ 0.29 $ 1.17 $ 1.30 $ 0.69 $ 0.96 $ 0.59
Diluted.................... 0.10 0.29 1.15 1.29 0.69 0.96 0.59
Weighted average shares
outstanding................ 5,149 5,137 5,143 5,137 5,187 5,276 5,321
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, -------------------------------------------------
1998 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................. $179,351 $239,241 $142,355 $131,018 $121,742 $147,565
Long-term debt............... 26,275 27,122 36,149 44,013 38,256 53,458
Stockholders' equity......... 100,297(3) 136,229(3) 72,085 61,077 58,710 60,088
Cash dividends per share..... -- -- -- -- -- --
</TABLE>
- ---------------
(1) On May 27, 1998, Weatherford acquired Weatherford Enterra, Inc., issuing
additional shares of Weatherford common stock and thereby reducing
Christiana's ownership percentage in Weatherford to approximately 4%. As a
result, on May 27, 1998, Christiana changed the manner in which it accounts
for its investment in Weatherford from the equity method to the cost method.
Under the cost method, only dividends paid by Weatherford will be reflected
in future earnings of Christiana.
(2) All earnings per share amounts have been restated to reflect the adoption of
Statement of Accounting Standards No. 128, "Earnings Per Share", effective
December 15, 1997.
(3) Includes $21.4 million and $57.8 million of unrealized holding gains on
securities available-for-sale as of September 30, 1998 and June 30, 1998,
respectively, resulting from a change in the method of accounting for
Christiana's investment in Weatherford.
79
<PAGE> 83
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following summary unaudited pro forma condensed consolidated financial
data of Weatherford is based on the historical financial data of Weatherford and
the historical financial data of Christiana. The Unaudited Pro Forma Condensed
Consolidated Statements of Income for the twelve months ended December 31, 1997,
and the nine months ended September 30, 1998, give effect to the proposed merger
and the sale by Christiana, prior to the proposed merger, of a two-thirds
interest in TLC to C2 for approximately $10.7 million, as if these transactions
occurred on January 1, 1997. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet gives effect to the sale by Christiana of a two-thirds interest in
TLC to C2 for approximately $10.7 million, and the $10.0 million purchase of
Weatherford common stock by Christiana in the merger as if these transactions
occurred on September 30, 1998.
The pro forma information is not necessarily indicative of the results that
actually would have been achieved had such transactions been consummated as of
the dates mentioned above, or that may be achieved in the future. All other
acquisitions by Weatherford are not material individually or in the aggregate;
therefore, pro forma information is not reflected. Because this pro forma
information is a summary, it does not contain all information that may be
important to you. You should also read the following:
- Weatherford's Management's Discussion and Analysis of Financial Condition
and Results of Operations and its financial statements and related notes
contained in its Annual Report on Form 10-K for the year ended December
31, 1997.
- Weatherford's Quarterly Report on Form 10-Q for the period ended
September 30, 1998.
- Weatherford's Current Report on Form 8-K dated June 15, 1998, as amended
by Amendment No. 1 to Current Report on Form 8-K on Form 8-K/A dated July
20, 1998 and Amendment No. 2 to Current Report on Form 8-A on Form 8-K/A
dated December 10, 1998.
- Weatherford's Selected Condensed Consolidated Financial Data.
- Christiana's financial statements and related notes.
The above information is included or are incorporated by reference in this joint
proxy statement/ prospectus.
80
<PAGE> 84
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
------------------------------------------
PURCHASE OF
WEATHERFORD CHRISTIANA SALE OF WEATHERFORD MERGER WEATHERFORD
HISTORICAL HISTORICAL TLC(A) SHARES(B) ENTRIES PRO FORMA
----------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 48,542 $ 5,286 $ 33,246(c) $(10,000) $ (20,571)(d)(e) $ 56,503
Accounts receivable, net........... 461,323 9,172 (9,172) -- -- 461,323
Inventories........................ 552,609 -- -- -- -- 552,609
Other current assets............... 114,802 3,839 (2,573) -- (1,266)(f) 114,802
---------- -------- -------- -------- --------- ----------
Total current assets........ 1,177,276 18,297 21,501 (10,000) (21,837) 1,185,237
---------- -------- -------- -------- --------- ----------
Property, plant and equipment, net... 900,616 69,906 (69,906) -- -- 900,616
Goodwill, net........................ 766,031 5,396 (5,396) -- -- 766,031
Investment in Weatherford............ -- 84,283 -- 10,000 (94,283)(g) --
Investment in TLC.................... -- -- 7,785(h) -- (3,180)(i) 4,605
Other assets......................... 80,297 1,469 (1,469) -- -- 80,297
---------- -------- -------- -------- --------- ----------
$2,924,220 $179,351 $(47,485) $ -- $(119,300) $2,936,786
========== ======== ======== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of long-term debt........ $ 259,742 $ 2,630 $ (2,630) $ -- $ -- $ 259,742
Accounts payable................... 159,025 4,248 (4,248) -- -- 159,025
Other accrued liabilities.......... 216,251 6,822 (435)(j) -- 2,448(e)(f) 225,086
---------- -------- -------- -------- --------- ----------
Total current liabilities... 635,018 13,700 (7,313) -- 2,448 643,853
---------- -------- -------- -------- --------- ----------
Long-term debt....................... 244,552 26,275 (26,275) -- -- 244,552
Deferred income taxes and other...... 118,640 39,079 (10,927)(j) -- (24,421)(g) 122,371
5% Convertible Subordinated
Preferred Equivalent Debentures.... 402,500 -- -- -- -- 402,500
Stockholders' equity:
Common stock....................... 103,461 5,209 -- -- (822)(k)(l) 107,848
Capital in excess of par........... 1,051,455 12,347 -- -- 84,162(k)(l) 1,147,964
Treasury stock, at cost............ (190,996) (1,236) -- -- (99,660)(k)(l) (291,892)
Retained earnings.................. 631,354 62,612 (2,970) -- (59,642)(e)(l) 631,354
Cumulative foreign currency
translation adjustment........... (71,764) -- -- -- -- (71,764)
Unrealized gain on securities
available for sale............... -- 21,365 -- -- (21,365)(g) --
---------- -------- -------- -------- --------- ----------
Total stockholders'
equity.................... 1,523,510 100,297 (2,970) -- (97,327) 1,523,510
---------- -------- -------- -------- --------- ----------
$2,924,220 $179,351 $(47,485) $ -- $(119,300) $2,936,786
========== ======== ======== ======== ========= ==========
</TABLE>
81
<PAGE> 85
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
WEATHERFORD CHRISTIANA ------------- WEATHERFORD
HISTORICAL HISTORICAL CHRISTIANA(M) PRO FORMA
------------ ---------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Products.................................. $1,097,823 $ -- $ - $1,097,823
Services and rentals...................... 871,266 90,101 (90,101) 871,266
---------- ------- -------- ----------
1,969,089 90,101 (90,101) 1,969,089
---------- ------- -------- ----------
Costs and expenses:
Cost of sales:
Products............................... 790,314 -- -- 790,314
Services and rentals................... 580,812 76,377 (76,377) 580,812
Selling, general and administrative....... 264,553 9,103 (9,103) 264,553
Equity in earnings in unconsolidated
affiliates............................. (2,582) -- -- (2,582)
---------- ------- -------- ----------
1,633,097 85,480 (85,480) 1,633,097
---------- ------- -------- ----------
Operating income............................ 335,992 4,621 (4,621) 335,992
---------- ------- -------- ----------
Other income (expense):
Interest expense.......................... (43,273) (2,991) 2,991 (43,273)
Interest income........................... 8,329 507 (507) 8,329
Equity in earnings in Weatherford......... -- 6,290 (6,290)(n) --
Equity in earnings in TLC................. -- -- 130 130
Other income (expense), net............... 3,913 (1,470) 1,470 3,913
---------- ------- -------- ----------
(31,031) 2,336 (2,206) (30,901)
---------- ------- -------- ----------
Income (loss) before income taxes........... 304,961 6,957 (6,827) 305,091
Provision (benefit) for income taxes........ 108,188 2,763 (2,717)(o) 108,234
---------- ------- -------- ----------
Income (loss) from continuing operations.... $ 196,773 $ 4,194 $ (4,110) $ 196,857
========== ======= ======== ==========
Earnings per share from continuing
operations:
Basic..................................... $ 2.04 $ 2.05
========== ==========
Diluted................................... $ 2.01 $ 2.02
========== ==========
Weighted average shares outstanding:
Basic..................................... 96,052 96,052(p)
========== ==========
Diluted................................... 97,562 97,562
========== ==========
</TABLE>
82
<PAGE> 86
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
WEATHERFORD CHRISTIANA -------------- WEATHERFORD
HISTORICAL HISTORICAL CHRISTIANA(M) PRO FORMA
----------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Products.................................. $ 978,927 $ -- $ -- $ 978,927
Services and rentals...................... 607,820 65,835 (65,835) 607,820
---------- ------- -------- ----------
1,586,747 65,835 (65,835) 1,586,747
---------- ------- -------- ----------
Costs and expenses:
Cost of sales:
Products............................... 675,442 -- -- 675,442
Services and rentals................... 403,262 55,373 (55,373) 403,262
Selling, general and administrative....... 213,330 6,387 (6,387) 213,330
Merger costs and other charges............ 120,000 -- -- 120,000
Equity in earnings of unconsolidated
affiliates............................. (2,241) -- -- (2,241)
---------- ------- -------- ----------
1,409,793 61,760 (61,760) 1,409,793
---------- ------- -------- ----------
Operating income............................ 176,954 4,075 (4,075) 176,954
---------- ------- -------- ----------
Other income (expense):
Interest expense.......................... (40,482) (1,772) 1,772 (40,482)
Interest income........................... 1,692 273 (273) 1,692
Equity in earnings in Weatherford......... -- 4,425 (4,425)(n) --
Equity in earnings in TLC................. -- -- 495 495
Other income (expense), net............... 2,665 (128) 128 2,665
---------- ------- -------- ----------
(36,125) 2,798 (2,303) (35,630)
---------- ------- -------- ----------
Income (loss) before income taxes........... 140,829 6,873 (6,378) 141,324
Provision (benefit) for income taxes........ 51,823 2,707 (2,534)(o) 51,996
---------- ------- -------- ----------
Income (loss) from continuing operations.... $ 89,006 $ 4,166 $ (3,844) $ 89,328
========== ======= ======== ==========
Earnings per share from continuing
operations:
Basic..................................... $ 0.92 $ 0.92
========== ==========
Diluted................................... $ 0.91 $ 0.91
========== ==========
Weighted average shares outstanding:
Basic..................................... 96,973 96,973(p)
========== ==========
Diluted................................... 97,684 97,684
========== ==========
</TABLE>
83
<PAGE> 87
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
These notes describe the assumptions used to prepare the unaudited pro
forma condensed consolidated financial statements. The pro forma adjustments are
based on estimates made by Weatherford's management using information currently
available.
PRO FORMA ADJUSTMENTS
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Balance Sheet are the following:
(a) This adjustment reflects the sale of a two-thirds interest in TLC by
Christiana to C2 for cash of $10.67 million and reflects a $3.0 million
loss, net of taxes of $1.9 million. The loss results from the sale price
being less than the $15.6 million carrying value of the two-thirds interest
in TLC. The sale is in accordance with the merger agreement as (1) TLC is
required to distribute $23.0 million to Christiana, funded from borrowings
of TLC to permit Christiana to have sufficient cash to allow Weatherford to
pay the cash consideration, (2) Christiana is required to sell its
two-thirds interest in TLC to C2 for $10.67 million and (3) Weatherford is
required to pay to the Christiana shareholders an amount of cash equal to
the cash held by Christiana in excess of the amount of accrued unpaid taxes
(without giving effect to the value of certain tax deductions to be
retained by Christiana) and fixed liabilities at the closing of the
transaction to be maintained by Christiana for the benefit of Weatherford.
(b) This adjustment reflects Christiana's purchase in the open market of $10.0
million, or 489,300 shares, of Weatherford common stock at an average
market price of $20.44 per share. Subsequent to this purchase, Christiana's
investment in Weatherford represents 4,386,762 shares of Weatherford common
stock; accordingly, 4,386,762 shares of Weatherford common stock will be
distributed to the Christiana shareholders as a result of the merger.
(c) This adjustment reflects the receipt by Christiana of $23.0 million from a
dividend from TLC funded through TLC's borrowings to meet the required
minimum cash levels required by the merger agreement, and reflects the
receipt by Christiana of $10.67 million from its sale of the two-thirds
interest in TLC less $0.4 million of cash held by TLC.
(d) This adjustment reflects the pro forma cash payment by Weatherford of $18.9
million ($3.67 per share) to the holders of Christiana common stock
pursuant to the merger agreement. The pro forma cash payment by Weatherford
of $3.67 per share is based on the pro forma data as of September 30, 1998;
however, Christiana currently estimates that such payment will be between
$3.50 and $4.00 per share. The cash payment difference of $0.33 per share
reflects expected cash flow through the anticipated closing and timing
differences for cash expenditures, including taxes, for the period from
October 1, 1998, to closing, not reflected in the historical financial
information of Christiana. Both the pro forma cash payment by Weatherford
of $3.67 per share and Christiana's estimate of a cash payment between
$3.50 and $4.00 per share assume Christiana is not required to make
additional purchases of up to $5.0 million of Weatherford common stock. If
Christiana makes additional purchases of Weatherford common stock of $5.0
million, Christiana estimates that the pro forma cash payment would be
between $2.50 and $3.00 per share.
(e) This adjustment reflects the cancellation of Christiana employee stock
options for $1.7 million in cash. The cancellation of Christiana employee
stock options generates a tax benefit of $0.6 million and a reduction in
retained earnings of $1.1 million. Cash in the amount of the tax benefit,
$0.6 million, is required to be retained by Christiana for the benefit of
Weatherford.
(f) This adjustment records a $3.0 million liability, net of $1.3 million of
expenses paid as of September 30, 1998, for transaction costs related to
the transaction.
84
<PAGE> 88
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(g) This adjustment eliminates Christiana's investment of $94.3 million in
4,386,762 shares of Weatherford common stock, related deferred taxes of
$24.4 million and unrealized gain on securities available-for-sale of $21.4
million.
(h) This adjustment reflects the remaining one-third interest in TLC held by
Christiana. The investment represents a one-third interest in the net book
value of TLC.
(i) Prior to the sale of Christiana's two-thirds interest in TLC, the pro forma
net book value of TLC was $23.4 million at September 30, 1998. After the
sale of Christiana's two-thirds interest in TLC, the remaining net book
value of TLC is $7.8 million. Weatherford reflects a reduction of $3.2
million in the carrying value of Christiana's remaining one-third interest
in TLC to reflect the negative goodwill resulting from this transaction.
The negative goodwill is calculated as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Effect of Weatherford shares of common stock exchanged...... $ --
-------
Pro forma Christiana cash (after the cash distribution to
Christiana shareholders).................................. 7,961
One-third interest in TLC................................... 7,785
Pro forma Christiana taxes payable (current and deferred)... (9,532)
Weatherford and Christiana transaction costs payable........ (3,034)
-------
Negative Goodwill................................. $ 3,180
=======
</TABLE>
(j) This adjustment reflects the current federal taxes payable of $8.3 million
resulting from the sale by Christiana of its two-thirds interest in TLC.
This liability had previously been provided as a deferred tax liability.
(k) This adjustment reflects the issuance of 4,386,762 shares of Weatherford
common stock in the transaction at a price of $23.00 per share, or $100.9
million, the market price of the Weatherford common stock on September 22,
1998, and the acquisition of 4,386,762 shares of Weatherford common stock
held by Christiana as a result of the transaction. The shares of
Weatherford common stock held by Christiana have been classified as
treasury shares valued at the market price of $23.00 per share, or $100.9
million, on September 22, 1998.
(l) This adjustment eliminates the remaining Christiana common stock of $5.2
million, capital in excess of par of $12.3 million, retained earnings of
$58.5 million and treasury stock of $1.2 million.
The adjustments to the accompanying Unaudited Pro Forma Condensed
Consolidated Statements of Income are the following:
(m) This adjustment eliminates TLC's historical operating results and reflects
a one-third equity interest in TLC.
(n) This adjustment eliminates Christiana's equity in earnings of Weatherford.
(o) This adjustment records the income tax benefit related to the effect of the
pro forma adjustments at the statutory rate.
(p) Weatherford's historical shares outstanding and basic weighted average pro
forma post merger shares outstanding as of December 31, 1997, were
96,860,622 and 96,051,625, respectively. Weatherford's historical shares
outstanding and basic weighted average pro forma post merger shares
outstanding as of September 30, 1998, were 97,458,439 and 96,972,605,
respectively.
85
<PAGE> 89
DESCRIPTION OF WEATHERFORD
Weatherford is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the exploration,
production and transmission sectors of the oil and gas industry. Weatherford's
principal industry segments consist of (1) drilling products, (2) completion and
oilfield products and services and (3) artificial lift and compression products
and services. Weatherford operates in virtually every oil and gas exploration
and production region in the world.
Weatherford's drilling products segment manufactures (1) drill pipe and
other drilling products, (2) premium engineered connections and associated
tubulars and (3) marine connectors and related accessories. Weatherford's
drilling products are designed and engineered for high performance applications.
Drill pipe, as well as drill collars, heavyweights and kellys manufactured by
Weatherford, serve as the principal mechanical drilling tools used to drill an
oil or natural gas well. These products constitute all components of the drill
stem used to drill a well from the rig to the drill bit. Weatherford's premium
tubulars consist of premium tubing, liner and casing and, together with
Weatherford's line of premium engineered connections, are used for the
production of oil and natural gas in harsh downhole environments. Weatherford's
marine connector product line consists of downhole conductors for offshore
applications and is used to define the original architecture of an offshore well
and to support subsea applications.
Weatherford's completion and oilfield products and services segment
manufactures, sells and services cementation products and liner hangers and
equipment used to provide oilfield services. Other products manufactured by this
segment include hydraulic power tongs and related equipment used to provide
tubular running services, milling tools, whipstocks and weighted drill pipe used
in rental and downhole services and sold to customers. This segment also
provides oilfield equipment rental, downhole services and tubular running
services. Weatherford's rental equipment includes specialized pressure control
equipment, drill string equipment, handling tools, stabilizers and other
equipment and tools used in the drilling, completion and workover of oil and gas
wells. Downhole services include fishing, milling, whipstock installation and
retrieval, well control assistance, plugging and abandonment services, pipe
recovery wireline services, foam services and internal casing patch
installation.
Weatherford's artificial lift and compression segment (1) designs,
manufactures and services a complete line of artificial lift equipment and (2)
manufactures, packages, rents and sells parts and services for gas compressor
units over a broad horsepower range. Weatherford's artificial lift product line
includes a wide range of downhole pumps, surface pump drive units, gas lift
equipment, hydraulic lift products and progressing cavity pumps. Weatherford's
gas compressor units are used for increasing natural gas pressure to facilitate
gas flow from the wellhead and through gas gathering systems and processing
plants and injecting natural gas into oil wells to enhance recovery and into gas
storage wells. Other general applications include cogeneration, seismic marine
surveys and natural gas fueling stations.
Weatherford has achieved significant growth in recent years through a
consistent strategy of synergistic acquisitions and internal development.
Acquisitions have focused on the acquisition of name brand products, geographic
expansion, the development of complete product lines and savings through
consolidation. Internal development has focused on product development and
geographic expansion. Weatherford's growth strategy has resulted in the Company
becoming the largest manufacturer of drill pipe, drill collars and heavyweight
drill pipe in the world, the largest provider of premium tubular connectors in
North America and one of the largest providers of artificial lift equipment in
the world. Weatherford is the leading worldwide supplier of rental tools and
fishing and other downhole services and the leading worldwide provider of
tubular running services. To Weatherford's knowledge, none of its competitors
has as broad a product line of rod lift and progressing cavity pumps.
Weatherford was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. Sub is a wholly owned subsidiary of
Weatherford that was incorporated in Wisconsin in December 1997 for the purpose
of effecting the merger. Weatherford's and Sub's corporate office is located at
5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415, and their telephone
number is (713) 297-8400.
86
<PAGE> 90
MANAGEMENT STOCKHOLDINGS
The following table sets forth as of the record date the beneficial
ownership of the outstanding Weatherford common stock by each current director
and each current executive officer of Weatherford and all directors and
executive officers of Weatherford as a group.
<TABLE>
<CAPTION>
BEFORE THE MERGER AFTER THE MERGER
------------------------ ------------------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT
BENEFICIALLY OF BENEFICIALLY OF
NAME OWNED(1) CLASS(%) OWNED(1) CLASS(%)
---- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Bernard J. Duroc-Danner........................... 830,000 * 830,000 *
Curtis W. Huff(2)................................. 76,000 * 76,000 *
James G. Kiley.................................... 55,000 * 55,000 *
Frances R. Powell................................. 41,953 * 41,953 *
Randall D. Stilley................................ 23,750 * 23,750 *
John C. Coble..................................... 80,400 * 80,400 *
Robert F. Stiles.................................. 60,200 * 60,200 *
E. Lee Colley, III................................ -- * -- *
Jon Nicholson(3).................................. 16,294 * 16,294 *
Donald R. Galletly(4)............................. 5,000 * 5,000 *
David J. Butters.................................. 56,712 * 56,712 *
Sheldon B. Lubar(5)............................... 30,000 * 30,000 *
Robert B. Millard................................. 118,960 * 118,960 *
Robert A. Rayne(6)................................ 20,000 * 20,000 *
Philip Burguieres(7).............................. 200,391 * 200,391 *
William E. Macaulay(8)............................ 5,632,350 5.7% 5,632,350 5.7%
Robert K. Moses, Jr.(9) .......................... 424,383 * 424,383 *
All Directors and Executive Officers as a Group
(17 persons).................................... 7,671,393 7.8% 7,671,393 7.8%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership by a person includes both outstanding shares of
Weatherford common stock owned and shares of Weatherford common stock which
such person has a right to acquire within 60 days upon the exercise of
outstanding options of Weatherford common stock. Shares beneficially owned
as a result of such options consist of 830,000, 55,000, 19,000, 80,400,
60,000, 10,000, 30,000, 10,000, 20,000, 41,000 and 1,155,400 shares for
Messrs. Duroc-Danner, Kiley, Stilley, Coble, Stiles, Butters, Lubar,
Millard, and Rayne and Ms. Powell and all directors and executive officers
as a group, respectively. Directors and executive officers have sole voting
and investment power with respect to the shares they own.
(2) Includes 75,000 restricted shares subject to vesting over a four year period
extending through June 2002. Until vested, these shares may not be
transferred by Mr. Huff, but may be voted by him.
(3) Includes 1,055 shares of Weatherford common stock held under Weatherford's
401(k) Savings Plan (the "401(k) Plan") in Mr. Nicholson's account, as to
which he has sole voting and no dispositive power.
(4) Includes 1,000 shares of Weatherford common stock held by Mr. Galletly's
wife, with respect to which he has no voting or dispositive power.
(5) Does not include 4,386,762 shares of Weatherford common stock owned directly
by Christiana. Mr. Lubar beneficially owns approximately 18.8% of the
outstanding shares of Christiana common stock. Pursuant to the merger, Mr.
Lubar will be entitled to receive 825,173 shares of Weatherford common stock
or approximately 0.8% of the outstanding shares of Weatherford common stock
after the merger.
87
<PAGE> 91
(6) Excludes 400,000 shares beneficially owned by London Merchant Securities
plc, of which Mr. Rayne serves as Executive Director. Mr. Rayne disclaims
beneficial ownership of these shares.
(7) Includes (a) 950 shares of Weatherford common stock held by Mr. Burguieres'
wife, with respect to which he has no voting or dispositive power, and (b)
475 shares of Weatherford common stock held by Mr. Burguieres' adult son
supported by him, with respect to which he has sole voting and dispositive
power; Mr. Burguieres disclaims beneficial ownership of all such shares.
Also includes (a) 431 shares of Weatherford Common Stock held under
Weatherford's Employee Stock Purchase Plan (the "ESPP") in the account of
Mr. Burguieres, as to which he has sole voting and no dispositive power
prior to withdrawal of such shares from the ESPP, and (b) 421 shares of
Weatherford common stock held under the 401(k) Plan in Mr. Burguieres'
account, as to which shares Mr. Burguieres has sole voting and no
dispositive power.
(8) Includes 6,619 shares of Weatherford common stock held by Mr. Macaulay's
wife, with respect to which he has no voting or dispositive power. Mr.
Macaulay disclaims beneficial ownership of such shares. Also includes
5,623,340 shares of Weatherford Common Stock owned beneficially by First
Reserve Corporation ("First Reserve") and certain affiliated funds of which
First Reserve acts as general partner. Mr. Macaulay serves as President and
Chief Executive Officer of First Reserve. However, Mr. Macaulay disclaims
beneficial ownership of the shares of Weatherford common stock beneficially
owned by First Reserve.
(9) Includes an aggregate of 42,750 shares of Weatherford common stock held in
various trusts for Mr. Moses' children, his brother and his sister, of which
Mr. Moses is the trustee, with respect to which Mr. Moses has sole voting
and dispositive power; Mr. Moses disclaims beneficial ownership of all such
shares. Does not include (a) an aggregate of 49,875 shares of Weatherford
common stock held in various trusts for Mr. Moses' children, with respect to
which Mr. Moses has no voting or dispositive power, (b) 1,758 shares of
Weatherford common stock held in a trust for Mr. Moses' son, with respect to
which he has no voting or dispositive power (since Mr. Moses is not a
trustee of such trusts and has no voting or dispositive power, he disclaims
beneficial ownership of all such shares) or (c) 593 shares of Weatherford
common stock held by Mr. Moses' adult son supported by him, with respect to
which Mr. Moses has no voting or dispositive power.
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<PAGE> 92
DESCRIPTION OF CHRISTIANA
BUSINESS
General. Christiana's only operating entity is TLC. Christiana also owns
4,386,762 shares of Weatherford common stock, which represents approximately
4.5% of the outstanding shares of Weatherford common stock. Christiana also
holds, through a wholly owned subsidiary, mortgage notes receivable, derived
from certain condominium sales, which as of September 30, 1998, had an aggregate
principal amount outstanding of $187,000.
Christiana was incorporated in 1954 as a Delaware corporation and was
reincorporated in 1992 as a Wisconsin corporation. The principal executive
offices of Christiana are located at 700 North Water Street, Suite 1200,
Milwaukee, Wisconsin 53202, and its telephone number is (414) 291-9000.
TLC. TLC provides refrigerated and dry (non-refrigerated) warehousing,
transportation and distribution services and international freight forwarding
services. TLC's industry is comprised generally of entities that provide
warehousing or trucking and other entities that provide management services for
the distribution and warehousing needs of their customers. TLC believes that its
ability to offer customers "one-stop shopping" through its complement of
warehousing, trucking and the provision of management services for distribution
and warehousing needs provides it with a competitive advantage. Christiana's
services generally combine transportation, warehousing and information services
to manage the distribution channel for a customer's products from the point of
manufacturing to the point of consumption. This combination allows TLC to
capitalize on the growing trend of corporations toward seeking to reduce costs
by outsourcing large components of their logistics function.
TLC's operations are conducted through a network of 12 distribution
warehouses, comprised of an aggregate of 34 million cubic feet of refrigerated
and frozen storage capacity in six locations and five dry distribution centers
in key markets, primarily in the upper Midwest. TLC's refrigerated warehousing
operations include temperature sensitive storage services, freezing vegetable
processing and packaging services. TLC's transportation and distribution
services include refrigerated and non-refrigerated transportation services, full
service truckload and less-than-truckload. Transportation services are provided
utilizing Christiana-owned equipment as well as through carrier management
service. TLC also provides a full range of international freight management
services, fully computerized inventory management, assembling and repackaging.
Revenues. TLC's revenue for each of the basic service lines are detailed
below for fiscal years ended June 30, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
REVENUES
(DOLLARS IN MILLIONS)
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
AMOUNT % AMOUNT % AMOUNT %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Refrigerated Warehousing............ $44 49% $38 45% $35 45%
Dry Warehousing..................... 8 9% 12 14% 14 18%
Transportation...................... 39 43% 33 39% 28 36%
International....................... 2 2% 3 4% 3 4%
Eliminations........................ (3) (3%) (2) (2%) (3) (3%)
--- --- --- --- --- ---
Total Revenues............ $90 100% $84 100% $77 100%
=== === === === === ===
</TABLE>
As of September 30, 1998, the pro forma book value of TLC was approximately
$25 million.
Customers. TLC's services target the consumer goods industries. Nearly 75%
of TLC's revenues come from food manufacturers, food wholesalers and food
retailers.
While TLC's top 15 customers, all of which participate in the food
industry, account for 60% of revenues, no one customer represents more than 10%
of the business. Beyond the food industry, the balance of TLC's customer base is
spread across a broad base of industries including pharmaceuticals, automotive
suppliers, building supplies and office furniture.
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Competition. Competition in TLC's industry is very fragmented. Leonard's
Guide, a leading industry publication, lists more than 1,500 companies competing
in the United States marketplace. Among TLC's competitors are companies, such as
Exel, AmeriCold Logistics, Inc. (formerly Americold Corporation), GATX
Logistics, Inc., ProLogis, Inc. or Ryder Integrated Logistics, Inc. that own and
operate warehouses and/or transportation equipment. These companies utilize
their asset base and the expertise with which to operate them to provide
services. Other competitors, such as Hub Group Logistics Services, Menlo
Logistics, and C.H. Robinson Logistics offer transportation and distribution
management expertise and information systems and sub-contract warehousing and
transportation services.
TLC experiences competition for transportation management services on a
national basis. In its warehousing and transportation business, TLC competes
generally on a regional and local basis. Other than the high capital
requirements of building a refrigerated warehouse facility, there are no
significant barriers to entry into the transportation, warehousing and
management service markets in which TLC operates, permitting a large number of
smaller competitors to enter the various markets.
In addition, TLC's customers, many of which have substantially greater
resources than TLC, may divert business from TLC's warehousing and
transportation operations by building their own warehouse facilities and/or
operating their own transportation fleet.
Organization. TLC's operations are headquartered in Zeeland, Michigan, and
TLC also maintains an office in Milwaukee, Wisconsin. TLC is organized into
three main operating units: refrigerated warehousing, dry warehousing and
transportation. Each operating unit is headed up by a group vice
president/general manager. Sales and marketing for TLC are principally performed
at the corporate level, with support from the group vice presidents as well as
local warehouse facility managers.
Sales and marketing are principally performed at the corporate level, with
support from the group vice presidents and facility managers. The sales
organization is comprised of seven individuals and is divided into the following
teams: refrigerated warehousing team; dry warehousing team; transportation team;
and logistics sales team. Each of these teams has primary responsibility for
selling their specific services. The goal is to develop the sales team to
effectively present the fullest extent of TLC's services suited for each
customer.
Marketing and advertising is done centrally for the entire company and uses
a combination of media advertising and direct mail. The marketing organization
also has responsibility for maintaining and gathering information on market
intelligence related to competition, customers and the logistic industry in
general.
Business development supports both sales and operations by providing
logistics engineering capabilities, pricing and costing services, and assists in
the startup of complex logistic projects.
The only employees of Christiana are the executive officers described under
"Directors and Executive Officers". TLC had approximately 737 employees as of
September 30, 1998. A breakdown of the employees by functional area is set forth
below:
<TABLE>
<CAPTION>
EMPLOYEE BREAKDOWN BY FUNCTION
------------------------------------------
FUNCTION NUMBER OF EMPLOYEES PERCENTAGE OF TOTAL
-------- ------------------- -------------------
<S> <C> <C>
Operations....................................... 484 65.7%
Transportation................................... 192 26.1%
Administration................................... 51 6.9%
Sales and Marketing.............................. 10 1.3%
--- ----
Total............................................ 737 100%
</TABLE>
No TLC employees are covered by union contracts.
Intellectual Property. TLC's operations are not dependent on any particular
patent, license, franchises, or trademarks. TLC has registered a trademark and
the name "Total Logistic Control" with the United States Patent and Trademark
office.
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Weatherford. Christiana owned 3,897,462 shares of Weatherford,
representing an approximate 4% ownership interest as of September 30, 1998.
Christiana's holdings in Weatherford resulted from the June 30, 1995 merger of
Prideco, a former majority owned subsidiary of Christiana, with a subsidiary of
Weatherford and a $13.2 million cash investment to purchase additional
Weatherford shares in connection with the Prideco merger transaction. Prior to
December 8, 1998, Christiana purchased an additional 489,300 shares of
Weatherford common stock pursuant to the amended merger agreement.
PROPERTIES
As of September 30, 1998, TLC owned or leased twelve facilities in five
states. Of this total, seven are refrigerated/frozen with the balance being dry
facilities. The refrigerated facilities are operated through seven public
refrigerated warehouses located in Wisconsin (2), Michigan (3), and Illinois
(2). TLC's refrigerated facilities are large single-story buildings constructed
at dock height with full insulation and vapor barrier protection. These
facilities are strategically located and well served by rail and truck.
In addition to the refrigerated facilities discussed above, there are five
public non-refrigerated (or dry) warehouse distribution facilities, three of
which are located in Michigan and one in each of Indiana and New Jersey. Zeeland
Distribution Center II, located in Zeeland, Michigan is a company-owned
facility. All other dry facilities are held under lease. Lease terms generally
match the underlying contracts with major customers served at each facility.
These facilities are single-story block or metal construction buildings. All dry
facilities are approved as food grade storage facilities.
The following tables list the twelve facilities by location, size, type,
and if owned or leased.
REFRIGERATED WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE SPACE
(CUBIC FEET TYPE OF
FACILITY LOCATION IN MILLIONS) FACILITY
-------- -------- ------------------- -------------
<S> <C> <C> <C>
Rochelle Logistic Center I..... Rochelle, Illinois #1 10.6 Distribution
Rochelle Logistic Center II.... Rochelle, Illinois #2 3.5 Distribution
Beaver Dam Logistic Center..... Beaver Dam, Wisconsin 7.2 Distribution/
Production
Milwaukee Logistic Center...... Wauwatosa, Wisconsin 4.3 Distribution
Holland Logistic Center........ Holland, Michigan* 2.1 Distribution/
Production
Kalamazoo Logistic Center I.... Kalamazoo Logistic #1** 3.3 Distribution
Kalamazoo Logistic Center II... Kalamazoo Logistic #2 2.8 Distribution
----
Total................................................... 33.8
====
</TABLE>
DRY WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
TOTAL STORAGE TYPE
SPACE (SQ. FT. OF
FACILITY LOCATION IN THOUSANDS) FACILITY
-------- -------- -------------- --------
<S> <C> <C> <C>
Zeeland Logistic Center I*........................... Zeeland, MI 202 Public
Zeeland Logistic Center II........................... Zeeland, MI 220 Public
Michigan Distr. Center I*............................ Kalamazoo, MI 88 Public
Munster Logistic Center*............................. Munster, IN 125 Public
Dayton Logistic Center*.............................. Dayton, NJ 90 Public
---
Total..................................................................... 725
===
</TABLE>
- ---------------
*Leased facility
**Includes 1.8 million cubic feet of dry storage capacity.
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<PAGE> 95
TLC owns and operates a 10,000 square foot truck maintenance facility
located at the Kalamazoo Logistics Center. This facility is used for the
maintenance of TLC's transportation equipment.
DESCRIPTION OF PROPERTIES
A brief description of each of the properties described above follows,
listed alphabetically by state and city.
Illinois Properties.
<TABLE>
<S> <C>
Rochelle Logistic Center I Rochelle Logistic Center II
975 South Caron Road 600 Wiscold Drive
Rochelle, IL 61068 Rochelle, IL 61068
</TABLE>
Rochelle Cold Storage campus is TLC's newest and largest refrigerated
facility, initially constructed in 1986. TLC believes that Rochelle Cold Storage
is one of the largest and most modern cold storage warehouse facilities in the
United States. Currently this facility is comprised of 14,100,000 cubic feet of
capacity after undergoing four capacity expansions in 1988, 1990, 1993, and
1996. All space is capable of temperatures of -20 degreesF to ambient. Rochelle
Cold Storage is strategically located at the intersection of two main line
East-West railroads, the Burlington Northern and the Chicago Northwestern, and
the cross roads of interstate highways I 39 and I 88. Rochelle Cold Storage
serves primarily distribution customers in the Midwest.
Indiana Properties.
Munster Logistic Center
9200 Calumet Avenue
Munster, IN 46321
Munster Logistic Center is located just south of the Chicago market with
access to major north-south and east-west highways. The facility has access to
rail through Conrail and is a food grade warehouse. The total facility has
available 125,000 square feet of dry storage. The warehouse operates as a public
warehouse with most of the customer base on short term contracts.
Michigan Properties.
Holland Logistic Center
449 Howard Avenue
Holland, MI 49424
Holland Logistic Center has undergone a number of expansions over the
years, with a major reconstruction in 1983 after a fire destroyed approximately
50% of the facility. Today, this refrigerated facility comprises 2,100,000 cubic
feet of storage capacity of which 1,300,000 cubic feet is freezer capacity,
400,000 cubic feet is cooler capacity and 400,000 cubic feet is convertible
capacity between freezer and cooler. Holland services both distribution
customers as well as blueberry growers in the West Michigan area. This location
is situated on a CSX rail spur with two refrigerated rail docks. This facility
is held under a lease which expires December 31, 2000.
<TABLE>
<S> <C>
Kalamazoo Logistic Center I Kalamazoo Logistic Center II
6677 Beatrice Drive 6805 Beatrice Drive
Kalamazoo, MI 49009 Kalamazoo, MI 49009
</TABLE>
Kalamazoo Logistic Center campus has two distribution centers at this
location. Facility #1 is a 3,300,000 cubic foot facility with 1,100,000 cubic
feet of freezer capacity, 400,000 cubic feet of cooler capacity and 1,800,000
cubic feet of dry storage capacity. This location services a number of
distribution customers in the Midwest and is strategically located at the I 94
and U.S. 31 crossroads in Michigan, equal distance between Chicago and Detroit.
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Facility #2 is located adjacent to Facility #1 and is comprised of
2,800,000 cubic feet of capacity. This facility contains 1,500,000 cubic feet of
cooler capacity and 1,300,000 cubic feet of freezer capacity. Two large
distribution customers utilize 75% of this space. These facilities are held
under long term leases.
Also located at the Kalamazoo Logistic Center is a company owned 10,000
square foot transportation equipment maintenance center. Approximately 50% of
TLC's fleet of over-the-road transportation units is domiciled in Kalamazoo,
Michigan.
<TABLE>
<S> <C>
Zeeland Logistic Center I Zeeland Logistic Center II
8250 Logistic Drive 8363 Logistic Drive
Zeeland, MI 49464 Zeeland, MI 49464
</TABLE>
Zeeland Logistic Center campus has two facilities each of which provide dry
warehousing storage as public warehouses. Each of these facilities are foreign
trade zones and food grade warehouses, that provide both racked and bulk
storage. Capacity is utilized by both long term contractual customers and as
short term public warehouses. Zeeland Logistic Center I has 201,600 square feet
of storage and Zeeland Logistic Center II has 220,000 square feet.
New Jersey Property.
Dayton Logistic Center
260 Docks Corner Road
Dayton, NJ 08810
Dayton Logistic Center provides warehousing and distribution services for
customers to the northeast region of the country. The facility has both
contractual and short term customers and operates as a public warehouse. In
total, the facility has 90,000 square feet of dry storage capacity.
Wisconsin Properties.
Beaver Dam Logistic Center
1201 Green Valley Road
Beaver Dam, WI 53916
Beaver Dam Logistic Center was originally constructed in 1975. Since 1975,
this facility has undergone three freezer additions, the most recent in 1991,
and today is comprised of 7,200,000 cubic feet of freezer storage space. Beaver
Dam Logistic Center serves distribution related customers as well as vegetable
and cranberry processors. This facility's unique capabilities involve value
added services for vegetable processors and food service and packaging
operations.
Milwaukee Logistic Center
11400 West Burleigh Street
Milwaukee, WI 53222
Milwaukee Logistic Center was originally constructed in 1954. There have
been six expansions of this facility and today the Milwaukee Logistic Center
facility comprises 4,300,000 cubic feet of which 3,754,000 cubic feet is freezer
capacity and 546,000 cubic feet is cooler space. This facility has multi-
temperature refrigerated storage ranging from -20 degreesF to +40 degreesF and
daily blast freezing capacity of 750,000 pounds. This location has a 7-car
private rail siding. An additional 3,000,000 cubic feet of company owned
refrigerated and processing space adjacent to the Milwaukee Logistic Center
facility is leased on a long term basis to a third party retail grocery company.
LEGAL PROCEEDINGS
From time to time, Christiana is named as a defendant in actions arising
out of the normal course of business. As of September 30, 1998, Christiana was
not a party to any pending legal proceeding that it believes to be material.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Three months ended September 30, 1998 compared to three months ended September
30, 1997
Christiana's consolidated revenues for the three months ended September 30,
1998 were $22,370,000 compared to $23,047,000, reflecting a decline of 2.9% due
primarily to the closure of two dry warehouses offset partially by a 3.8%
revenue gain in refrigerated warehousing services. Volume growth in refrigerated
warehousing services resulted primarily from increased capacity utilization, due
both to new customer relationships and expanded programs with existing customers
at the Rochelle and Milwaukee Logistic Centers. Revenues for the quarter
attributable to transportation services were level with the prior year's period.
Earnings from operations for the quarter were $1,372,000 compared to
$1,617,000 for the same period last year. Operating earnings contributed by TLC
totaled $1,764,000 in the first quarter compared to $1,987,000 for the same
period last year. The decline in operating earnings was primarily attributable
to increased depreciation, marketing and administrative expenses directed at
developing new value-added service programs.
Consolidated net earnings for the quarter were $502,000 or $0.10 per share
compared to $1,485,000 or $0.29 per share for the same period last year.
Included in the prior year's period results were equity earnings of Weatherford
which contributed net earnings of $1,178,000 or $0.23 per share. Since May 27,
1998, Christiana no longer reports its proportionate share of Weatherford's
earnings under the equity method. On a comparable basis, without equity earnings
of Weatherford, Christiana's net earnings increased 64% from $307,000 to
$502,000 quarter to quarter. The improvement in net earnings for the quarter,
adjusted to eliminate Weatherford's contribution, was primarily due to reduced
interest expense and other charges related to litigation settlement and facility
closures which were incurred in the comparable period last year.
Interest income was lower in the quarter compared to the same period last
year due both to lower rates available on short-term U.S. government securities
and lower principal amount of mortgage notes receivable.
Interest expense was lower this period due primarily to reduced borrowings
resulting from $9,699,000 of debt reduction during the last twelve months ended
September 30, 1998.
Net earnings for past three fiscal years.
The following table reflects the components of Christiana's net earnings
for each of the past three fiscal years:
CONTRIBUTION TO NET EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------------------------------
1998 1997 1996
------------------- ------------------ ------------------
$ PER SHARE $ PER SHARE $ PER SHARE
------- --------- ------ --------- ------ ---------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Christiana, including Corporate... $(1,171) $(.23) $ (719) $(.14) $ 971 $0.19
Refrigerated Warehousing and
Logistics....................... 2,392 .47 1,011 .20 1,536 0.29
Weatherford*...................... 4,786 .93 6,371 1.24 1,096 0.21
------- ----- ------ ----- ------ -----
Net Earnings...................... $ 6,007 $1.17 $6,663 $1.30 $3,603 $0.69
======= ===== ====== ===== ====== =====
</TABLE>
- ---------------
* Net of deferred taxes.
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<PAGE> 98
Fiscal 1998 compared to Fiscal 1997.
Christiana's consolidated revenues for fiscal 1998 were $90,179,000
compared to $84,208,000 reported for fiscal 1997, an increase of $5,971,000 or
7.1%. Revenue growth at TLC was primarily attributable to volume increases in
logistic services which include carrier management services, transportation
management services and transportation operations. During fiscal 1998, revenues
attributable to logistic services increased $6,049,000 or 18.1% over the prior
year due to operation of an expanded fleet and strong demand for transportation
services. Revenue growth in Refrigerated Warehousing services was $1,686,000 or
5.1% in fiscal 1998 due primarily to increased utilization of existing
facilities from both new and existing customer relationships. Revenues from Dry
Warehousing operations in fiscal 1998 declined $3,599,000 or 29.9%, due to the
closure of two facilities at the end of fiscal 1997 consistent with TLC's
strategy to de-emphasize public dry warehousing activities. The balance of the
revenue increase in fiscal 1998 of $1,835,000, is primarily attributable to
expanded volume in distribution services of food products to the State of
Michigan Department of Education under a new five-year contract.
Gross profit for the year increased $887,000 or 6.7% to $14,122,000. Each
of TLC's service lines with the exception of Dry Warehousing had increased gross
profit due primarily to better utilization of the assets, improved productivity
and strong cost controls. TLC services increased gross profit by $1,009,000 or
38.5%, due to volume growth, higher utilization of revenue producing assets and
an expanded fleet compared to fiscal 1997. Refrigerated Warehousing operations
increased gross profit by $465,000 or 6.0%, through increased capacity
utilization of facilities and strong cost control. Dry Warehousing had a decline
in gross profit of $494,000 or 26% primarily due to reduced revenues in this
area. Distribution services gross profit increased $240,000 or 49%, due to
higher volume attributable to a new five-year contract with Michigan Department
of Education covering an expanded region of service.
Selling, general and administrative expenses for the year were reduced
$292,000 due primarily to lower corporate related expenses. Selling, general and
administrative expenses at TLC increased $305,000 or 4.3% in fiscal 1998 due to
increased sale and marketing activities designed to grow TLC services.
Earnings from operations of $5,758,000 increased $1,179,000 or 25.7%,
compared to $4,579,000 reported for fiscal 1997. The improvements in earnings
from operations is attributable to revenue growth, improved operating margins
and lower corporate overhead expense.
Interest expense in fiscal 1998 was $2,691,000, a reduction of $475,000
from the prior year due to strong cash flow from TLC which enabled over
$9,000,000 of debt reduction during fiscal 1998.
Net earnings in fiscal 1998 totaled $6,007,000 or $1.17 per share ($1.15
diluted) compared to $6,663,000 or $1.30 per share ($1.29 diluted) in fiscal
1997. The decline in net earnings reported for this period is primarily
attributable to two items: in last year's period, Weatherford sold Mallard Bay
Drilling, realizing a $66,900,000 one time after tax gain which resulted in
Christiana recording an after tax gain of $3,475,000 and in this fiscal year,
Christiana incurred a $589,000 after-tax charge related to the settlement of
litigation. Net earnings in fiscal 1998 include equity in earnings of
Weatherford of $4,786,000 for 11 months ended May 27, 1998 when Christiana
changed the method of accounting for its Weatherford investment to the cost
method.
Fiscal 1997 compared to Fiscal 1996.
Christiana's consolidated revenues for fiscal 1997 were $84,208,000
compared to $77,170,000 reported for fiscal 1996, an increase of 9.1%. Revenue
growth was primarily attributable to increased volume in transportation and
refrigerated warehousing services. The most significant improvement was in
transportation revenues which increased 20.6% over the previous year. During
fiscal 1997, TLC secured a large multi-year contract to provide logistic
services to a major frozen food producer. This contract, as well as certain
management changes, enabled Christiana to significantly improve the operating
performance in transportation related logistic services during fiscal 1997.
Refrigerated warehousing services revenues increased 14.7% over last year's
level due primarily to increased utilization of the expanded capacity at the
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<PAGE> 99
Rochelle TLC Center and higher utilization at all the Michigan based
refrigerated facilities during fiscal 1997.
Revenue growth combined with aggressive cost management resulted in a 1%
increase in gross margin. During fiscal 1997, TLC closed two dry public
warehouses which were leased facilities, Atlanta, Georgia and Sparks, Nevada.
The closure of these facilities resulted from Christiana's inability to secure
longer term value-added logistic services contracts in line with Christiana's
strategic focus on dry warehousing operations. Warehousing and TLC expenses were
negatively impacted by $358,000 of charges related to warehouse closures and
corporate restructuring. Selling, general and administrative expenses increased
$1,125,000 or 14.9% due mainly to increased marketing and sales activities.
Earnings from operations increased $358,000 or 8.5% to $4,579,000 in fiscal 1997
from $4,221,000 in fiscal 1996.
Loss on disposal of assets of $765,000 was primarily related to a
$1,085,000 charge incurred in the disposal of special freezing equipment in
connection with securing a long term contract for vegetable processing,
freezing, and warehouse services with a major customer of the Beaver Dam TLC
Center. In addition, in fiscal 1997 gains on the sales of real estate totaled
$271,000 which included the final sales of the 366 condominium home project in
San Diego. In fiscal 1996, gains on sales of real estate were $2,818,000.
Consolidated net earnings for fiscal 1997 were $6,663,000, or $1.30 per
share, up 85% from last year's level of $3,603,000, or $.69 per share. The
principal factors impacting net earnings in fiscal 1997 were the growth in
equity earnings in Weatherford and improved operating performance at TLC.
Financial Condition, Liquidity and Capital Resources.
Cash equivalents and short-term investments totaled $5,286,000 at September
30, 1998 compared to $5,539,000 at June 30, 1998, a decrease of $253,000.
Christiana's working capital at June 30, 1998 was $3,493,000 compared to
$4,257,000 at June 30, 1997.
Operating activities for the fiscal year ended June 30, 1998 provided cash
of $7,944,000 derived primarily from net earnings, depreciation and amortization
partially offset by equity in earnings of Weatherford. Operating activities for
the three month period ended September 30, 1998 provided cash of $1,273,000
attributable primarily to net earnings, depreciation and amortization and
increased accounts payable and accrued liabilities offset by increased accounts
receivable, and inventories.
Capital expenditures for the fiscal year ended June 30, 1998 totaled
$2,829,000, the major components of which were: $1,671,000 for machinery and
equipment additions primarily related to warehousing operations; $400,000 for
leasehold improvements at the corporate office; and $163,000 for computer
systems. The remaining expenditures were incurred for equipment and facility
improvements within the dry warehousing and transportation segments. Capital
expenditures for the three month period ended September 30, 1998 of $546,000
were attributable to TLC.
Investing activities for the fiscal year ended June 30, 1998 provided cash
of $3,685,000 derived primarily from $4,611,000 of proceeds of short-term
investments and $1,217,000 from payments on mortgage notes receivable partially
offset by the sale of mortgage notes receivable and mortgage prepayments.
Investing activities for the three month period ended September 30, 1998 used
cash of $67,000 primarily from capital expenditures offset by a decrease in
mortgage notes receivable and sale of assets.
Cash used in financing activities for the fiscal year ended June 30, 1998
resulted in the reduction of long term debt by $9,555,000. Net cash used in
financing activities to reduce debt in the three month period ended September
30, 1998 totaled $1,459,000.
Christiana's balance sheet at June 30, 1998, reflects $144,206,000 as its
carrying value for 3,897,462 shares of Weatherford common stock. This represents
the fair market value of Christiana's holding in Weatherford at June 30, 1998.
Weatherford has not paid dividends on Weatherford common stock since 1984 and it
is anticipated, for the foreseeable future, that its earnings will be retained
for the development
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<PAGE> 100
of its business. As of September 30, 1998, the fair market value of this
investment decreased from $144.2 million at June 30, 1998 to approximately $84.3
million as a result of market fluctuations.
At September 30, 1998 Christiana had in place a $15 million unsecured line
of credit for general corporate purposes. Borrowings under this line of credit
bear interest on a floating rate of LIBOR plus 125 basis points or prime at
Christiana's option. There were no borrowings under this facility during the
fiscal year ended June 30, 1998 or at September 30, 1998.
TLC has available to it a revolving credit facility at a floating rate of
LIBOR plus 175 basis points. This facility will finance TLC's capital needs, the
$20.0 million dividend to Christiana and the repayment of the promissory note to
Christiana in the amount of $3.0 million, plus interest. After the merger it is
anticipated that TLC will have approximately $17.0 million of additional
borrowing capacity under its revolving credit facility.
Christiana's current sources of capital include: cash generated from
operations, sale of remaining mortgage portfolio, borrowings under its revolving
credit agreement and line of credit and the use of its marketable Weatherford
shares. Christiana believes that current reserves of cash and short-term
investments, access to existing credit facilities and internally generated cash
from operations are sufficient to finance the projected cash requirements of its
current operations.
Christiana continues to evaluate new acquisitions in areas strategic to
existing operations as well as new lines of business. However, while Christiana
is a party to the merger agreement with Weatherford, Christiana is restricted
from making acquisitions without the approval of Weatherford. Future
acquisitions may be funded through cash flow from operations, liquidation of
mortgage notes receivable, liquidation of Weatherford common stock, borrowings
under its existing line of credit and other facilities, and equity issuance if
desirable.
As of September 30, 1998, Christiana had no material capital commitments.
Year 2000 Disclosure.
During fiscal 1998, Christiana completed a comprehensive assessment of its
Year 2000 problem for both its financial information systems and other
non-financial systems. In the opinion of Christiana management, all hardware and
software that could have a significant Year 2000 problem have been identified
and a remediation plan has been implemented. Year 2000 problems for financial
information systems are being corrected through hardware and software upgrades.
Non-financial systems, primarily telephone and security, will be repaired or
replaced in order to achieve Year 2000 compliance. Based on Christiana's current
projections, all Year 2000 compliant systems, both financial and non-financial,
will be implemented no later than January 1, 1999 to allow for sufficient
testing. As of September 30, 1998, Christiana was approximately 70% complete
with the installation of its Year 2000 compliant upgrades. By the time these
upgrades are completed, Christiana estimates that it will have expended
approximately $950,000 to resolve its Year 2000 problem.
Christiana believes that its efforts are sufficient to address its Year
2000 problem. However, there can be no assurance that Christiana will be
successful in its efforts. Any failure to address the Year 2000 problem will
have a material adverse effect on the ability of TLC to provide its
transportation and warehousing services and process vital financial data. This
could result in a material loss of revenues to Christiana in amounts which are
not known at this time. Christiana currently has no contingency plans if its
efforts to address the Year 2000 problem fail. After Christiana has completed
the upgrades described above, contingency plans will be developed.
TLC has solicited all of its major service providers concerning their
progress in compliance with the Year 2000 problem. TLC has received responses
from such providers and is not aware of the inability of any service provider to
address its Year 2000 problem.
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<PAGE> 101
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information, as of the date hereof,
about the members of the board of directors of Christiana and also provides
information about the beneficial ownership of Christiana's capital stock by all
of the directors and executive officers as a group. The persons shown in the
table as officers of Christiana comprise all of Christiana's executive officers.
Directors of Christiana are elected annually by a plurality of the votes cast by
shareholders. Executive officers are appointed annually by the board of
directors. The Christiana board met six times during its 1998 fiscal year.
<TABLE>
<CAPTION>
SERVED AS NO. OF SHARES
PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY
NAME (AND AGE) DURING LAST FIVE YEARS SINCE OWNED
-------------- ---------------------- --------- -------------
<S> <C> <C> <C>
Nicholas F. Brady(68).......... Chairman and President (since 2/93) 10/93 200,000(1)
of Darby Advisors, Inc., a private (3.9%)
investment company, Easton,
Maryland(1)
William T. Donovan(46)......... President and Chief Financial Officer 10/90 167,532(2)
of Christiana(2) (3.3%)
David J. Lubar(43)............. President of Lubar & Co. Incorporated 10/90 427,403
("Lubar & Co."), venture capital (8.3%)
and investments, Milwaukee, Wisconsin
Sheldon B. Lubar(69)........... Chairman and Chief Executive 1/87 968,615(3)
Officer of Christiana(3) 18.8%
Albert O. Nicholas(67)......... Owner and President of Nicholas 1/90 310,700(4)
Company, Inc., a registered (6.0%)
investment adviser, Milwaukee,
Wisconsin(4)
John R. Patterson(51).......... President and Chief Executive Officer 10/96 45,000(5)*
of TLC(5)
Gary R. Sarner(52)............. Chairman of TLC(6) 10/92 61,000(6)*
All directors and executive officers as a group................................... 2,180,250(7)
(42.3%)
</TABLE>
- ---------------
* Less than 1%.
(1) Previously, Secretary of the United States Department of the Treasury for
over four years, and before that, Chairman of Dillon, Read & Co., Inc. He is
also a director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a director (or trustee) of 27 Templeton Funds, which are registered
investment companies. The shares listed are owned by a trust of which Mr.
Brady is the beneficiary and a co-trustee.
(2) Donovan has served in the capacity listed or in another capacity as an
executive officer of Christiana for more than the last five years. He has
also been a principal of Lubar & Co. for more than the last five years. Mr.
Donovan is also a director of Grey Wolf, Inc. The shares listed include
14,000 shares subject to acquisition upon exercise of employee stock options
currently exercisable or exercisable within 60 days from the date hereof.
(3) Mr. Lubar has also been a principal of Lubar & Co. for more than the last
five years. Mr. Lubar is also a director of Ameritech Corporation,
Weatherford, Firstar Corporation, Massachusetts Mutual Life Insurance Co.,
Jefferies & Company, Inc. and MGIC Investment Corporation. Includes 433,705
shares held by Mr. Lubar's wife.
(4) Nicholas Company is the adviser to six registered investment companies:
Nicholas Fund, Inc., Nicholas II, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Edition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Fund. Mr. Nicholas is the president and a director of each of those
companies. Mr. Nicholas is also a director of Bando McGlocklin Capital
Corporation.
(5) Mr. Patterson has served in the capacity listed since February 1996. Before
joining TLC, Mr. Patterson served as Vice President-Operations for Schneider
Logistics, Inc., Green Bay, Wisconsin (a provider of transportation and
logistics services). For six years prior thereto, Mr. Patterson was the
President and principal owner of Pro Drive, Inc., Green Bay, Wisconsin (a
truck driver recruiting and
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<PAGE> 102
training firm). The shares listed include 32,300 shares subject to
acquisition upon exercise of employee stock options currently exercisable or
exercisable within 60 days from the date hereof.
(6) Chairman of TLC since January 1994. Before that, Mr. Sarner was the
President of Wiscold, Inc., the business of which was acquired by Christiana
in September 1992. The shares listed include 55,000 shares subject to
acquisition upon exercise of employee stock options currently exercisable or
exercisable within 60 days from the date hereof.
(7) Does not include shares for which Messrs. Donovan, Sarner and Patterson hold
options that are not currently exercisable or exercisable within 60 days of
the date hereof.
Sheldon B. Lubar is the father of David J. Lubar.
During fiscal 1998, the Board of Directors met six times. Each director
attended at least 75% of the aggregate of (1) the total number of all Board
meetings and (2) the total number of meetings of committees of which he was a
member. The Board has two standing committees: audit and compensation. It has no
standing nominating committee or any committee performing similar functions.
EXECUTIVE COMPENSATION
Summary Compensation Table. This table gives information about the
compensation of the four persons who were executive officers of Christiana
during fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
FISCAL ------------------- SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)(1) COMPENSATION(2)
--------------------------- ------ -------- -------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Sheldon B. Lubar, 1998 $ 65,250 -- -- --
Chairman and Chief 1997 66,000 -- -- $ 750
Executive Officer 1996 66,000 -- -- 750
William T. Donovan, 1998 $150,000 $ 50,000 -- $ 860
President and Chief 1997 150,000 100,000 15,000 750
Financial Officer 1996 150,000 -- -- 750
Gary R. Sarner, 1998 $167,500 $ 15,000 -- $1,055
Chairman of TLC 1997 167,500 15,000 -- 750
1996 167,500 -- -- 750
John R. Patterson(3) 1998 $175,000 $ 75,000 -- $2,387
President and Chief 1997 175,000 40,000 -- 2,900(3)
Executive Officer of TLC 1996 55,000 25,000 100,000 2,150(3)
</TABLE>
- ---------------
(1) Christiana's only long-term compensation plan or program is the 1995 Stock
Option Plan. The amounts shown are the number of shares underlying options
granted during the fiscal year.
(2) Except as set forth in footnote 3, this column consists solely of amounts
contributed by Christiana to a Section 401(k) retirement plan.
(3) Mr. Patterson joined TLC in February 1996. In fiscal 1998, 1997 and 1996,
Christiana paid life insurance premiums in the amount of $2,150 on a term
life policy maintained by Christiana for Mr. Patterson's benefit. In fiscal
1997, Christiana contributed $750 to a Section 401(k) retirement plan for
the benefit of Mr. Patterson.
Fiscal Year-End Option Value Table. The table below gives information about
the number and value of unexercised options for Christiana's stock held by
William T. Donovan, Gary R. Sarner and John R. Patterson at June 30, 1998.
Christiana's other executive officer, Sheldon B. Lubar, does not hold any
options on Christiana's stock. The closing price as reported by the NYSE on that
date was $31.00 per
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<PAGE> 103
share. At June 30, 1998 only options whose exercise price was below $31.00 were
in-the-money. For these options, the value shown is the difference between
$31.00 and the exercise price for the number of options held. The value of
options which were not-in-the-money is shown as zero.
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------------------------------------
NO. OF SHARES
UNDERLYING OPTIONS VALUE OF IN-THE-MONEY OPTIONS
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -----------------------------
<S> <C> <C>
William T. Donovan.................... 10,000/15,000 $77,000/$115,500
Gary R. Sarner........................ 55,000/40,000 $31,527/$23,851
John R. Patterson..................... 32,300/60,000 $218,025/$405,000
</TABLE>
Pensions. Christiana has no pension plans or programs.
Compensation of Directors. Non-employee directors (Nicholas F. Brady, David
J. Lubar and Albert O. Nicholas) are each paid an annual retainer of $15,000 for
attendance at Board and committee meetings and other consultations.
Employment Contracts. No officer of Christiana has an employment contract.
Compensation Committee Interlocks and Insider Participation. The members of
the Compensation Committee are Nicholas F. Brady, Sheldon B. Lubar and Albert O.
Nicholas. This Committee, which also administers Christiana's stock option
program, met twice during fiscal 1998. Mr. Lubar is Christiana's principal
officer and its principal shareholder.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the merger, each share of Christiana common stock as of the closing of
the merger will be converted into the right to receive Weatherford common stock
and cash. The directors and officers of Christiana beneficially own shares of
Christiana common stock (including shares of Christiana common stock subject to
options) in the amounts set forth under "-- Management -- Directors and
Executive Officers".
Sheldon B. Lubar's three daughters, Joan P. Lubar, Kristine L. Thomson and
Susan Solvang (the wife of Oyvind Solvang, the Vice President of C2), each own
448,551, 430,478 and 442,953 shares of Christiana common stock, respectively.
In connection with the merger, Sheldon Lubar and C2 entered into an
agreement providing:
- That all Christiana shareholders would have the right to purchase at
least the same percentage ownership in C2 as such Christiana shareholder
has in Christiana immediately prior to completion of the merger and at
the same price per share as each member of the Lubar family.
- That Mr. Lubar and the remainder of the Lubar family will purchase enough
shares of C2 common stock in the C2 offering so that the net proceeds are
at least $10.67 million to fund C2's purchase of two-thirds of TLC.
This agreement will insure that C2 has sufficient funds to complete the TLC
sale.
The Lubar family, Lubar & Co. and Venture Capital Fund, L.P., a fund
managed by Lubar & Co., and William T. Donovan own 5.3%, 0.8%, 6.0% and 0.7%,
respectively, of Emmpak Foods, Inc. ("Emmpak"), a customer of TLC. During fiscal
1998, Emmpak accounted for approximately $2.2 million in gross revenue for TLC.
David J. Lubar serves on the board of directors of Emmpak.
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<PAGE> 104
David J. Lubar and Sheldon B. Lubar are officers and directors of Lubar &
Co., and each own 50% of its stock, respectively. Christiana's headquarters are
in part of the premises occupied by Lubar & Co., 700 North Water Street, Suite
1200, Milwaukee, Wisconsin and owned by 700 North Water LLC. The Lubar family
owns 90% of 700 North Water LLC and William T. Donovan owns 5% of 700 North
Water LLC. Christiana pays 700 North Water LLC its pro rata share ($6,500 per
month for fiscal 1998) of the rent, utilities and other expenses of those
premises.
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<PAGE> 105
DESCRIPTION OF C2
GENERAL
C2 was formed on December 11, 1997 for the purpose of acquiring a
two-thirds interest in TLC. C2 is a Wisconsin corporation with its executive
offices located at 700 North Water Street, Suite 1200, Milwaukee, Wisconsin
53202, and its telephone number is (414) 291-9000.
Simultaneously herewith, C2 is offering, pursuant to the C2 prospectus,
5,202,664 shares of C2 common stock for $4.00 per share, with the objective of
raising approximately $21.0 million. Approximately $10.67 million of the
proceeds from the C2 offering will be utilized to fund the acquisition of a
two-thirds interest in TLC. C2 intends to utilize any additional funds raised in
the C2 offering for general corporate purposes, including future acquisitions.
The Lubar family has committed, pursuant to the Lubar/C2 agreement, to purchase
such number of shares of C2 common stock as is necessary for the net proceeds of
the C2 offering, after deducting expenses of the C2 offering, to equal $10.67
million.
C2 will bear expenses associated with the C2 offering. These expenses are
estimated as follows: (1) Commission filing fees, $6,140; (2) Nasdaq listing
fee, $10,000; (3) printing costs, expenses for state securities laws filings and
transfer agent fees and expenses, $36,000; (4) accounting and tax services,
$75,000; (5) legal fees and expenses, $140,000; and (6) miscellaneous, $8,000.
Mr. Lubar will not personally bear any expenses relating to the merger, the TLC
sale or the C2 offering.
MANAGEMENT
The following table contains the name, age and position with C2 of each
executive officer and director as of January 1, 1998. Each person's respective
background is described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ---------------------
<S> <C> <C>
William T. Donovan............................... 45 Chairman and Director
President and
David J. Lubar................................... 43 Director
Oyvind Solvang................................... 38 Vice President
David E. Beckwith................................ 69 Secretary
Nicholas F. Brady................................ 67 Director
Sheldon B. Lubar................................. 68 Director
Albert O. Nicholas............................... 66 Director
</TABLE>
William T. Donovan was named Chairman of C2 in December 1997. Mr. Donovan
is also the President, Chief Financial Officer and a director of Christiana,
positions he will vacate at the close of the merger. Mr. Donovan has held
various executive positions with Christiana since June 1988. Mr. Donovan has
also been a principal of Lubar & Co., a venture capital and investments firm
located in Milwaukee, Wisconsin since January 1980. Mr. Donovan is also a
Director of Grey Wolf, Inc.
David J. Lubar has been President of C2 since December 1997. Mr. Lubar also
serves as President of Lubar & Co., a position he has held since January 1991.
Mr. Lubar is a Director of Christiana, a position he will vacate as of the close
of the merger. Mr. Lubar is the son of Sheldon B. Lubar.
Oyvind Solvang has been Vice President of C2 since December 1997. Mr.
Solvang is also the Vice President of Christiana, a position he will vacate as
of the close of the merger. Mr. Solvang has served as President of Cleary Gull
Reiland & McDevitt, Inc., an investment banking firm located in Milwaukee,
Wisconsin from January 1996 to October 1996 and Chief Operating Officer of
Cleary Gull Reiland & McDevitt, Inc., from October 1995 to January 1996. Prior
thereto, from May 1994 to September 1995, Mr. Solvang served as President of
Scinticor, Incorporated, a manufacturer of cardiac imaging devices, located in
Milwaukee, Wisconsin, and from August 1990 to April 1994 as Vice President and
General Manager of Applied Power, Inc., a supplier of hydraulic systems, located
in Butler, Wisconsin.
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<PAGE> 106
David E. Beckwith has been Secretary of C2 since December 1997. Since May
1995, he served as Secretary of Christiana, a position he will vacate as of the
close of the merger. Mr. Beckwith has been associated with the law firm of Foley
& Lardner since 1952 and has been a Partner at Foley & Lardner since 1960.
Nicholas F. Brady has been a Director of C2 since December 1997. Since
February 1993, Mr. Brady has been Chairman and President of Darby Advisors,
Inc., a private investment company located in Easton, Maryland. Prior thereto,
Mr. Brady served as Secretary of the United States Department of the Treasury
for over four years, and before that, Chairman of Dillon, Reed & Co., Inc. Mr.
Brady is a Director of Amerada Hess Corporation and H.J. Heinz Company, as well
as a Director (or trustee) of 27 Templeton funds, which are registered
investment companies. Mr. Brady is also a Director of Christiana, a position he
will vacate as of the close of the merger.
Sheldon B. Lubar has been a Director of C2 since December 1997. Mr. Lubar
has also been a principal of Lubar & Co. since its inception in 1977. Mr. Lubar
is a Director of Ameritech Corporation, Weatherford, Firstar Corporation,
Massachusetts Mutual Life Insurance Co., Jefferies & Company, Inc. and MGIC
Investment Corporation. Mr. Lubar currently serves as Chairman, Chief Executive
Officer and a Director of Christiana, all of which positions he will vacate as
of the close of the merger. Mr. Lubar is the father of David J. Lubar.
Albert O. Nicholas has been a Director of C2 since December 1997. Mr.
Nicholas has been owner and President of Nicholas Company, Inc., a registered
investment advisor located in Milwaukee, Wisconsin since December, 1967.
Nicholas Company, Inc. is the advisor to six registered investment companies:
Nicholas Fund, Inc., Nicholas Two, Inc., Nicholas Income Fund, Inc., Nicholas
Limited Addition, Inc., Nicholas Money Market Fund, Inc. and Nicholas Equity
Income Fund. Mr. Nicholas is the President and a Director of each of these
investment companies. Mr. Nicholas is also a Director of Bando McGlocklin
Capital Corporation. In addition, Mr. Nicholas serves as a Director of
Christiana, a position he will vacate as of the close of the merger.
DESCRIPTION OF TLC CREDIT AGREEMENT
TLC entered into a credit agreement, dated November 2, 1998, with Firstar
Bank Milwaukee, N.A., as agent, and certain other banks that will be parties
thereto. Pursuant to the credit agreement, TLC will, subject to the achievement
of certain financial ratios and compliance with certain conditions, have the
right to obtain revolving loans in the following outstanding principal amounts:
<TABLE>
<CAPTION>
MAXIMUM AMOUNT OF
TIME PERIOD REVOLVING LOANS OUTSTANDING
- ----------- ---------------------------
<S> <C>
Closing date through November 2, 1999................. $70.00 million
November 3, 1999 through November 2, 2000............. $65.35 million
November 3, 2000 through November 2, 2001............. $64.35 million
November 3, 2001 through November 2, 2002............. $59.35 million
November 3, 2002 through November 2, 2003............. $53.35 million
</TABLE>
The entire unpaid principal balance of loans made under the credit
agreement will be due and payable on November 2, 2003.
The proceeds of the initial loans under the credit agreement were used to
refinance existing indebtedness of TLC in the amount of approximately $32.0
million. Additional loans will finance the payment of a distribution to
Christiana of $20.0 million cash and the repayment of $3.0 million, plus
interest, under the note to Christiana. The available balance of the facility,
estimated to be $17.0 million after completion of the merger, will be available
for working capital and general corporate purposes, including the issuance of
letters of credit of up to $3.5 million outstanding at any one time.
The credit agreement is secured by liens or security interests on all or
substantially all of the assets of TLC, other than certain transportation
equipment, and mortgages on its real estate.
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<PAGE> 107
The interest rate on borrowings under the credit agreement after the C2
offering is expected to be, at the option of TLC, LIBOR plus 175 basis points or
the prime rate, less 25 basis points. These rates will vary over the term of the
credit agreement pursuant to a pricing grid based on the ratio of consolidated
funded debt to consolidated EBITDA, all as defined in the credit agreement, in
accordance with the following table:
APPLICABLE PERCENTAGES
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE APPLICABLE APPLICABLE
FOR PERCENTAGE PERCENTAGE
EURODOLLAR FOR PRIME FOR LETTER
PRICING CONSOLIDATED FUNDED REVOLVING RATE OF CREDIT
LEVEL DEBT RATIO LOANS LOANS FEE
------- ----------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
7............................ >4.5:1.0 2.25 0.00 1.25
6............................ <4.5:1.0 but >4.0:1.0 2.00 (0.25) 1.25
5............................ <4.0:1.0 but >3.5:1.0 1.75 (0.25) 1.25
4............................ <3.5:1.0 but >3.0:1.0 1.50 (0.50) 1.25
3............................ <3.0:1.0 but >2.5:1.0 1.25 (0.50) 1.25
2............................ <2.5:1.0 but >2.0:1.0 1.00 (0.50) 1.25
1............................ <2.0:1.0 0.75 (1.00) 1.25
</TABLE>
The credit agreement also contains provisions requiring TLC to reimburse its
lenders for increases in certain taxes, revenue requirements and other costs
incurred by the lenders.
Loans made under the credit agreement may be prepaid in whole or in part
without premium or penalty, except for reimbursement of the lenders for any
losses the lenders suffer as a result of repayment of LIBOR-based loan prior to
the last day of that applicable interest period.
Events of default under the credit agreement, include, without limitation,
those relating to:
- Non-payment of interest, principal or fees payable under the credit
agreement.
- Inaccuracy of representations or warranties in the loan documents.
- Non-performance of covenants.
- Cross-default to other material debt of TLC and its subsidiaries.
- Bankruptcy or insolvency.
- Judgments in excess of specified amounts.
- Certain ERISA events.
- Impairment of security interests in collateral.
- Invalidity of guarantees.
- Materially inaccurate or false representations or warranties.
- A change in control.
As a result of the borrowings under the credit agreement, TLC, as well as
C2 on a pro forma basis, will be highly leveraged. C2's pro forma total funded
debt to total capitalization including minority interest at September 30, 1998
was 62% assuming 5,202,664 shares are sold in the C2 offering. In addition, TLC
may, subject to certain restrictions in its debt agreements, incur further
indebtedness from time to time to finance expansion, either through acquisitions
or capital leases, or for other purposes.
Due to TLC's substantial indebtedness, a significant portion of its cash
flow from operations will be required for debt service.
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<PAGE> 108
The extent to which TLC is leveraged could have the following consequences:
- Impairment of TLC's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions or other
purposes.
- Dedication of a substantial portion of TLC's cash flow from operations to
the payment of debt service requirements (principal and interest) on its
indebtedness.
- Vulnerability of TLC to changes in general economic conditions.
- Limitations on TLC's ability to capitalize on significant business
opportunities and to respond to competition.
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<PAGE> 109
DESCRIPTION OF WEATHERFORD AND CHRISTIANA CAPITAL STOCK
WEATHERFORD
Weatherford's authorized capital stock consists of 250,000,000 shares of
Weatherford common stock, par value $1.00 per share, and 3,000,000 shares of
Preferred Stock, par value $1.00 per share. At December 22, 1998, 97,452,892
shares of Weatherford common stock were outstanding, including (1) 49,024 shares
of Weatherford common stock remaining to be exchanged for shares of common stock
of GulfMark International, Inc. ("GulfMark") in connection with Weatherford's
prior acquisition of GulfMark, (2) 3,321 shares of Weatherford common stock
remaining to be exchanged for common shares of Taro Industries Limited ("Taro")
in connection with Weatherford's prior acquisition of Taro and (3) 495,581
shares of Weatherford common stock remaining to be exchanged for shares of
common stock of Weatherford Enterra, Inc. in connection with the merger of
Weatherford and Weatherford Enterra, Inc. In addition, at December 22, 1998,
there were (1) 5,031,250 shares of Weatherford common stock reserved for
issuance upon the conversion of Weatherford's 5% Convertible Subordinated
Preferred Equivalent Debentures due 2027, (2) 5,052,000 shares of Weatherford
common stock reserved for issuance pursuant to the proposed merger and (3)
7,900,000 shares of Weatherford common stock reserved for issuance pursuant to
various benefit plans of Weatherford and its subsidiaries, of which 6,013,252
shares of Weatherford common stock were reserved for issuance upon the exercise
of outstanding options and awards. At December 22, 1998, there were no shares of
Weatherford preferred stock issued or outstanding. The holders of shares of
Weatherford common stock are not liable to further calls or assessments by
Weatherford. The description below is a summary of and is qualified in its
entirety by the provisions of Weatherford's Amended and Restated Certificate of
Incorporation, as amended, as currently in effect.
Subject to the rights of the holders of any outstanding shares of
Weatherford preferred stock and those rights provided by law, (1) dividends may
be declared and paid or set apart for payment upon the Weatherford common stock
out of any assets or funds of Weatherford legally available for the payment of
dividends and may be payable in cash, stock or otherwise, (2) the holders of
Weatherford stock have the exclusive right to vote for the election of directors
and, except as provided below, on all other matters requiring stockholder action
generally, with each share being entitled to one vote and (3) upon the voluntary
or involuntary liquidation, dissolution or winding up of Weatherford, the net
assets of Weatherford will be distributed pro rata to the holders of the
Weatherford common stock in accordance with their respective rights and
interests to the exclusion of the holders of any outstanding shares of
Weatherford preferred stock.
Although the holders of the Weatherford common stock are generally entitled
to vote for the approval of amendments to Weatherford's Amended and Restated
Certificate of Incorporation, as amended, the voting rights of the holders of
the Weatherford common stock are limited with respect to certain amendments to
Weatherford's Amended and Restated Certificate of Incorporation, as amended,
that affect only the holders of the Weatherford preferred stock. Specifically,
subject to the rights of any outstanding shares of any series of Weatherford
preferred stock, Weatherford's Amended and Restated Certificate of
Incorporation, as amended, provides that it may be amended from time to time in
any manner that would solely modify or change the relative powers, preferences
and rights and the qualifications or restrictions of any issued shares of any
series of Weatherford preferred stock then outstanding with the only required
vote or consent for approval of such amendment being the affirmative vote or
consent of the holders of a majority of the outstanding shares of the series of
Weatherford preferred stock so affected, provided that the powers, preferences
and rights and the qualifications and limitations or restrictions of such series
after giving effect to such amendment are no greater than the powers,
preferences and rights and qualifications and limitations or restrictions
permitted to be fixed and determined by the Board of Directors with respect to
the establishment of any new series of shares of Weatherford preferred stock
pursuant to the authority vested in the Board of Directors as to such matters.
Holders of the Weatherford common stock do not have any cumulative voting,
redemptive or conversion rights and have no preemptive rights to subscribe for,
purchase or receive any class of shares or securities of Weatherford. Holders of
the Weatherford common stock have no fixed dividend rights.
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<PAGE> 110
Dividends may be declared by the Board of Directors at its discretion depending
on various factors, although no dividends are anticipated for the foreseeable
future.
The Weatherford preferred stock may be issued from time to time in one or
more series, with each such series having such powers, preferences and rights
and qualifications and limitations or restrictions as may be fixed by
Weatherford's Board of Directors pursuant to the resolution or resolutions
providing for the issuance of such series.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by Weatherford of stock or any transaction
from which the director derived an improper personal benefit. Weatherford's
Amended and Restated Certificate of Incorporation, as amended, provides that
Weatherford's directors are not liable to Weatherford or its stockholders for
monetary damages for breach of their fiduciary duty, subject to the above
described exceptions specified by Delaware law.
As a Delaware corporation, Weatherford is subject to Section 203 of the
Delaware General Corporation Law (the "DGCL"). In general, Section 203 prevents
an "interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the time such person became an interested stockholder unless (1) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination; (2) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (3) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
Weatherford has approved the acquisition by Christiana of the shares of
Weatherford common stock owned by them under Section 203 and Christiana are
therefore not subject to the restrictions under Section 203.
The Registrar and Transfer Agent for the Weatherford common stock is
American Stock Transfer and Trust Company, New York, New York.
CHRISTIANA
Authorized Capital Stock. The aggregate number of shares of Christiana
capital stock which Christiana has authority to issue is 13,000,000, consisting
of one class, designated as "Common Stock", with a par value of $1.00 per share
and 1,000,000 shares of a class designated as Preferred Stock, with a par value
of $10.00 per share. As of September 30, 1998 there were 5,149,330 shares of
Christiana common stock issued and outstanding. Based on certain commitments by
officers of Christiana to exercise options and purchase shares of Christiana
common stock, as of the closing of the merger, Christiana
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expects that there will be 5,149,330 shares of Christiana common stock issued
and outstanding. There are no shares of preferred stock outstanding and the
Board of Directors of Christiana has not fixed any powers, preferences or rights
with respect to any Preferred Stock.
Dividend and Liquidation Rights. All shares of Christiana common stock will
participate equally with respect to dividends and rank equally upon liquidation
subject to the rights of holders of any prior ranking stock which may be
subsequently authorized and issued. In the event of liquidation, dissolution or
winding up of Christiana, the owners of Christiana common stock are entitled to
receive pro rata the assets and funds of Christiana remaining after satisfaction
of all creditors of Christiana and payment of all amounts to which owners of
prior ranking stock, if any, then outstanding may be entitled.
Voting Rights. Except as hereinafter set forth, every holder of Christiana
common stock has one vote for each share.
No shareholder of Christiana has cumulative voting rights which means that
the holders of shares entitled to exercise more than 50% of the voting power of
shares entitled to vote, represented in person or by proxy at a meeting at which
a quorum (a majority of the shares entitled to vote) is represented, are
entitled to elect all of the directors to be elected. Under Christiana's Bylaws,
each member of the Board of Directors is elected each year at Christiana's
annual meeting.
Certain Statutory Provisions. Section 180.1150 of the WBCL provides that
the voting power of shares of an "issuing public corporation", which includes
Christiana, which are held by any person holding in excess of 20% of the voting
power in the election of directors of the issuing public corporation's shares
shall be limited to 10% of the full voting power of such excess shares. This
statutory voting restriction will not be applicable to shares acquired directly
from Christiana, to shares acquired in a transaction incident to which
shareholders of Christiana vote to restore the full voting power of such shares
(either before or after the acquisition of the shares) and under certain other
circumstances.
Except as may otherwise be provided by law, the requisite affirmative vote
of shareholders for certain significant corporate actions, including a merger or
share exchange with another corporation, sale of all or substantially all of the
corporate property and assets, or voluntary liquidation, is a majority of all
the votes entitled to be cast on the transaction by each voting group of
outstanding shares entitled to vote thereon. Sections 180.1130 through 180.1134
of the WBCL provide generally that, in addition to the vote otherwise required
by law or the articles of incorporation of an "issuing public corporation",
certain business combinations not meeting certain adequacy-of-price standards
specified in the statute must be approved by (1) the holders of at least 80% of
the votes entitled to be cast and (2) two-thirds of the votes entitled to be
cast by the corporation's outstanding voting shares owned by persons other than
a "significant shareholder" who is a party to the transaction or an affiliate or
associate thereof. Section 180.1130 defines "business combination" to include,
subject to certain exceptions, a merger or share exchange of the issuing public
corporation (or any subsidiary thereof) with, or the sale or other disposition
of substantially all assets of the issuing public corporation to, any
significant shareholder or affiliate thereof. "Significant shareholder" is
defined generally to mean a person that is the beneficial owner of 10% or more
of the voting power of the outstanding voting shares of the issuing public
corporation.
Pursuant to the requirements of Sections 180.1130 through 180.1134 of the
WBCL, the Lubar Shares will not be counted for purposes of obtaining the
affirmative vote of two-thirds of the outstanding voting shares of Christiana
common stock required to approve the merger.
Sections 180.1140 through 180.1145 of the WBCL provide that a "resident
domestic corporation", such as Christiana, may not engage in a "business
combination" with an "interested stockholder" (e.g., a person beneficially
owning 10% or more of the aggregate voting power of the stock of such
corporation) within three years after the date (the "stock acquisition date") on
which the interested stockholder acquired his or her 10% or greater interest,
unless the business combination (or the acquisition of the 10% or greater
interest) was approved before the stock acquisition date by the corporation's
board of directors. If the interested stockholder fails to obtain such approval
by the board of directors, then even after such three-year period, a business
combination with the interested stockholder may be consummated only with
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the approval of the holders of a majority of the voting stock not beneficially
owned by such interested stockholder, unless the combination satisfies certain
adequacy-of-price standards intended to provide a fair price for shares held by
non-interested shareholders.
The above sections of the WBCL could have the effect, among others, of
discouraging takeover proposals for Christiana or impeding a business
combination between Christiana and a major shareholder of Christiana.
Preemptive Rights. No holder of Christiana common stock has any preemptive
or subscription rights.
Conversion Rights, Redemption Provisions and Sinking Fund
Provisions. Christiana common stock is not convertible, is not redeemable and
has no sinking fund.
Liability to Further Calls or to Assessment. Certain statutory personal
liability may be imposed upon shareholders of Wisconsin corporations, including
Christiana, under Section 180.0622(2)(b) of the WBCL. The substantially
identical predecessor to such statute has been judicially interpreted to mean
that shareholders of a Wisconsin corporation are subject to personal liability,
up to an amount equal to the consideration for which their shares were issued
(instead of the aggregate par value in the case of shares with par value, as the
statute states), for all debts owing to employees of the corporation for
services performed for the corporation, but not exceeding six months service in
any one case. The provisions of this Section of the WBCL are presently
applicable to the shares of capital stock of Christiana.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF WEATHERFORD AND CHRISTIANA
The rights of holders of Christiana common stock are currently governed by
Wisconsin law, Christiana's Articles of Incorporation, as amended, and
Christiana's By-laws, as amended. Upon consummation of the merger, holders of
Christiana common stock will become holders of Weatherford common stock and
their rights as holders of Weatherford common stock will be governed by Delaware
law and Weatherford's Amended and Restated Certificate of Incorporation, as
amended, and Weatherford's Amended and Restated By-laws. Set forth below is a
summary of material differences between the rights of holders of Christiana
common stock and rights of holders of Weatherford common stock.
SPECIAL VOTE REQUIRED FOR CERTAIN COMBINATIONS
Section 203 of the DGCL applies to Weatherford. Although Weatherford is
subject to Section 203, the merger with Christiana is not prohibited by Section
203.
Except as may otherwise be provided by law, the WBCL provides that the
requisite affirmative vote of shareholders for certain significant corporate
actions, including a merger or share exchange with another corporation, sale of
all or substantially all of the corporate property and assets, or voluntary
liquidation, is a majority of all the votes entitled to be cast on the
transaction by each voting group of outstanding shares entitled to vote thereon.
Section 180.1131 of the WBCL provides generally that, in addition to the vote
otherwise required by law or the articles of incorporation of an "issuing public
corporation", certain business combinations not meeting certain
adequacy-of-price standards specified in the statute must be approved by (1) the
holders of at least 80% of the votes entitled to be cast and (2) two-thirds of
the votes entitled to be cast by the corporation's outstanding voting shares
owned by persons other than a "significant shareholder" who is a party to the
transaction or an affiliate or associate thereof. Section 180.1130 defines
"business combination" to include, subject to certain exceptions, a merger or
share exchange of the issuing public corporation (or any subsidiary thereof)
with, or the sale or other disposition of substantially all assets of the
issuing public corporation to, any significant shareholder or affiliate thereof.
"Significant shareholder" is defined generally to mean a person that is the
beneficial owner of 10% or more of the voting power of the outstanding voting
shares of the issuing public corporation. Although Christiana believes that
Sections 180.1130 through 180.1134 of the WBCL are not intended to apply to
transactions such as the merger, Christiana will require the shareholder vote
required under Section 180.1131 under the assumption that such Section applies
to the merger.
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VOTE REQUIRED FOR CORPORATE TRANSACTIONS AND OTHER MATTERS
Under the DGCL, an amendment to a corporation's certificate of
incorporation requires the affirmative vote of the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon and a majority of
the outstanding stock of each class entitled to vote thereon as a class unless
the corporation's certificate of incorporation provides for a higher percentage.
The DGCL also provides that the holders of a majority of the outstanding stock
of the corporation entitled to vote thereon may approve an agreement of merger
or consolidation or the dissolution of a corporation.
The WBCL generally requires the approval of a majority of the votes
entitled to be cast on the amendment by each voting group with respect to which
the amendment would create dissenters' rights and a majority of votes of every
other voting group entitled to vote on the amendment, unless the articles of
incorporation, bylaws adopted under authority granted in the articles of
incorporation or the WBCL require a greater proportion. The WBCL also provides
generally that holders of a majority of outstanding stock of a corporation
entitled to vote thereon may approve an agreement of merger, consolidation or
the dissolution of a corporation, subject to the statutory provisions described
above under "-- Special Vote Required for Certain Combinations" and "Description
of Weatherford and Christiana Capital Stock -- Christiana".
Article 8 of Weatherford's Amended and Restated Certificate of
Incorporation, as amended, provides that the Amended and Restated Certificate of
Incorporation, as amended, may be amended, altered, changed or repealed as
prescribed by statute. Under the DGCL, such amendment must be approved by a
majority of the outstanding Weatherford common stock. Under Article 4 of
Weatherford's Amended and Restated Certificate of Incorporation, as amended, any
amendment to the Amended and Restated Certificate of Incorporation, as amended,
that affects any series of outstanding preferred stock must be approved by a
majority of the holders of such series. The DGCL does not require a vote of the
Weatherford stockholders for the consummation of the merger.
Christiana's Articles of Incorporation, as amended, are silent as to
amendments to the Articles of Incorporation, as amended, and the vote required
to approve mergers and other material corporate transactions.
DISPOSITION OF ASSETS
The DGCL provides that a corporation may sell, lease or exchange all or
substantially all of its property and assets for such consideration as its Board
of Directors deems expedient and in the best interest of the corporation, when
and as authorized by resolution adopted by the holders of a majority of the
outstanding stock of the corporation entitled to vote thereon.
Under the WBCL, a corporation may sell, lease, exchange or otherwise
dispose of all, or substantially all, of its property and assets otherwise than
in the usual and regular course of business on such terms and conditions and for
the consideration determined by the corporation's Board of Directors, upon
adoption of a resolution by the Board of Directors approving the proposed
transaction and approval by the majority of all the votes entitled to be cast on
the transactions by the shareholders of the corporation.
POWER TO AMEND BY-LAWS
Under the DGCL, the power to adopt, amend or repeal by-laws of a
corporation is vested in the authority of the stockholders entitled to vote,
unless the corporation's certificate of incorporation confers such power upon
its directors. However, power conferred shall not divest the stockholders of
their power to adopt, amend or repeal the by-laws. Weatherford's Amended and
Restated By-laws permit amendments by its board of directors and require an 80%
vote of stockholders to amend the Amended and Restated By-laws.
Under the WBCL, the power to adopt, amend or repeal by-laws of a
corporation is vested in the authority of the board of directors of the
corporation, unless the articles of incorporation provide otherwise. However,
the corporation's stockholders may adopt, amend or repeal by-laws even though
the board of
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directors has this power as well. Christiana's articles of incorporation do not
divest the directors of their power to adopt, amend and repeal by-laws.
QUORUM REQUIREMENTS FOR DIRECTORS' MEETINGS
The DGCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the certificate of
incorporation or by-laws require a greater number. Weatherford's Amended and
Restated By-laws provide that a majority of the total number of directors shall
constitute a quorum for the transaction of business.
The WBCL provides that a majority of the total number of directors shall
constitute a quorum for the transaction of business, unless the articles of
incorporation or by-laws provide for a greater or lesser number, provided that a
quorum may not be fewer than one-third of the number of directors. Christiana's
By-laws provide that a quorum of the board of directors consists of any four
directors of the eight member board of directors.
REMOVAL OF DIRECTORS
The DGCL and Weatherford's Amended and Restated By-laws provide that
directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors. In addition,
Weatherford's Amended and Restated By-laws provide that directors may be
removed, to the extent permitted by law, for cause by vote of the majority of
the directors then in office. A director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him. The WBCL provides that directors may be removed with or without
cause, unless the articles of incorporation or by-laws provide that directors
may be removed only for cause. Shareholders may remove a director if the number
of shareholder votes cast to remove the director exceeds the numbers of
shareholder votes cast not to remove such director, unless the articles of
incorporation or by-laws provide for a greater voting requirement. Neither
Christiana's Articles of Incorporation, as amended, nor its By-laws expressly
addresses the removal of directors.
DIRECTOR ELECTIONS, QUALIFICATIONS AND NUMBER
The DGCL provides that the number of directors of a Delaware corporation
shall be fixed by, or in the manner provided in, the by-laws, unless the
certificate of incorporation fixes such number, in which case, it can only be
changed by amending the certificate of incorporation. Under the DGCL, a director
need not be a stockholder to be qualified unless so required by the
corporation's certificate of incorporation or by-laws. Weatherford's Amended and
Restated By-laws provide that directors are to be elected by a plurality vote of
the stockholders; provided, however, that any vacancies occurring in the board
may be filled by the remaining directors.
The WBCL provides that the number of directors of a Wisconsin corporation
shall be fixed in accordance with the articles of incorporation or by-laws.
Under the WBCL, a director need not be a stockholder to be qualified unless so
required by the corporation's articles of incorporation or by-laws. Under the
WBCL, unless otherwise provided by the articles of incorporation, directors are
to be elected by a plurality of votes cast by the shares entitled to vote in the
election; provided, however, that a vacancy on the board may be filled by the
shareholders or the board of directors. Christiana's Articles of Incorporation,
as amended, are silent with respect to the qualifications and election of
directors.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Weatherford common stock and Christiana common stock are each traded on the
NYSE under the symbols "WFT" and "CST", respectively. The following table sets
forth the range of high and low sale prices for Weatherford common stock and
Christiana common stock for the periods indicated, as reported on the NYSE. The
prices for the Weatherford common stock have been adjusted to reflect a
two-for-one stock split effected in May 1997.
<TABLE>
<CAPTION>
WEATHERFORD CHRISTIANA
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Twelve Months Ended December 31, 1996
Quarter ended March 31, 1996............................. $14 7/16 $11 1/8 $24 3/4 $22 1/4
Quarter ended June 30, 1996.............................. 17 1/2 12 7/8 24 1/4 20 1/8
Quarter ended September 30, 1996......................... 20 1/4 14 22 3/4 20 5/8
Quarter ended December 31, 1996.......................... 25 3/4 19 1/2 25 3/4 23 1/2
Twelve Months Ended December 31, 1997
Quarter ended March 31, 1997............................. $31 7/8 $23 7/8 $33 3/4 $26 1/2
Quarter ended June 30, 1997.............................. 45 1/2 28 39 7/8 31 1/2
Quarter ended September 30, 1997......................... 64 42 1/16 44 3/8 37 5/8
Quarter ended December 31, 1997.......................... 73 40 1/4 46 9/16 36 5/8
Twelve Months Ended December 31, 1998
Quarter ended March 31, 1998............................. $53 7/8 $37 1/2 $41 1/2 $33 15/16
Quarter ended June 30, 1998.............................. 58 7/16 34 3/4 43 5/8 29 3/16
Quarter ended September 30, 1998......................... 39 15/16 15 31 13/16 17 3/8
Quarter ended December 31, 1998 (through December 22,
1998)................................................. 28 3/4 16 25 3/8 16 1/8
</TABLE>
On October 13, 1998, the last full trading day prior to the public
announcement of the execution by Weatherford and Christiana of the amended
merger agreement, the closing sale prices of Weatherford common stock and of
Christiania common stock as reported by the NYSE were $16 13/16 and $16 3/8 per
share, respectively.
On December 22, 1998, the closing sale prices of Weatherford common stock
and of Christiana common stock as reported by the NYSE were $17 1/16 and $18 3/8
per share, respectively.
Following the merger, Weatherford common stock will continue to be traded
on the NYSE under the symbol "WFT", and Christiana common stock will cease to be
traded and there will be no further market for such stock.
Weatherford has not paid any dividends on the Weatherford common stock
since 1984 and currently anticipates that, for the foreseeable future, any
earnings will be retained for the development of Weatherford's business. The
declaration of all dividends is at the discretion of Weatherford's Board of
Directors. Weatherford's dividend policy will be reviewed by the Board of
Directors at such future time as may be appropriate in light of relevant factors
at the time.
Christiana has not declared or paid any dividends during the past five
years.
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STOCK OWNERSHIP AND CERTAIN BENEFICIAL OWNERS
WEATHERFORD
The following table sets forth certain information with respect to each
person who as of the record date, was known by Weatherford to be the beneficial
owner of more than 5% of the outstanding shares of Weatherford common stock.
<TABLE>
<CAPTION>
BEFORE THE MERGER AFTER THE MERGER
------------------------------ ------------------------------
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY PERCENT BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED(1) OF CLASS(%) OWNED(1) OF CLASS(%)
---------------- ---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
First Reserve Corporation(2)............ 5,623,340 5.8 5,623,340 5.8
475 Steamboat Road
Greenwich, CT 06830
FMR Corp.(3)............................ 6,200,050 6.4 6,200,050 6.4
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) Information with respect to beneficial ownership is based on information
furnished by each stockholder or contained in filings made with the
Commission. Unless otherwise indicated below, the persons or group listed
have sole voting and dispositive power with respect to their shares of
Weatherford common stock, and none of such shares are deemed to be owned
because the holder has the right to acquire the shares within 60 days.
(2) Represents shares owned by the following funds (the "First Reserve Funds"),
for each of which First Reserve is the general partner: American Gas & Oil
Investors, Limited Partnership -- 1,292,000 shares; AmGO II, Limited
Partnership -- 807,500 shares; First Reserve Fund V, Limited
Partnership -- 2,185,000 shares; First Reserve Fund V-2, Limited
Partnership -- 608,000 shares; and First Reserve Fund VI, Limited
Partnership -- 698,602 shares. Also includes 32,238 shares owned directly by
First Reserve. First Reserve, in its role as managing general partner of the
First Reserve Funds and acting on behalf of the First Reserve Funds, has the
power to cause each First Reserve Fund to dispose of or vote shares of
Common Stock held by such First Reserve Fund. The principal beneficial
owners of the common stock of First Reserve are its executive officers,
including Mr. Macaulay, President and Chief Executive Officer of First
Reserve, who is also a director of Weatherford.
(3) Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp. ("FMR") and a registered investment adviser, is the
beneficial owner of 5,353,024 shares as a result of acting as investment
adviser to various registered investment companies (the "Funds"). Fidelity
Management Trust Company ("FMTC"), a wholly owned subsidiary of FMR, is the
beneficial owner of 778,781 shares as a result of serving as investment
manager of various institutional accounts. Fidelity International Limited is
the beneficial owner of 49,495 shares and has sole voting and dispositive
power over all such shares. Edward C. Johnson 3d, FMR's Chairman and
principal stockholder, FMR, through its control of Fidelity, and the Funds
each has sole power to dispose of the 5,353,024 shares owned by the Funds
and Mr. Johnson and FMR, through its control of FMTC, each has sole power to
vote and dispose of 709,571 shares owned by the institutional accounts;
however, Mr. Johnson and FMR have no power to vote 69,210 shares owned by
the institutional accounts. The sole power to vote all shares owned by the
Funds resides with the Funds' Boards of Trustees. Fidelity carries out the
voting of the Funds' shares under written guidelines established by the
Funds' Board of Trustees. Additionally, Mr. Johnson and FMR may be deemed to
be the beneficial owner of an additional 18,750 shares resulting from the
assumed conversion of 30,000 of the Debentures. Members of the Mr. Johnson's
family and trusts for their benefit are the predominant owners of Class B
shares of common stock of FMR. Mr. Johnson owns 12.0% and Abigail P.
Johnson, Mr. Johnson's wife and a Director of FMR, owns 24.5% of the voting
stock of FMR. The Johnson family and all other Class B shareholders have
entered into a shareholders' voting agreement under which all Class B shares
will be voted in accordance with the majority vote of Class B shares.
Accordingly, through their ownership of voting common stock and the
execution of the shareholders'
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voting agreement, members of the Johnson family may be deemed, under the
Investment Company Act of 1940, to form a controlling group with respect to
FMR.
CHRISTIANA
The following table gives information, as of the record date, about the
beneficial ownership of Christiana common stock by the persons known to the
Board of Directors to own beneficially more than 5% of the outstanding
Christiana common stock. As used in this proxy statement, "beneficial ownership"
has the meaning set forth in Rule 13d-3 of the Exchange Act. The information is
provided as of the record date except that information regarding Dimensional
Fund Advisors, Inc. is provided as of February 10, 1998, the date on which it
filed its Schedule 13G with the Commission.
<TABLE>
<CAPTION>
NO. OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Sheldon B. Lubar............................................ 968,615(1) 18.8%
Suite 1200
700 North Water Street
Milwaukee, WI 53202
Albert O. Nicholas.......................................... 310,700 6.0%
700 North Water Street
Milwaukee, WI 53202
David J. Lubar.............................................. 427,403 8.2%
Joan P. Lubar(1)............................................ 448,551 8.7%
Kristine L. Thomson(1)...................................... 430,478 8.4%
Susan Solvang(1)............................................ 442,953 8.6%
Dimensional Fund Advisors Inc.(2)........................... 290,100 5.6%
</TABLE>
- ---------------
(1) Joan P. Lubar, Kristine L. Thomson and Susan Solvang (the wife of Oyvind
Solvang, the Vice President of Christiana) are Sheldon B. Lubar's daughters.
Their address is c/o Christiana Companies, Inc., 700 North Water Street,
Suite 1200, Milwaukee, Wisconsin 53202.
(2) Includes 22,100 shares owned by DFA Investment Dimensions Group Inc. (the
"Fund") and 69,000 shares owned by The DFA Investment Trust Company (the
"Trust"). Persons who are officers of Dimensional Fund Advisors Inc. also
serve as officers of the Fund and the Trust, each an open-end management
investment company registered under the Investment Company Act of 1940. In
their capacities as officers of the Fund and the Trust, these persons vote
the shares owned by the Fund and the Trust. Dimensional Fund Advisors Inc.'s
address is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
The information provided with respect to the Fund and the Trust is based on
a Schedule 13G filed with the Commission.
LEGAL MATTERS
The validity of the shares of Weatherford common stock to be issued in
connection with the merger will be passed upon by Fulbright & Jaworski L.L.P.,
1301 McKinney, Suite 5100, Houston, Texas 77010. Uriel E. Dutton, formerly a
director of Weatherford, is a partner of Fulbright & Jaworski L.L.P. Mr. Dutton
currently holds options to purchase 70,000 shares of Weatherford common stock,
which options were granted to him pursuant to Weatherford's Amended and Restated
Non-Employee Director Stock Option Plan. In addition, Curtis W. Huff, who has
been engaged as a special consultant to Fulbright & Jaworski L.L.P. on matters
unrelated to Weatherford and its competitors, is Senior Vice President, General
Counsel and Secretary of Weatherford. Pursuant to an agreement with Weatherford,
Mr. Huff holds 75,000 restricted shares of Weatherford common stock and options
to purchase 200,000 shares of Weatherford common stock.
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EXPERTS
Weatherford's supplemental restated consolidated financial statements as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, and historical consolidated financial statements, prior to
the restatement thereof for the merger of EVI, Inc. and Weatherford Enterra,
Inc., as of December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997, incorporated by reference in this joint proxy
statement/prospectus and the registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
Christiana's consolidated financial statements as of June 30, 1998 and 1997
and for each of the three years in the period ended June 30, 1998, included in
this joint proxy statement/prospectus and the registration statement, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
Weatherford Enterra, Inc.'s consolidated financial statements as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, incorporated by reference in this joint proxy
statement/prospectus and the registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
GulfMark Retained Assets' (a business segment of GulfMark International,
Inc.) financial statements as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996, incorporated by reference in
this joint proxy statement/prospectus and the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The consolidated financial statements of Trico at December 31, 1995 and
1996 and for the years then ended, appearing in Weatherford's Amendment No. 1 to
Form 8-K on Form 8-K/A, dated December 2, 1997 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The combined financial statements for BMW as of March 31, 1997 and 1996,
and for each of the two years in the period ended March 31, 1997, incorporated
by reference in this joint proxy statement/prospectus and the Registration
Statement have been audited by Arthur Andersen LLP, independent chartered
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.
STOCKHOLDERS' PROPOSALS
Any proposals of holders of Weatherford common stock intended to be
presented at the Annual Meeting of Stockholders of Weatherford to be held in
1999 must be submitted in writing and received by Weatherford, addressed to the
Secretary at 5 Post Oak Park, Suite 1760, Houston, Texas 77027, no later than
January 15, 1999, to be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
If the merger is not consummated, any proposals of stockholders of
Christiana intended to be presented at the Annual Meeting of Shareholders of
Christiana to be held in 1998 are required to be received by Christiana,
addressed to the Secretary at 700 North Water Street, Suite 1200, Milwaukee,
Wisconsin 53202, no later than January 29, 1999, to be considered for inclusion
in the proxy statement and form of proxy relating to that meeting.
115
<PAGE> 119
CERTAIN DEFINED TERMS USED IN THIS JOINT PROXY STATEMENT/PROSPECTUS
In this joint proxy statement/prospectus:
- We refer to Weatherford International, Inc., a Delaware corporation,
as "Weatherford". Weatherford was previously known as EVI Weatherford, Inc.
and is the surviving corporation in the merger of EVI, Inc. and Weatherford
Enterra, Inc. that was completed on May 27, 1998.
- We refer to Christiana Acquisition, Inc., a Wisconsin corporation
and wholly owned subsidiary of Weatherford, as "Sub".
- We refer to Christiana Companies, Inc., a Wisconsin corporation, as
"Christiana".
- We refer to C2, Inc., a Wisconsin corporation, as "C2".
- We refer to Total Logistic Control, LLC, a Delaware limited
liability company, as "TLC".
- We refer to the merger of Sub into Christiana as the "merger".
- We refer to the sale by Christiana to C2 of a two-thirds interest in
TLC as the "TLC sale".
- We sometimes refer to the merger and related transactions as the
"transaction".
- We refer to Sheldon Lubar, Chairman of the Board of Directors of
Christiana, and the members of his immediate family as the "Lubar family".
- We refer to the agreement between Weatherford, Christiana, C2 and
Sub concerning the merger as the "merger agreement" and sometimes as the
"amended merger agreement".
- We refer to the merger agreement prior to the most recent amendment
as the "prior merger agreement".
- We refer to the agreement under which C2 will acquire its interest
in TLC as the "TLC purchase agreement".
- We refer to the agreement governing the future operations of TLC as
the "operating agreement".
- We refer to the right of the shareholders of Christiana to purchase
shares of C2 common stock pursuant to the Lubar/C2 agreement as the "C2
offering".
- We refer to the prospectus of C2 relating to the C2 offering as the
"C2 prospectus".
- We refer to the special meeting of Weatherford stockholders to vote
on the merger as the "Weatherford special meeting".
- We refer to the special meeting of Christiana shareholders to vote
on the transaction as the "Christiana special meeting". We also refer to
the Christiana special meeting and the Weatherford special meeting as the
"special meetings".
- We refer to the proposal to approve the merger as the "merger
proposal".
- We refer to the common stock, par value $1.00 per share, of
Weatherford as "Weatherford common stock".
- We refer to the common stock, par value $1.00 per share, of
Christiana as "Christiana common stock".
- We refer to the common stock, par value $.01 per share, of C2 as "C2
common stock".
- We refer to that fraction of a share of Weatherford common stock to
be issued in the merger in exchange for each share of Christiana common
stock as the "Weatherford share consideration".
- We refer to the amount of cash to be paid in respect of each share
of Christiana common stock as the "cash consideration".
116
<PAGE> 120
- We refer to the obligations and liabilities to be assumed by C2 and
TLC pursuant to the TLC purchase agreement as the "C2/TLC assumed
liabilities".
- We refer to the purchases of $10.0 million of Weatherford common
stock made by Christiana pursuant to the amended merger agreement as the
"Weatherford Common Stock Purchases".
- We refer to the purchases of up to $5.0 million of Weatherford
common stock required to be made by Christiana following the Christiana
special meeting, if necessary to qualify the merger as a partially tax free
reorganization, as the "additional purchases of Weatherford common stock".
- We refer to the agreement of Sheldon B. Lubar and certain members of
this family to purchase enough shares of common stock of C2 as is necessary
to raise the $10.67 million needed to fund C2's purchase of a two-thirds
interest in TLC as the "Lubar/C2 agreement".
All information in this joint proxy statement/prospectus relating to
Weatherford (other than tax consequences, which has been supplied by Christiana)
has been supplied by Weatherford and all information relating to Christiana and
C2 has been supplied by Christiana and C2, respectively.
117
<PAGE> 121
CHRISTIANA COMPANIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Earnings for the years ended June
30, 1998, 1997, and 1996.................................. F-3
Consolidated Balance Sheets as of June 30, 1998 and June 30,
1997...................................................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended June 30, 1998, 1997 and 1996.................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997 and 1996.............................. F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Condensed Balance Sheets as of September 30,
1998 (unaudited) and June 30, 1998........................ F-16
Consolidated Condensed Statements of Earnings for the three
months ended September 30, 1998 and 1997 (unaudited)...... F-17
Consolidated Condensed Statements of Shareholders' Equity as
of September 30, 1998 (unaudited)......................... F-18
Consolidated Condensed Statements of Cash Flows for the
three months ended September 30, 1998 and 1997
(unaudited)............................................... F-19
Notes to Consolidated Condensed Financial Statements
(unaudited)............................................... F-20
</TABLE>
F-1
<PAGE> 122
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Christiana Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Christiana
Companies, Inc. (a Wisconsin corporation) and subsidiary as of June 30, 1998 and
1997, and the related consolidated statements of earnings, shareholders' equity
and cash flows for each of the years in the three year period ended June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Christiana Companies, Inc. as of June 30, 1998 and 1997, and the results of
their consolidated operations and their cash flows for each of the three years
in the period ended June 30, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
September 23, 1998
F-2
<PAGE> 123
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Warehousing and Logistic Services................... $90,179,000 $84,208,000 $77,170,000
----------- ----------- -----------
Costs and Expenses:
Warehousing and Logistic Expenses................... 76,057,000 70,973,000 65,418,000
Selling, General & Administrative Expenses.......... 8,364,000 8,656,000 7,531,000
----------- ----------- -----------
84,421,000 79,629,000 72,949,000
----------- ----------- -----------
Earnings From Operations.............................. 5,758,000 4,579,000 4,221,000
----------- ----------- -----------
Other Income (Expense):
Interest Income..................................... 441,000 516,000 531,000
Interest Expense.................................... (2,691,000) (3,166,000) (3,096,000)
Gain (Loss) on Disposal of Assets................... (17,000) (765,000) 2,818,000
Equity in Earnings of Weatherford................... 7,872,000 10,479,000 1,745,000
Other Expense, Net.................................. (1,436,000) (674,000) (208,000)
----------- ----------- -----------
4,169,000 6,390,000 1,790,000
----------- ----------- -----------
Earnings Before Income Taxes.......................... 9,927,000 10,969,000 6,011,000
Income Tax Provision.................................. 3,920,000 4,306,000 2,408,000
----------- ----------- -----------
Net Earnings.......................................... $ 6,007,000 $ 6,663,000 $ 3,603,000
=========== =========== ===========
Basic Net Earnings Per Share.......................... $ 1.17 $ 1.30 $ 0.69
=========== =========== ===========
Diluted Net Earnings Per Share........................ $ 1.15 $ 1.29 $ 0.69
=========== =========== ===========
Weighted Average Number of Shares Outstanding......... 5,142,963 5,136,630 5,186,679
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 124
CHRISTIANA COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF JUNE 30
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents................................. $ 5,539,000 $ 2,888,000
Short-Term Investments.................................... -- 4,611,000
Accounts Receivable, Net.................................. 8,342,000 7,649,000
Inventories, Prepaids and Other Assets.................... 1,330,000 978,000
Current Portion of Mortgage Notes Receivable.............. 347,000 --
Deferred Tax Asset........................................ 1,445,000 750,000
------------ ------------
Total Current Assets.............................. 17,003,000 16,876,000
------------ ------------
Long-Term Assets:
Investment in Weatherford International Inc............... 144,206,000 41,257,000
Mortgage Notes Receivable................................. 185,000 1,749,000
Fixed Assets, Net......................................... 71,112,000 75,604,000
Goodwill.................................................. 5,435,000 5,592,000
Other Assets.............................................. 1,300,000 1,277,000
------------ ------------
Total Long-Term Assets............................ 222,238,000 125,479,000
------------ ------------
TOTAL ASSETS...................................... $239,241,000 $142,355,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of Credit............................................ $ 239,000 $ --
Current Portion of Long-Term Debt......................... 3,003,000 3,531,000
Accounts Payable.......................................... 3,505,000 3,526,000
Accrued Liabilities....................................... 6,763,000 5,562,000
------------ ------------
Total Current Liabilities......................... 13,510,000 12,619,000
------------ ------------
Long-Term Liabilities:
Long-Term Debt............................................ 27,122,000 36,149,000
Deferred Tax Liability.................................... 61,207,000 20,288,000
Other Liabilities......................................... 1,173,000 1,214,000
------------ ------------
Total Long-Term Liabilities....................... 89,502,000 57,651,000
------------ ------------
Total Liabilities................................. 103,012,000 70,270,000
------------ ------------
Shareholders' Equity:
Preferred Stock........................................... -- --
Common Stock.............................................. 5,209,000 5,196,000
Additional Paid-In Capital................................ 12,347,000 12,022,000
Unrealized Gain on Securities Available for Sale.......... 57,799,000 --
Treasury Stock, at Cost................................... (1,236,000) (1,236,000)
Retained Earnings......................................... 62,110,000 56,103,000
------------ ------------
Total Shareholders' Equity........................ 136,229,000 72,085,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $239,241,000 $142,355,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 125
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(1)(2)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
COMMON STOCK TREASURY STOCK ADDITIONAL SECURITIES
---------------------- --------------------- PAID-IN AVAILABLE RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL FOR SALE EARNINGS TOTAL
--------- ---------- ------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30,
1995.................. 5,195,630 $5,196,000 -- $ -- $12,022,000 $ -- $41,492,000 $ 58,710,000
Purchase of Treasury
Stock................. -- -- (59,000) (1,236,000) -- -- -- (1,236,000)
Net Earnings............ -- -- -- -- -- -- 3,603,000 3,603,000
--------- ---------- ------- ----------- ----------- ----------- ----------- ------------
Balance, June 30,
1996.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $ -- $45,095,000 $ 61,077,000
Weatherford Stock
Issuance.............. -- -- -- -- -- -- 4,345,000 4,345,000
Net Earnings............ -- -- -- -- -- -- 6,663,000 6,663,000
--------- ---------- ------- ----------- ----------- ----------- ----------- ------------
Balance, June 30,
1997.................. 5,195,630 $5,196,000 (59,000) $(1,236,000) $12,022,000 $ -- $56,103,000 $ 72,085,000
Unrealized Gain on
Securities Available
for Sale.............. -- -- -- -- -- 57,799,000 -- 57,799,000
Exercise of Options..... 12,700 13,000 -- -- 325,000 -- -- 338,000
Net Earnings............ -- -- -- -- -- -- 6,007,000 6,007,000
--------- ---------- ------- ----------- ----------- ----------- ----------- ------------
Balance, June 30,
1998.................. 5,208,330 $5,209,000 (59,000) $(1,236,000) $12,347,000 $57,799,000 $62,110,000 $136,229,000
========= ========== ======= =========== =========== =========== =========== ============
</TABLE>
- ---------------
(1) Preferred stock: $10 par value, 1,000,000 shares authorized, none issued.
(2) Common stock: $1 par value, 12,000,000 shares authorized.
See notes to consolidated financial statements.
F-5
<PAGE> 126
CHRISTIANA COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30
-----------------------------------------
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings.......................................... $ 6,007,000 $ 6,663,000 $ 3,603,000
Adjustments to Reconcile Net Earnings to Net Cash
Provided By Operating Activities:
Depreciation and Amortization....................... 6,678,000 7,155,000 7,159,000
(Gain) Loss on Disposal of Assets................... 177,000 765,000 (3,024,000)
Deferred Income Tax (Benefit) Provision............. 2,955,000 4,813,000 (1,084,000)
Equity in Earnings of Weatherford................... (7,872,000) (10,479,000) (1,745,000)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable.......... (693,000) 645,000 (34,000)
(Increase) Decrease in Inventories.................. 119,000 (166,000) (191,000)
(Increase) Decrease in Prepaids and Other Assets.... (565,000) (303,000) 788,000
Increase (Decrease) in Accounts Payable and Accrued
Liabilities...................................... 1,138,000 90,000 3,091,000
----------- ------------ ------------
Net Cash Provided By Operating Activities............. 7,944,000 9,183,000 8,563,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (Purchase of) Short-Term Investments,
Net.............................................. 4,611,000 (3,861,000) 2,072,000
Investments Capital Expenditures.................... (2,829,000) (3,488,000) (19,715,000)
(Increase) Decrease in Mortgage Notes Receivable.... 1,217,000 1,565,000 (109,000)
Proceeds from Sales of Assets....................... 686,000 2,743,000 8,894,000
----------- ------------ ------------
Net Cash Provided By (Used In) Investing Activities... 3,685,000 (3,041,000) (8,858,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (Payments) on Line of Credit, Net........ 239,000 (1,354,000) (489,000)
Proceeds from Issuance of Common Stock.............. 338,000 -- --
Proceeds from Notes Payable......................... -- -- 9,011,000
Stock Repurchase.................................... -- -- (1,236,000)
Payments of Long-Term Debt.......................... (9,555,000) (5,628,000) (3,638,000)
----------- ------------ ------------
Net Cash Provided By (Used In) Financing Activities... (8,978,000) (6,982,000) 3,648,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 2,651,000 (840,000) 3,353,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.......... 2,888,000 3,728,000 375,000
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR................ $ 5,539,000 $ 2,888,000 $ 3,728,000
=========== ============ ============
Supplemental Disclosures of Cash Flow Information:
Interest Paid....................................... $ 2,683,000 $ 3,190,000 $ 3,228,000
Income Taxes Paid................................... $ 813,000 $ 1,396,000 $ 2,579,000
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 127
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THREE YEARS ENDED JUNE 30, 1997)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business: At June 30, 1998, Christiana is engaged in
providing public refrigerated and dry (non-refrigerated) warehousing and
logistic services; and owning 3,897,462 shares of Weatherford International,
Inc. common stock which represents an approximate 4% ownership interest.
Revenue Recognition: Transportation revenue is recognized when the goods
are delivered to the customer. Warehousing revenue is recognized as services are
provided. Costs and related expenses are recorded as incurred.
Principles of Consolidation: The consolidated financial statements include
the accounts of Christiana Companies, Inc., ("Christiana") and its wholly-owned
subsidiary (together with Christiana referred to as the "Company"). All material
intercompany transactions have been eliminated in consolidation.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Short-Term Investments: Short-term investments consist of U.S. Treasury
securities and commercial paper maturing in less than one year. These
investments are carried at amortized cost, which approximates fair value.
Accounts Receivable: Accounts receivable are presented net of a reserve for
bad debts of $222,000 and $333,000 at June 30, 1998 and 1997, respectively. The
provision for bad debts was $119,000, $227,000 and $123,000 for the years ended
June 30, 1998, 1997 and 1996, respectively.
Inventories: Inventories consist predominately of transportation equipment
repair parts. These items are carried at their lower of FIFO (first-in,
first-out) cost or market value.
Investment in Weatherford International, Inc.: Prior to May 27, 1998, the
Company accounted for its investment in Weatherford under the equity method. As
such, the Company's proportionate share of Weatherford earnings through May 27,
1998, is recorded in the statement of earnings as "Equity in Earnings of
Weatherford International, Inc." On May 27, 1998, Weatherford acquired
Weatherford Enterra, Inc. issuing additional shares of common stock which
reduced the Company's ownership percentage to approximately 4%. As a result of
this reduction in ownership, the Company no longer accounts for this investment
under the equity method; but rather accounts for its investment in Weatherford
using the cost method. Under the cost method, only dividends paid by Weatherford
will be reflected in future earnings of the Company.
The Company has classified its investment in Weatherford as "available-for
sale." Accordingly, the Weatherford shares owned by the Company (3,897,462
shares as of June 30, 1998) are recorded at their fair market value on the
balance sheet. Unrealized gains, net of deferred taxes, in the amount of
$57,799,000, are reflected as an increase to Shareholders' Equity.
Mortgage Notes Receivable: At June 30, 1998, mortgage notes receivable,
derived from condominium sales, totaled $532,000 and accrue interest at rates
ranging from 7.250% to 8.500%.
The principal balance of mortgage notes receivable matures as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
- ------------------
<S> <C>
1999......................... $347,000
2000......................... 3,000
2001......................... 3,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
- ------------------
<S> <C>
2002......................... $ 3,000
2003......................... 4,000
Thereafter................... 172,000
</TABLE>
F-7
<PAGE> 128
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the years ended June 30, 1998 and 1997, mortgage notes receivable of
$1,170,000 and $1,882,000, respectively, were sold or prepaid.
Fixed Assets: Fixed assets are carried at cost less accumulated
depreciation, which is computed using both straight-line and accelerated methods
for financial reporting purposes. The cost of major renewals and improvements
are capitalized; repair and maintenance costs are expensed as incurred. A
summary of the cost of fixed assets and the estimated useful lives for financial
reporting purposes is as follows:
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------- ESTIMATED
1998 1997 USEFUL LIVES
------------ ------------ ------------
<S> <C> <C> <C>
Fixed Assets:
Land........................................ $ 3,331,000 $ 3,380,000 --
Machinery and Equipment..................... 53,644,000 53,171,000 5-7 years
Buildings and Improvements.................. 41,488,000 41,534,000 30-32 years
Construction-In-Progress.................... 616,000 451,000 --
Less: Accumulated Depreciation.............. (27,967,000) (22,932,000)
------------ ------------
$ 71,112,000 $ 75,604,000
============ ============
</TABLE>
Goodwill: Goodwill is amortized on a straight-line basis over 40 years
($157,000 in 1998, 1997 and 1996). The accumulated amortization at June 30, 1998
and 1997 was $723,000 and $566,000, respectively. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life may warrant revision or that the remaining
balance of goodwill may not be recoverable. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of
undiscounted cash flows over the remaining life of the goodwill measuring
whether the goodwill is impaired. If impaired, a loss is recognized for the
amount that the carrying value exceeds the fair value.
Long-Lived Assets: During fiscal 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-lived Assets and Assets to be Disposed of." Adoption of this standard
did not have a material impact on the Company's financial position or results of
operations. The Company continually evaluates whether events and circumstances
have occurred that may indicate the remaining estimated useful life may warrant
revision or that the remaining balance of long-lived assets may be not
recoverable. When factors indicate that long-lived assets should be evaluated
for possible impairment, the Company uses an estimate of the undiscounted cash
flows over the remaining life of the long-lived assets measuring whether these
assets are impaired. If impaired, a loss is recognized for the amount that the
carrying value exceeds the fair value.
Other Assets: Other Assets primarily represent deferred charges and cash
surrender value of officer's life insurance.
Income Taxes: Deferred income taxes are provided on the temporary
differences in the carrying values of assets and liabilities for financial
reporting and income tax purposes.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with original maturities of less than ninety days to be cash
equivalents.
Reclassifications: Certain reclassifications have been made in the 1997
statements to conform with 1998 presentation.
F-8
<PAGE> 129
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
B. WEATHERFORD INTERNATIONAL, INC. MERGER AGREEMENT:
On December 12, 1997, the Company entered into an agreement with
Weatherford International, Inc. ("Weatherford") whereby Weatherford will
purchase all of the outstanding shares of the Company. The terms of the merger
provide that each Christiana common share will be converted into (i) .7453
shares of Weatherford International, Inc. common stock, (ii) cash in the
approximate amount of $4.00, depending upon the balance of certain assets and
liabilities at the time of closing and (iii) a contingent cash payment of
approximately $1.92 after 5 years, subject to the incurrence of any indemnity
claims by Weatherford during this period.
On August 17, 1998, the shareholders of both Weatherford and Christiana
overwhelmingly approved the Merger agreement and sale of Total Logistic Control
to C2, Inc. However, due to the recent decline in the value of Weatherford's
common stock price, the merger transaction was postponed until the conditions
are met for Christiana's shareholders to not recognize any taxable gain or loss
on their exchange of Christiana shares for Weatherford common stock in the
merger. To meet this requirement, Weatherford's stock price must be
approximately $30.00 per share. As of September 23, 1998, the fair market value
of this investment decreased from $144.2 million at June 30, 1998 to
approximately $97.4 million as a result of market fluctuations.
By its terms, the Merger Agreement may be terminated by either party after
October 31, 1998. Currently, both Christiana and Weatherford are monitoring
Weatherford's stock price and will close the merger on or prior to October 31,
1998, if it exceeds $30.00 per share and all other requirements remain
satisfied.
As of June 30, 1998, the Company has deferred approximately $773,000 of
transaction costs related to the merger. If the merger is not completed, these
costs will be charged to earnings during fiscal 1999 at the time of termination.
Total merger related costs that would ultimately be charged to earnings,
including those amounts deferred at June 30, 1998, are estimated at
approximately $1.8 million.
C. INDEBTEDNESS:
The following is a summary of consolidated indebtedness:
<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Christiana Corporate
Notes Payable............................................ $ -- $ 2,286,000
Total Logistic Control, LLC
Revolving Credit Agreement............................... 27,273,000 31,248,000
Notes Payable, Equipment Related......................... 1,088,000 4,382,000
Subordinated Note........................................ 1,764,000 1,764,000
----------- -----------
Subtotal......................................... 30,125,000 39,680,000
Less: Current Portion of Long-Term Debt.................... (3,003,000) (3,531,000)
----------- -----------
Long-Term Debt............................................. $27,122,000 $36,149,000
=========== ===========
</TABLE>
Christiana has a $15,000,000 unsecured line of credit, renewable annually.
Borrowings under this line bear interest at either the London Interbank Offered
Rate ("LIBOR") plus 125 basis points, or prime at the Company's option. No
compensating balances are required under the terms of this credit facility.
There were no borrowings under this credit line in fiscal 1998 or 1997.
Total Logistic Control, LLC ("TLC") has a $5,000,000 line of credit with a
bank, renewable annually. Borrowings under this credit facility bear interest at
either LIBOR plus 200 basis points or the bank's prime rate (8.5% at June 30,
1998) and are secured by certain accounts receivable. As of June 30, 1998 and
1997, $239,000 and $0 was outstanding under this line. This line of credit was
terminated on August 5, 1998.
F-9
<PAGE> 130
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TLC has a revolving credit agreement that provides for borrowings at June
30, 1998 up to $35,000,000. Borrowings under this agreement mature on March 31,
2001 and bear interest, payable monthly at either LIBOR plus 125 basis points
(6.906% at June 30, 1998) or the bank's prime rate (8.5% at June 30, 1998) and
are unsecured. The revolving credit agreement requires, among other things, that
defined levels of net worth and debt service coverage be maintained and
restricts certain activities including limitation on new indebtedness and the
disposition of assets. As of June 30, 1998, the Company was in compliance with
all covenants. No compensating balances are required under the terms of this
credit facility.
TLC's notes payable relate to specific equipment purchases, primarily
transportation and material handling equipment and are secured by specified
assets. These notes bear interest on both fixed and floating terms ranging from
6.375% to 9.37%. No compensating balances are required under the terms of these
credit arrangements. TLC's subordinated note bears interest at 8% and was
incurred in the redemption of a former shareholder's ownership coincident with
the sale to Christiana. This obligation is guaranteed by Christiana.
Future maturities of consolidated indebtedness are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30 TOTAL
---------- -----------
<S> <C>
1999........................................................ $ 3,003,000
2000........................................................ 5,008,000
2001........................................................ 22,114,000
</TABLE>
D. INCOME TAXES:
The Income Tax Provision consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Current
Federal...................................... $ 837,000 $ (442,000) $ 3,029,000
State........................................ 128,000 (65,000) 463,000
Deferred....................................... 2,955,000 4,813,000 (1,084,000)
---------- ---------- -----------
$3,920,000 $4,306,000 $ 2,408,000
========== ========== ===========
</TABLE>
The components of Deferred Income Taxes are:
<TABLE>
<CAPTION>
AT JUNE 30
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred Tax Assets:
Accrued Expenses and Other Reserves...................... $ 1,722,000 $ 1,612,000
----------- -----------
Total Deferred Tax Assets........................ $ 1,722,000 $ 1,612,000
----------- -----------
Deferred Tax Liabilities:
Tax Over Book Depreciation............................... $12,795,000 $12,329,000
Unrealized Gain on Weatherford shares.................... 37,270,000 --
Equity in Earnings of Weatherford........................ 7,854,000 4,767,000
Weatherford Stock Issuance............................... 2,787,000 2,787,000
Installment Sales........................................ -- 407,000
Other.................................................... 779,000 860,000
----------- -----------
Total Deferred Tax Liability..................... 61,485,000 21,150,000
----------- -----------
Net Deferred Tax Liability................................. $59,763,000 $19,538,000
=========== ===========
</TABLE>
F-10
<PAGE> 131
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory Federal Income Tax Rate........................... 34% 35% 34%
Increase (Reduction) in Taxes Resulting From:
State Income Tax, Net..................................... 4 5 5
Other, Net................................................ 1 (1) 1
== == ==
39% 39% 40%
== == ==
</TABLE>
E. STOCK OPTIONS AND EMPLOYEE BENEFIT PLAN:
The Company has 295,000 shares of its common stock reserved for issuance
under a stock option plan, which permits the granting of options as well as
appreciation rights and awards. During fiscal 1998, options totaling 16,666 were
cancelled and 12,700 options were exercised. During fiscal 1997, options for a
total of 40,000 shares were granted at exercise prices of $21.50 and $22.25.
During fiscal 1996, options for a total of 100,000 shares were granted at an
exercise price of $24.25 per share. At June 30, 1998 and 1997, 52.8% and 36.0%,
respectively, of total options granted were exercisable. The remaining options
are exercisable over the next six years.
As of June 30, 1998, the total number of stock options outstanding and
those currently exercisable were 254,384 and 134,384, respectively. The
weighted-average exercise price of total stock options outstanding and those
currently exercisable was $27.49 and $28.31, respectively. Additionally, the
weighted average contractual life of stock options outstanding as of June 30,
1998 was 2.2 years.
Changes in stock options outstanding are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
--------- ---------------
<S> <C> <C>
Balance, June 30, 1995................................... 151,250 26.000 - 34.375
Options Granted........................................ 100,000 24.250
Options Cancelled...................................... 7,500 27.125 - 34.375
------- ---------------
Balance, June 30, 1996................................... 243,750 24.250 - 34.375
Options Granted........................................ 40,000 21.500 - 22.250
------- ---------------
Balance, June 30, 1997................................... 283,750 21.500 - 34.375
Options Cancelled...................................... 16,666 22.250
Options Exercised...................................... 12,700 24.250 - 30.150
------- ---------------
Balance, June 30, 1998................................... 254,384 21.500 - 34.375
======= ===============
</TABLE>
Pro forma information regarding net income and earnings per share is
required by Statement of Financial Accounting Standards No. 123 and has been
determined as if the Company had accounted for its stock options under the fair
value method as provided therein. The fair value of each option is estimated on
the date of the grant using an option pricing model with the following
weighted-average assumptions used for options issued in fiscal 1997 and 1996,
respectively: risk-free interest rate of 6.5%; expected remaining lives of 5 and
6 years; expected volatility of 25% and 20%; and no expected dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net earnings and earnings per share as
reported and pro forma, as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects on reported net
F-11
<PAGE> 132
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
income for future years, because as provided by SFAS No. 123, only the effects
of awards granted after July 1, 1996 are considered in the pro forma
calculation.
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
------------------------ ------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net Earnings................................. $6,007,000 $5,767,000 $6,663,000 $6,282,000
Basic Earnings Per Share..................... $ 1.17 $ 1.12 $ 1.30 $ 1.22
</TABLE>
The Company has a 401(k) plan covering substantially all of its employees.
The costs under this plan have not been material. The Company does not provide
post employment medical or life insurance benefits.
F. COMMITMENTS:
TLC has operating leases for certain warehousing and office facilities.
Rental expense under these leases was $6,812,000, $7,213,000 and $5,479,000 in
fiscal 1998, 1997 and 1996, respectively. At June 30, 1998, future minimum lease
payments under these operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30
----------
<S> <C>
1999........................................................ $4,226,000
2000........................................................ 3,765,000
2001........................................................ 3,304,000
2002........................................................ 2,630,000
2003........................................................ 1,825,000
Thereafter.................................................. 8,456,000
</TABLE>
G. EARNINGS PER SHARE:
In fiscal 1998, the Company adopted SFAS No. 128, "Earnings per Share". As
a result, a summary of basic and diluted earnings per share for the years ended
June 30, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Basic Earnings per share:
Net income available to common shareholders.... $6,007,000 $6,663,000 $3,603,000
========== ========== ==========
Average shares of common stock outstanding..... 5,142,963 5,136,630 5,186,679
Basic earnings per share....................... $ 1.17 $ 1.30 $ 0.69
========== ========== ==========
Diluted earnings per share:
Average shares of common stock outstanding..... 5,142,963 5,136,630 5,186,679
Incremental common shares applicable to common
stock options............................... 66,290 22,974 --
---------- ---------- ----------
Average common shares assuming full dilution... 5,209,253 5,159,604 5,186,679
Diluted earnings per share..................... $ 1.15 $ 1.29 $ 0.69
========== ========== ==========
</TABLE>
F-12
<PAGE> 133
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
H. WEATHERFORD INTERNATIONAL, INC. SUMMARY FINANCIAL INFORMATION:
The following represents summarized financial information for Weatherford
International, Inc. Weatherford's fiscal year ends on December 31, 1997. For
more information regarding Weatherford's financial condition and operations,
reference is made to Weatherford's Form 10-K filed with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1997 1996
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Current Assets.............................................. $ 631,025 $558,681
Noncurrent Assets........................................... 735,041 294,162
---------- --------
Total Assets...................................... $1,366,066 $852,843
========== ========
Current Liabilities......................................... $ 314,165 $233,126
Noncurrent Liabilities...................................... 524,668 165,633
Stockholders' Equity........................................ 527,233 454,084
---------- --------
Total Liabilities & Stockholders' Equity.......... $1,366,066 $852,843
========== ========
</TABLE>
SUMMARIZED INCOME STATEMENTS
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues.................................................. $ 892,264 $ 478,020 $ 351,587
Operating Expenses........................................ (750,260) (431,733) (319,147)
Other Expenses, Net....................................... (13,350) (14,741) (16,049)
--------- --------- ---------
Income Before Taxes....................................... 128,654 31,546 16,391
Provision for Taxes....................................... (44,959) (7,041) (5,080)
--------- --------- ---------
Income from Continuing Operations......................... 83,695 24,505 11,311
Discontinued Operations, Net of Taxes..................... -- 74,392 --
--------- --------- ---------
Income before Extraordinary Item.......................... 83,695 98,897 11,311
Extraordinary Item........................................ (9,010) (731) --
--------- --------- ---------
Net Income................................................ $ 74,685 $ 98,166 $ 11,311
========= ========= =========
Earnings per Share........................................ $ 1.62 $ 2.41 $ 0.38
========= ========= =========
</TABLE>
During fiscal 1997, Weatherford issued additional stock in a public
offering. The Company's proportionate share of the gain was $4,345,000 and is
reflected as an increase in retained earnings in the consolidated statement of
Shareholders' Equity.
Included in the Company's retained earnings is $16,598,000 of undistributed
earnings related to its' investment in Weatherford.
I. ACCOUNTING PRONOUNCEMENTS:
Effective July 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and display of comprehensive
income and its components. Components of comprehensive income are net income and
all
F-13
<PAGE> 134
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other non-shareholder changes in equity. For the quarter ended September 30,
1998, the Company will be required to show components of comprehensive income in
a separate financial statement.
Effective July 1, 1998, the Company adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." This statement establishes
standards for the way that a public company reports information about operating
segments in its annual financial statements. It also requires the company to
report selected information about operating segments in its interim financial
reports. This statement requires that a public company report financial and
descriptive information about its operating segments based on the way that the
chief operating decision maker organizes segments within the company for making
operating decisions and assessing performance. For the quarter ended September
30, 1998, the Company will be required to disclose segment information in the
notes to financial statements.
F-14
<PAGE> 135
CHRISTIANA COMPANIES, INC.
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER DECEMBER MARCH JUNE TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FISCAL 1998
Revenues...................... $23,047,000 $23,667,000 $21,865,000 $21,600,000 $90,179,000
Earnings From Operations...... 1,617,000 1,438,000 1,066,000 1,637,000 5,758,000
Earnings Before Taxes......... 2,438,000 1,441,000 3,001,000 3,047,000 9,927,000
Net Earnings.................. 1,485,000 858,000 1,833,000 1,831,000 6,007,000
Basic Earnings Per Share...... $ 0.29 $ 0.17 $ 0.36 $ 0.35 $ 1.17
Diluted Earnings Per Share.... $ 0.29 $ 0.16 $ 0.35 $ 0.35 $ 1.15
FISCAL 1997
Revenues...................... $20,480,000 $20,342,000 $22,450,000 $20,936,000 $84,208,000
Earnings From Operations...... 1,489,000 1,525,000 1,093,000 472,000 4,579,000
Earnings Before Taxes......... 1,767,000 6,126,000* 1,671,000 1,405,000 10,969,000
Net Earnings.................. 1,083,000 3,730,000 1,019,000 831,000 6,663,000
Basic Earnings Per Share...... $ 0.21 $ 0.73 $ 0.20 $ 0.16 $ 1.30
Diluted Earnings per Share.... $ 0.21 $ 0.73 $ 0.20 $ 0.16 $ 1.30
</TABLE>
- ---------------
* Includes $5,715,000 of gain on the sale of Mallard Drilling, a Weatherford
subsidiary.
FIVE YEAR FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Product Sales............ $ -- $ -- $ -- $ 55,239,000 $ 46,428,000
Warehousing and TLC
Services............ 90,179,000 84,208,000 77,170,000 71,642,000 43,725,000
------------ ------------ ------------ ------------ ------------
90,179,000 84,208,000 77,170,000 126,881,000 90,153,000
Net Earnings............... 6,007,000 6,663,000 3,603,000 5,062,000 3,121,000
Basic Earnings Per Share... $ 1.17 $ 1.30 $ 0.69 $ 0.96 $ 0.59
Total Assets............... 239,241,000 142,355,000 131,018,000 121,742,000 147,565,000
Long-Term Liabilities...... 89,502,000 57,651,000 57,926,000 51,388,000 67,154,000
Shareholders' Equity....... 136,229,000 72,085,000 61,077,000 58,710,000 60,088,000
</TABLE>
F-15
<PAGE> 136
CHRISTIANA COMPANIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
------------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................. $ 5,286,000 $ 5,539,000
Accounts receivable, net.................................. 9,172,000 8,342,000
Inventories, prepaids and other........................... 3,839,000 2,775,000
Current portion of mortgage notes receivable.............. -- 347,000
------------ ------------
Total Current Assets.............................. 18,297,000 17,003,000
------------ ------------
Long-Term Assets:
Investment in Weatherford................................. 84,283,000 144,206,000
Mortgage notes receivable................................. 187,000 185,000
Fixed assets, net......................................... 69,906,000 71,112,000
Other assets.............................................. 6,678,000 6,735,000
------------ ------------
Total Long-Term Assets............................ 161,054,000 222,238,000
------------ ------------
$179,351,000 $239,241,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 4,248,000 $ 3,505,000
Accrued liabilities....................................... 6,822,000 6,763,000
Line of credit............................................ -- 239,000
Current portion of long-term debt......................... 2,630,000 3,003,000
------------ ------------
Total Current Liabilities......................... 13,700,000 13,510,000
------------ ------------
Long-Term Liabilities:
Long-term debt............................................ 26,275,000 27,122,000
Deferred federal and state income taxes................... 37,917,000 61,207,000
Other liabilities......................................... 1,162,000 1,173,000
------------ ------------
Total Long-Term Liabilities....................... 65,354,000 89,502,000
------------ ------------
Total Liabilities................................. 79,054,000 103,012,000
------------ ------------
Shareholders' Equity:
Preferred stock
Common stock, par value $1 per share; authorized
12,000,000 shares; issued 5,208,330.................... 5,209,000 5,209,000
Additional paid-in capital................................ 12,347,000 12,347,000
Unrealized gain on securities available for sale.......... 21,365,000 57,799,000
Treasury stock, at cost................................... (1,236,000) (1,236,000)
Retained earnings......................................... 62,612,000 62,110,000
------------ ------------
Total Shareholders' Equity........................ 100,297,000 136,229,000
------------ ------------
$179,351,000 $239,241,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 137
CHRISTIANA COMPANIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Warehousing and logistic services......................... $22,370,000 $23,047,000
----------- -----------
Costs and Expenses:
Warehousing and logistic services......................... 18,633,000 19,201,000
Selling, general and administrative....................... 2,365,000 2,229,000
----------- -----------
20,998,000 21,430,000
----------- -----------
Earnings from Operations.................................... 1,372,000 1,617,000
Other Income (Expense):
Interest income........................................... 80,000 132,000
Interest expense.......................................... (573,000) (752,000)
Equity in earnings of Weatherford......................... -- 1,937,000
Other income (expense), net............................... (54,000) (496,000)
----------- -----------
(547,000) 821,000
----------- -----------
Earnings before income taxes................................ 825,000 2,438,000
Income tax provision........................................ 323,000 953,000
----------- -----------
Net Earnings................................................ $ 502,000 $ 1,485,000
=========== ===========
Basic Earnings per Share.................................... $ 0.10 $ 0.29
=========== ===========
Diluted Earnings per Share.................................. $ 0.10 $ 0.29
=========== ===========
Weighted average number of shares outstanding............... 5,149,330 5,136,630
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE> 138
CHRISTIANA COMPANIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ------- -----------
<S> <C> <C> <C> <C>
Balance, June 30, 1998......................... 5,208,330 $5,209,000 (59,000) $(1,236,000)
--------- ---------- ------- -----------
Unrealized loss on securities available for
sale...................................... -- -- -- --
Net earnings for the three months ended
September 30, 1998 (unaudited)............ -- -- -- --
--------- ---------- ------- -----------
Balance, September 30, 1998.................... 5,208,330 $5,209,000 (59,000) $(1,236,000)
========= ========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
ADDITIONAL SECURITIES
PAID-IN AVAILABLE RETAINED
CAPITAL FOR SALE EARNINGS TOTAL
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1998.................. $12,347,000 $57,799,000 $62,110,000 $136,229,000
----------- ----------- ----------- ------------
Unrealized loss on securities
available for sale................. -- (36,434,000) -- (36,434,000)
Net earnings for the three months
ended September 30, 1998
(unaudited)........................ -- -- 502,000 502,000
----------- ----------- ----------- ------------
Balance, September 30, 1998............. $12,347,000 $21,365,000 $62,612,000 $100,297,000
=========== =========== =========== ============
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE> 139
CHRISTIANA COMPANIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 502,000 $ 1,485,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization........................ 1,735,000 1,708,000
Deferred income tax expenses......................... 200,000 1,171,000
Equity in earnings of Weatherford.................... -- (1,937,000)
Changes in assets and liabilities:
Increase in accounts receivable...................... (830,000) (2,419,000)
(Increase) decrease in other assets.................. (1,125,000) 254,000
Increase in accounts payable and accrued
liabilities......................................... 791,000 1,525,000
----------- -----------
Net cash provided by operating activities................... 1,273,000 1,787,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments, net................... -- (1,987,000)
Capital expenditures...................................... (546,000) (1,029,000)
Proceeds from sale of assets.............................. 134,000 --
Decrease in mortgage notes receivable..................... 345,000 3,000
----------- -----------
Net cash (used in) investing activities..................... (67,000) (3,013,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings on credit lines................. (239,000) 944,000
Net payments of notes and loans payable................... (1,220,000) (2,020,000)
----------- -----------
Net cash (used in) financing activities..................... (1,459,000) (1,076,000)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS................. (253,000) (2,302,000)
BEGINNING CASH AND CASH EQUIVALENTS, July 1................. 5,539,000 2,888,000
----------- -----------
ENDING CASH AND CASH EQUIVALENTS, September 30.............. $ 5,286,000 $ 586,000
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 573,000 $ 765,000
Income taxes paid......................................... 401,000 --
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE> 140
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- ACCOUNTING POLICIES
The accompanying unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to present fairly the results
for the interim periods presented and should be read in conjunction with the
Company's 1998 Annual Report on Form 10-K.
NOTE 2 -- INVESTMENT IN WEATHERFORD INTERNATIONAL, INC.
Prior to May 27, 1998, the Company accounted for its investment in
Weatherford under the equity method. As such, the Company's proportionate share
of Weatherford earnings through May 27, 1998, is recorded in the statement of
earnings as "Equity in Earnings of Weatherford." On May 27, 1998, Weatherford
acquired Weatherford Enterra, Inc. issuing additional shares of common stock
which reduced the Company's ownership percentage to approximately 4%. As a
result of this reduction in ownership, the Company no longer accounts for this
investment under the equity method; but rather accounts for its investment in
Weatherford using the cost method. Under the cost method, only dividends paid by
Weatherford will be reflected in future earnings of the Company.
The Company has classified its investment in Weatherford as
"available-for-sale." Accordingly, the Weatherford shares owned by the Company
(3,897,462 shares as of September 30, 1998) are recorded at their fair market
value on the balance sheet. Unrealized gains, net of deferred taxes, in the
amount of $21,365,000, are reflected as an increase to Shareholders' Equity.
NOTE 3 -- WEATHERFORD/CHRISTIANA MERGER
On October 14, 1998, Christiana and Weatherford International, Inc.
announced amended merger terms which were designed both to improve the terms for
Christiana shareholders and to increase substantially the likelihood of
completing the merger on a partially tax free basis. The amended terms eliminate
a $10 million contingent holdback that was previously required and commits
Christiana to purchase at least $10 million of Weatherford common stock, plus up
to an additional $5 million of Weatherford share purchases, if necessary, to
allow for the stock consideration in the merger to be received by the Christiana
shareholders to be on a tax-free basis. The cash component in the merger is
anticipated to be between $3.00 and $4.00 per Christiana share depending on if
any of the additional $5 million Weatherford common share purchases are
completed. Completion of the merger, as amended, is subject to various
conditions, including approvals by Weatherford and Christiana shareholders.
NOTE 4 -- COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes rules for the reporting of
comprehensive income and its components. The Company's comprehensive income
components consist of net income and unrealized gains on securities available
for sale and are presented in the Consolidated Statement of Shareholders'
Equity. For interim reporting, the Company has chosen to disclose comprehensive
income in the notes to financial statements. The components of comprehensive
income for the three months ended September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
------------ ----------
<S> <C> <C>
Net income.................................................. $ 502,000 $1,485,000
Unrealized loss on securities held for sale, net of taxes... (36,434,000) --
------------ ----------
Total comprehensive income/(loss)................. $(35,932,000) $1,485,000
============ ==========
</TABLE>
F-20
<PAGE> 141
CHRISTIANA COMPANIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- EARNINGS PER SHARE
In fiscal 1998, the Company adopted SFAS No. 128, "Earnings per Share." The
following is a reconciliation of basic and diluted earnings per share for the
quarters ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Basic Earnings per Share:
Net income available to common shareholders............... $ 502,000 $1,485,000
Average shares of common stock outstanding................ 5,149,330 5,136,630
---------- ----------
Basic earnings per share.................................. $ 0.10 $ 0.29
========== ==========
Diluted Earnings per Share:
Average shares of common stock outstanding................ 5,149,330 5,136,630
Incremental common shares applicable to common stock
options................................................ 1,898 70,483
---------- ----------
Average common shares assuming full dilution.............. 5,151,228 5,207,113
---------- ----------
Diluted earnings per share................................ $ 0.10 $ 0.29
========== ==========
</TABLE>
NOTE 6 -- ACCOUNTING PRONOUNCEMENTS
The Company is currently researching SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
This statement shall be effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. Earlier application of all provisions of this
statement is permitted. This statement shall not be applied retroactively to
financial statements of prior periods. This statement is expected not to impact
the Company's operating results or financial position as the Company does not
currently use derivative financial instruments.
F-21
<PAGE> 142
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
WEATHERFORD INTERNATIONAL, INC.,
CHRISTIANA ACQUISITION, INC.,
CHRISTIANA COMPANIES, INC.
AND
C2, INC.
DATED AS OF
OCTOBER 14, 1998
<PAGE> 143
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C> <C>
THE MERGER.................................................. A-3
1.1 THE MERGER.................................................. A-3
1.2 CLOSING DATE................................................ A-4
1.3 CONSUMMATION OF THE MERGER.................................. A-4
1.4 EFFECTS OF THE MERGER....................................... A-4
1.5 ARTICLES OF INCORPORATION; BYLAWS........................... A-4
1.6 DIRECTORS AND OFFICERS...................................... A-4
1.7 CONVERSION OF SECURITIES.................................... A-4
1.8 EXCHANGE OF CERTIFICATES.................................... A-5
(a) Exchange Agent.......................................... A-5
(b) Payment of Merger Consideration......................... A-5
(c) Retention of Cash Pending Post Closing Audit............ A-5
(d) [Intentionally Omitted]................................. A-5
(e) Exchange Procedure...................................... A-5
(f) Distributions with Respect to Unexchanged Christiana
Shares...................................................... A-6
(g) No Further Ownership Rights in Christiana Shares........ A-6
(h) Escheat................................................. A-6
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION.................. A-6
ARTICLE II
REPRESENTATIONS AND WARRANTIES.............................. A-7
2.1 REPRESENTATIONS AND WARRANTIES OF WEATHERFORD AND SUB....... A-7
(a) Organization and Compliance with Law.................... A-7
(b) Capitalization.......................................... A-7
(c) Authorization and Validity of Agreement................. A-7
(d) No Approvals or Notices Required; No Conflict........... A-8
(e) Commission Filings; Financial Statements................ A-8
(f) Absence of Certain Charges and Events................... A-8
(g) Tax Matters............................................. A-8
(h) Voting Requirements..................................... A-9
(i) Brokers................................................. A-9
(j) Information Supplied.................................... A-9
2.2 REPRESENTATIONS AND WARRANTIES OF CHRISTIANA AND C2......... A-9
(a) Organization............................................ A-9
(b) Capitalization.......................................... A-10
(c) Authorization and Validity of Agreement................. A-11
(d) No Approvals or Notices Required; No Conflict with
Instruments to which Christiana is a Party.................. A-11
(e) Commission Filings; Financial Statements................ A-12
(f) Conduct of Business in the Ordinary Course; Absence of
Certain Changes and Events.................................. A-12
(g) Litigation.............................................. A-13
(h) Employee Benefit Plans.................................. A-13
(i) Taxes................................................... A-14
(j) Environmental Matters................................... A-15
(k) Investment Company...................................... A-16
(l) Severance Payments...................................... A-16
(m) Voting Requirements..................................... A-16
(n) Brokers................................................. A-16
(o) Assets and Liabilities at Closing....................... A-16
(p) Compliance with Laws.................................... A-17
(q) Contracts............................................... A-17
(r) Title to Property....................................... A-18
</TABLE>
A-1
<PAGE> 144
<TABLE>
<S> <C> <C>
(s) Insurance Policies........................................................................... A-18
(t) Loans........................................................................................ A-18
(u) No Fraudulent Transfer....................................................................... A-18
(v) Information Supplied......................................................................... A-19
ARTICLE III
COVENANTS OF CHRISTIANA.......................................................................... A-19
3.1 CONDUCT OF BUSINESS BY CHRISTIANA PENDING THE MERGER............................................. A-19
3.2 CASH REQUIREMENTS................................................................................ A-21
3.3 AFFILIATES' AGREEMENTS........................................................................... A-22
3.4 WEATHERFORD COMMON STOCK PURCHASES............................................................... A-22
ARTICLE IV
COVENANTS OF WEATHERFORD PRIOR TO THE EFFECTIVE TIME............................................. A-22
4.1 RESERVATION OF WEATHERFORD STOCK................................................................. A-22
4.2 CONDUCT OF WEATHERFORD PENDING THE MERGER........................................................ A-22
4.3 STOCK EXCHANGE LISTING........................................................................... A-22
ARTICLE V
ADDITIONAL AGREEMENTS............................................................................ A-22
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT......................................... A-22
5.2 ACCOUNTANTS LETTER............................................................................... A-23
5.3 MEETINGS OF STOCKHOLDERS......................................................................... A-23
5.4 FILINGS; CONSENTS; REASONABLE EFFORTS............................................................ A-23
5.5 NOTIFICATION OF CERTAIN MATTERS.................................................................. A-24
5.6 EXPENSES......................................................................................... A-24
5.7 CHRISTIANA'S EMPLOYEE BENEFITS................................................................... A-24
5.8 LIQUIDATION OR MERGER OF CHRISTIANA.............................................................. A-24
ARTICLE VI
CONDITIONS....................................................................................... A-25
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER...................................... A-25
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WEATHERFORD.............................................. A-25
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHRISTIANA............................................... A-27
ARTICLE VII
MISCELLANEOUS.................................................................................... A-27
7.1 TERMINATION...................................................................................... A-27
7.2 EFFECT OF TERMINATION............................................................................ A-28
7.3 WAIVER AND AMENDMENT............................................................................. A-28
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................................... A-28
7.5 PUBLIC STATEMENTS................................................................................ A-29
7.6 ASSIGNMENT....................................................................................... A-29
7.7 NOTICES.......................................................................................... A-29
7.8 GOVERNING LAW.................................................................................... A-30
7.9 ARBITRATION...................................................................................... A-30
7.10 SEVERABILITY..................................................................................... A-31
7.11 COUNTERPARTS..................................................................................... A-31
7.12 HEADINGS......................................................................................... A-31
7.13 CONFIDENTIALITY AGREEMENT........................................................................ A-31
7.14 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES...................................................... A-31
7.15 DISCLOSURE LETTERS............................................................................... A-31
</TABLE>
LIST OF EXHIBITS
Exhibit A -- Logistic Purchase Agreement
Exhibit B -- Amended and Restated Articles of Incorporation of Christiana
A-2
<PAGE> 145
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of October
14, 1998 (this "Agreement"), is made and entered into by and among WEATHERFORD
INTERNATIONAL, INC. (formerly known as EVI, Inc.), a Delaware corporation
("Weatherford"), CHRISTIANA ACQUISITION, INC., a Wisconsin corporation and
wholly owned subsidiary of Weatherford ("Sub"), CHRISTIANA COMPANIES, INC., a
Wisconsin corporation ("Christiana"), and C2, INC., a Wisconsin corporation
("C2").
WHEREAS, Weatherford, Sub, Christiana and C2 entered into an Agreement and
Plan of Merger, dated as of December 12, 1997, and an Amendment No. 1 to
Agreement and Plan of Merger and Logistic Purchase Agreement dated May 26, 1998;
WHEREAS, Weatherford, Sub, Christiana and C2 desire to amend and restate
the Agreement and Plan of Merger to provide for additional amendments set forth
herein;
WHEREAS, subject to and in accordance with the terms and conditions of this
Agreement, the respective Boards of Directors of Weatherford, Sub and
Christiana, and Weatherford as sole stockholder of Sub, have approved the merger
of Sub with and into Christiana (the "Merger"), whereby each issued and
outstanding share of common stock, $1.00 par value, of Christiana ("Christiana
Common Stock") not owned directly or indirectly by Christiana will be converted
into the right to receive (i) common stock, $1.00 par value, of Weatherford
("Weatherford Common Stock") plus (ii) the Cash Consideration Per Share (as
defined in Section 1.7(e));
WHEREAS, as a condition to the Merger, Christiana will sell to C2
two-thirds of the interest (the "Logistic Interest") in Total Logistic Control,
LLC, a Delaware limited liability company and wholly owned subsidiary of
Christiana ("Logistic"), in consideration for $10,666,667 in cash (the "Logistic
Sale") pursuant to a Purchase Agreement, as amended by Amendment No. 1 to
Agreement and Plan of Merger and Logistic Purchase Agreement, dated May 26, 1998
and Amendment No. 2 to Logistic Purchase Agreement dated October 14, 1998,
between Christiana, C2, EVI, Inc. (now known as Weatherford International, Inc.)
and Sub in substantially the form attached hereto as Exhibit A (the "Logistic
Purchase Agreement");
WHEREAS, immediately after the Effective Time, Christiana will only hold
the Christiana Assets, as such terms are hereinafter defined in Sections 1.3 and
2.2(o);
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) by
reason of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Wisconsin Business Corporation Law
("WBCL"), at the Effective Time (as defined in Section 1.3), Sub shall be merged
with and into Christiana. As a result of the Merger, the separate corporate
existence of Sub shall cease and Christiana shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation"), and
all the properties, rights, privileges, powers and franchises of Sub and
Christiana shall vest in the Surviving Corporation, without any transfer or
assignment having occurred, and certain liabilities, debts and duties of Sub and
Christiana shall attach to the Surviving Corporation, all in accordance with the
WBCL and subject to the provisions of the Logistic Purchase Agreement.
A-3
<PAGE> 146
1.2 CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fulbright &
Jaworski L.L.P., Houston, Texas, as soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VI hereof or at such other time
and place and on such other date as Weatherford and Christiana shall agree;
provided that the closing conditions set forth in Article VI hereof shall have
been satisfied or waived at or prior to such time. The date on which the Closing
occurs is herein referred to as the "Closing Date".
1.3 CONSUMMATION OF THE MERGER. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Department of Financial Institutions of the State of Wisconsin the Articles
of Merger in such form as required by, and executed in accordance with, the
relevant provisions of the WBCL. The "Effective Time" of the Merger, as that
term is used in this Agreement, shall mean such time as the Articles of Merger
are duly filed with the Department of Financial Institutions of the State of
Wisconsin or at such later time (not to exceed seven days from the date the
Articles of Merger are filed) as is specified in the Articles of Merger pursuant
to the mutual agreement of Weatherford and Christiana.
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
the applicable provisions of the WBCL. If at any time after the Effective Time
of the Merger, the Surviving Corporation shall consider or be advised that any
further assignments or assurances in law or otherwise are necessary or desirable
to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, all rights, title and interests in all real estate and other
property and all privileges, powers and franchises of Christiana and Sub, the
Surviving Corporation and its proper officers and directors, in the name and on
behalf of Christiana and Sub, shall execute and deliver all such proper deeds,
assignments and assurances in law and do all things necessary and proper to
vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purpose of this Agreement, and the
proper officers and directors of the Surviving Corporation are fully authorized
in the name of Christiana or otherwise to take any and all such action.
1.5 ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation of
Christiana, as amended and restated by the amendment set forth in Exhibit B
attached hereto, shall be the Articles of Incorporation of the Surviving
Corporation and thereafter shall continue to be its Articles of Incorporation
until amended as provided therein or under the WBCL. The bylaws of Sub, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation and thereafter shall continue to be its bylaws until
amended as provided therein or under the WBCL.
1.6 DIRECTORS AND OFFICERS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation at and after
the Effective Time, each to hold office in accordance with the Articles of
Incorporation and bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, in each case until the earlier of
their resignation or removal or their respective successors are duly elected or
appointed and qualified.
1.7 CONVERSION OF SECURITIES. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
further action on the part of Weatherford, Christiana, Sub or their
stockholders:
(a) Subject to adjustments pursuant to Section 1.7(e) hereof, each
share of Christiana Common Stock issued and outstanding immediately prior
to the Effective Time (the "Christiana Shares") shall be converted into the
right to receive (i) a fraction of a share of Weatherford Common Stock
equal to the number of shares of Weatherford Common Stock held by
Christiana at the Effective Time divided by the number of shares of
Christiana Common Stock outstanding immediately prior to the Effective Time
(the "Stock Exchange Ratio") plus (ii) the Cash Consideration Per Share as
defined in Section 1.7(e); provided, however, that no fractional shares of
Weatherford Common Stock shall be issued and, in lieu thereof, all
fractional shares of Weatherford Common Stock that would otherwise be
issuable in the Merger shall be rounded to the nearest whole share of
Weatherford Common Stock. Except as set forth in the preceding sentence
with respect to the Cash Consideration Per Share, no other consideration
will be paid to the Christiana stockholders.
A-4
<PAGE> 147
(b) Each Christiana Share owned directly or indirectly by Christiana
as treasury stock and each Christiana Share owned by Sub, Weatherford or
any direct or indirect wholly-owned subsidiary of Weatherford or of
Christiana immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment or other
consideration shall be made or paid with respect thereto.
(c) Each share of common stock, $1.00 par value, of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, $1.00 par value, of
the Surviving Corporation.
(d) [Intentionally Omitted]
(e) The "Cash Consideration Per Share", shall equal the quotient of
the Christiana Net Cash divided by 5,149,330. The "Christiana Net Cash"
shall mean and be equal to all cash on hand of Christiana at the Closing
minus (ii) an amount of cash necessary to pay the Christiana Liabilities in
full without giving effect to the use or application of any tax deductions
relating to the exercise of options or any tax benefits that may be
realized as a result of amended Tax Returns. The "Cash Consideration Per
Share" is based on 5,149,330 shares of Christiana Common Stock being issued
and outstanding immediately prior to the Effective Time. In the event the
number of shares of Christiana Common Stock outstanding immediately prior
to the Effective Time is greater or less than 5,149,330, the Cash
Consideration Per Share shall be adjusted to equal the quotient of the
Christiana Net Cash divided by the number of shares of Christiana Common
Stock issued and outstanding immediately prior to the Effective Time.
1.8 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time of the Merger,
Weatherford shall select a bank or trust company to act as exchange agent
(the "Exchange Agent") for the issue of shares of Weatherford Common Stock
upon surrender of certificates representing Christiana Shares.
(b) Payment of Merger Consideration. Weatherford shall take all steps
necessary to enable and cause there to be provided to the Exchange Agent on
a timely basis, as and when needed after the Effective Time of the Merger,
certificates for the shares of Weatherford Common Stock to be issued upon
the conversion of the Christiana Shares pursuant to Section 1.7 and the
cash necessary to be issued for the Cash Consideration Per Share.
(c) Retention of Cash Pending Post Closing Audit. Within 30 days
following the Effective Date, Weatherford shall (i) complete a post closing
audit by Weatherford of the Christiana Net Cash and (ii) pay to the
Exchange Agent on behalf of the holders of the Christiana Shares the Cash
Consideration Per Share in respect of such Christiana Shares subject to the
prior presentation of the certificates that immediately prior to the
Effective Time represented the outstanding Christiana Shares (the
"Certificates").
(d) [Intentionally Omitted]
(e) Exchange Procedure. As soon as reasonably practical after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder
of record of a Certificate or Certificates, other than Weatherford, Sub and
Christiana and any directly or indirectly wholly owned subsidiary of
Weatherford, Sub or Christiana, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in a form and have such other provisions as
Weatherford and Sub may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the
certificates representing the shares of Weatherford Common Stock and the
Cash Consideration Per Share. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by the Surviving Corporation, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of Weatherford Common Stock into
which the Christiana Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 1.7 and the Cash
A-5
<PAGE> 148
Consideration Per Share as provided in Section 1.8(c), and the Certificate
so surrendered shall forthwith be canceled. If the shares of Weatherford
Common Stock are to be issued to an individual, corporation, limited
liability company, partnership, governmental authority or any other entity
(a "Person"), other than the person in whose name the Certificate so
surrendered is registered, it shall be a condition of exchange that such
Certificate shall be properly endorsed or otherwise in proper form for
transfer and that the Person requesting such exchange shall pay any
transfer or other taxes required by reason of the exchange to a Person
other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 1.8, each
Certificate shall be deemed at any time after the Effective Time of the
Merger to represent only the right to receive upon such surrender the
number of shares of Weatherford Common Stock and the Cash Consideration Per
Share payable in respect of the Christiana Shares pursuant to Section 1.7.
The Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the shares of Weatherford Common Stock held by it
from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect thereto
for the account of Persons entitled thereto. Any unexchanged shares of
Weatherford Common Stock issuable pursuant to the Merger in respect of the
Christiana Shares shall be issued in the name of the Exchange Agent pending
the receipt by the Exchange Agent of Certificates.
(f) Distributions with Respect to Unexchanged Christiana Shares. No
dividends or other distributions declared or made after the Effective Time
of the Merger with respect to the shares of Weatherford Common Stock with a
record date after the Effective Time of the Merger shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of
Weatherford Common Stock represented thereby and the Cash Consideration Per
Share shall not be paid until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the
record holder of the Certificates representing the shares of Weatherford
Common Stock issued in exchange therefor, without interest, (i) the amount
of dividends or other distributions with a record date after the Effective
Time of the Merger theretofore paid with respect to such whole shares of
Weatherford Common Stock, as the case may be, (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time of the Merger but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
shares of Weatherford Common Stock and (iii) the Cash Consideration Per
Share at the appropriate payment date as provided in this Section 1.8.
(g) No Further Ownership Rights in Christiana Shares. All shares of
Weatherford Common Stock issued upon the surrender of Certificates in
accordance with the terms of this Article I, together with any dividends
payable thereon to the extent contemplated by this Section 1.8 and the
rights to receive the Cash Consideration Per Share as provided herein,
shall be deemed to have been exchanged and paid in full satisfaction of all
rights pertaining to the Christiana Shares theretofore represented by such
Certificates and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Christiana Shares
that were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger, Certificates are
presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article I.
(h) Escheat. None of Weatherford, Sub, Christiana, the Surviving
Corporation or their transfer agents shall be liable to a holder of the
Christiana Shares for any amount properly paid to a public official
pursuant to applicable property, escheat or similar laws.
1.9 TAKING OF NECESSARY ACTION; FURTHER ACTION. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger and the Logistic Sale as promptly as possible.
If, at any time after the Effective Time, any such further action is necessary
or desirable to carry out the purposes of this Agreement or the Logistic Sale,
and to vest the Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, powers and franchises of Christiana or
Sub as of the Effective Time, such corporations shall direct their respective
officers and directors to take all such lawful and necessary action.
A-6
<PAGE> 149
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF WEATHERFORD AND SUB. Weatherford and
Sub hereby jointly and severally represent and warrant to Christiana that:
(a) Organization and Compliance with Law. Weatherford and Sub are
corporations duly incorporated, validly existing and in good standing under
the laws of the states of Delaware and Wisconsin, respectively. Each of
Weatherford and Sub has all requisite corporate power and corporate
authority to own, lease and operate all of its properties and assets and to
carry on its business as now being conducted, except where the failure to
be so organized, existing or in good standing would not have a material
adverse effect on the financial condition of Weatherford and its
subsidiaries (the "Weatherford Subsidiaries"), taken as a whole (a
"Weatherford MAE"). Each of Weatherford and Sub is duly qualified to do
business, and is in good standing, in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified would not have a
Weatherford MAE. Each of Weatherford and Sub is in compliance with all
applicable laws, judgments, orders, rules and regulations, except where
such failure would not have a Weatherford MAE. Weatherford has heretofore
delivered to Christiana true and complete copies of Weatherford's Amended
and Restated Certificate of Incorporation (the "Weatherford Certificate"),
and Sub's Articles of Incorporation and their respective bylaws as in
existence on the date hereof.
(b) Capitalization.
(i) The authorized capital stock of Weatherford consists of
250,000,000 shares of Weatherford Common Stock, $1.00 par value, and
3,000,000 shares of preferred stock, $1.00 par value ("Weatherford
Preferred Stock"). As of July 10, 1998, there were 97,511,967 shares of
Weatherford Common Stock issued and outstanding. As of July 10, 1998,
(i) 5,031,250 shares of Weatherford Common Stock were reserved for
issuance pursuant to the conversion provisions of Weatherford's 5%
Convertible Subordinated Preferred Equivalent Debentures due 2027, (ii)
3,900,000 shares of Weatherford Common Stock were reserved for issuance
pursuant to pending or proposed acquisitions, (iii) 1,577,410 shares of
Weatherford Common Stock were remaining to be exchanged for shares of
stock in connection with various completed acquisitions and (iv)
3,269,376 shares of Weatherford Common Stock were reserved for issuance
pursuant to Weatherford's employee and director benefit plans and
arrangements, of which 1,897,704 shares of Weatherford Common Stock were
reserved for issuance upon exercise of outstanding options. At July 10,
1998, there were no shares of Weatherford Preferred Stock issued or
outstanding. No holder of Weatherford Common Stock is entitled to
preemptive rights under Delaware law or Weatherford's Certificate of
Incorporation.
(ii) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, $1.00 par value, all of which
are validly issued, fully paid and nonassessable and are owned by
Weatherford.
(iii) Each share of Weatherford Common Stock to be issued hereunder
as a result of the Merger will be fully paid and non-assessable upon
issuance.
(c) Authorization and Validity of Agreement. The execution and
delivery by Weatherford and Sub of this Agreement and the consummation by
each of them of the transactions contemplated hereby have been duly
authorized by all necessary corporate action (subject only, with respect to
the Merger, to approval of this Agreement by each of their stockholders as
provided for in Section 5.3). On or prior to the date hereof, the Board of
Directors of Weatherford or duly authorized committee thereof has
determined to recommend approval of the Merger to the stockholders of
Weatherford, and such determination is in effect on the date hereof. This
Agreement has been duly executed and delivered by Weatherford and Sub and
is the valid and binding obligation of Weatherford and Sub, enforceable
against Weatherford and Sub in accordance with its terms.
A-7
<PAGE> 150
(d) No Approvals or Notices Required; No Conflict. Neither the
execution and delivery of this Agreement nor the performance by Weatherford
or Sub of its obligations hereunder, nor the consummation of the
transactions contemplated hereby by Weatherford and Sub, will (i) conflict
with the Weatherford Certificate or the bylaws of Weatherford or Sub; (ii)
assuming satisfaction of the requirements set forth in clause (iii) below,
violate any provision of law applicable to Weatherford or any of the
Weatherford Subsidiaries; (iii) except for (A) requirements of Federal or
state securities laws, (B) requirements arising out of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (C)
requirements of notice filings in such foreign jurisdictions as may be
applicable, and (D) the filing of Articles of Merger by Sub in accordance
with the WBCL, require any consent or approval of, or filing with or notice
to, any public body or authority, domestic or foreign, under any provision
of law applicable to Weatherford or any of the Weatherford Subsidiaries; or
(iv) require any consent, approval or notice under, or violate, breach, be
in conflict with or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the creation or imposition of
any lien, mortgage, pledge, security interest, restriction on transfer,
option, charge, right of any third Person or any other encumbrance of any
nature (a "Lien") upon any properties, assets or business of Weatherford or
any of the Weatherford Subsidiaries under, any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument or other agreement or commitment or any order,
judgment or decree to which Weatherford or any of the Weatherford
Subsidiaries is a party or by which Weatherford or any of the Weatherford
Subsidiaries or any of its or their assets or properties is bound or
encumbered, except (A) those that have already been given, obtained or
filed and (B) those that, in the aggregate, would not have a Weatherford
MAE.
(e) Commission Filings; Financial Statements. Weatherford has filed
all reports and documents required to filed with the Securities and
Exchange Commission (the "Commission") since December 31, 1995. All
reports, registration statements and other filings (including all notes,
exhibits and schedules thereto and documents incorporated by reference
therein) filed by Weatherford with the Commission since December 31, 1995,
through the date of this Agreement, together with any amendments thereto,
are sometimes collectively referred to as the "Weatherford Commission
Filings". Weatherford has heretofore delivered to, or made accessible to,
Christiana copies of the Weatherford Commission Filings. As of the
respective dates of their filing with the Commission, the Weatherford
Commission Filings complied in all material respects with the applicable
requirements of the Securities Act of 1934 (the "Securities Act"), the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Commission thereunder, and did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(f) Absence of Certain Charges and Events. Since December 31, 1997,
except as contemplated by this Agreement or as disclosed in the Weatherford
Commission Filings filed with the Commission prior to the date hereof,
there has been no Weatherford MAE.
(g) Tax Matters.
(i) Except as set forth in Section 2.1(g) of the disclosure letter
delivered by Weatherford to Christiana on the date hereof (the
"Weatherford Disclosure Letter"), all returns and reports, including,
without limitation, information and withholding returns and reports
("Tax Returns"), of or relating to any foreign, federal, state or local
tax, assessment or other governmental charge ("Taxes" or a "Tax") that
are required to be filed on or before the Closing Date by or with
respect to Weatherford or any of the Weatherford Subsidiaries, or any
other corporation that is or was a member of an affiliated group (within
the meaning of Section 1504(a) of the Code) of corporations of which
Weatherford was a member for any period ending on or prior to the
Closing Date, have been or will be duly and timely filed, and all Taxes,
including interest and penalties, due and payable pursuant to such Tax
Returns have been paid or, except as set forth in Section 2.1(g) of the
Weatherford Disclosure Letter, adequately provided for in reserves
established by Weatherford, except where the failure to file, pay or
provide for would not have a Weatherford MAE.
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(ii) Weatherford has no present plan or intention after the Merger
to (A) liquidate the Surviving Corporation, (B) merge the Surviving
Corporation with or into another corporation, (C) sell or otherwise
dispose of the stock of the Surviving Corporation, (D) cause or permit
the Surviving Corporation to sell or otherwise dispose of any of the
assets of Christiana or the assets of Sub vested in the Surviving
Corporation except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by the
Surviving Corporation within the meaning of Section 368(a)(2)(C) of the
Code, or (E) reacquire any of the stock issued to the Christiana
stockholders pursuant to the Merger.
(iii) Weatherford is not an investment company as defined in
sec.368(a)(2)(F)(iii) and (iv) of the Code or as defined in the
Investment Company Act of 1940 and the rules and regulations promulgated
thereunder.
(h) Voting Requirements. The affirmative vote of the holders of a
majority of the shares of Weatherford Common Stock present at the special
stockholders' meeting and entitled to vote is the only vote of the holders
and any class or series of the capital stock of Weatherford necessary to
approve this Agreement and the Merger.
(i) Brokers. Except for fees and expenses payable by Weatherford to
Morgan Stanley & Co. Incorporated, no broker, investment banker, or other
Person acting on behalf of Weatherford is or will be entitled to any
broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement.
(j) Information Supplied. None of the information supplied or to be
supplied by Weatherford for inclusion or incorporation by reference in (i)
the Registration Statement (as defined in Section 5.1) will, at the time
the Registration Statement is filed with the Commission, and at any time it
is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the Proxy Statement (as
defined in Section 2.2(d)) will, at the date the Proxy Statement is first
mailed to Weatherford's stockholders and at the time of the Weatherford
Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder. For purposes of this
Agreement, the parties agree that the statements made and information in
the Registration Statement and the Proxy Statement relating to the Federal
income tax consequences of the transactions contemplated hereby shall be
deemed to be supplied by Christiana and not by Weatherford or Sub.
2.2 REPRESENTATIONS AND WARRANTIES OF CHRISTIANA AND C2. Each of
Christiana and C2 hereby, jointly and severally, represents and warrants to
Weatherford that:
(a) Organization. Each of Christiana and C2 is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Wisconsin. Logistic is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of
Delaware. Each of Christiana, C2 and Logistic has all requisite corporate
(or equivalent) power and corporate (or equivalent) authority and all
necessary governmental authorizations to own, lease and operate all of its
properties and assets and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing
or to have such governmental authority would not (i) have a material
adverse effect on the financial condition of Christiana or Logistic after
giving effect to the Logistic Sale or (ii) prevent or adversely affect the
ability of Christiana and C2 to perform and comply with their respective
obligations under this Agreement, the Logistic Purchase Agreement or any
other agreement to be executed and delivered in connection with the
transactions contemplated hereby or thereby (a "Christiana MAE"). Except as
set forth in Section 2.2(a) of the disclosure letter delivered by
Christiana to Weatherford on the date hereof (the "Christiana Disclosure
Letter"), each of Christiana,
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Logistic and C2 is duly qualified as a foreign corporation or limited
liability company to do business, and is in good standing, in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except in such jurisdictions where the failure to be duly qualified does
not and would not have a Christiana MAE. Each of Christiana, Logistic and
C2 is in compliance with all applicable laws, judgments, orders, rules and
regulations, domestic and foreign, except where failure to be in such
compliance would not have a Christiana MAE. Christiana has heretofore
delivered to Weatherford true and complete copies of (i) Christiana's
Articles of Incorporation (the "Christiana Articles") and bylaws, (ii)
Logistic's Certificate of Organization and operating agreement and (iii)
C2's Articles of Incorporation and operating agreement, in each case as in
existence on the date hereof.
(b) Capitalization.
(i) The authorized capital stock of Christiana consists of
12,000,000 shares of Christiana Common Stock, $1.00 par value, and
1,000,000 shares of preferred stock, $10.00 par value ("Christiana
Preferred Stock"). As of July 10, 1998, there were 5,149,330 shares of
Christiana Common Stock issued and outstanding and no shares of
Christiana Common Stock were held as treasury shares. There are no
outstanding shares of Christiana Preferred Stock. No shares of
Christiana Common Stock have been reserved for issuance pursuant to the
stock option plan described in Section 2.2(b)(iii). All issued and
outstanding shares of Christiana Common Stock are validly issued, fully
paid and nonassessable (except as set forth in Wis Stats sec. 180.0622)
and no holder thereof is entitled to preemptive rights. Christiana is
not a party to, and is not aware of, any voting agreement, voting trust
or similar agreement or arrangement relating to any class or series of
its capital stock, or any agreement or arrangement providing for
registration rights with respect to any capital stock or other
securities of Christiana.
(ii) Christiana owns 100% of the membership interests in Logistic.
All issued and outstanding membership interests of Logistic are validly
issued, fully paid and nonassessable and no holder thereof is entitled
to preemptive rights. Logistic is not a party to, any voting agreement,
voting trust or similar agreement or arrangement relating to its
membership interests, or any agreement or arrangement providing for
registration rights with respect to any membership interests or other
interests of Logistic.
(iii) As of the date hereof, there are outstanding options (the
"Christiana Options") to purchase an aggregate of 267,083 shares of
Christiana Common Stock under the 1995 Stock Option Plan (the
"Christiana Option Plan"). All Christiana Options shall be terminated or
exercised prior to the Effective Time. As of the Effective Time, there
will be no options outstanding under the Christiana Option Plan. There
are not now (other than as set forth in this Section 2.2(b)), and at the
Effective Time there will not be, any (A) shares of capital stock or
other equity securities of Christiana issuable pursuant to the exercise
of Christiana Options or (B) outstanding options, warrants, scrip,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of Christiana, or
contracts, understandings or arrangements to which Christiana is a
party, or by which it is or may be bound, to issue additional shares of
its capital stock or options, warrants, scrip or rights to subscribe
for, or securities or rights convertible into or exchangeable for, any
additional shares of its capital stock.
(iv) Section 2.2(b)(iv) of the Christiana Disclosure Letter sets
forth a list of all corporations, partnerships, limited liability
companies and other entities of which Christiana owns directly or
indirectly, an equity interest (such entities, excluding Weatherford and
its subsidiaries, referred to herein as the "Christiana Subsidiaries").
(c) Authorization and Validity of Agreement. Each of Christiana and C2
has all requisite corporate power and authority to enter into this
Agreement, the Logistic Purchase Agreement and the other agreements and
instruments contemplated to be executed and delivered in connection with
the Merger and the Logistic Sale (the Logistic Purchase Agreement and such
other agreements and instruments contemplated to be executed and delivered
in connection with the Merger and the Logistic Sale being
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referred to as the "Other Agreements") and to perform its obligations
hereunder and thereunder. The execution and delivery by Christiana and C2
of this Agreement and the Other Agreements to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action (subject only, with
respect to the Merger and the Logistic Sale, to approval of this Agreement
and the Logistic Sale by the Christiana stockholders as provided for in
Section 5.3). On or prior to the date hereof the Board of Directors of
Christiana has determined to recommend approval of the Merger and the
Logistic Sale to the stockholders of Christiana, and such determination is
in effect as of the date hereof. This Agreement has been duly executed and
delivered by Christiana and C2 and is the valid and binding obligation of
Christiana and C2 enforceable against it in accordance with its terms. The
Other Agreements, when executed and delivered by Christiana and C2, as
applicable, will constitute valid and binding obligations of Christiana and
C2, enforceable against them in accordance with their respective terms.
(d) No Approvals or Notices Required; No Conflict with Instruments to
which Christiana is a Party. The execution and delivery of this Agreement
and the Other Agreements do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof
and thereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of or "put"
right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Christiana, Logistic, C2 or any of their subsidiaries under, any
provision of (i) the Christiana Articles or bylaws of Christiana, the
Certificate of Organization or operating agreement of Logistic or the
Articles of Incorporation or bylaws of C2, or any provision of the
comparable organizational documents of its subsidiaries, (ii) except as set
forth in Section 2.2(d) of the Christiana Disclosure Letter, any loan or
credit agreement, note, bond, mortgage, indenture, lease, guaranty or other
financial assurance agreement or other agreement, instrument, permit,
concession, franchise or license applicable to Christiana or its properties
or assets, (iii) except as set forth in Section 2.2(d) of the Christiana
Disclosure Letter, any loan or credit agreement, note, bond, mortgage,
indenture, lease, guaranty or other financial assurance agreement or other
agreement, instrument, permit, concession, franchise or license applicable
to Logistic or any other Christiana Subsidiary, or their respective
properties or assets and (iv) subject to governmental filing and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation or arbitration award applicable
to Christiana, Logistic or C2 or any of their subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not have a Christiana MAE. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, including local
authorities (a "Governmental Entity"), is required by or with respect to
Christiana, Logistic or C2 or any of their subsidiaries in connection with
the execution and delivery of this Agreement by Christiana and C2 or the
consummation by Christiana of the transactions contemplated hereby, except
for (i) the filing of a pre-merger notification and report form by
Christiana under the HSR Act, (ii) the filing with the Commission of (A) a
proxy or information statement relating to Stockholder Approval (such proxy
or information statement as amended or supplemented from time to time, the
"Proxy Statement"), and (B) such reports under Section 13(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (iii) the filing of the Certificate of
Merger with the Wisconsin Secretary of State with respect to the Merger as
provided in the WBCL and appropriate documents with the relevant
authorities of other states in which Christiana is qualified to do business
and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings and notices as are set forth in
Section 2.2(d) of the Christiana Disclosure Letter.
(e) Commission Filings; Financial Statements. Christiana has filed all
reports, registration statements and other filings, together with any
amendments required to be made with respect thereto, that it has been
required to file with the Commission. All reports, registration statements
and other filings (including all notes, exhibits and schedules thereto and
documents incorporated by reference therein) filed by Christiana with the
Commission since December 31, 1995, through the date of this Agreement,
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together with any amendments thereto, are sometimes collectively referred
to as the "Christiana Commission Filings." Christiana has heretofore
delivered to Weatherford copies of the Christiana Commission Filings. As of
the respective dates of their filing with the Commission, the Christiana
Commission Filings complied in all material respects with the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. To the best knowledge of Christiana, all
material contracts of Christiana and its subsidiaries have been included in
the Christiana Commission Filings since the initial registration of its
stock under the Exchange Act, except for those contracts not required to be
filed pursuant to the rules and regulations of the Commission.
Each of the consolidated financial statements (including any related
notes or schedules) included in the Christiana Commission Filings was
prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be noted therein or in the
notes or schedules thereto) and complied with the rules and regulations of
the Commission. Such consolidated financial statements fairly present the
consolidated financial position of Christiana as of the dates thereof and
the results of operations, cash flows and changes in stockholders' equity
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments on a basis
comparable with past periods). As of the date hereof, Christiana has no
liabilities, absolute or contingent, that may reasonably be expected to
have a Christiana MAE, that are not reflected in the Christiana Commission
Filings, except (i) those incurred in the ordinary course of business
consistent with past operations and not relating to the borrowing of money
and (ii) those set forth in Section 2.2(e) of the Christiana Disclosure
Letter.
(f) Conduct of Business in the Ordinary Course; Absence of Certain
Changes and Events. Since December 31, 1995, except as contemplated by this
Agreement, the Logistic Purchase Agreement or as disclosed in the
Christiana Commission Filings or set forth in Section 2.2(f) of the
Christiana Disclosure Letter, Christiana and its subsidiaries have
conducted their respective businesses only in the ordinary and usual course
in accordance with past practice, and there has not been: (i) a Christiana
MAE or any other material adverse change in the financial condition,
results of operations, assets or business of Christiana, taken as a whole;
(ii) to the knowledge of Christiana, any other condition, event or
development that reasonably may be expected to result in any such material
adverse change or a Christiana MAE; (iii) any change by Christiana or
Logistic in its accounting methods, principles or practices; (iv) any
revaluation by Christiana or Logistic of any of its assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business
and consistent with past practice; (v) any entry by Christiana or Logistic
into any commitment or transaction that would be material to Christiana or
Logistic; (vi) any declaration, setting aside or payment of any dividends
or distributions in respect of the Christiana Common Stock or any
redemption, purchase or other acquisition of any of its securities; (vii)
any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of Christiana or Logistic;
(viii) any increase in indebtedness of borrowed money other than borrowing
under existing credit facilities as disclosed in Section 2.2(f) of the
Christiana Disclosure Letter; (ix) any granting of a security interest or
Lien on any property or assets of Christiana or Logistic, other than (A)
Liens for taxes not due and payable and (B) inchoate mechanics',
warehousemen's and other statutory Liens incurred in the ordinary course of
business (collectively, "Permitted Liens"); or (x) any increase in or
establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other
employee benefit plan or any other increase in the compensation payable or
to become payable to any directors, officers or key employees of Christiana
or Logistic or which Christiana or Logistic would be responsible.
(g) Litigation. Except as disclosed in the Christiana Commission
Filings or as set forth in Section 2.2(g) of the Christiana Disclosure
Letter, there are no claims, actions, suits, investigations,
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inquiries or proceedings, ("Demands"), pending or, to the knowledge of
Christiana, threatened against or affecting (i) Christiana or Logistic or
any of their respective properties at law or in equity, or any of their
employee benefit plans or fiduciaries of such plans, or (ii) C2 or any
Christiana or C2 subsidiaries or any of their respective properties at law
or in equity, or any of their respective employee benefit plans or
fiduciaries of such plans, before or by any federal, state, municipal or
other governmental agency or authority, or before any arbitration board or
panel (each a "Governmental Entity"), wherever located (i) that exist today
or (ii) that would otherwise, if adversely determined, have a Christiana
MAE. None of Christiana, Logistic or C2 is subject to any judicial,
governmental or administrative order, writ, judgment, injunction or decree.
(h) Employee Benefit Plans.
(i) Section 2.2(h) of the Christiana Disclosure Letter provides a
description of each of the following which is sponsored, maintained or
contributed to by Christiana or any corporation, trade, business or
entity under common control with Christiana within the meaning of
Section 414(b),(c),(m) or (o) of the Code or Section 4001 of ERISA (a
"Christiana ERISA Affiliate") for the benefit of its employees, or has
been so sponsored, maintained or contributed to within three years prior
to the Closing Date.
(A) each "employee benefit plan," as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), ("Plan"); and
(B) each stock option plan, collective bargaining agreement,
bonus plan or arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy or agreement, deferred
compensation agreement or arrangement, executive compensation or
supplemental income arrangement, consulting agreement, employment
agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding that is not described
in Section 2.2(h)(i)(A) to which Christiana or Logistic is a party or
has any obligation ("Benefit Program or Agreement").
True and complete copies of each of the Plans, Benefit Programs
or Agreements, related trusts, if applicable, and all amendments
thereto, together with (i) the Forms 5500, 990 and 1041, as
applicable, for the three most recent fiscal years, (ii) all current
summary plan descriptions for each such Plan, (iii) the most recent
Internal Revenue Service determination letters for each such Plan, as
applicable, and all correspondence with the Internal Revenue Service
and the Department of Labor relating to such Plans, Benefit Programs
and Agreements have been furnished to Weatherford.
(ii) Except as otherwise set forth in Section 2.2(h) of the
Christiana Disclosure Letter,
(A) None of Christiana or any Christiana ERISA Affiliate
contributes to or has an obligation to contribute to, or has at any
time contributed to or had an obligation to contribute to, a plan
subject to Title IV of ERISA, including, without limitation, a multi
employer plan within the meaning of Section 3(37) of ERISA, nor have
such companies engaged in any transaction described in Sections 406
and 407 of ERISA (unless exempt under Section 408) or Section 4975 of
the Code (unless exempt);
(B) Each Plan and each Benefit Program or Agreement has been
administered, maintained and operated in all material respects in
accordance with the terms thereof and in compliance with its
governing documents and applicable law (including, where applicable,
ERISA and the Code and timely filing of Form 5500s for each year);
(C) There is no matter pending with respect to any of the Plans
before any governmental agency, and there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the
knowledge of Christiana or C2, threatened against, or with respect
to, any of the Plans or Benefit Programs or Agreements or its assets;
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(D) No act, omission or transaction has occurred which would
result in imposition on Christiana or any Christiana ERISA Affiliate
of breach of fiduciary duty liability damages under Section 409 of
ERISA, a civil penalty assessed pursuant to subsections (c), (i) or
(l) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code; and
(E) Except as provided in Section 5.7, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby will not require Christiana or any Christiana
ERISA Affiliate to make a larger contribution to, or pay greater
benefits under, any Plan, Benefit Program or Agreement than it
otherwise would or create or give rise to any additional vested
rights or service credits under any Plan or Benefit Program or
Agreement or cause the companies to make accelerated payments.
(iii) Except as set forth in Section 2.2(h) of the Christiana
Disclosure Letter, termination of employment of any employee of
Christiana immediately after consummation of the transactions
contemplated by this Agreement would not result in payments under the
Plans, Benefit Programs or Agreements which, in the aggregate, would
result in imposition of the sanctions imposed under Sections 280G and
4999 of the Code.
(iv) Each Plan may be unilaterally amended or terminated in its
entirety without liability except as to benefits accrued thereunder
prior to such amendment or termination.
(v) Except as set forth in Section 2.2(h) of the Christiana
Disclosure Letter, none of the employees of Christiana or Logistic are
subject to union or collective bargaining agreements.
(vi) None of Christiana or any of the Christiana ERISA Affiliates
has agreed or is obligated to provide retiree medical coverage and each
of such companies has fully complied with all obligations under COBRA
applicable to it.
(i) Taxes.
(i) Except as set forth in Section 2.2(i) of the Christiana
Disclosure Letter, all Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date by or with respect to
Christiana or any Christiana Subsidiary, or any other corporation that
is or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which Christiana was a member
for any period ending on or prior to the Closing Date, have been or will
be duly and timely filed, and all Taxes, including interest and
penalties, due and payable pursuant to such Tax Returns have been or
will be duly and timely paid or adequately provided for in reserves
established by Christiana or any such Christiana Subsidiary, except
where the failure to file, pay or provide for would not have a material
adverse effect on the financial condition, results of operations, or
business of Christiana or otherwise result in a Christiana MAE. All
income Tax Returns of or with respect to Christiana or any Christiana
Subsidiary have been audited by the applicable Governmental Authority,
or the applicable statute of limitations has expired, for all periods up
to and including the tax year ended June 30, 1993. There is no material
claim against Christiana or any Christiana Subsidiary with respect to
any Taxes, and no material assessment, deficiency or adjustment has been
asserted or proposed with respect to any Tax Return of or with respect
to Christiana or any Christiana Subsidiary that has not been adequately
provided for in reserves established by Christiana or such Christiana
Subsidiary. The total amounts set up as liabilities for current and
deferred Taxes in the consolidated financial statements included in the
Christiana Commission Filings have been prepared in accordance with
generally accepted accounting principles and are sufficient to cover the
payment of all material Taxes, including any penalties or interest
thereon and whether or not assessed or disputed, that are, or are
hereafter found to be, or to have been, due with respect to the
operations of Christiana or any Christiana Subsidiary through the
periods covered thereby. Christiana has (and as of the Closing Date will
have) made estimated tax payments for taxable years for which the United
States consolidated federal income Tax return is not yet due required
with respect to Taxes. Except as set forth in Section 2.2(i) of the
Christiana Disclosure Letter, no waiver or extension of any statute of
limitations as to any federal, state, local or
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foreign Tax matter has been given by or requested from Christiana or any
Christiana Subsidiary. Except for statutory Liens for current Taxes not
yet due, no Liens for Taxes exist upon the assets of Christiana. Except
as set forth in paragraph 2.2(i) of the Christiana Disclosure Letter,
none of Christiana or any Christiana Subsidiary has filed consolidated
income Tax Returns with any corporation, other than consolidated
federal, state or foreign income Tax returns by Christiana for any
taxable period which is not now closed by the applicable statute of
limitations. Except as set forth in Section 2.2(i) of the Christiana
Disclosure Letter, none of Christiana or any Christiana Subsidiary has
any deferred intercompany gain as defined in Treasury Regulations
Section 1.1502-13.
(ii) As of the Closing Date, to Christiana's knowledge, there is no
plan or intention by the stockholders of Christiana to sell, exchange or
otherwise dispose of a number of shares of Weatherford received in the
Merger that would reduce the Christiana stockholders' ownership of
Weatherford shares to a number of shares having a value, as of the date
of the Merger, of less than 50% of the value of all of the formerly
outstanding Christiana Shares as of the same date. The shares of
Weatherford Common Stock held by the Christiana stockholders and
otherwise sold, redeemed or disposed of prior or subsequent to the
Merger will be considered in making this representation.
(iii) Christiana is not under the jurisdiction of a court in a
Title 11 or similar case with the meaning of sec.368(a)(3)(A) of the
Code.
(iv) There is no intercorporate indebtedness existing between
Christiana and Weatherford that was issued, acquired or will be settled
at a discount.
(v) As of the Closing Date, Christiana shall have fully accrued for
all Taxes that may be required to be paid as a result of the Logistic
Sale and the other transactions contemplated hereby. The value of the
interest in Logistic Common Stock to be sold pursuant to the Logistic
Sale has been determined pursuant to an outside appraisal and reflects
an amount equal to or greater than the fair value and fair market value
of such shares.
(j) Environmental Matters. Except as set forth in Section 2.2(j) of
the Christiana Disclosure Letter, (i) the properties, operations and
activities of Christiana and each of its Subsidiaries complies in all
material respects with all applicable Environmental Laws; (ii) none of
Christiana or any of its Christiana Subsidiaries is subject to any
existing, pending or, to the knowledge of Christiana, threatened action,
suit, investigation, inquiry or proceeding by or before any governmental
authority under any Environmental Law; (iii) except where the failure would
have a Christiana MAE, all notices, permits, licenses, or similar
authorizations, if any, required to be obtained or filed by Christiana
under any Environmental Law in connection with any aspect of the business
of Christiana, Logistic or any Christiana Subsidiary, including without
limitation those relating to the treatment, storage, disposal or release of
a hazardous substance or solid waste, have been duly obtained or filed and
will remain valid and in effect after the Merger and the Logistic Sale, and
each of Christiana, Logistic and each other Christiana Subsidiary is in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations; (iv) Christiana and each of its
Subsidiaries has satisfied and are currently in compliance with all
financial responsibility requirements applicable to their operations and
imposed by any governmental authority under any other Environmental Law,
and none of such parties has received any notice of noncompliance with any
such requirements; (v) to Christiana's knowledge, there are no physical or
environmental conditions existing on any property currently owned or
previously owned by Christiana or any entity in which it has or had
ownership interest that could reasonably be expected to give rise to any
on-site or off-site remedial obligations under any Environmental Laws; and
(vi) to Christiana's knowledge, since the effective date of the relevant
requirements of applicable Environmental Laws, all hazardous substances or
solid wastes generated by Christiana or used in connection with their
properties or operations have been transported only by carriers authorized
under Environmental Laws to transport such substances and wastes, and
disposed of only at treatment, storage, and disposal facilities authorized
under environmental laws to treat, store or dispose of such substances and
wastes, and, to the knowledge of Christiana, such carriers and facilities
have been and are operating in compliance with such
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authorizations and are not the subject of any existing, pending, or overtly
threatened action, investigation, or inquiry by any governmental authority
in connection with any Environmental Laws.
For purposes of this Agreement, the term "Environmental Laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders or
determinations of any Governmental Authority pertaining to health or the
environment currently in effect in any and all jurisdictions in which the
party in question and its subsidiaries own property or conduct business,
including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution Act
of 1990 ("OPA"), any state laws pertaining to the handling of oil and gas
exploration and production wastes or the use, maintenance, and closure of
pits and impoundments, and all other environmental conservation or
protection laws. For purposes of this Agreement, the terms "hazardous
substance" and "release" have the meanings specified in RCRA; provided,
however, that to the extent the laws of the state in which the property is
located establish a meaning for "hazardous substance," "release," "solid
waste" or "disposal" that is broader than that specified in either CERCLA
or RCRA, such broader meaning shall apply. For purposes of this Agreement,
the term "Governmental Authority" includes the United States, any foreign
jurisdiction, the state, county, city, and political subdivisions in which
the party in question owns property or conducts business, and any agency,
department, commission, board, bureau or instrumentality of any of them.
(k) Investment Company. Christiana is not an investment company as
defined in the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
(l) Severance Payments. Except as set forth in Section 2.2(l) of the
Christiana Disclosure Letter, Christiana will not have any liability or
obligation to pay a severance payment or similar obligation to any of their
respective employees, officers, or directors as a result of the Merger or
the transactions contemplated by this Agreement, nor will any of such
Persons be entitled to an increase in severance payments or other benefits
as a result of the Merger, the Logistic Sale or the transactions
contemplated by this Agreement or the Other Agreements in the event of the
subsequent termination of their employment.
(m) Voting Requirements. Subject to the provisions of Section 5.3(a),
the affirmative vote of the holders of a majority of the outstanding shares
of Christiana Common Stock is the only vote of the holders of any class or
series of the capital stock of Christiana necessary to approve this
Agreement, the Merger, the Logistic Sale and the transactions contemplated
hereby and by the Other Agreements in order to comply with the WBCL,
Christiana's Articles of Incorporation and Bylaws and the rules and
regulations of the New York Stock Exchange (the "NYSE").
(n) Brokers. Except for Prudential Securities Incorporated, whose fees
shall be paid by Christiana, no broker, investment banker, or other Person
acting on behalf of Christiana is or will be entitled to any broker's,
finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement.
(o) Assets and Liabilities at Closing. At the Effective Time:
(i) the assets of Christiana (the "Christiana Assets") shall
consist of (1) at least 3,897,462 shares of Weatherford Common Stock,
which shall be held free and clear of all Liens, (2) cash of at least
$13,000,000, (3) a one-third interest in Logistic, (4) certain tax
benefits, and (5) all tax, financial, accounting and other general
corporate records, including records relating to all past operations and
subsidiaries (including partnerships and joint ventures);
(ii) the liabilities of Christiana (the "Christiana Liabilities")
shall consist only of (1) transactional expenses related to the Merger
and the Logistic Sale, (2) all Taxes of Christiana relating to
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periods through the Closing Date, including Taxes (other than the
Weatherford Related Taxes) from the Logistic Sale and deferred
intercompany Taxes and (3) all other outstanding and accrued liabilities
to which Christiana may be subject, other than Assumed Liabilities (as
defined in the Logistic Purchase Agreement) and Weatherford Related
Taxes;
(iii) all obligations and liabilities (fixed or contingent, known
or unknown) of Christiana shall have been assumed by C2 and Logistic
other than liabilities described in clause (ii); and
(iv) except as set forth in Section 2.2(o) of the Disclosure
Schedule or agreed to in writing by Weatherford prior to the Closing,
Christiana shall have been released from all continuing obligations (i)
relating to Logistic or any other historical business of Christiana or
its subsidiaries and affiliates and (ii) under any and all agreements
relating to the borrowing of funds, including any and all guarantees or
similar arrangements relating thereto.
(p) Compliance with Laws. Christiana, Logistic, C2 and each of their
respective subsidiaries hold all required, necessary or applicable permits,
licenses, variances, exemptions, orders, franchises and approvals of all
Governmental Entities, except where the failure to so hold could not
reasonably be expected to have a Christiana MAE (the "Christiana Permits").
All applications with respect to such permits, licenses, variances,
exemptions, orders, franchises and approvals were complete and correct in
all material respects when made and neither Christiana nor C2 know of any
reason why any of such permits, licenses, variances, exemptions, orders,
franchises and approvals would be subject to cancellation. Christiana,
Logistic, C2 and each of their respective subsidiaries are in compliance
with the terms of the Christiana Permits except where the failure to so
comply could not reasonably be expected to have a Christiana MAE. None of
Christiana, Logistic, C2 or any of their respective subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation,
rule, permit or order of any Federal, state or local government, domestic
or foreign, or any Governmental Entity, any arbitration award or any
judgment, decree or order of any court or other Governmental Entity,
applicable to Christiana, Logistic, C2 or any of their respective
subsidiaries or their respective business, assets or operations, except for
violations and failures to comply that would not have a Christiana MAE.
(q) Contracts.
(i) Section 2.2(q) to the Christiana Disclosure Letter contains a
complete list of the following contracts, agreements, arrangements and
commitments: (i) all employment or consulting contracts or agreements to
which Christiana or Logistic is contractually obligated; (ii) current
leases, sales contracts and other agreements with respect to any
property, real or personal, of Christiana or Logistic or to which
Christiana or Logistic is contractually obligated; (iii) contracts or
commitments for capital expenditures or acquisitions in excess of
$30,000 to which Christiana or Logistic is obligated; (iv) agreements,
contracts, indentures or other instruments relating to the borrowing of
money, or the guarantee of any obligation for the borrowing of money, to
which Christiana or Logistic or any of their subsidiaries is a party or
any of their respective properties is bound; (v) contracts or agreements
or amendments thereto that would be required to be filed as an exhibit
to an Annual Report on Form 10-K filed by Christiana as of the date
hereof that has not been filed as an exhibit to the Christiana's Annual
Report on Form 10-K for the year ended June 30, 1997, filed by it with
the Commission or any report filed with the Commission under the
Exchange Act since such date; (vi) all corporations, partnerships,
limited liability companies and other entities which Christiana has
owed, directly or indirectly, an equity interest since 1953, (vii) all
material indemnification and guaranty or other similar obligations to
which Christiana or Logistic is bound and which the officers of
Christiana, after reasonable investigation, are aware, (viii) any
outstanding bonds, letters of credit posted or guaranteed by Christiana
or Logistic with respect to any Person, (ix) any covenants not to
compete or other obligations affecting Christiana or Logistic that would
restrict the Surviving Corporation or Weatherford and its affiliates
from engaging in any business or activity which the officers of
Christiana or Logistic are aware, after reasonable investigation and (x)
contracts, agreements, arrangements or commitments, other than the
foregoing that could reasonably be considered to be material to
Christiana or Logistic.
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(ii) True and correct copies of all the instruments described in
Section 2.2(q) of the Christiana Disclosure Letter have been furnished
or made available to Weatherford. Except as noted in the Christiana
Disclosure Letter, all such agreements, arrangements or commitments are
valid and subsisting and each of Christiana, Logistic and their
respective subsidiaries to the extent each is a party, has duly
performed its obligations thereunder in all material respects to the
extent such obligations have accrued, and no breach or default
thereunder by Christiana, Logistic or their respective subsidiaries or,
to the knowledge of Christiana, any other party thereto has occurred
that could impair the ability of Christiana, Logistic or their
respective subsidiaries to enforce any material rights thereunder. There
are no material liabilities of any of the parties to any of the
contracts between Christiana, Logistic or C2 or any of their respective
subsidiaries and third parties arising from any breach of or default in
any provision thereof or which would permit the acceleration of any
obligation of any party thereto or the creation of a Lien upon any asset
of Christiana, Logistic or any of their respective subsidiaries.
(r) Title to Property.
(i) At the Effective Time, Christiana will have good and marketable
title to, or valid leasehold interests in, all its properties and
assets. Christiana has good and valid title to 3,897,462 shares of
Weatherford Common Stock, free and clear of all Liens. Christiana has
good and valid title to 1000 units of Logistic, free and clear of all
Liens, which units represents all of the interest in Logistics.
(ii) Except as set forth in Section 2.2(r)(ii) of the Christiana
Disclosure Letter, each of Christiana and Logistic has complied in all
material respects with the terms of all leases to which it is a party
and under which it is in occupancy, and all such leases are in full
force and effect. Each of Christiana and Logistic enjoys peaceful and
undisturbed possession under all such leases.
(s) Insurance Policies. Section 2.2(s) of the Christiana Disclosure
Letter contains a correct and complete description of all insurance
policies of Christiana covering Christiana, Logistic and their respective
subsidiaries, any employees or other agents of Christiana, Logistic and
their respective subsidiaries or any assets of Christiana and its
subsidiaries. Each such policy is in full force and effect, is with
responsible insurance carriers and is substantially equivalent in coverage
and amount to policies covering companies of the size of Christiana and in
the business in which Christiana and its subsidiaries is engaged, in light
of the risk to which such companies and their employees, businesses,
properties and other assets may be exposed. All retroactive premium
adjustments under any worker's compensation policy of Christiana or any of
its Subsidiaries have been recorded in Christiana's financial statements in
accordance with generally accepted accounting principles and are reflected
in the financial statements contained in the Commission Filings.
(t) Loans. Section 2.2(t) of the Christiana Disclosure Letter sets
forth all existing loans, advances or other extensions of credit (excluding
accounts receivable arising in the ordinary course of business) by
Christiana or its subsidiaries to any party other than intercompany loans,
advances, guaranties or extensions of credit. All items listed in Section
2.2(t) of the Christiana Disclosure Letter will be repaid in full or
assumed by C2 prior to the Effective Time of the Merger. All intercompany
obligations and loans between Christiana and its subsidiaries, including
C2, will be extinguished prior to the Logistic Sale without any ongoing
liability to Christiana or C2 with respect thereto, except as set forth
herein or in the Logistic Purchase Agreement.
(u) No Fraudulent Transfer. Christiana has not within the last twelve
months made any transfer or incurred any obligation with actual intent to
hinder, delay or defraud any entity to which it was or may become indebted
and it has not transferred any material property without receiving
reasonably equivalent value for any such transfer obligation. Both
immediately prior to and immediately after the Logistic Sale and the
Merger, (i) the fair value of (x) Christiana's assets at the time of the
Merger and (y) Logistic's and C2's assets after the Logistic Sale and (z)
the assets of CST Financial, Inc. ("CST") Martinique Holdings, Inc. ("MHI")
and Christiana Community Builders, Inc. ("CCB") immediately prior to their
liquidation in each case at a fair valuation exceeds their respective debts
and liabilities, subordinated,
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contingent or otherwise, (ii) the present fair saleable value of
Christiana's, Logistic's, C2's, CST's, MHI's and CCB's property is greater
than the amount that will be required to pay its probable liability on
their respective debts and other liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and mature, (iii)
Christiana prior to the Logistic Sale and Logistic, C2 after the Logistic
Sale and CST, MHI and CCB prior to their liquidation each reasonably expect
to be able to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, and
(iv) Christiana before the Logistic Sale and Logistic and C2 after the
Logistic Sale will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted. For all purposes of clauses of
(i) through (iv), the amount of contingent liabilities at any time shall be
computed as the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
(v) Information Supplied. None of the information supplied or to be
supplied by Christiana or C2 for inclusion or incorporation by reference in
(i) the Registration Statement (as defined in Section 5.1) will, at the
time the Registration Statement is filed with the Commission, and at any
time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to
Christiana's stockholders and at the time of the Christiana Stockholders
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder. For purposes of this Agreement, the parties
agree that the statements made and information in the Registration
Statement and the Proxy Statement relating to the Federal income tax
consequences of the transactions contemplated hereby shall be deemed to be
supplied by Christiana and C2 and not by Weatherford or Sub.
ARTICLE III
COVENANTS OF CHRISTIANA
3.1 CONDUCT OF BUSINESS BY CHRISTIANA PENDING THE MERGER. Christiana
covenants and agrees that, from the date of this Agreement until the Effective
Time, unless Weatherford shall otherwise agree in writing or as otherwise
expressly contemplated by this Agreement or the Logistic Purchase Agreement or
set forth in Section 3.1 of the Christiana Disclosure Letter:
(a) the business of Christiana and the Christiana Subsidiaries shall
be conducted only in, and Christiana and the Christiana Subsidiaries shall
not take any action except in, the ordinary course of business and
consistent with past practice, provided that, Christiana may take the
actions required by Section 3.4 hereof;
(b) Christiana shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber any capital
stock of Christiana except upon the exercise of Christiana Options; (ii)
split, combine, or reclassify any outstanding capital stock, or declare,
set aside, or pay any dividend payable in cash, stock, property, or
otherwise with respect to its capital stock whether now or hereafter
outstanding; (iii) redeem, purchase or acquire or offer to acquire any of
its capital stock; (iv) acquire, agree to acquire or make any offer to
acquire for cash or other consideration, any equity interest in or assets
of any corporation, partnership, joint venture, or other entity in an
amount greater than $500,000, provided that, Christiana may take the
actions required by Section 3.4 hereof; or (v) enter into any contract,
agreement, commitment, or arrangement with respect to any of the matters
set forth in this Section 3.1(b);
(c) Christiana shall not transfer, dispose or otherwise convey any of
the shares of Weatherford Common Stock held by it or grant or permit there
to exist any Lien on such shares;
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(d) Christiana shall not enter into any contract regarding its
business having a term greater than 120 days or involving an amount in
excess of $50,000 or commit to do the same and except for a cold storage
facility in Hudsonville, Michigan, no Christiana Subsidiary shall enter
into any contract outside the ordinary course of business;
(e) Christiana shall not become bound by any agreement or obligation
in an amount in excess of $500,000 in the aggregate for all such agreements
and obligations;
(f) Christiana shall not pledge or encumber any of the assets to be
held by Christiana following the Logistic Sale;
(g) Neither Christiana nor any of its Subsidiaries shall enter into
any employment or consulting contracts;
(h) Neither Christiana nor any of its Subsidiaries shall enter into
any contract or agreement that if effective on the date hereof would be
required to be identified as a disclosure pursuant to Section 2.2(q) of the
Christiana Disclosure Letter;
(i) Neither Christiana nor any of its Subsidiaries shall sell, lease,
mortgage, pledge, grant a Lien on or otherwise encumber or otherwise
dispose of any of Christiana's or its Subsidiaries' properties or assets,
except sales of inventory in the ordinary course of business consistent
with past practice and Christiana may liquidate (in a manner acceptable to
Weatherford) CST Financial, Inc., Martinique Holdings, Inc. and Christiana
Community Builders, Inc. and transfer their assets to Logistic without
consideration;
(j) Neither Christiana nor any of its Subsidiaries shall, directly or
indirectly, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Christiana or
its Subsidiaries, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice
which obligations in respect of Christiana and its Subsidiaries other than
Logistic shall be released in connection with the Logistic Sale, or make or
permit to remain outstanding any loans, advances or capital contributions
to, or investments in, any other Person, other than to Christiana or any
direct or indirect wholly owned subsidiary of Christiana;
(k) Neither Christiana nor any of its Subsidiaries shall make any
election relating to Taxes except for those elections to be made in
connection with its 1997 Tax Returns that are consistent with the 1996 Tax
Returns;
(l) Neither Christiana nor any of its Subsidiaries shall change any
accounting principle used by it;
(m) Christiana shall use its reasonable efforts (i) to preserve intact
the business organization of Christiana and Logistic except Christiana may
liquidate (in a manner acceptable to Weatherford) CST Financial, Inc.,
Martinique Holdings, Inc. and Christiana Community Builders, Inc. and
transfer their assets to Logistic without consideration, (ii) to maintain
in effect any material authorizations or similar rights of Christiana and
Logistic, (iii) to preserve the goodwill of those having material business
relationships with it; (iv) to maintain and keep each of Christiana's
properties in the same repair and condition as presently exists, except for
deterioration due to ordinary wear and tear and damage due to casualty; and
(v) to maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it;
(n) Christiana shall, and shall cause the Christiana Subsidiaries to,
perform their respective obligations under any contracts and agreements to
which it is a party or to which any of its assets is subject, except to the
extent such failure to perform would not have a Christiana MAE and except
for such obligations as Christiana in good faith may dispute;
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(o) Christiana shall cause there to exist immediately prior to the
Effective Time Christiana Net Cash (including $10,666,677 to be paid by C2
under the Logistic Purchase Agreement) of not less than $13 million;
(p) Neither Christiana nor any of its Subsidiaries shall settle or
compromise any litigation (whether or not commenced prior to the date of
this Agreement) other than settlements or compromises: (i) of litigation
where the amount paid in settlement or compromise does not exceed $500,000,
or if greater, the amount of the reserve therefor reflected in the most
recent SEC Documents and the terms of the settlement would not otherwise
have a Christiana MAE, or (ii) in consultation and cooperation with
Weatherford, and, with respect to any such settlement, with the prior
written consent of Weatherford;
(q) Christiana shall cause the Logistic Purchase Agreement to be
executed and delivered by Christiana and the Logistic Sale to be effected
prior to the Merger immediately prior to the Effective Time;
(r) Christiana shall not authorize any of, or commit or agree to take
any of, or permit any Christiana Subsidiary to take any of, the foregoing
actions to the extent prohibited by the foregoing and shall not, and shall
not permit any of the Christiana Subsidiaries to, take any action that
would, or that reasonably could be expected to, result in any of the
representations and warranties set forth in this Agreement becoming untrue
or any of the conditions to the Merger set forth in Article VI not being
satisfied. Christiana promptly shall advise Weatherford orally and in
writing of any change or event having, or which, insofar as reasonably can
be foreseen, would have, a material adverse effect on Christiana and the
Christiana Subsidiaries, taken as a whole, or cause a Christiana MAE.
(s) Christiana shall cause Logistic to pay to Christiana a
distribution in the amount of $20 million cash prior to the Effective Time
(the "Logistic Dividend");
(t) Christiana shall cause Logistic to pay in full the entire
principal amount of the Wiscold Note dated September 1, 1992, in the
principal amount of $3,000,000, together with all accrued interest thereon
(the "Wiscold Note"); and
(u) Except as set forth in Section 2.2(o) of the Disclosure Schedule
or agreed to in writing by Weatherford prior to the Closing, Christiana
shall cause all of its obligations (i) relating to Logistic or any other
historical business of Christiana or its Subsidiaries and (ii) under any
and all agreements relating to the borrowing of funds, including all
guarantees and other similar arrangements relating thereto, to be fully
released or otherwise satisfied in a manner acceptable to Weatherford.
3.2 CASH REQUIREMENTS. Christiana covenants that as of the Effective Time
it shall have cash equal to the sum of (i) $13 million (including $10,666,677 to
be received under the Logistic Purchase Agreement) and (ii) all accrued and
unpaid liabilities and obligations of Christiana. For purposes of this Section
3.2, the unpaid liabilities and obligations of Christiana shall mean the full
undiscounted amount of liabilities for which Christiana shall be responsible,
including any liabilities that will accrue as a result of the Merger, the
Logistic Sale or the transactions contemplated herein, whether or not such
liabilities would be required to be reflected as a liability by generally
accepted accounting principles; provided, however, that such liabilities shall
not include any liabilities for any gain on any Weatherford Common Stock held by
Christiana realized as a result of a sale of such stock by Christiana or a
liquidation or merger of Christiana (other than the Merger) within two years
after the Effective Time, nor any tax liability for income of Weatherford
attributable to Christiana under the equity method of accounting either before
or after the Effective Time (the "Weatherford Related Taxes"). Further, for
purposes of calculating such liabilities, any Taxes (other than the Weatherford
Related Taxes) payable in respect of the Logistic Sale or other transactions
contemplated herein or under the Logistic Purchase Agreement shall be fully
accrued as a liability and any Tax credits, deductions, other Tax benefits of
Christiana shall not be considered or used to offset any such liability. The
provisions of this Section 3.2 shall not affect Logistic's and C2's obligations
under the Logistic Purchase Agreement to assume and indemnify Weatherford as set
forth therein.
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3.3 AFFILIATES' AGREEMENTS. Prior to the Closing Date, Christiana shall
deliver to Weatherford a letter identifying all Persons that are, at the time
this Agreement is submitted for approval to the stockholders of Christiana,
"affiliates" of Christiana for purposes of Rule 145 under the Securities Act
("Affiliates"). Christiana shall deliver or cause to be delivered to Weatherford
an undertaking by each Affiliate in form satisfactory to Weatherford that no
Weatherford Common Stock received or to be received by such Affiliate pursuant
to the Merger will be sold or disposed of except pursuant to an effective
registration statement under the Securities Act or in accordance with the
provisions of Rule 144 or paragraph (d) of Rule 145 under the Securities Act or
another exemption from registration under the Securities Act.
3.4 WEATHERFORD COMMON STOCK PURCHASES. Prior to the date the Proxy
Statement is mailed to the stockholders of Weatherford and Christiana,
Christiana shall purchase, in one transaction or a series of transactions, at
least $10 million of Weatherford Common Stock (the "$10 Million Purchase").
After the Christiana Stockholders Meeting, as defined in Section 5.3, Christiana
shall purchase, in one transaction or a series of transactions, up to an
additional $5 million of Weatherford Common Stock (the "$5 Million Purchase").
Notwithstanding the foregoing, Christiana shall not be required to make any
purchase unless such purchase, when considering the then current price of
Weatherford Common Stock, prior purchases and amounts, if any, remaining under
the $10 Million Purchase and the $5 Million Purchase, will allow the Merger when
completed to qualify as a reorganization within the meaning of Section
368(a)(1)(A) by reason of Section 368(a)(2)(E) of the Code. Christiana may, but
is not required to, waive the foregoing and purchase any other Weatherford
Common Stock. All such purchases shall be made in accordance with applicable
securities laws, including Regulation M and Rule 10b-18 promulgated under the
Exchange Act.
ARTICLE IV
COVENANTS OF WEATHERFORD PRIOR TO THE EFFECTIVE TIME
4.1 RESERVATION OF WEATHERFORD STOCK. Weatherford shall reserve for
issuance, out of its authorized but unissued capital stock, such number of
shares of Weatherford Common Stock as may be issuable upon consummation of the
Merger.
4.2 CONDUCT OF WEATHERFORD PENDING THE MERGER. Weatherford covenants and
agrees that, from the date of this Agreement until the Effective Time, unless
Christiana shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement, it will not take any action that would, or that
could be expected to, result in any of the representations and warranties set
forth in this Agreement becoming untrue or any of the conditions to the merger
set forth in Article VI not being satisfied.
4.3 STOCK EXCHANGE LISTING. Weatherford shall use reasonable efforts to
cause the shares of Weatherford Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly
as reasonably practicable after the execution of this Agreement, Weatherford and
Christiana shall prepare and file with the Commission preliminary proxy
materials that shall constitute the Proxy Statement of Weatherford and
Christiana and the registration statement with respect to the Weatherford Common
Stock to be issued in connection with the Merger (the "Registration Statement").
As promptly as reasonably practicable after final comments are received from and
cleared by the Commission on the preliminary proxy materials, Weatherford and
Christiana shall file with the Commission a combined joint proxy statement and
registration statement on Form S-4 (or on such other form as shall be
appropriate) relating to the approval and adoption of the Merger and this
Agreement by the stockholders of Weatherford and the stockholders of Christiana
and the issuance by Weatherford of Weatherford Common Stock in connection with
the Merger and shall use their reasonable efforts to cause the Registration
Statement to become effective as soon as practicable. Subject to the terms and
conditions set forth in Section 6.2 and the fiduciary obligations of the Board
of Directors of Weatherford with respect to such matters, the Proxy Statement
shall contain a statement that the Board of Directors of Weatherford recommended
that the stockholders of Weatherford approve and adopt the Merger and this
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Agreement. Subject to the terms and conditions set forth in Section 6.3 and the
fiduciary obligations of the Board of Directors of Christiana with respect to
such matters, the Proxy Statement shall contain a statement that the Board of
Directors of Christiana recommended that the stockholders of Christiana approve
and adopt the Merger and this Agreement.
5.2 ACCOUNTANTS LETTER. Christiana shall use its reasonable efforts to
cause Arthur Andersen LLP to deliver a letter pursuant to SAS 72 dated as of the
date of the Proxy Statement and confirmed and updated at the Closing as of the
Closing Date, and addressed to itself and Weatherford, in the form and substance
reasonably satisfactory to Weatherford and customary in the scope and substance
for agreed upon procedures letters delivered by independent public accountants
in connection with registration statements and proxy statements similar to the
Registration Statement and Proxy Statement.
5.3 MEETINGS OF STOCKHOLDERS.
(a) Christiana shall promptly take all action reasonably necessary in
accordance with the WBCL and its Articles of Incorporation and bylaws to
convene a meeting of its stockholders to consider and vote upon the
adoption and approval of the Merger and this Agreement and the Logistic
Sale (the "Christiana Shareholders Meeting"). Christiana shall provide
that, in addition to any vote that may be required by law, the approval of
the Merger and this Agreement and the Logistic Sale shall require approval
of a majority of the votes cast for or against such matters excluding any
shares of Christiana Common Stock held by Lubar & Co. Incorporated and its
affiliates; provided, however, Christiana may, in lieu of such requirement,
obtain an agreement by Lubar & Co. Incorporated and its affiliates to vote
all of its shares of Christiana Common Stock for, against or abstain from
voting with respect to such matters in the same proportion as the shares of
Christiana Common Stock are voted on such matters by the other stockholders
of Christiana. Subject to the terms and conditions set forth in Section 6.3
and the fiduciary obligations of the Board of Directors of Christiana with
respect to such matters, the Board of Directors of Christiana (i) shall
recommend at such meeting that the stockholders of Christiana vote to adopt
and approve the Merger and this Agreement and the Logistic Sale, (ii) shall
use its best efforts to solicit from stockholders of Christiana proxies in
favor of such adoption and approval and (iii) shall take all other action
reasonably necessary to secure a vote of its stockholders in favor of the
adoption and approval of the Merger and this Agreement.
(b) Weatherford shall promptly take all action reasonably necessary in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and its Certificate of Incorporation and bylaws to convene a
meeting of its stockholders to consider and vote upon the adoption and
approval of the Merger and this Agreement. Subject to the terms and
conditions set forth in Section 6.2 and the fiduciary obligations of the
Board of Directors of Weatherford with respect to such matters, the Board
of Directors of Weatherford (i) shall recommend at such meeting that the
stockholders of Weatherford vote to adopt and approve the Merger and this
Agreement, (ii) shall use its reasonable efforts to solicit from
stockholders of Weatherford proxies in favor of such adoption and approval
and (iii) shall take all other action reasonably necessary to secure a vote
of its stockholders in favor of the adoption and approval of the Merger and
this Agreement.
(c) Weatherford and Christiana shall coordinate and cooperate with
respect to the timing of such meetings and shall endeavor to hold such
meetings on the same day and as soon as practicable after the date hereof.
5.4 FILINGS; CONSENTS; REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, Christiana and Weatherford shall (i) make all
necessary filings with respect to the Merger and this Agreement under the HSR
Act, the Securities Act, the Exchange Act, and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto; (ii) use reasonable efforts to
obtain all consents, waivers, approvals, authorizations, and orders required in
connection with the authorization, execution, and delivery of this Agreement and
the consummation of the Merger; and (iii) use reasonable efforts to take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper, or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
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5.5 NOTIFICATION OF CERTAIN MATTERS. Christiana shall give prompt notice
to Weatherford, and Weatherford shall give prompt notice to Christiana, orally
and in writing, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate at any time from the date
hereof to the Effective Time; and (ii) any material failure of Christiana or
Weatherford, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
compiled with or satisfied by it hereunder.
5.6 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
those out-of-pocket expenses (which do not include fees for attorneys,
accountants and financial advisors) incurred in connection with (i) the
registration fees for the Weatherford Common Stock under the Securities Act to
be issued in the Merger, (ii) the registration and qualification of the
Weatherford Common Stock under any state securities and blue sky laws, (iii) the
listing of the Weatherford Common Stock on the NYSE, (iv) the HSR filing fee (v)
the investment banking, appraisal, and related expenses of Christiana, (vi) the
cost of any proxy solicitors and (vii) the printing and mailing of the
Registration Statement and the Proxy Statement shall be paid by Christiana;
provided, however, that if this Agreement shall have been terminated pursuant to
Section 7.1 as a result of the willful breach by a party of any of its
representations, warranties, covenants, or agreements set forth in this
Agreement, such breaching party shall pay the direct out-of-pocket costs and
expenses of the other parties in connection with the transactions contemplated
by this Agreement.
5.7 CHRISTIANA'S EMPLOYEE BENEFITS.
(a) Christiana shall take action prior to the Merger and the Logistic
Sale to (i) either cancel all outstanding Christiana Options or accelerate
such Christiana Options and make such Christiana Options terminate prior to
the Effective Time and (ii) and terminate the Christiana Option Plan.
(b) Christiana shall pay to each holder of Christiana Options an
amount of cash necessary to obtain cancellation of all Christiana Options
held by such holders.
(c) Christiana shall cause all employee benefit plans to which it is a
sponsor or has obligations to be terminated or assumed by Logistic or C2
without any continuing obligations on the part of Christiana.
(d) Christiana shall transfer to Logistic or C2 all employees of
Christiana without any liability to the Surviving Corporation. C2 shall be
responsible for all severance and other obligations with respect to such
terminated employees, if any. As of the Effective Time, Christiana shall
have no employees or employee benefit plans or obligations.
5.8 LIQUIDATION OR MERGER OF CHRISTIANA. Weatherford agrees that for a
period of two years following the Effective Date it shall not cause or permit
Christiana to (i) liquidate or dissolve, (ii) sell or transfer any shares of
Weatherford Common Stock held by Christiana or (iii) merge Christiana into any
other entity unless Weatherford receives an opinion of a nationally-recognized
tax counsel or accounting firm that such transaction will not adversely affect
the tax treatment of the Merger; provided, however, this restriction shall not
be deemed to prohibit or restrict (i) a sale or disposition of Christiana's
interest in Logistic to the extent permitted by the Logistic Purchase Agreement
or the operating agreement relating to Logistic, (ii) a change in control of
Weatherford, (iii) a merger, consolidation, share exchange or similar
transaction involving Weatherford or its subsidiaries (other than Christiana) or
(iv) a sale or disposition of any assets of Weatherford or its subsidiaries
(other than Christiana).
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ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the Merger (and the Logistic Sale in the case
of Christiana) shall have been approved and adopted by the requisite vote
of the stockholders of Christiana and Weatherford, as may be required by
law, by the rules of the NYSE, by Section 5.3(a) and by any applicable
provisions of their respective charters or bylaws;
(b) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(c) No order shall have been entered and remain in effect in any
action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal the
consummation of the Logistic Sale and the Merger;
(d) The Registration Statement and a registration statement under the
Securities Act to be filed by C2 in connection with the Merger shall each
be effective on the Closing Date, and all post-effective amendments thereto
filed shall have been declared effective or shall have been withdrawn; and
no stop-order suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been initiated or, to the
knowledge of the parties, threatened by the Commission;
(e) There shall have been obtained any and all material permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other governmental body or agency, that reasonably
may be deemed necessary so that the consummation of the Merger and the
transactions contemplated thereby will be in compliance with applicable
laws, the failure to comply with which would have a Christiana MAE or a
Weatherford MAE;
(f) The shares of Weatherford Common Stock issuable upon consummation
of the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance;
(g) Weatherford, C2 and Christiana shall have received an opinion,
dated as of the Effective Date, from American Appraisal Associates, Inc. in
form and substance satisfactory to them, in respect of the matters
described in Section 2.2(u); and
(h) All approvals and consents of third Persons (i) the granting of
which is necessary for the consummation of the Merger, the Logistic Sale or
the transactions contemplated in connection therewith and (ii) the
non-receipt of which would have a Christiana MAE or a Weatherford MAE.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WEATHERFORD. The obligation of
Weatherford to effect the Merger is, at the option of Weatherford, also subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Christiana contained in
Section 2.2 shall be accurate as of the date of this Agreement and (except
to the extent such representations and warranties speak specifically as of
an earlier date) as of the Closing Date as though such representations and
warranties had been made at and as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by Christiana on or before the Closing Date shall have been duly
complied with and performed in all material respects; and a certificate to
the foregoing effect dated the Closing Date and signed by the chief
executive officer and the president of Christiana shall have been delivered
to Weatherford;
(b) There shall not have occurred or exist any fact or condition that
would reasonably result in a Christiana MAE or would constitute a material
fixed or contingent liability to Christiana, and
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Weatherford shall have received a certificate signed by the president of
Christiana dated the Closing Date to such effect;
(c) The Board of Directors of Weatherford shall have received from
Morgan Stanley & Co. Incorporated, financial advisor to Weatherford, a
written opinion, satisfactory in form and substance to the Board of
Directors of Weatherford, to the effect that consideration to be paid by
Weatherford in the Merger is fair to Weatherford from a financial point of
view, which opinion shall not subsequently be withdrawn;
(d) The Christiana Options shall have been cancelled and the
Christiana Plans shall have been terminated or such options shall have been
exercised;
(e) Christiana shall have received, and furnished written copies to
Weatherford of, the Christiana affiliates' agreements pursuant to Section
3.3;
(f) Weatherford shall have received from Foley & Lardner, counsel to
Christiana, an opinion dated the Closing Date covering customary matters
relating to the Agreement and the Merger, including an opinion in form and
substance satisfactory to Weatherford with respect to the matters described
in Section 2.2(a), (b), (c), (d) and (k) (provided that the form of such
opinion shall be agreed upon prior to the filing of the Registration
Statement with the Commission);
(g) Weatherford shall have received from Arthur Andersen LLP a written
opinion, in form and substance satisfactory to Weatherford, dated as of the
date that the Proxy Statement is first mailed to the Stockholders of
Christiana and Weatherford to the effect that (i) the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code by reason of Section
368(a)(2)(E) of the Code, (ii) Weatherford, Sub and Christiana will each be
a party to that reorganization within the meaning of Section 368(b) of the
Code and (iii) Weatherford, Sub and Christiana shall not recognize any gain
or loss for U.S. federal income tax purposes as a result of the Merger
(although Christiana will recognize gain or loss for U.S. federal income
tax purposes as a result of the Logistic Sale), and such opinion shall be
confirmed at the Closing;
(h) Weatherford shall have received from Arthur Andersen LLP a letter,
in form and substance satisfactory to Weatherford, dated as of the Closing
Date, to the effect that the Merger would not adversely affect the ability
of Weatherford to account for any prior or future business combination as a
pooling of interest;
(i) C2 shall have executed and delivered to Christiana and Weatherford
the Logistic Purchase Agreement and agreement among members in form and
substance, including schedules, acceptable to Weatherford;
(j) The Logistic Sale shall have been consummated;
(k) Christiana shall have delivered to Weatherford a pro forma balance
sheet after giving effect to the Logistic Sale, including a full accrual
for Taxes thereon without regard to any tax credits or tax deductions that
Christiana may have in connection with the exercise of any stock options,
reflecting Christiana Net Cash in an amount not less than $13 million;
(l) Except as permitted by Section 3.1, all outstanding Indebtedness
(including guarantees thereof) of Christiana and its Subsidiaries (other
than Logistics) shall have been paid in full or Christiana shall have been
fully released therefrom;
(m) The assets of Christiana shall consist only of cash of at least
$13 million, at least 3,897,462 shares of Weatherford Common Stock, certain
tax benefits and 333.333 units of Logistic representing one-third of the
outstanding interests of Logistic; and
(n) There shall not be pending any litigation involving Christiana or
any of its subsidiaries, that Weatherford, in its sole discretion,
considers to be a material liability for which adequate security has not
been provided.
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6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CHRISTIANA. The obligation of
Christiana to effect the Merger is, at the option of Christiana, also subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Weatherford and Sub
contained in Section 2.1 shall be accurate as of the date of this Agreement
and (except to the extent such representations and warranties speak
specifically as of an earlier date) as of the Closing Date as though such
representations and warranties had been made at and as of that time; all
the terms, covenants and conditions of this Agreement to be complied with
and performed by Weatherford on or before the Closing Date shall have been
duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Closing Date and signed by
the chief executive officer of Weatherford shall have been delivered to
Christiana;
(b) The Board of Directors of Christiana and C2 shall have received
from Prudential Securities Corporation, financial advisor to Christiana and
C2, a written opinion, satisfactory in form and substance to the Board of
Directors of Christiana and C2, to the effect that from a financial point
of view to the Christiana Shareholders the Merger, which includes (i) the
consideration to be received in the Merger and (ii) the purchase price for
Logistic is fair to the Christiana Shareholders, which opinion shall not
subsequently be withdrawn;
(c) Christiana and C2 shall have received from Fulbright & Jaworski
L.L.P. counsel to Weatherford, an opinion dated the Closing Date covering
customary matters relating to this Agreement and the Merger, including an
opinion in form and substance with respect to the matters described in
Section 2.1(a), (b)(iii), (c) and (d)(i), (ii) and (iii);
(d) C2 and Christiana shall have received from Arthur Andersen LLP, a
written opinion, in form and substance satisfactory to Christiana, dated as
of the date that the Proxy Statement is first mailed to stockholders of
Christiana and Weatherford to the effect that (i) the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code by reason of Section
368(a)(2)(E) of the Code; (ii) Weatherford, Sub and Christiana will each be
a party to that reorganization within the meaning of Section 368(b) of the
Code, and (iii) Weatherford, Sub and Christiana shall not recognize any
gain or loss for U.S. federal income tax purposes as a result of the Merger
(although Christiana will recognize gain or loss for U.S. federal income
tax purposes as a result of the Logistic Sale), and such opinion shall be
confirmed at the Closing; and
(e) The Logistic Sale under the Logistic Purchase Agreement shall have
occurred.
ARTICLE VII
MISCELLANEOUS
7.1 TERMINATION. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of
Weatherford or the stockholders of Christiana:
(a) by mutual written consent of Weatherford and Christiana;
(b) by either Weatherford or Christiana if (i) the Merger has not been
consummated on or before January 31, 1999 (provided that the right to
terminate this Agreement under this clause (i) shall not be available to
any party whose breach of any representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such
date); (ii) any court of competent jurisdiction, or some other governmental
body or regulatory authority shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting
the Merger; (iii) the stockholders of Christiana shall not approve the
Logistic Sale or the Merger at the Christiana stockholder meeting or at any
adjournment thereof; (iv) the stockholders of Weatherford shall not approve
the Merger at the Weatherford stockholder meeting or any adjournment
thereof; or (v) in the exercise of its good faith judgment as to its
fiduciary duties to its
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stockholders imposed by law, as advised by outside counsel, the Board of
Directors of Christiana or Weatherford determines that such termination is
appropriate in complying with its fiduciary obligations.
(c) by Christiana if (i) Weatherford shall have failed to comply in
any material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by Weatherford or Sub at or
prior to such date of termination (provided such breach has not been cured
within 30 days following receipt by Weatherford of written notice from
Christiana of such breach and is existing at the time of termination of
this Agreement); (ii) any representation or warranty of Weatherford
contained in this Agreement shall not be true in all respects when made
(provided such breach has not been cured within 30 days following receipt
by Weatherford of written notice from Christiana of such breach and is
existing at the time of termination of this Agreement) or on and as of the
Effective Time as if made on and as of the Effective Time (except to the
extent it relates to a particular date), except for such failures to be so
true and correct which would not individually or in the aggregate,
reasonably be expected to have a Weatherford MAE, assuming the
effectiveness of the Merger; or (iii) the Board of Directors of Weatherford
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Christiana or shall have resolved to do any
of the foregoing.
(d) by Weatherford if (i) Christiana shall have failed to comply in
any material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by it at or prior to such
date of termination (provided such breach has not been cured within 30 days
following receipt by Christiana of written notice from Weatherford of such
breach and is existing at the time of termination of this Agreement); (ii)
any representation or warranty of Christiana contained in this Agreement
shall not be true in all respects when made (provided such breach has not
been cured within 30 days following receipt by Christiana of written notice
from Weatherford of such breach and is existing at the time of termination
of this Agreement) or on and as of the Effective Time as if made on and as
of the Effective Time (except to the extent it relates to a particular
date), except for such failures to be so true and correct which would not
individually or in the aggregate, reasonably be expected to have a
Christiana MAE assuming the effectiveness of the Merger or (iii) the Board
of Directors of Christiana withdraws, modifies or changes its
recommendation of this Agreement or the Merger in a manner adverse to
Weatherford or shall have resolved to do any of the foregoing.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Weatherford or Christiana as provided in Section 7.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Weatherford, Sub or Christiana, except (i) with respect to this Section
7.2, Section 5.6 and Section 7.13, and (ii) such termination shall not relieve
any party hereto for any intentional breach prior to such termination by a party
hereto of any of its representations or warranties or of any of its covenants or
agreements set forth in this Agreement.
7.3 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is, or whose stockholders are, entitled to the
benefits thereof. This Agreement may not be amended or supplemented at any time,
except by an instrument in writing signed on behalf of each party hereto,
provided that after this Agreement has been approved and adopted by the
stockholders of Weatherford and Christiana, this Agreement may be amended only
as may be permitted by applicable provisions of the DGCL and the WBCL. The
waiver by any party hereto of any condition or of a breach of another provision
of this Agreement shall not operate or be construed as a waiver of any other
condition or subsequent breach. The waiver by any party hereto of any of the
conditions precedent to its obligations under this Agreement shall not preclude
it from seeking redress for breach of this Agreement other than with respect to
the condition so waived.
7.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the
representations and warranties of C2 contained herein, which shall survive
without limitation, none of the representations and warranties in this Agreement
shall survive the Effective Time.
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7.5 PUBLIC STATEMENTS. Christiana and Weatherford agree to consult with
each other prior to issuing any press release or otherwise making any public
statement with respect to the transactions contemplated hereby.
7.6 ASSIGNMENT. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns.
7.7 NOTICES. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Christiana:
Christiana Companies, Inc.
700 N. Water Street, Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to C2:
C2, Inc.
700 N. Water Street, Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to Weatherford or Sub:
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Strauss
Facsimile: (713) 651-5246
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or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.7. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.8 GOVERNING LAW. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall be governed by the laws of the State
of Delaware, without regard to conflict of laws principles.
7.9 ARBITRATION. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.9. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by Christiana, if prior to the Merger, or C2,
if after the Merger, and one to be appointed by Weatherford within fourteen days
following the submission of the claim to the parties hereto and the third to be
appointed by the two so appointed within five days thereafter. Should either
party refuse or neglect to join in the timely appointment of the arbitrators,
the other party shall be entitled to select both arbitrators. Should the two
arbitrators fail timely to appoint a third arbitrator, either party may apply to
the Chief Judge of the United States District Court for the Southern District of
Texas to make such appointment. The arbitrators shall have ninety days after the
selection of the third arbitrator within which to allow discovery, hear evidence
and issue their decision or award and shall in good faith attempt to comply with
such time limits; provided, however, if two of the three arbitrators believe
additional time is necessary to reach a decision, they may notify the parties
and extend the time to reach a decision in thirty day increments, but in no
event to exceed an additional ninety days. Discovery of evidence shall be
conducted expeditiously by the parties, bearing in mind the parties desire to
limit discovery and to expedite the decision or award of the arbitrators at the
most reasonable cost and expense of the parties. Judgment upon an award rendered
pursuant to such Arbitration may be entered in any court having jurisdiction, or
application may be made to such court for a judicial acceptance of the award,
and an order of enforcement, as the case may be. The place of Arbitration shall
be Houston, Texas. The decision of the arbitrators, or a majority thereof, made
in writing, shall be final and binding upon the parties hereto as to the
questions submitted, and each party shall abide by such decision.
Notwithstanding the provisions of this Section 7.9, neither party shall be
prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of arbitration and
entry of the arbitrators' award:
(a) each of the parties hereto irrevocably consents to the
non-exclusive jurisdiction of, and venue in, any state court located in
Harris County, Texas or any federal court sitting in the Southern District
of Texas in any suit, action or proceeding seeking injunctive relief,
orders in aid of arbitration, or entry of an arbitral award arising out of
or relating to this Agreement or any of the other agreements contemplated
hereby and any other court in which a matter that may result in a claim for
indemnification hereunder by a Weatherford Indemnified Party (as defined in
the Logistic Purchase Agreement) may be brought with respect to any claim
for indemnification by a Weatherford Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted
by law, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding seeking injunctive relief, orders
in aid of arbitration or entry of an arbitral award arising out of or
relating to this Agreement or any of the other agreements contemplated
hereby brought in any state court located in Harris County, Texas or any
federal court sitting in the Southern District of Texas or any other court
in which a matter that may result in a claim hereunder or for
indemnification under the Logistic Purchase Agreement by a Weatherford
Indemnified Party may be brought with respect to any claim for
indemnification by a
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Weatherford Indemnified Party, and further irrevocably waive any claim that
any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum;
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its
designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any suit,
action or proceeding arising out of or relating to this Agreement or any of
the other agreements contemplated hereby for the purposes of injunctive
relief, orders in aid of arbitration and entry of an arbitral award.
7.10 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall continue in full force and effect and shall in no way be
affected, impaired or invalidated.
7.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.12 HEADINGS. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7.13 CONFIDENTIALITY Agreement. The Confidentiality Agreements entered
into between Weatherford and Christiana on December 10, 1997 (the
"Confidentiality Agreements") are hereby incorporated by reference herein and
made a part hereof.
7.14 ENTIRE AGREEMENT: THIRD PARTY BENEFICIARIES. This Agreement, the
Other Agreements and the Confidentiality Agreements constitute the entire
agreement and supersede all other prior agreements and understandings, both oral
and written, among the parties or any of them, with respect to the subject
matter hereof and neither this nor any document delivered in connection with
this Agreement confers upon any Person not a party hereto any rights or remedies
hereunder.
7.15 DISCLOSURE LETTERS.
(a) The Christiana Disclosure Letter, executed by Christiana as of the
date hereof, and delivered to Weatherford on the date hereof, contains all
disclosure required to be made by Christiana under the various terms and
provisions of this Agreement. Each item of disclosure set forth in the
Christiana Disclosure Letter specifically refers to the Article and Section
of the Agreement to which such disclosure responds, and shall not be deemed
to be disclosed with respect to any other Article or Section of the
Agreement.
(b) The Weatherford Disclosure Letter, executed by Weatherford as of
the date hereof, and delivered to Christiana on the date hereof, contains
all disclosure required to be made by Weatherford under the various terms
and provisions of this Agreement. Each item of disclosure set forth in the
Weatherford Disclosure Letter specifically refers to the Article and
Section of the Agreement to which such disclosure responds, and shall not
be deemed to be disclosed with respect to any other Article or Section of
the Agreement.
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IN WITNESS WHEREOF each of the parties caused this Agreement to be executed
on its behalf by its officers thereunto duly authorized, all as of the date
first above written.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ CURTIS W. HUFF
----------------------------------
Name: Curtis W. Huff
---------------------------------
Title: Senior Vice President,
General Counsel and
Secretary
---------------------------------
CHRISTIANA ACQUISITION, INC.
By: /s/ CURTIS W. HUFF
----------------------------------
Name: Curtis W. Huff
---------------------------------
Title: President
---------------------------------
CHRISTIANA COMPANIES, INC.
By: /s/ WILLIAM T. DONOVAN
----------------------------------
Name: William T. Donovan
---------------------------------
Title: President
---------------------------------
C2, INC.
By: /s/ WILLIAM T. DONOVAN
----------------------------------
Name: William T. Donovan
---------------------------------
Title: Chairman
---------------------------------
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APPENDIX B
AGREEMENT*
BY AND AMONG
WEATHERFORD INTERNATIONAL, INC.,
TOTAL LOGISTIC CONTROL, LLC,
CHRISTIANA COMPANIES, INC.,
AND
C2, INC.
DECEMBER 12, 1997
* As amended by Amendment No. 1 to Agreement and Plan of Merger and Logistic
Purchase Agreement dated May 26, 1998 and Amendment No. 2 to Logistic Purchase
Agreement dated October 14, 1998.
<PAGE> 176
AGREEMENT
THIS AGREEMENT ("Agreement") made as of this 12th day of December, 1997, as
amended by Amendment No. 1 dated May 26, 1998 and Amendment No. 2 dated October
14, 1998, by and among WEATHERFORD INTERNATIONAL, INC., a Delaware corporation
(formerly known as EVI, Inc.) ("Weatherford"), TOTAL LOGISTIC CONTROL, LLC, a
Delaware limited liability company ("TLC"), CHRISTIANA COMPANIES, INC., a
Wisconsin corporation ("Christiana") and C2, INC., a Wisconsin corporation
("C2").
W I T N E S S E T H :
WHEREAS, Weatherford, Christiana Acquisition, Inc., a Wisconsin corporation
("Sub"), Christiana and C2 have entered into an Amended and Restated Agreement
and Plan of Merger dated as of October 14, 1998 (as amended, the "Merger
Agreement") pursuant to which Sub, a wholly owned subsidiary of Weatherford,
will merge with and into Christiana and thereby Christiana will become a wholly
owned subsidiary of Weatherford (the "Merger").
WHEREAS, as a condition to the Merger, Christiana will sell 666.667
Membership Units (as defined in Section 1.16 hereof) of TLC to C2 pursuant to
the terms and conditions hereinafter set forth (the "Logistic Sale").
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein and the mutual benefits derived from this Agreement ("Agreement"), the
parties, intending to be legally bound, hereby agree as follows:
1. Definitions.
1.1 Affiliate. Affiliate means, as to the person specified, any person
controlling, controlled by or under common control with such person, with the
concept of control in such context meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract or otherwise.
1.2 Assumed Liabilities. Assumed Liabilities means any and all Liabilities
and Environmental Liabilities (except for the Retained Liabilities) to which
Christiana, Weatherford or a Christiana Company may now or at any time in the
future become subject (whether directly or indirectly, including by reason of
Christiana or a Christiana Company owning, controlling or operating any business
or assets of any Person (including any current or past Affiliate)), resulting
from, arising out of or relating to (i) any Christiana Company (other than TLC),
(ii) the business, operations or assets of Christiana or any Christiana Company
on or prior to the Effective Date, (iii) any Christiana Taxes for periods ending
on or before the Effective Date (except Christiana Taxes to be expressly
retained by Christiana pursuant to the Merger Agreement), (iv) any obligation,
matter, fact, circumstance or action or omission by any Person in any way
relating to or arising from the business, operations or assets of Christiana or
a Christiana Company that existed on or prior to the Effective Date; (v) any
product or service provided by Christiana or any Christiana Company prior to the
Effective Date, (vi) the Merger, the Logistic Sale or any of the other
transactions contemplated hereby, (vii) previously conducted operations of
Christiana or any Christiana Company and (viii) C2's interest in TLC. The term
"Assumed Liabilities" shall include, without limitation, the following
Liabilities (other than Retained Liabilities):
(a) Any and all Liabilities and Environmental Liabilities resulting
from, arising out of or relating to (i) the assets, activities, operations,
current or former facilities, actions or omissions of Christiana or any of
its officers, directors, employees, independent contractors or agents
occurring on or before the Effective Date, (ii) the assets, activities,
operations, current or former facilities, actions or omissions of any
Christiana Company or any of its officers, directors, employees,
independent contractors or agents, (iii) any product liability claim,
recall, replacement, returns or customer allowances of or relating to
Christiana or any Christiana Company, or (iv) any contract or permit of
Christiana or any Christiana Company;
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(b) Any and all accounts and notes payable of Christiana or any
Christiana Company, excluding accounts payable which have been accounted
for in the calculation of Christiana Net Cash set forth in the Merger
Agreement;
(c) Any and all Liabilities relating to Christiana or any Christiana
Company employee benefit plans;
(d) Any and all Liabilities and Environmental Liabilities on behalf of
or which arise from or relate to active employees, or retired and inactive
employees, of Christiana or any Christiana Company, including, without
limitation, (i) liability for any salaries, wages, tax equalization
payments, vacation pay, sick leave, personal leave, severance pay, wrongful
dismissal or discrimination claims; (ii) liability for or under any
employee benefit plan, policy or arrangement, including, without
limitation, retirement, pension, medical, dental, profit sharing,
unemployment, supplemental unemployment or disability plan policy or
arrangement; (iii) liability for any payroll taxes, social security or
similar taxes or withholding; (iv) liability arising from claims or
litigation; and (v) liability arising from any injury, death, loss,
disability, occupational disease or claims under any worker's compensation
laws;
(e) Any and all Liabilities and Environmental Liabilities resulting
from, arising out, relating to or occurring on the Properties, including
those properties listed on Schedule 1.2 hereof, the operations on any of
the foregoing, and any off-site Environmental Liabilities related to any of
the foregoing, including without limitation, those under any
indemnification agreement or obligation of Christiana or any Christiana
Company and any documents relating thereto;
(f) Any and all Liabilities of TLC or any of its subsidiaries with
respect to transactions or events occurring or existing on or prior to the
Effective Date;
(g) Any and all litigation and claims for Liabilities of Christiana or
any Christiana Company existing as of the Effective Date;
(h) Any and all Liabilities for Christiana Taxes, arising out of, or
related to, Christiana for taxable periods on or before the Effective Date
(except such Christiana Taxes expressly retained by Christiana pursuant to
the Merger Agreement);
(i) Any misrepresentation or incorrect representation or warranty of
Christiana under the Merger Agreement without regard to any materiality or
knowledge qualification; and
(j) Any and all legal, accounting, consulting and expert fees and
expenses incurred after the date hereof in investigating, preparing,
defending, settling or discharging any claim or action arising under, out
of or in connection with any of the Assumed Liabilities other than those
associated with Weatherford's counsel's evaluation of the Merger and the
Logistic sale.
1.3 Business Day. Business Day means a day on which national banks are
generally open for the transaction of business in Houston, Texas.
1.4 CERCLA. CERCLA means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. sec. 9601, et seq.
1.5 Christiana. Christiana, for purposes of the assumption indemnification
provisions of this Agreement includes Christiana Companies, Inc. and any and all
predecessors thereto, whether by merger, purchase or acquisition of assets or
otherwise, and any and all predecessors to any such entities.
1.6 Circumstance. Circumstance has the meaning specified in Section 6.2
hereof.
1.7 Effective Date. Effective Date means the time and date the Merger is
made effective.
1.8 Environmental Conditions. Environmental Conditions means any
pollution, contamination, degradation, damage or injury caused by, related to,
arising form or in connection with the generation, handling, use, treatment,
storage, transportation, disposal, discharge, release or emission of any Waste
Materials.
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1.9 Environmental Law or Environmental Laws. Environmental Law or
Environmental Laws means all laws, rules, regulations, statutes, ordinances,
decrees or orders of any governmental entity now or at any time in the future in
effect relating to (i) the control of any potential pollutant or protection of
the air, water or land, (ii) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation, and (iii) exposure to
hazardous, toxic or other substances alleged to be harmful. The term
"Environmental Law" or "Environmental Laws" includes, without limitation, (1)
the terms and conditions of any license, permit, approval or other authorization
by any governmental entity and (2) judicial, administrative or other regulatory
decrees, judgments and orders of any governmental entity. The term
"Environmental Law" or "Environmental Laws" includes, but is not limited to the
following statutes and the regulations promulgated thereunder: the Clean Air
Act, 42 U.S.C. Section 7401 et seq., The Clean Water Act, 33 U.S.C. Section 1251
et seq., the Resource Conservation Recovery Act, 42 U.S.C. Section 6901 et seq.,
the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 11011 et
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the
Water Pollution Control Act, 33 U.S.C. Section 1251, et seq., the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq., CERCLA and any state, county or local
regulations similar thereto.
1.10 Environmental Liabilities. Environmental Liabilities means any and
all liabilities, responsibilities, claims, suits, losses, costs (including
remediation, removal, response, abatement, clean-up, investigative or monitoring
costs and any other related costs and expenses), other causes of action
recognized now or at any later time, damages, settlements, expenses, charges,
assessments, liens, penalties, fines, pre-judgment and post-judgment interest,
attorney fees and other legal fees (i) pursuant to any agreement, order, notice,
requirement, responsibility or directive (including directives embodied in
Environmental Laws), injunction, judgment or similar documents (including
settlements) arising out of or in connection with any Environmental Laws, or
(ii) pursuant to any claim by a governmental entity or other person or entity
for personal injury, property damage, damage to natural resources, remediation
or similar costs or expenses incurred or asserted by such entity or person
pursuant to common law or statute.
1.11 Weatherford Indemnified Parties. Weatherford Indemnified Parties
shall have the meaning set forth in Section 6.1(a) hereof.
1.12 Christiana Company. Christiana Company means any corporation,
partnership, limited liability company, association or other entity, of which
Christiana or any Christiana Company now or at any time in the past owned,
directly or indirectly, an ownership interest in (whether or not such ownership
interest constituted control of the entity and whether or not such interest
represented a passive or active investment), including those companies named on
Schedule 1.12 hereto.
1.13 Christiana Taxes. Christiana Taxes means any and all taxes (other
than Weatherford Related Taxes as defined in the Merger Agreement) to which
Christiana or any Christiana Company may be obligated relating to or arising
from (i) the current or past operations or assets of Christiana or any
Christiana Company through the Effective Date, (ii) the Logistic Sale, (iii) the
Merger, (iv) any tax return filed by any current or past member of Christiana's
consolidated group, (v) any Tax to which Christiana may be alleged to be liable
by reason of being affiliated with any other Person for all periods prior to the
Effective Date, (vi) property taxes with respect to the assets of Christiana or
any Christiana Company for all periods prior to the Effective Date and (vii) any
transfer taxes or value added taxes in connection with the transactions
contemplated by the Logistic Sale and the Merger.
1.14 Liability. Liability means any and all claims, demands, liabilities,
responsibilities, disputes, causes of action and obligations of every nature
whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured,
or fixed or contingent.
1.15 Member. Member means each person who has been admitted to TLC as a
member as provided in the Delaware Limited Liability Company Act (the "DLLCA")
and the Operating Agreement.
1.16 Membership Units. Membership Units means the basis by which a
Member's ownership interest in TLC issued pursuant to the Operating Agreement is
measured.
1.17 Merger. Merger means the merger of Christiana Acquisition, Inc. with
and into Christiana Companies, Inc. as contemplated by the Merger Agreement.
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1.18 Merger Agreement. Merger Agreement means the Amended and Restated
Agreement and Plan of Merger dated as of October 14, 1998, by and among
Weatherford International, Inc., a Delaware corporation, Christiana Acquisition,
Inc., a Wisconsin corporation, Christiana Companies, Inc., a Wisconsin
corporation, and C2, Inc. a Wisconsin corporation.
1.19 Operating Agreement. Operating Agreement shall mean the form of
Operating Agreement attached hereto as Exhibit A.
1.20 Person. Person means an individual, corporation, limited liability
company, partnership, governmental authority or any other entity.
1.21 Properties. Properties means the properties currently or previously
owned or operated by Christiana or any Christiana Company.
1.22 Retained Liabilities. Retained Liabilities shall mean and be limited
solely to (i) those accounts payable relating to Christiana that are reflected
on the Effective Date balance sheet of Christiana, (ii) those accounts payable
reflected on the Effective Date balance sheet of Christiana and agreed to by
Weatherford prior to the Effective Date, (iii) the obligations of Christiana
that arise after the Effective Date (other than obligations relating to matters
existing or occurring on or prior to the Effective Date and indemnification,
warranty and product liability, wrongful death or property claims associated
with actions or omissions prior to the Effective Date or any business conducted
prior to the Effective Date) and (iv) Weatherford Related Taxes (as defined in
the Merger Agreement).
1.23 Taxes. Taxes means all federal, state, local, foreign and other
taxes, charges, fees, duties, levies, imposts, customs or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, profit share, license,
lease, service, service use, value added, withholding, payroll, employment,
excise, estimated, severance, stamp, occupation, premium, property, windfall
profits or other taxes, fees, assessments, customs, duties, levies, imposts, or
charges of any kind whatsoever with any interest, penalties, additions to tax,
fines or other additional amounts imposed thereon or related thereto, and the
term Tax means any one of the foregoing Taxes.
1.24 Waste Materials. Waste Material means any (i) toxic or hazardous
materials or substances; (ii) solid wastes, including asbestos, polychlorinated
biphenyls, mercury, buried contaminants, chemicals, flammable or explosive
materials; (iii) radioactive materials; (iv) petroleum wastes and spills or
releases of petroleum products; and (v) any other chemical, pollutant,
contaminant, substance or waste that is regulated by any governmental entity
under any Environmental Law.
2. Purchase and Sale of Membership Units; Purchase Price.
2.1 Purchase and Sale of Membership Units.
(a) Effective as of the closing, Christiana shall sell, transfer,
assign, convey and deliver, and C2 shall purchase and accept, 666.667
Membership Units.
(b) CHRISTIANA MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE MEMBERSHIP UNITS OR THE ASSETS (CURRENT,
FIXED, PERSONAL, REAL, TANGIBLE OR INTANGIBLE) OF TLC AND ITS SUBSIDIARIES,
INCLUDING, BUT NOT LIMITED TO, CONDITION OR WORKMANSHIP THEREOF, OR THE
ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, CAPACITY,
SUITABILITY, UTILITY, SALABILITY, AVAILABILITY, COLLECTIBILITY, OPERATIONS,
CONDITIONS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IT BEING
THE EXPRESS AGREEMENT OF C2, TLC AND CHRISTIANA THAT, EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, C2 WILL ACQUIRE THE MEMBERSHIP UNITS AND
INTEREST IN THE ASSETS OF TLC THROUGH SUCH OWNERSHIP INTEREST IN THEIR
PRESENT CONDITION AND STATE OF REPAIR, ON AN "AS IS AND WHERE IS, WITH ALL
FAULTS" BASIS.
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2.2 Assumption. Effective as of the closing, as an inducement to Sub to
merge with Christiana, C2 hereby unconditionally assumes and undertakes to pay,
satisfy and discharge when due the Assumed Liabilities. Notwithstanding the
foregoing, Christiana hereby retains and C2 will have no liability with respect
to the Retained Liabilities. In addition, effective as of the Closing, as a
further inducement to Sub to merge with Christiana, TLC hereby unconditionally
assumes and undertakes to pay, satisfy and discharge when due the Assumed
Liabilities to the extent such Assumed Liabilities relate to any of the
historical businesses, operations or assets of TLC and its subsidiaries. The
closing shall occur on or prior to the closing of the Merger.
2.3 Purchase Price. The aggregate purchase price ("Purchase Price") for
the 666.667 Membership Units shall be (i) $10,666,667, payable on the same date
that funds are paid by Weatherford to the Exchange Agent (as defined in the
Merger Agreement) pursuant to Section 1.8(c) of the Merger Agreement by C2 to
Christiana in the form of a certified or cashier's check, or, at the option of
Christiana, by wire transfer of immediately available funds to an account
designated by Christiana and (ii) the assumption by C2 at the closing of the
Assumed Liabilities.
2.4 ABSOLUTE ASSUMPTION. IT IS THE INTENT OF THE PARTIES THAT THE
LIABILITIES AND ENVIRONMENTAL LIABILITIES ASSUMED BY C2 AND TLC UNDER THIS
AGREEMENT SHALL BE WITHOUT REGARD TO THE CAUSE THEREOF OR THE NEGLIGENCE OF ANY
PERSON, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE,
AND WHETHER SUCH LIABILITY OR ENVIRONMENTAL LIABILITY IS BASED ON STRICT
LIABILITY, ABSOLUTE LIABILITY OR ARISING AS AN OBLIGATION OF CONTRIBUTION. C2
AND TLC EACH HEREBY WAIVES AND RELEASES FOR ITSELF AND ON BEHALF OF AFFILIATES
(OTHER THAN CHRISTIANA, WEATHERFORD AND THEIR RESPECTIVE AFFILIATES) ANY CLAIMS,
DEFENSES OR CLAIMS FOR CONTRIBUTION THAT IT HAS OR MAY HAVE AGAINST CHRISTIANA,
WEATHERFORD OR ANY OF THEIR RESPECTIVE AFFILIATES WITH RESPECT TO THE ASSUMED
LIABILITIES.
3. Representations of Christiana.
3.1 Organization. Christiana is a corporation duly organized and validly
existing under the laws of the state of Wisconsin. TLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Delaware.
3.2 Title. The 666.667 Membership Units being transferred pursuant to this
Agreement without any representation or warranty of any kind, including any
implied representations of the title.
4. Representations of C2 and TLC.
4.1 Organization. TLC is a limited liability company duly organized and
validly existing under the laws of the state of Delaware. C2 is a corporation
duly organized and validly existing under the laws of the state of Wisconsin.
4.2 Corporate Power. Each of C2 and TLC has full power, legal right and
authority to enter into this Agreement, and to carry out the transactions
contemplated hereby. The execution of this Agreement, and full performance
hereunder, has been duly authorized by C2's Board of Directors and TLC's
Members.
4.3 Validity. This Agreement has been duly and validly executed and
delivered by C2 and TLC and is the legal, valid and binding obligation of each
of C2 and TLC, enforceable in accordance with its terms.
5. Operating Agreement; Put and Participation Rights.
5.1 Operating Agreement. At the Closing, C2 and Christiana shall enter
into the Operating Agreement.
5.2 Put. At any time after the fifth anniversary date of the Effective
Date, Christiana shall have the option (but shall not be required) to sell to C2
or TLC, at Christiana's option, and C2 and TLC, as applicable, shall be required
to purchase, all (but not less than all) of Christiana's Membership Units for a
price equal to $7 million. To exercise this option, Christiana shall provide
notice in writing to C2 or TLC, as applicable, of such election. The closing of
any purchase pursuant to this Section 5.2 shall occur within 60 days of notice
to C2 or TLC, as applicable. The price required to be paid by C2 or TLC, as
applicable pursuant to this Section 5.2 shall be paid in cash. The rights
contained in this Section 5.2 shall expire on the date one year after the fifth
anniversary of the Effective Date.
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5.3 Participation Rights.
(a) If (x) there shall be proposed a C2 Change of Control or (y) C2 shall
propose to transfer or sell all of its interest in TLC to an unrelated third
party (a "Third Party") in one or more transactions (a "TLC Disposition"),
Christiana shall have the right, but not the obligation, to participate (a "Tag
Along Right") in such transaction as follows:
(i) In the case of a C2 Change of Control, Christiana shall have a
right to sell its Membership Units to C2 and TLC as determined as set forth
below for cash at the fair market value of such Membership Units as may be
agreed to by Christiana and C2 or, in the absence of such agreement, as
determined by appraisal, as set forth below; and
(ii) In the case of a TLC Disposition, Christiana shall have the right
to sell its Membership Units to the proposed purchaser of C2's Membership
Units for the same equivalent consideration per equivalent unit in TLC, in
cash, and otherwise on the same terms as C2 sells or transfers its
interests in TLC.
The purchasing entity in the case of a C2 Change of Control shall be
determined by C2 and TLC; provided, however, that each shall be responsible for
the purchase in the event of a default by the selected purchasing entity.
If circumstances occur which give rise to the Tag Along Right, then C2
shall give written notice ("Tag Along Notice") to Christiana providing a summary
of the terms of the proposed transaction and advising Christiana of its Tag
Along Right. The Tag Along Notice shall be required to be accompanied by the
offer to purchase required by this Section 5.3 by (x) the proposed purchasing
entity in the case of a C2 Change of Control and (y) the proposed purchaser in
the case of a proposed TLC Disposition. Christiana may exercise its Tag Along
Right by delivery of written notice to C2 within fifteen (15) days of its
receipt of the Tag Along Notice. If Christiana gives written notice indicating
that it wishes to exercise its Tag Along Right,
(1) In the case of a C2 Change of Control, Christiana shall be
obligated to sell its Membership Units to C2 or TLC, as the case may be,
and C2 and TLC shall be obligated to purchase for cash at the fair market
value of such Membership Units as may be agreed to by Christiana and C2 or,
in the absence of such agreement, as determined by a mutually acceptable
Third Party appraiser contemporaneous with the closing of the C2 Change of
Control; provided that if the parties cannot agree on an appraiser, each
shall appoint its own appraiser and those appraisers will appoint the Third
Party appraiser; and, provided, further, that the final decision of the
appraisers shall be as agreed by two of the three appraisers; and
(2) In the case of a TLC Disposition, Christiana shall be obligated to
sell its Membership Units, and the proposed purchaser shall be obligated to
purchase, for the same equivalent consideration per equivalent unit in TLC
and otherwise on the same terms as C2 sells or transfers its interests in
TLC with the sale to occur on or prior to the closing of the TLC
Disposition; provided, however, that Christiana shall receive its
equivalent consideration per equivalent unit in TLC in cash.
No transaction which would result in a C2 Change of Control may be effected
unless such transaction is effected in full compliance with the terms of this
Section 5.3.
(b) For the purposes of this Section 5.3, a "C2 Change of Control" shall be
defined to be (x) a transfer, conveyance or other disposition of shares of C2
stock by a member of the Lubar Family, (y) the issuance by C2 of any additional
shares of C2 stock or (z) a merger, consolidation, conversion or share exchange
or other similar transaction involving C2, if, after giving effect to such
transaction described in (x), (y) or (z), the Lubar Family shall cease to
beneficially own (defined to mean both the right to vote and dispose of the full
economic interests in the shares) at least 25% of all of the voting and
ownership interests in C2 or the resulting entity.
(c) For the purposes of this Section 5.3, the "Lubar Family" shall be
defined to be Sheldon B. Lubar, Joan P. Lubar, David J. Lubar, Kristine L.
Thomson, Susan L. Solvang, their spouses, their children, trusts for the benefit
of any of the foregoing and the Lubar Family Foundation.
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6. Indemnification.
6.1 Indemnification Matters.
(a) Indemnification. Each of C2 and TLC, jointly and severally, hereby
agree to indemnify, defend and hold Christiana, Weatherford and their respective
officers, directors, employees, agents and assigns (collectively, the
"Weatherford Indemnified Parties") harmless from and against any and all
Liabilities or Environmental Liabilities (including, without limitation,
reasonable fees and expenses of attorneys, accountants, consultants and experts)
that the Weatherford Indemnified Parties incur, are subject to a claim for, or
are subject to, that are based upon, arising out of, relating to or otherwise in
respect of:
(i) Any breach of any covenant or agreement of C2 or TLC contained in
this Agreement or in any other agreement contemplated hereby;
(ii) The acts or omissions of Christiana or any Christiana Company on
or before the Effective Date;
(iii) The acts or omissions of TLC, any Christiana Company or any of
its Affiliates (other than Christiana or Weatherford) or the conduct of any
business by them on or after the Effective Date (it being understood that
this indemnification shall not apply to acts or omissions by Christiana or
Weatherford after the Effective Date);
(iv) The Assumed Liabilities;
(v) Any and all amounts for which Christiana or Weatherford may be
liable on account of any claims, administrative charges, self-insured
retentions, deductibles, retrospective premiums or fronting provisions in
insurance policies, including as the result of any uninsured period,
insolvent insurance carriers or exhausted policies, arising from claims by
Christiana or any Christiana Company, or the employees of any of the
foregoing, or claims by insurance carriers of Christiana or any Christiana
Company for indemnity arising from or out of claims by or against
Christiana or any Christiana Company for acts or omissions of Christiana or
any Christiana Company, or related to any current or past business of
Christiana or any Christiana Company or any product or service provided by
Christiana or any Christiana Company in whole or part prior to the
Effective Date;
(vi) Any settlements or judgments in any litigation commenced by one
or more insurance carriers against Christiana or Weatherford on account of
claims by any Christiana Company or employees of any Christiana Company
and, if filed prior to the Effective Date, by Christiana or any employee of
Christiana;
(vii) Any Taxes (other than Weatherford Related Taxes) as a result of
the Logistic Sale and any Taxes as a result of the Merger subsequently
being determined to be a taxable transaction for foreign, federal, state or
local law purposes regardless of the theory or reason for the transactions
being subject to Tax;
(viii) The on-site or off-site handling, storage, treatment or
disposal of any Waste Materials generated by Christiana or any Christiana
Company on or prior to the Effective Date or any Christiana Company at any
time;
(ix) Any COBRA Liability with respect to any employees of Christiana
or any Christiana Company prior to the Closing;
(x) Any and all Environmental Conditions, known or unknown, existing
on, at or underlying any of the Properties on or prior to the Effective
Date;
(xi) Any and all Liabilities incurred by Christiana or Weatherford
pursuant to its obligations hereunder in seeking to obtain or obtaining any
consent or approval to assign and transfer any interest in TLC;
(xii) Any acts or omissions of Christiana or any Christiana Company
relating to the ownership or operation of the business of Christiana or any
Christiana Company or the Properties on or prior to the Effective Date;
(xiii) Any Liability relating to any claim or demand by any
stockholder of Christiana or Weatherford with respect to the Merger, the
Logistic Sale or the transactions relating thereto; and
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(xiv) Any Liability relating to any Christiana or any Christiana
Company employee benefit or welfare plans arising out of circumstances
occurring on or prior to the Effective Date.
(b) Allocation of Liability Payment Obligations. To the extent a Liability
exists or a claim for indemnification is made by a Weatherford Indemnified Party
hereunder, such Liability shall be paid and such claim shall be defended and
paid as follows:
(i) If the Liability or claim relates primarily to the historic
assets, liability operations of business TLC (excluding [describe non TLC
historic subs] (the "TLC Historic Business"), TLC shall, as between C2 and
TLC, be primarily responsible for the payment of such Liability and the
defense and payment of such claim. If TLC does not defend or pay such
claim, C2 shall be responsible for the defense and payment of such claim.
(ii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, C2 shall, as between C2 and TLC and subject
to the provisions of clause (iii) below, be primarily responsible for the
payment of such Liability and the defense and payment of such claim. If C2
does not defend or pay such claim, TLC shall be responsible for the defense
and payment of such claim.
(iii) If the Liability or claim relates primarily to a matter other
than the TLC Historic Business, the costs of defense and payment of the
Liability shall be paid by Weatherford to the extent and only to the extent
of the Christiana Retained Cash (as defined in the Merger Agreement);
provided that once such Christiana Retained Cash is paid pursuant to the
Merger Agreement, Weatherford shall have no obligation to pay such amounts.
Any such payments shall be subject to Weatherford being provided with
reasonable documentation regarding the payment obligations.
(iv) If TLC pays any amounts relating to an Assumed Liability or an
indemnification claim hereunder, Christiana shall be entitled to receive a
cash payment equal to one-third of any such amount paid when and if (i) TLC
or all or substantially all of its assets are sold, (ii) there is a sale of
Membership Units by C2 or (iii) there is a direct or indirect transfer or
sale of the membership units of TLC held by C2 or of the membership units
of C2. The obligation to pay such amounts shall be payable by C2.
(v) To secure the obligations of C2 hereunder, C2 shall pledge to
Christiana all of C2's interest in TLC, including all rights to
distributions in respect thereof, pursuant to a pledge agreement in such
form and having such terms as Christiana may reasonably request.
(vi) Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed to be an assumption of any obligation or
responsibility by Weatherford of any Assumed Liabilities and its
obligations hereunder shall be personal to TLC and C2 to the extent and
only to the extent Weatherford has agreed to fund the payment of indemnity
claims by it with the Christiana Retained Cash as expressly provided
herein. No third party shall be deemed to have any rights against
Weatherford as result of this Agreement.
(c) Absolute Indemnity. NONE OF THE WEATHERFORD INDEMNIFIED PARTIES WILL
BE OBLIGATED TO INSTITUTE ANY LEGAL PROCEEDINGS IN CONNECTION WITH THE
COLLECTION OR PURSUIT OF ANY INSURANCE IN ORDER TO EXERCISE AN INDEMNIFICATION
REMEDY UNDER THIS SECTION VI. UNLESS OTHERWISE SPECIFICALLY EXPRESSED, THIS
INDEMNITY OBLIGATION SHALL APPLY WITHOUT REGARD TO WHETHER THE LIABILITY OR
ENVIRONMENTAL LIABILITY WAS CAUSED BY THE ORDINARY OR GROSS NEGLIGENCE OF ANY OF
THE WEATHERFORD INDEMNIFIED PARTIES (WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT OR ACTIVE OR PASSIVE), OR WHETHER THE LIABILITY OR ENVIRONMENTAL
LIABILITY IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN
OBLIGATION OF CONTRIBUTION OR INDEMNITY. EACH OF C2 AND TLC ACKNOWLEDGES THAT IT
IS AWARE OF VARIOUS THEORIES KNOWN AS THE "EXPRESS NEGLIGENCE" DOCTRINE AND
OTHER SIMILAR DOCTRINES AND THEORIES THAT MAY LIMIT INDEMNIFICATION AND AGREES
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AND STIPULATES THAT THE PROVISIONS OF THIS AGREEMENT REFLECT THE EXPRESS INTENT
OF THE PARTIES THAT THE INDEMNIFICATION TO BE PROVIDED BY TLC AND C2 APPLY
NOTWITHSTANDING THE FACT THAT THE LIABILITY OR ENVIRONMENTAL LIABILITY (I) MAY
NOT CURRENTLY BE KNOWN BY IT OR MANIFEST ITSELF IN ANY REGARD, (II) MAY ARISE
UNDER A STATUTE OR THEORY THAT MAY NOT CURRENTLY EXIST OR BE KNOWN TO TLC, (III)
MAY ARISE AS A RESULT OF A NEGLIGENT ACT OR OMISSION BY ANY OF THE WEATHERFORD
INDEMNIFIED PARTIES (WHETHER SUCH CONDUCT BE SOLE, JOINT OR CONCURRENT OR ACTIVE
OR PASSIVE) OR (IV) MAY CONSTITUTE A VIOLATION OF ANY APPLICABLE CIVIL OR
CRIMINAL LAW OR REGULATION.
6.2 Notice of Circumstance. After receipt by a Weatherford Indemnified
Party of notice, or a Weatherford Indemnified Party's actual discovery, of any
action, proceeding, claim, demand or potential claim which could give rise to a
right to indemnification pursuant to any provision of this Agreement (any of
which is individually referred to a as a "Circumstance"), the Weatherford
Indemnified Party shall give TLC and C2 (collectively the "TLC Parties") written
notice describing the Circumstances in reasonable detail; provided, however,
that no delay by a Weatherford Indemnified Party in notifying the TLC Parties
shall relieve the TLC Parties from any Liability or Environmental Liability
hereunder unless (and then solely to the extent) the TLC Parties' position is
actually adversely prejudiced. In the event the TLC Parties notifies the
Weatherford Indemnified Party within 15 days after such notice that the TLC
Parties is assuming the defense thereof, (i) the TLC Parties will defend the
Weatherford Indemnified Parties against the Circumstances with counsel of its
choice, provided such counsel is reasonably satisfactory to Weatherford, (ii)
the Weatherford Indemnified Parties may retain separate co-counsel at its or
their sole cost or expense (except that the TLC Parties will be responsible for
the fees and expenses for the separate co-counsel to the extent Weatherford
concludes reasonably that the counsel the TLC Parties has selected has a
conflict of interest), (iii) the Weatherford Indemnified Parties will not
consent to the entry of any judgment or enter into any settlement with respect
to the Circumstances without the written consent of the TLC Parties, and (iv)
the TLC Parties will not consent to the entry of any judgment with respect to
the Circumstances, or enter into any settlement which (x) requires any payments
by or continuing obligations of a Weatherford Indemnified Party, (y) requires a
Weatherford Indemnified Party to admit any facts or liability that could
reasonably be expected to adversely affect a Weatherford Indemnified Party in
any other matter or (z) does not include a provision whereby the plaintiff or
claimant in the matter released the Weatherford Indemnified Parties from all
Liability with respect thereto, without the written consent of Weatherford. In
the event the TLC Parties does not notify Weatherford within 15 days after
Weatherford has given notice of the Circumstance that the TLC Parties is
assuming the defense thereof, the Weatherford Indemnified Parties may defend
against, or enter into any settlement with respect to, the Circumstance in any
manner the Weatherford Indemnified Parties reasonably may deem appropriate, at
the TLC Parties' sole cost. The foregoing provisions shall be subject to the
provisions of Section 6.1(b).
6.3 Insurance. The TLC Parties shall not be obligated to indemnify the
Weatherford Indemnified Parties for amounts which shall have been covered and
paid by insurance of the Weatherford Indemnified Parties, provided, however,
insurance shall not include deductibles or self-insured retentions.
6.4 Scope of Indemnification. INDEMNIFICATION UNDER THIS SECTION VI SHALL
BE IN ADDITION TO ANY REMEDIES CHRISTIANA, WEATHERFORD OR ANY WEATHERFORD
INDEMNIFIED PARTY MAY HAVE AT LAW OR EQUITY. THERE SHALL BE NO TIME LIMIT AS TO
C2'S OR TLC'S INDEMNIFICATION OBLIGATIONS HEREUNDER.
6.5 Indemnity for Certain Environmental Liabilities. It is the intention
of the parties that the indemnity provided herein with respect to Environmental
Liabilities under CERCLA and corresponding provisions of state law is an
agreement expressly not barred by 42 U.S.C. Section 9607(e)(i) and corresponding
provisions of state law.
6.6 C2 and TLC Covenants. To assure the performance of the obligations of
C2 and TLC under this Agreement, C2 and TLC each hereby covenants and agrees
that it will not, and will cause its subsidiaries to not, merge, convert into
another entity, engage in a share or interest exchange for a majority of its
units or
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shares, liquidate or transfer, assign or otherwise convey or allocate, directly
or indirectly, in one or more transactions, whether or not related, a majority
of C2's or TLC's assets (determined in good faith by a board or similar managing
body's resolution prior to the transaction on a fair value and consolidated
basis) to any Person unless the acquiring Person expressly assumes the
obligations of C2 or TLC, as the case may be, hereunder, (ii) executes and
delivers to Christiana and Weatherford an agreement agreeing to be bound by each
and every provision of this Agreement as if it were C2 or TLC, as the case may
be,and (iii) has a net worth on a pro forma basis after giving effect to the
acquisition or business combination equal to or greater than that of C2 or TLC,
as the case may be, on a consolidated basis.
7. Miscellaneous.
7.1 Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits thereof. This Agreement
may not be amended or supplemented at any time, except by an instrument in
writing signed on behalf of each party hereto, provided that this Agreement may
be amended only as may be permitted by the laws that govern Weatherford, TLC,
Christiana and C2. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement shall not operate or be construed
as a waiver of any other condition or subsequent breach. The waiver by any party
hereto of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
7.2 Arbitration. Any disputes, claims or controversies connected with,
arising out of, or related to, this Agreement and the rights and obligations
created herein, or the breach, validity, existence or termination hereof, shall
be settled by Arbitration to be conducted in accordance with the Commercial
Rules of Arbitration of the American Arbitration Association, except as such
Commercial Rules may be changed by this Section 7.2. The disputes, claims or
controversies shall be decided by three independent arbitrators (that is,
arbitrators having no substantial economic or other material relationship with
the parties), one to be appointed by TLC and C2 and one to be appointed by
Weatherford within fourteen days following the submission of the claim to the
parties hereto and the third to be appointed by the two so appointed within five
days. Should either party refuse or neglect to join in the timely appointment of
the arbitrators, the other party shall be entitled to select both arbitrators.
Should the two arbitrators fail timely to appoint a third arbitrator, either
party may apply to the Chief Judge of the United States District Court for the
Southern District of Texas to make such appointment. The arbitrators shall have
ninety days after the selection of the third arbitrator within which to allow
discovery, hear evidence and issue their decision or award and shall in good
faith attempt to comply with such time limits; provided, however, if two of the
three arbitrators believe additional time is necessary to reach a decision, they
may notify the parties and extend the time to reach a decision in thirty day
increments, but in no event to exceed an additional ninety days. Discovery of
evidence shall be conducted expeditiously by the Parties, bearing in mind the
parties desire to limit discovery and to expedite the decision or award of the
arbitrators at the most reasonable cost and expense of the parties. Judgment
upon an award rendered pursuant to such Arbitration may be entered in any court
having jurisdiction, or application may be made to such court for a judicial
acceptance of the award, and an order of enforcement, as the case may be. The
place of Arbitration shall be Houston, Texas. The decision of the arbitrators,
or a majority thereof, made in writing, shall be final and binding upon the
parties hereto as to the questions submitted, and each party shall abide by such
decision. Notwithstanding the provisions of this Section 7.2, neither party
shall be prohibited from seeking injunctive relief pending the completion of any
arbitration. The costs and expenses of the arbitration proceeding, including the
fees of the arbitrators and all costs and expenses, including legal fees and
witness fees, incurred by the prevailing party, shall be borne by the losing
party.
Solely for purposes of injunctive relief, orders in aid of arbitration and entry
of the arbitrator's award:
(a) each of the parties hereto irrevocably consents to the non-exclusive
jurisdiction of, and venue in, any state court located in Harris County, Texas
or any federal court sitting in the Southern District of Texas in any suit,
action or proceeding seeking injunctive relief, arising out of or relating to
this Agreement or any of the other agreements contemplated hereby and any other
court in which a matter that may result in a claim for
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indemnification hereunder by a Weatherford Indemnified Party may be brought with
respect to any claim for indemnification by a Weatherford Indemnified Party;
(b) each of the parties hereto waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding seeking injunctive relief, orders in aid of
arbitration or entry of an arbitration arising out of or relating to this
Agreement or any of the other agreements contemplated hereby brought in any
state court located in Harris County, Texas or any federal court sitting in the
Southern District of Texas or any other court in which a matter that may result
in a claim for indemnification hereunder by a Weatherford Indemnified Party may
be brought with respect to any claim for indemnification by a Weatherford
Indemnified Party, and further irrevocably waive any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum; and
(c) each of the parties hereto irrevocably designates, appoints and
empowers CT Corporation System, Inc. and any successor thereto as its designee,
appointee and agent to receive, accept and acknowledge for and on its behalf,
and in respect of its property, service of any and all legal process, summons,
notices and documents which may be served in any suit, action or proceeding
arising out of or relating to this Agreement or any of the other agreements
contemplated hereby.
7.3 Assignment. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any person other than TLC, C2, Christiana,
Weatherford, and the Weatherford Indemnified Parties any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
7.4 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in Person or by courier, (ii) sent by telecopy or facsimile transmission, answer
back requested, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Weatherford:
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Strauss
Facsimile: (713) 651-5246
if to TLC:
Total Logistic Control, LLC
700 N. Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
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with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
if to Christiana:
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: Curtis W. Huff
Facsimile: (713) 297-8488
with a copy to:
Fulbright & Jaworski, L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attn: Charles L. Strauss
Facsimile: (713) 651-5246
if to C2:
700 N. Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attn: William T. Donovan
Facsimile: (414) 291-9061
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attn: Joseph B. Tyson, Jr.
Facsimile: (414) 297-4900
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.4. Such notices shall be
effective, (i) if delivered in Person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
7.5 Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach shall by governed by the laws of the State
of Texas without regard to conflict of laws principles.
7.6 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
7.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.8 Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.
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7.9 Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all other prior agreements and understandings, both oral and written,
among the parties or any of them, with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
WEATHERFORD INTERNATIONAL, INC.
("Weatherford")
By: /s/ BERNARD J. DUROC-DANNER
----------------------------------
Title: President
---------------------------------
TOTAL LOGISTIC CONTROL, LLC
("TLC")
By: /s/ WILLIAM T. DONOVAN
----------------------------------
Title: Vice President
---------------------------------
CHRISTIANA COMPANIES, INC.
("Christiana")
By: /s/ WILLIAM T. DONOVAN
----------------------------------
Title: President
---------------------------------
C2, INC.
("C2")
By: /s/ WILLIAM T. DONOVAN
----------------------------------
Title: President
---------------------------------
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APPENDIX C
TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
, 1999
<PAGE> 190
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I FORMATION................................................. 4
1.01 Definitions................................................. 4
1.02 Formation; Name............................................. 4
1.03 Purposes.................................................... 4
1.04 Registered and Principal Offices............................ 4
1.05 Term........................................................ 4
1.06 Foreign Qualification....................................... 5
1.07 No State Law Partnership.................................... 5
1.08 Partnership Classification.................................. 5
ARTICLE II MEMBERS.................................................. 5
2.01 Members..................................................... 5
2.02 Admission of Additional Members............................. 5
ARTICLE III CAPITAL CONTRIBUTIONS................................... 5
3.01 Capital Contributions by Members............................ 5
3.02 Purchase of Units by C2, Inc................................ 5
3.03 Loans to the Company........................................ 5
3.04 Withdrawal and Return of Contributions...................... 6
3.05 Interest on Contributions................................... 6
3.06 Limitation on Member's Deficit Make-up...................... 6
3.07 Capital Accounts............................................ 6
3.08 Units....................................................... 6
ARTICLE IV ALLOCATIONS.............................................. 6
4.01 Profits and Losses.......................................... 6
4.02 Tax Allocations............................................. 6
4.03 Construction................................................ 7
ARTICLE V DISTRIBUTIONS............................................. 7
5.01 Current Tax Distributions................................... 7
5.02 Other Distributions......................................... 7
5.03 Amounts Withheld............................................ 7
5.04 Distribution Restrictions................................... 7
ARTICLE VI MANAGEMENT............................................... 8
6.01 Voting and Decisions........................................ 8
6.02 Restriction on Transactions................................. 8
6.03 Regular Meetings............................................ 8
6.04 Special Meetings............................................ 8
6.05 Quorum...................................................... 9
6.06 Notice...................................................... 9
6.07 Manner of Acting............................................ 9
6.08 Vacancies................................................... 9
6.09 Presumption of Assent....................................... 9
6.10 Resignation of Manager...................................... 9
6.11 Action Without Meeting...................................... 9
6.12 Telephonic Meetings......................................... 10
6.13 Reliance by Third Parties................................... 10
6.14 Filing of Documents......................................... 10
6.15 Limitation on Liability; Indemnification.................... 10
6.16 Delegation to Members or Representatives of Members......... 10
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
6.17 Time Devoted to Business.................................... 11
6.18 Compensation of Members and Officers........................ 12
ARTICLE VII ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND
DISASSOCIATION..................................................... 12
7.01 Assignment and Transfer..................................... 12
7.02 Disassociation.............................................. 13
7.03 Restraining Order........................................... 13
ARTICLE VIII DISSOLUTION AND WINDING UP.............................. 13
8.01 Dissolution................................................. 13
8.02 Winding Up and Liquidation.................................. 14
8.03 Compliance With Timing Requirements of Regulations.......... 14
ARTICLE IX BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS............. 14
9.01 Books and Records........................................... 14
9.02 Fiscal Year and Method of Accounting........................ 14
9.03 Reports and Statements...................................... 15
9.04 Tax Elections............................................... 15
9.05 Tax Matters Partner......................................... 15
ARTICLE X MISCELLANEOUS.............................................. 15
10.01 Amendments.................................................. 15
10.02 Bank Accounts............................................... 15
10.03 Binding Effect.............................................. 15
10.04 Rules of Construction....................................... 15
10.05 Choice of Law and Severability.............................. 16
10.06 Counterparts................................................ 16
10.07 Entire Agreement............................................ 16
10.08 Last Day for Performance Other Than a Business Day.......... 16
10.09 Notices..................................................... 16
10.10 Title to Property; No Partition............................. 16
ARTICLE XI GLOSSARY.................................................. 17
</TABLE>
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TOTAL LOGISTIC CONTROL, LLC
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (this "Operating
Agreement") is effective as of the [ ] day of [ ], 1999, between
Christiana Companies, Inc., a Wisconsin corporation, and C2, Inc., a Wisconsin
corporation (individually, "Member", and collectively, the "Members").
WITNESSETH:
WHEREAS, Christiana Companies, Inc. has formed a limited liability company
known as Total Logistic Control, LLC (the "Company"), by causing the filing of a
Certificate of Organization (the "Certificate") pursuant to the Act;
WHEREAS, C2, Inc. desires to acquire an interest in the Company and
Christiana Companies, Inc. desires to sell a portion of its interest to C2, Inc.
pursuant to the terms and conditions of that certain Agreement by and among
Weatherford International, Inc., a Delaware corporation, Christiana Acquisition
Co., a Wisconsin corporation, Christiana Companies, Inc., a Wisconsin
corporation, and C2, Inc., a Wisconsin corporation, dated December 12, 1997, as
amended by Amendment No. 1 dated as of May 26, 1998 and Amendment No. 2 dated as
of October 14, 1998 (the "Purchase Agreement").
WHEREAS, the parties hereto desire to set forth in full all of the terms
and conditions of their agreements and understandings in this Operating
Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
ARTICLE I
FORMATION
1.01 Definitions. Capitalized terms used in this Operating Agreement shall
have the meanings set forth in the text of this Operating Agreement in the
Glossary contained in Article XI.
1.02 Formation; Name. Christiana Companies, Inc. formed the Company as a
limited liability company pursuant to the Act by causing, on June 13, 1997, the
Certificate to be filed with the Delaware Secretary of State, which shall
constitute notice that the Company is a limited liability company. The Company's
name shall be Total Logistic Control, LLC.
1.03 Purposes. The purposes of the Company shall be to engage in any and
all general business activities permissible under the Act.
1.04 Registered and Principal Offices. The registered office of the
Company shall initially be located at 1209 Orange Street, Wilmington (County of
New Castle), Delaware, 19801. The registered agent of the Company shall be the
Corporation Trust Company, whose address is the same as that of the registered
office. The principal office of the Company shall be located at 777 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202. The Board of Managers may
establish additional offices or may relocate the principal or registered
offices.
1.05 Term. The Company's term officially began on June 13, 1997, and shall
continue until terminated by operation of law or by some provision of this
Operating Agreement.
1.06 Foreign Qualification. Prior to the Company's conducting business in
any jurisdiction other than Delaware, the Board of Managers shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Board of Managers, with all requirements
necessary to qualify the Company as a foreign limited liability company in that
jurisdiction. Each Member shall execute, acknowledge, swear to, and deliver all
certificates and other instruments conforming with this Operating Agreement that
are necessary or appropriate to qualify, continue, and terminate the Company as
a foreign limited liability company in all such jurisdictions in which the
Company may conduct business.
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1.07 No State Law Partnership. The Members intend that the Company be
operated in a manner consistent with its treatment as a partnership for federal
and state income tax purposes and not be operated or treated as a "partnership"
(including, without limitation, a limited partnership or joint venture) for any
other purpose, including, but not limited to, Section 303 of the Federal
Bankruptcy Code, and this Operating Agreement shall not be construed to suggest
otherwise. No Member shall take any action inconsistent with the express intent
of the parties hereto as set forth herein.
1.08 Partnership Classification. The Members hereby agree that the Company
shall not be operated or treated as an "association" taxed as a corporation
under the Code and that no election shall be made under the Treasury Regulations
by the Members, the Members or any officer to treat the Company as an
"association" taxable as a corporation without the prior unanimous written
consent of the Members.
ARTICLE II
MEMBERS
2.01 Members. The names and business addresses of the Members of the
Company are set forth on Exhibit A hereto.
2.02 Admission of Additional Members. Additional members may be admitted
to the Company only with Member Approval.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.01 Capital Contributions by Members.
(a) Initial Capital Contributions. The initial capital contribution
made by Christiana Companies, Inc. to the Company in exchange for its 100%
percentage interest in the Company is set forth on Exhibit C to this
Operating Agreement of Total Logistic Control, LLC dated June 13, 1997.
Christiana Companies, Inc.'s 100% percentage interest is hereby restated as
1,000 Units in the Company.
(b) Additional Capital Contributions. No additional capital
contributions to the Company shall be required. Additional capital
contributions to the Company may be made with Manager Approval. No
additional Units in the Company may be issued without prior Member
Approval.
3.02 Purchase of Units by C2, Inc. Pursuant to the terms and conditions of
the Purchase Agreement, C2, Inc. purchased 666.667 of the Units in the Company
held by Christiana Companies, Inc. Immediately following such purchase, each
Member holds the number of Units in the Company set forth on Exhibit A hereto.
3.03 Loans to the Company. Except as set forth in this Operating
Agreement, no Member shall make a loan to the Company without Manager Approval.
3.04 Withdrawal and Return of Contributions. No Member shall be entitled
to withdraw or to the return of its capital contributions. No Member shall have
the right to demand and receive property other than cash in return for its
contributions, except that upon dissolution, the Members shall be entitled to
share in the distribution of the remaining assets of the Company in accordance
with Article VIII of this Operating Agreement.
3.05 Interest on Contributions. Capital contributions to the Company shall
not earn interest.
3.06 Limitation on Member's Deficit Make-up. The Members shall have no
obligation to restore any deficit in their Capital Accounts.
3.07 Capital Accounts.
(a) Maintenance of Capital Accounts. A separate Capital Account shall
be maintained and adjusted for each Member on the books and records of the
Company in accordance with the Code and
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the Treasury Regulations. The initial balance of each Member's Capital
Account shall be the amount of its initial contribution to the Company.
(b) Transfers. In the event any interest in the Company is transferred
in accordance with the terms of this Operating Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest.
(c) Revaluation. In the event the Values of Company assets are
adjusted pursuant to the definition of the term "Value" in Article XI
hereof, the Capital Accounts of all Members shall be adjusted
simultaneously to reflect the aggregate net adjustment as if the Company
recognized gain or loss equal to the amount of such aggregate net
adjustment, and such adjustment shall be allocated to the Members in
accordance with Article IV hereof.
(d) Interpretation. The manner in which Capital Accounts are to be
maintained pursuant to this Section 3.07 is intended to and shall be
construed so as to comply with the requirements of Section 704(b) of the
Code and the Treasury Regulations promulgated thereunder.
3.08 Units. The membership interests in the Company shall be divided into
Units. Except as set forth herein, each Unit shall have identical preferences,
limitations, and other relative rights.
ARTICLE IV
ALLOCATIONS
4.01 Profits and Losses. Except as otherwise provided in Section 4.02
hereof, Profits and Losses shall be allocated among the Members in proportion to
the number of Units held by such Members.
4.02 Tax Allocations.
(a) Capital Contributions. In accordance with section 704(c) of the
Code and the Treasury Regulations under that section, income, gain, loss,
and deduction with respect to any capital contribution shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of the capital contribution for
federal income tax purposes and its initial Value.
(b) Adjustment of Value. If the Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to the asset shall take account of any variation between the
asset's adjusted basis for federal income tax purposes and its Value as so
adjusted in the same manner as under section 704(c) of the Code and the
Treasury Regulations under that section.
(c) Elections. Any elections or other decisions relating to the
allocations shall be made by the Board of Managers in any manner that
reasonably reflects the purpose and intent of this Operating Agreement.
Allocations pursuant to this Section 4.02 are solely for purposes of
national, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Capital Account or share of Profits
and Losses, other items, or Distributions pursuant to any provision of this
Operating Agreement.
(d) Determination of Allocable Amounts. For purposes of determining
the Profits and Losses, or any other items of income, gain, loss, or
deduction allocable to any fiscal period, Profits and Losses, and any other
such items shall be determined on a daily, monthly, or other basis, as
determined by the Board of Managers using any permissible method under
section 706 of the Code and the Treasury Regulations under that section.
(e) Income Tax Consequences. The Members are aware of the income tax
consequences of the allocations made by this Article IV and agree to be
bound by the provisions of this Article IV in reporting their shares of
income, gain, loss, and deductions for income tax purposes.
4.03 Construction. The provisions of this Article IV (and other related
provisions in this Operating Agreement) pertaining to the allocation of items of
Company income, gain, loss, deductions, and credits shall be interpreted
consistently with the Treasury Regulations, and to the extent unintentionally
inconsistent with such Treasury Regulations, shall be deemed to be modified to
the extent necessary to make such provisions consistent with the Treasury
Regulations.
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ARTICLE V
DISTRIBUTIONS
5.01 Current Tax Distributions. To the extent permitted by law and
consistent with the Company's obligations to its creditors, the Company shall
make distributions ("Tax Distributions") in accordance with this Section 5.01 on
or before April 15, June 15, September 15 and December 15 of each year. The
aggregate amount of the Tax Distribution made with respect to a given date shall
be the product of (1) the Company's estimated federal taxable income (computed
without taking into account any asset change in value due to the Purchase
Agreement, for the calendar quarter that includes such date, multiplied by (2)
the sum of (i) the highest corporate federal income tax rate as stated in the
Internal Revenue Code, plus (ii) the highest corporate Wisconsin income tax rate
as stated in Wisconsin law, minus (iii) the product of (i) and (ii). The
aggregate amount of each Tax Distribution shall be distributed to the Members in
proportion to the number of Units held by such Members.
5.02 Other Distributions. At such times and in such form as may be
determined by Member Approval, distributions (in addition to the distributions
described in Sections 5.01 and 5.03) shall be made to the Members in proportion
to the number of Units held by each such Member.
5.03 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members pursuant to this Article V for all purposes under this Operating
Agreement.
5.04 Distribution Restrictions. The Company shall make no distribution if,
and to the extent, that after such distribution, the Company would not be able
to pay its debts as they become due in the usual course of business, or the fair
value of the Company's total assets would be less than the sum of its total
liabilities.
ARTICLE VI
MANAGEMENT
6.01 Voting and Decisions. Subject to the provisions of Section 6.02, the
management of the Company shall be vested in a Board of Managers. The initial
Board of Managers shall consist of six Managers. Each Manager shall be elected
by the vote or written consent of the Members owning at least a majority of the
Units in the Company provided, however, that Christiana Companies, Inc. and C2,
Inc. shall at all times each be entitled to elect, without the consent of any
other Member, a number of Managers that is proportionate to the number of Units
in the Company held by Christiana Companies, Inc. and C2, Inc., respectively.
6.02 Restriction on Transactions. The following actions shall require
Member Approval:
(a) The authorization or issuance of additional Units except for the
issuance of up to 101 Units to Company management for management incentive
options with five year cliff vesting;
(b) The authorization or payment of any distribution with respect to
Units, except for payment of any distribution that is necessary for C2,
Inc. to fulfill its obligation with respect to Section 5.2 of the Purchase
Agreement;
(c) The direct or indirect purchase or acquisition by the Company or
any Subsidiary of the Company of Units;
(d) The approval of any merger, consolidation or other similar
transaction involving the Company or any subsidiary of the Company or sale
of all or substantially all of the operating assets of the Company or any
subsidiary of the Company in one or more transactions;
(e) The creation of any new direct or indirect Subsidiary of the
Company;
(f) The making of any tax election;
(g) The liquidation or dissolution of the Company or any Subsidiary of
the Company;
(h) Any transaction between the Company or any Subsidiary of the
Company and any affiliate of a Member (other than a transaction between the
Company and a Subsidiary of the Company);
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(i) The payment of any compensation to any Member or any affiliate of
a Member or the entering into any employee benefit plan or compensatory
arrangement with or for the benefit of any Member or affiliate of any
Member except as permitted under Section 6.18;
(j) Any amendment to this Operating Agreement or the Certificate; and
(k) Any other matter for which Member Approval is required under the
Act.
6.03 Regular Meetings. A regular meeting of the Managers shall be held
without other notice other than this Operating Agreement at such time and place
as the Board of Managers shall determine. The Board of Managers may provide, by
resolution, the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings without other notice than such
resolution. An annual meeting of Members shall be held without notice other than
this Operating Agreement immediately following the annual meeting of Managers.
6.04 Special Meetings. Special meetings of the Board of Managers or
Members may be called at the request of any two Managers or any Member. The
person or persons authorized to call special meetings of the Board of Managers
may fix any place, either within our without the State of Delaware, as the place
for holding any special meeting of the Board of Managers called by them.
6.05 Quorum.
(a) Managers. A majority of the number of Managers shall constitute a
quorum for the transaction of business at any meeting of the Board of
Managers, but if less than such majority is present at a meeting, a
majority of the Board of Managers or Members present may adjourn the
meeting from time to time without further notice.
(b) Members. All Members shall be required to be present to constitute
a quorum for the transaction of business of a meeting of the Members. A
Member may not unreasonably fail to attend a meeting of Members where such
failure would cause irreparable damage to the Company, its business or its
assets.
6.06 Notice. Notice of any special meeting shall be given at least five
business days prior thereto by written notice delivered personally or mailed to
each Manager at his business address, or by telegram; provided, however,
telephonic meetings may be called on only two business days' notice. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail, so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Manager or Member may waive notice of
any meeting. The attendance of a Manager or Member at a meeting shall constitute
a waiver of notice of such meeting, except where a Manager or Member attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Managers need be specified in the notice or waiver of notice of such meeting.
6.07 Manner of Acting. The act of the majority of the Managers present at
a meeting at which a quorum is present shall be the act of the Board of Managers
("Manager Approval").
6.08 Vacancies. Subject to the provisions of Section 6.01 hereof, any
vacancy occurring in the Board of Managers shall be filled by the affirmative
vote of a majority of the remaining Managers through less than a quorum of the
Board of Managers. A Manager elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office.
6.09 Presumption of Assent. A Manager of the Company who is present at a
meeting of the Board of Managers at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless such
Manager's dissent shall be entered into the minutes of the meeting or unless
such Manager shall file his or her written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the Company
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Manager who voted in favor of such action.
6.10 Resignation of Manager. A Manager may resign from his or her position
as a Manager at any time by notice to the Board of Managers. Such resignation
shall become effective as set forth in such notice.
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6.11 Action Without Meeting. Any action required or permitted by this
Operating Agreement or by law to be taken at a meeting of the Board of Managers
or by the Members may be taken without a meeting if a written consent or
consents, describing the action so taken, is signed by all of the Managers or
Members, respectively, entitled to vote with respect to the subject matter
thereof and delivered to the Company for inclusion in the Company's records.
6.12 Telephonic Meetings. Except as herein provided and notwithstanding
any place set forth in the notice of the meeting or this Operating Agreement,
Members, Board of Managers and any committees thereof may participate in regular
or special meetings by, or through the use of, any means of communication by
which (a) all participants may simultaneously hear each other, such as by
conference telephone, or (b) all communication is immediately transmitted to
each participant, and each participant can immediately send messages to all
other participants. If a meeting is conducted by such means, then at the
commencement of such meeting, the presiding person shall inform the
participating Managers and Members that a meeting is taking place at which
official business may be transacted. Any participants in a meeting by such means
shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter, which the presiding person determines, in his or her sole
discretion, to be inappropriate under the circumstances for action at a meeting
held by such means. Such determination shall be made and announced in advance of
such meeting.
6.13 Reliance by Third Parties. Any person dealing with the Company, other
than a Member, may rely on the authority of the Board of Managers and any
officer of the Company in taking any action that is in the name of the Company
without inquiry into the provisions of this Operating Agreement or compliance
therewith. Every instrument purporting to be the action of the Company and
executed by the Board of Managers or any officer of the Company shall be
conclusive evidence in favor of any person relying thereon or claiming
thereunder that, at the time of delivery thereof, this Operating Agreement was
in full force and effect and that the execution and delivery of that instrument
is duly authorized by the Company.
6.14 Filing of Documents. The Board of Managers shall file or cause to be
filed all certificates or documents as may be determined by the Board of
Managers to be necessary or appropriate for the formation, continuation,
qualification, and operation of a limited liability company in the State of
Delaware and any other state in which the Company may elect to do business. To
the extent that the Board of Managers determines the action to be necessary or
appropriate, the Board of Managers shall do all things to maintain the Company
as a limited liability company under the laws of the State of Delaware and any
other state in which the Company may elect to do business.
6.15 Limitation on Liability; Indemnification. No Manager, Member or
officer of the Company shall be liable, responsible, or accountable in damages
or otherwise to the Members or the Company for any act or omission in connection
with the business of the Company if the officer acted (i) in good faith and in a
manner he or she reasonably believed to be within the scope of the authority
granted to him or her by this Operating Agreement and (ii) in the best
interests, or not opposed to the best interests, of the Company; provided that
the Manager or officer shall not be relieved from liability for any claim, issue
or matter as to which the officer shall have been finally adjudicated to have
committed fraud or willful misconduct. Subject to this limitation in the case of
such adjudication of liability, the Company shall indemnify the Managers, to the
fullest extent permitted under the Act, against any losses, judgements,
liabilities, and expenses (including, without limitation, reasonable attorney's
fees) incurred by reason of any act or omission in connection with the business
of the Company.
6.16 Delegation to Members or Representatives of Members. The Board of
Managers may, from time to time, fill the offices of president, vice president,
secretary and treasurer. The Board of Managers may appoint such other officers
and assistant officers as they deem necessary. Unless the Board of Managers
decide otherwise, if the title is one commonly used for officers of a business
corporation, the assignment of such title shall constitute the delegation of the
authority and duties that are normally associated with that office, as set forth
below, subject to any specific delegation of authority and duties made pursuant
to the first sentence of this Section 6.16. Any number of titles may be held by
the same person. Any delegation pursuant to this
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Section 6.16 may be revoked at any time by the Board of Managers. Any person so
delegated under this Section 6.16 shall not be considered a "manager" as defined
in Section 18.101(10) of the Act.
(a) President. The President shall be the principal executive officer
of the Company and, subject to the direction of the Board of Managers,
shall in general supervise and control the day-to-day operations of the
Company. The President shall preside at all meetings of the Board of
Managers. He or she shall have authority, subject to the terms of this
Operating Agreement and such rules as may be prescribed by the Board of
Managers, to appoint such agents and employees of the Company as he or she
shall deem necessary, to prescribe their powers, duties and compensation,
and to delegate authority to them. Such agents and employees shall hold
office at the discretion of the President. He or she shall have authority
to sign, execute, and acknowledge, on behalf of the Company, all deeds,
mortgages, bonds, stock certificates, contracts, leases, reports, and all
other documents or instruments necessary or proper to be executed in the
course of the Company's regular business, or which shall be authorized by
resolution of the Board of Managers or Members; and except as otherwise
provided by the Board of Managers, he or she may authorize any Vice
President or other officer or agent of the Corporation to sign, execute,
and acknowledge such documents or instruments in his or her place and
stead. In general, he or she shall perform all duties incident to the
office of the President and such other duties as may be prescribed by the
Board of Managers from time to time.
(b) The Vice President. In the absence of the President or in the
event of the President's death, inability or refusal to act, or in the
event for any reason it shall be impracticable for the President to act
personally, the Vice President (or in the event there be more than one vice
President, the Vice Presidents in the order designated by the Board of
Managers, or in the absence of any designation, then in the order of their
election or appointment) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President shall perform such
other duties and have such authority as from time to time may be delegated
or assigned to him or her by the President or by the Board of Managers. The
execution of any instrument of the Company by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in
the stead of the President.
(c) The Secretary. The Secretary shall (i) keep minutes of the
meetings of the Members and the Board of Managers (and of committees
thereof) in one or more books provided for that purpose (including records
of actions taken by the Members and the Board of Managers); (ii) see that
all notices are duly given in accordance with the provisions of this
Operating Agreement or as required by the Act; (iii) be custodian of the
corporate records; (iv) maintain a record of the Members of the Company, in
a form that conforms to the requirements of the Act; and (v) in general
perform all duties incidental to the office of Secretary and have such
other duties and exercise such other authority as from time to time may be
delegated or assigned by the President.
(d) The Treasurer. The Treasurer shall (i) have charge and custody of
and be responsible for all funds and securities of the Company; (ii)
maintain appropriate accounting records; (iii) receive and give receipt for
monies due and payable to the Company from any source whatsoever, and
deposit all such monies in the name of the Company in such banks, trust
companies, or other depositories as shall be selected in accordance with
the provisions of this Operating Agreement; and (iv) in general perform all
of the duties incident to the office of Treasurer and have such other
duties and exercise such other authority as from time to time may be
delegated or assigned by the President.
6.17 Time Devoted to Business. The Members and the Managers shall not be
required to devote their full time and efforts to the Company, but only so much
of their time and efforts as is reasonably necessary to perform their duties and
responsibilities to the Company.
6.18 Compensation of Members and Officers. The Board of Managers may
authorize the Company to pay the officers (other than those affiliated with
Lubar & Co., Incorporated) any reasonable fees or other compensation for their
services. C2 shall be paid an annual management fee of $250,000.
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ARTICLE VII
ASSIGNMENT, TRANSFER AND REPURCHASE OF MEMBER'S UNITS AND DISASSOCIATION
7.01 Assignment and Transfer.
(a) General Restrictions on Transfers. Except as otherwise provided
herein, a Member may not Transfer any Unit without the prior written
consent of the Board of Managers. Any Transfer, attempted Transfer, or
purported Transfer in violation of this Operating Agreement's terms and
conditions shall be null and void. Notwithstanding the foregoing:
(i) C2, Inc. may transfer its interest in the Company if it
complies with Section 5.2 of the Purchase Agreement.
(ii) C2, Inc. may pledge and assign its interest to Christiana and
Christiana may effect a Transfer of C2, Inc.'s Units pursuant to any
action taken with respect to any security interest granted to it by C2,
Inc.
(iii) Christiana may transfer its Units to any transferee that is
an affiliate of Christiana or C2, Inc. if such party agrees in writing
to be bound by the provisions of this Operating Agreement.
(iv) At any time after the fifth anniversary of the date of this
Operating Agreement, Christiana shall have the option (but shall not be
required) to sell to C2, Inc. or the Company at Christiana's option, and
C2, Inc. and the Company, as applicable, shall be required to purchase,
all (but not less than all) of Christiana's interests in the Company for
a price equal to $7.0 million. To exercise this option, Christiana shall
provide notice in writing to C2, Inc. or the Company, as applicable, of
such election. The closing of any purchase pursuant to this subsection
shall occur within 60 days of notice to C2, Inc. or the Company, as
applicable. The price required to be paid by C2, Inc. or the Company, as
applicable, pursuant to this subsection shall be paid in cash. The
rights contained in this subsection shall expire on the date one year
after the fifth anniversary of the date of this Operating Agreement.
(v) At any time after the fifth anniversary of the date of this
Operating Agreement, Christiana may transfer any or all of its Units in
the Company to any person without the prior consent of the Board of
Managers, provided, however, that in order to effect any such Transfer,
Christiana must provide C2, Inc. with a copy of the terms of the
proposed Transfer (the "Transfer Notice"). C2, Inc. shall have a right
of first refusal to purchase such Units for the same price and on the
same terms set forth in the Transfer Notice. Such rights shall be
exercised by C2, Inc. sending an appropriate notice to Christiana within
60 days after receipt of the Transfer Notice. The closing shall then be
held 30 days after C2, Inc. sends its notice to Christiana.
(b) Involuntary Transfer.
(i) Notice of Involuntary Transfer. In the event of an Involuntary
Transfer of a Unit, the Transferor or the Involuntary Transferee shall
immediately deliver a Notice of Involuntary Transfer to the Company.
During the 90-day period beginning on the earlier of (i) the date of
receipt by the Company of the Notice of Involuntary Transfer or (ii) the
date that the Company provides a notice to the Involuntary Transferee
and the Members that the Company is aware of the Involuntary Transfer,
the Company shall have the option to purchase the Units that are subject
to the Involuntary Transfer. The purchase price shall be an amount equal
to the book value attributable to those Units, as determined by the
Company's accountants, calculated as of the last day of the calendar
quarter immediately preceding the date of the Involuntary Transfer. The
purchase price shall be payable pursuant to the terms of payment set
forth in the applicable provisions of Section 7.01(e) below.
Notwithstanding the foregoing, in the case of a Member that is an
entity, the option described above in this Section 7.01(b) shall not
apply with respect to an Involuntary Transfer of Units resulting from a
merger of such Member into another entity if the proportionate interest
owned by each person who owns, directly or indirectly, an ownership
interest in such other entity immediately after the merger is
substantially the same as the proportionate interest owned, directly or
indirectly, by such person in the Member immediately before the merger.
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(ii) Acceptance of Offer. The Company shall exercise any such
option by delivering a written notice to the Transferor (if the
Transferor is still in existence) and the Involuntary Transferee within
such 90-day period, which notice shall specify a closing date, occurring
within 30 days after the end of such 90-day period, for the purchase by
the Company.
(iii) Status of Involuntary Transferee. Regardless of whether the
Company exercises such option or closes such purchase, the Involuntary
Transferee shall not be considered to be a Member, for any period of
time, as a result of the Involuntary Transfer (and the rights of the
Involuntary Transferee shall be as described in Section 7.01(c)), unless
all the Nontransferring Members have delivered (within such 90-day
period) their written consent, which consent may be withheld in the sole
and absolute discretion of the Nontransferring Members, to treating the
Involuntary Transferee as a Member.
(c) Effect of Transfers. Until an Involuntary Transferee is considered
a Member, if ever, pursuant to the applicable provisions of this Article
VII, the Units transferred to an Involuntary Transferee shall be considered
in all respects as Units held by the Transferor for purposes of this
Operating Agreement except for those provisions relating to the economic
rights associated with such Units, the nonmanagement provisions of which
will apply to the Involuntary Transferee as though the Involuntary
Transferee held the Units. Except as otherwise provided in this Operating
Agreement, any actions that a Member takes or would be entitled to take
with respect to Units, including, without limitation, votes, consents,
offers, sales, purchases, options, or other deeds taken pursuant to this
Operating Agreement, shall be taken by the Member for its Involuntary
Transferees with respect to the Units held by those Involuntary
Transferees. This Section 7.01(c) shall constitute an irrevocable and
absolute proxy and power of attorney granted by each Involuntary Transferee
to its Transferor to (1) take such actions on behalf of the Involuntary
Transferee without any further deed than the taking of the action by the
Member, and (2) sign any document or instrument evidencing such action for
or on behalf of the Involuntary Transferee relating to the Units held by
the Involuntary Transferee.
(d) Time and Place of Closing. Except as otherwise agreed by the
Company, the closing of any Involuntary Transfer (or purchase by the
Company) pursuant to this Article VII shall occur at the Company's
principal office on such day as the Company shall select pursuant to the
provisions of this Article VII. The Company shall notify the Transferor and
the Involuntary Transferee in writing of the exact date and time of closing
at least 10 days before the closing date.
(e) Transfer and Payment of Purchase Price. At the closing, the
Transferor shall deliver the Units that are subject to the Involuntary
Transfer (or purchase or redemption by the Company) free and clear of any
liens, security interests, encumbrances, charges, or other restrictions
(other than those created pursuant to this Operating Agreement), together
with all such instruments or documents of conveyance as shall be reasonably
required. If not otherwise provided pursuant to this Section 7.01 and the
Notice of Involuntary Transfer, or otherwise agreed, the price for any
Units to be purchased or redeemed by the Company shall be paid by certified
or bank cashier's check.
7.02 Disassociation. A person ceases to be a Member of the Company upon
the occurrence of, and at the time of, any event of disassociation defined under
the Act.
7.03 Restraining Order. In the event that any Member shall at any time
Transfer or attempt to Transfer its Units in violation of the provisions of this
Operating Agreement and any rights hereby granted, then the other Members and
the Company shall, in addition to all rights and remedies at law and in equity,
be entitled to a decree or order restraining and enjoining such Transfer, and
the offending Member shall not plead in defense thereto that there would be an
adequate remedy at law; it being hereby expressly acknowledged and agreed that
damages at law will be an inadequate remedy for a breach or threatened breach of
the violation of the provisions concerning transfer set forth in this Operating
Agreement.
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ARTICLE VIII
DISSOLUTION AND WINDING UP
8.01 Dissolution. The Company shall be dissolved upon the happening of any
of the following:
(a) By Member Approval to dissolve the Company;
(b) The Company being adjudicated insolvent or bankrupt; or
(c) Entry of a decree of judicial dissolution.
8.02 Winding Up and Liquidation. Upon a dissolution of the Company, the
Members shall by Member Approval select a liquidator (the "Liquidator"). The
Liquidator shall liquidate as much of the Company's assets in its discretion,
and shall do so as promptly as is consistent with obtaining fair value for them,
and shall apply and distribute the assets of the Company in accordance with the
following:
(a) First, to the payment and discharge of all of the Company's debts
and liabilities to creditors of the Company regardless of whether they are
Members, including, without limitation, the unpaid principal balance (and
any interest thereon) of any loan made by a Member; and
(b) Second, to the Members in accordance with their Capital Accounts,
after giving effect to all contributions, distributions and allocations for
all periods.
8.03 Compliance With Timing Requirements of Regulations. In the event the
Company is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Treasury Regulations, distributions shall be made pursuant to this Article
IX by the end of the fiscal year in which such liquidation occurs, or if later,
within ninety (90) days of such liquidation. Distributions pursuant to the
preceding sentence may be distributed to a trust established for the benefit of
the Members for the purposes of liquidating Company assets, collecting amounts
owed to the Company, and paying any contingent or unforeseen liabilities or
obligations of the Company or of the Members arising out of or in connection
with the Company. The assets of any such trust shall be distributed to the
Members from time to time, in the reasonable discretion of the Members in the
same proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to this Operating
Agreement; provided, however, such trust may only be created if the Company has
received an opinion from counsel, which is generally recognized as being capable
and qualified in the area of federal income taxation, that such trust will not
be classified as an association which would be taxed as a corporation for
federal income tax purposes.
ARTICLE IX
BOOKS, REPORTS, ACCOUNTING, AND TAX ELECTIONS
9.01 Books and Records. The Company shall maintain or cause to be
maintained at the Company's principal place of business, complete and accurate
books and records with respect to all Company business and transactions. Such
books and records shall be at all times during normal business hours open to
inspection by any Member. At a minimum, the Company shall keep the following
books and records at the principal place of business of the Company: (a) a list
of the full name(s) and last known business address(es) of each current and
former Member in alphabetical order, setting forth the date on which such person
became a Member and the date, if applicable, on which the person ceased to be a
Member; (b) a copy of the Articles of Organization and all certificates of
amendment, together with executed copies of any powers of attorney pursuant to
which any certificate has been executed; (c) a copy of this Operating Agreement
and all amendments thereto, including any prior Operating Agreements no longer
in effect; (d) copies of the Company's federal, state, and local income tax
returns and reports for the seven (7) most recent years; (e) copies of any
effective written Company agreements and of any financial statements of the
Company for the seven (7) most recent years; (f) all such other records as may
be required by law; and (g) full and true books of account.
9.02 Fiscal Year and Method of Accounting. The Company's fiscal year for
both tax and financial reporting purposes shall be the calendar year. The method
of accounting for both tax and financial reporting
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purposes shall be the cash method, unless otherwise required for tax purposes or
if the Board of Managers determine that there would be a significant advantage
to the Company if different methods were followed.
9.03 Reports and Statements.
(a) Annual Tax Reports. Within ninety (90) days of the end of each
fiscal year of the Company, the Company shall deliver to the Members such
information as shall be necessary for the preparation by the Members of
their federal, state, and local income and other tax returns.
(b) Annual Financial Reports. Within ninety (90) days after the end of
each fiscal year of the Company, the Company shall deliver to the Members
unaudited financial statements of the Company for the just completed fiscal
year, prepared at the expense of the Company, which financial statements
shall set forth, as of the end of and for the preceding fiscal year, the
following:
(1) A profit and loss statement and a balance sheet of the Company;
(2) Members' equity and changes in financial position; and
(3) The balances in the Capital Accounts of each Member.
9.04 Tax Elections.
(a) General. The Members shall have the sole authority through Member
Approval to make or revoke any elections on behalf of the Company for tax
purposes.
(b) Section 754 Election. In the event of a transfer of all or part of
the interest of a Member in the Company, at the request of the transferee,
the Board of Managers may, in its sole discretion, cause the Company to
elect, pursuant to Code Section 754, or the corresponding provision of
subsequent law, to adjust the basis of the Company property as provided by
Code Sections 734 and 743 provided, however, such election shall be made
effective as of the Closing of the transactions contemplated by the
Purchase Agreement.
9.05 Tax Matters Partner. C2, Inc. is designated as the "tax matters
partner" of the Company, as provided in regulations pursuant to Code Section
6231 and to perform such duties as are required or appropriate thereunder.
ARTICLE X
MISCELLANEOUS
10.01 Amendments. Except as provided in Section 10.05 hereof, amendments
to this Operating Agreement shall be undertaken and effective only with Member
Approval.
10.02 Bank Accounts. Company funds shall be deposited in the name of the
Company in accounts designated by the Board of Managers and withdrawals shall be
made only by persons duly authorized by the Board of Managers.
10.03 Binding Effect. Except as provided to the contrary, the terms and
provisions of this Operating Agreement shall be binding upon and shall inure to
the benefit of all the Members, their personal representatives, heirs,
successors, and assigns.
10.04 Rules of Construction. The captions in this Operating Agreement are
inserted only as a matter of convenience and in no way affect the terms or
intent of any provision of this Operating Agreement. All defined phrases,
pronouns, and other variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular, or plural, as the actual identity of the
organization, person, or persons may require. No provision of this Operating
Agreement shall be construed against any party hereto by reason of the extent to
which such party or its counsel participated in the drafting hereof.
10.05 Choice of Law and Severability. This Operating Agreement shall be
construed in accordance with the internal laws of Delaware. If any provision of
this Operating Agreement shall be contrary to the
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internal laws of Delaware or any other applicable law, at the present time or in
the future, such provision shall be deemed null and void, but shall not affect
the legality of the remaining provisions of this Operating Agreement. This
Operating Agreement shall be deemed to be modified and amended so as to be in
compliance with applicable law and this Operating Agreement shall then be
construed in such a way as will best serve the intention of the parties at the
time of the execution of this Operating Agreement.
10.06 Counterparts. This Operating Agreement may be executed in one or
more counterparts. Each such counterpart shall be considered an original and all
of such counterparts shall constitute a single agreement binding all the parties
as if all had signed a single document.
10.07 Entire Agreement. This Operating Agreement constitutes the entire
agreement among the Members regarding the terms and operations of the Company,
except for any amendments to this Operating Agreement adopted in accordance with
Section 10.01 hereof. This Operating Agreement and the other agreements referred
to in the preceding sentence supersede all prior and contemporaneous agreements,
statements, understandings, and representations of the parties regarding the
terms and operations of the Company, except as provided in the preceding
sentence.
10.08 Last Day for Performance Other Than a Business Day. In the event
that the last day for performance of an act or the exercise of a right hereunder
falls on a day other than a Business Day, then the last day for such performance
or exercise shall be the first Business Day immediately following the otherwise
last day for such performance or such exercise.
10.09 Notices. All notices, requests, consents, or other communications
provided for in or to be given under this Operating Agreement shall be in
writing, may be delivered in person, by facsimile transmission (fax), by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (i) upon receipt if delivered in person or by fax,
(ii) one day after having been delivered to an overnight air courier, or (iii)
three days after having been deposited in the mails as certified or registered
matter, all fees prepaid, directed to the parties or their assignees at the
following addresses (or at such other address as shall be given in writing by a
party hereto):
If to the Company, to the Board of Managers at:
Total Logistic Control, LLC
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Attention: William T. Donovan
(414) 291-9000
If to a Member, to the intended recipient at the Member's most recent
address as reflected in the Company's records.
10.10 Title to Property; No Partition.
All real and personal property owned by the Company shall be owned by it as
an entity and no Member shall have any ownership interest in such property in
its individual right or name, and each Member's Units represented thereby shall
be personal property.
ARTICLE XI
GLOSSARY
In this Operating Agreement, the following terms shall have the meanings
indicated below, and any derivations of these terms shall have correlative
meanings:
"Act" means the Delaware Limited Liability Company Act in its form as of
the date of this Operating Agreement.
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"Affiliate" means any of the following persons or entities: (i) any person
directly or indirectly controlling, controlled by, or under common control with
the person in question; (ii) any person owning any interest in the person in
question; (iii) any officer, director, employee, or partner of the person in
question; and (iv) if the person in question or any partner of the person in
question is an officer, director, or partner, any company for which such person
in question or any partner of the person in question acts in any such capacity.
"Board of Managers" means the management body of the Company acting on
behalf of the Members pursuant to Section 6.01.
"Business Day" means a day other than a Saturday, Sunday, or a legal
holiday on which federally chartered banks in the United States of America are
generally closed for business.
"Capital Account" means the separate account maintained for each Member
pursuant to Section 3.06 hereof.
"Christiana" means Christiana Companies, Inc. and its permitted successors
and assigns.
"Code" means the Internal Revenue Code of 1986, and any successor
provisions or codes thereto.
"Company" means Total Logistic Control, LLC.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if the Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis.
"Involuntary Transfer" means a Transfer of a Unit due to the bankruptcy of
a Member under applicable federal law.
"Involuntary Transferee" means any person receiving an interest in Units
due to the bankruptcy of a Member under applicable federal law pursuant to
Section 7.01(b).
"Liquidator" means the person selected as such by the Member pursuant to
Section 8.02 hereof.
"Manager" means an individual serving on the Board of Managers.
"Manager Approval" means an act of a majority of the Board of Managers
pursuant to Section 6.07.
"Member" means the parties executing this Operating Agreement or any Member
admitted pursuant to Section 2.02 or any Transferee permitted to become a Member
pursuant to Section 7.01.
"Member Approval" means the unanimous vote or written consent of the
Members.
"Nontransferring Members" means, with respect to a Transfer of Units, all
persons (other than the Transferor) who are Members immediately prior to such
Transfer.
"Notice of Involuntary Transfer" means the written notice to be sent by a
Transferor or an Involuntary Transferee to the Company pursuant to Article VII
describing the event giving rise to the Involuntary Transfer; the date upon
which the Transfer occurred; the reason or reasons for the Transfer; the name,
address and capacity of the Involuntary Transferee; and the number of Units
involved.
"Profits and Losses" means, for each fiscal year or other period, an amount
equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
i. Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
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ii. Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition, shall be subtracted from such taxable income or loss;
iii. Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Value;
iv. In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or
other period hereof; and
v. Notwithstanding any other provision of this definition, any items,
which are specially allocated pursuant to Section 4.02 hereof shall not be
taken into account in computing Profits or Losses.
"Sale" (or "Sell") means a sale, transfer, financing, refinancing,
condemnation, or other disposition by the Company of all or any portion of its
assets.
"Subsidiary" means any corporation, partnership, limited partnership,
association, limited liability company or other business entity.
"Tax Matters Partner" means the person designated in Section 9.05 as
provided in regulations pursuant to Code Section 6231.
"Transfer" means, with respect to a Unit, to voluntarily sell, give,
assign, bequeath, pledge or otherwise encumber, divest, dispose of, or transfer
direct ownership of all, any part of, or any interest in the Unit, but does not
include a change in control of any Member or any affiliate thereof.
"Transferor" means a Member who Transfers, or proposes to Transfer, any of
its Units pursuant to the terms of Article VII.
"Treasury Regulations" means the Federal Income Tax Regulations promulgated
under the Code, as such Regulations may be amended from time to time. All
references herein to specific sections of the Treasury Regulations shall be
deemed also to refer to any corresponding provisions of succeeding Treasury
Regulations, and any References to Temporary Regulations shall be deemed also to
refer to any corresponding provisions of final Treasury Regulations.
"Unit" or "Units" means the basis by which a Member's ownership interest in
the Company issued pursuant to Section 3.01(a) or (b) is measured.
"Value" means, with respect to any asset, the assets adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
Members;
vi. The Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Members as of the
following times: (A) the acquisition of any additional interest in the
Company by any new or existing Member in exchange for more than a de
minimis capital contribution; (B) the distribution by the Company to a
Member of more than a de minimis amount of Company property, unless all
Members receive simultaneous distributions of undivided interests in the
distributed property in proportion to their interests in the Company; and
(C) the termination of the Company for federal income tax purposes pursuant
to Code Section 708(b)(1)(B); and
vii. If the Value of an asset has been determined or adjusted pursuant
to (i) or (ii) above, such Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses.
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IN WITNESS WHEREOF, the undersigned have caused this Operating Agreement to
be executed as of the day and year first above written.
CHRISTIANA COMPANIES, INC.
By:
------------------------------------
William T. Donovan, President
C2, INC.
By:
------------------------------------
William T. Donovan, Chairman
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EXHIBIT A
<TABLE>
<CAPTION>
MEMBER UNITS
------ -------
<S> <C>
C2, Inc..................................................... 666.667
700 North Water Street
Suite 1200
Milwaukee, Wisconsin 53202
Christiana Companies, Inc................................... 333.333
5 Post Oak Park
Suite 1760
Houston, Texas 77027
</TABLE>
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APPENDIX D
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
TEXAS COMMERCE TOWER
600 TRAVIS, SUITE 3700
HOUSTON, TX 77002-2993
(713) 512-4400
October 9, 1998
Board of Directors
Weatherford International, Inc.
5 Post Oak Park
Suite 1760
Houston, TX 77027-3415
Gentlemen:
We understand that Weatherford International, Inc., previously known as
EVI, Inc. ("Weatherford"), Christiana Acquisition, Inc., a wholly owned
subsidiary of Weatherford ("Sub"), Christiana Companies, Inc. ("Christiana"),
and C2, Inc., ("C2"), propose to enter into an Amendment, substantially similar
to the draft dated October 7, 1998 (the "Amendment") to the Agreement and Plan
of Merger dated December 12, 1997, as amended (together with the Amendment, the
"Amended Merger Agreement"), which provides, among other things, for the merger
(the "Merger") of Sub with and into Christiana. Pursuant to the Merger,
Christiana will become a wholly owned subsidiary of Weatherford and each issued
and outstanding share of common stock, par value $1.00 per share, of Christiana
(the "Christiana Common Stock"), other than shares held directly or indirectly
by Christiana, will be converted into the right to receive (i) shares of common
stock, par value $1.00 per share, of Weatherford (the "Weatherford Common
Stock") equal to the number of shares of Weatherford Common Stock held by
Christiana at the time of the Merger divided by the number of outstanding shares
of Christiana Common Stock, and (ii) a certain cash amount per share equal to
the amount of cash held by Christiana in excess of its accrued unpaid taxes, the
value of certain tax benefits and fixed liabilities at the time of the Merger
divided by the number of outstanding shares of Christiana Common Stock, all
subject to adjustment as described in the Amended Merger Agreement.
We further understand that in a separate but related transaction,
Weatherford, Christiana, C2 and Total Logistic Control, LLC ("Logistic"), have
entered into an Agreement, dated December 12, 1997, as amended (the "Logistic
Agreement" and together with the Amended Merger Agreement, the "Agreements"),
which provides, among other things, as a condition to the Merger, for the sale
by Christiana to C2 of 667 Membership Units (two-thirds of the outstanding
interest) in Logistic for $10,666,667 in cash and the assumption by C2 of
certain Assumed Liabilities (as defined in the Logistic Agreement) (the
"Logistic Sale"). In addition, the Logistic Agreement also provides for the
indemnification by C2 and Logistic of Weatherford and Christiana and certain
other parties in certain circumstances. The terms and conditions of the Merger
and the Logistic Sale are more fully set forth in the Agreements.
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You have asked for our opinion as to whether the consideration to be paid
by Weatherford pursuant to the Amended Merger Agreement is fair from a financial
point of view to Weatherford.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Weatherford and Christiana;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Weatherford, Christiana and
Logistic prepared by the managements of Weatherford, Christiana and
Logistic, respectively;
(iii) analyzed certain financial projections concerning Weatherford,
Christiana and Logistic prepared by the managements of Weatherford,
Christiana and Logistic, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of Weatherford, Christiana and Logistic with senior
executives of Weatherford, Christiana and Logistic, respectively;
(v) analyzed the pro forma impact of the Merger on Weatherford's
earnings per share;
(vi) reviewed the reported prices and trading activity for Weatherford
Common Stock and Christiana Common Stock;
(vii) reviewed the Agreements and certain related documents;
(viii) reviewed a draft letter dated as of October 7, 1998
substantially similar to the letter to be provided to the Boards of
Directors of Weatherford and Christiana by Arthur Andersen LLP, regarding
the tax treatment of the Merger;
(ix) discussed and reviewed with Weatherford and Fulbright & Jaworski
L.L.P. the results of their legal and environmental due diligence; and
(x) performed other such analyses and considered such other factors as
we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performances of
Weatherford, Christiana and Logistic. We have not made any independent valuation
or appraisal of the assets or liabilities of Weatherford, Christiana or
Logistic, except, that we have received the draft letter of Arthur Andersen LLP
referred to as item (viii) above and the verbal report concerning certain legal
and environmental due diligence analyses performed by Weatherford and Fulbright
& Jaworski L.L.P. referred to as item (ix) above and we have relied, without
independent verification, upon such items for purposes of this opinion. In
addition, we have assumed the Logistic Sale will be consummated prior to or
simultaneously with the Merger in accordance with the terms set forth in the
Logistic Agreement including any terms and conditions relating to
indemnification and that the Merger will be consummated in accordance with the
terms set forth in the Amended Merger Agreement including that all material
conditions to closing have been satisfied and not waived. We have also assumed
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended. In arriving at our
opinion, we were not authorized to consider, and did not consider, any
alternative transaction or transaction structure. Our opinion is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
It is understood that this letter is for the information of the Board of
Directors of Weatherford and may not be used for any other purpose without our
prior written consent, provided however that we consent to the inclusion of our
opinion in any filing made by Weatherford with the Securities and Exchange
Commission in connection with the Merger. In addition, we provide no advice or
opinion as to how holders of Weatherford Common Stock should vote at the
shareholders' meeting held in connection with the Merger.
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We have been engaged solely to provide this opinion to the Board of
Directors of Weatherford in connection with this transaction and have received a
fee for our services. In the past, Morgan Stanley & Co. Incorporated and its
affiliates have provided financial advisory and financing services for
Weatherford and have received fees for the rendering of these services.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be paid by Weatherford pursuant to the Amended
Merger Agreement is fair from a financial point of view to Weatherford.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ STEPHEN M. TRAUBER
Stephen M. Trauber
Principal
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APPENDIX E
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, New York, NY 10292
[PRUDENTIAL SECURITIES LOGO]
PRIVATE AND CONFIDENTIAL
October 12, 1998
Independent Committee of the Board of Directors
Christiana Companies, Inc.
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Board of Directors
Christiana Companies, Inc.
Suite 1200
700 N. Water Street
Milwaukee, Wisconsin 53202
Gentlemen:
We understand that Christiana Companies, Inc., a Wisconsin corporation (the
"Company" or "CST"), Weatherford International, Inc. (formerly known as EVI,
Inc.), a Delaware corporation ("Weatherford"), Christiana Acquisition Inc., a
Wisconsin corporation and a wholly-owned subsidiary of Weatherford (the
"Acquisition Sub"), and C2, Inc., a Wisconsin corporation ("C2") and a wholly
owned subsidiary of Lubar & Co. Incorporated ("Lubar"), have proposed to enter
into an Amended and Restated Agreement and Plan of Merger (the "Agreement").
Pursuant to the Agreement, the Acquisition Sub shall merge with and into CST
(the "Merger"). In the Merger, each outstanding share of CST common stock, par
value $1.00 per share (the "CST Common Stock"), will be converted into the right
to receive a number of shares of Weatherford common stock, par value $.01 per
share (the "Weatherford Common Stock") equal to the number of shares of
Weatherford Common Stock held by CST at the effective time of the merger (the
"Effective Time") divided by the number of shares of CST Common Stock
outstanding immediately prior to the Effective Time and a cash payment (the
"Cash Payment") determined pursuant to the provisions of section 1.7(e) of the
Agreement. The Agreement is conditioned upon, among other matters, the sale by
CST of two-thirds of its interest in Total Logistic Control, LLC, a Delaware
limited liability company and a wholly-owned subsidiary of CST ("TLC"), to C2
for $10,666,667 in cash (the "Acquisition"), pursuant to an Acquisition
Agreement, dated as of December 12, 1997, as amended on May 26, 1998(as so
amended, the "Acquisition Agreement"). Pursuant to the Agreement, CST is
required to purchase shares of Weatherford Common Stock (the "Weatherford Common
Stock Purchases") (a) prior to the date the Company's proxy statement in
connection with the special stockholders meeting to be convened to consider the
Merger is mailed to the Company's stockholders for an aggregate cost of
$10,000,000 and, (b) after approval by the Company's stockholders of the Merger,
if necessary to qualify the merger as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, an additional
number of shares of Weatherford's Common Stock for an aggregate cost of
$5,000,000. In addition, we understand that C2 and Sheldon Lubar, a stockholder
of CST, have entered into an agreement dated December 22, 1997 and as amended on
January 30, 1998 (as so amended, the "C2 Agreement") pursuant to which C2 has
agreed that, at the election of each and any stockholder of CST, such
stockholder may purchase from C2 a number of shares of C2 common stock, par
value $1.00 per share (the "C2 Common Stock"), representing at least the same
proportionate ownership interest in C2 as such stockholder held in CST
immediately prior to the effective time of the Merger at the same price as the
C2 Common Stock will be acquired by Lubar and its affiliates, (the "C2 Optional
Purchase" and together with the Acquisition and the Merger, the "Transaction").
You have requested our opinion as to the fairness of the Transaction from a
financial point of view to the stockholders of the Company.
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PRUDENTIAL SECURITIES INCORPORATED
[PRUDENTIAL SECURITIES LOGO]
In conducting our analysis and arriving at the opinion expressed herein, we
have reviewed such materials and considered such financial and other factors as
we deemed relevant under the circumstances, including:
(i) The C2 Agreement, the Acquisition Agreement, a draft dated October
10, 1998, of the Agreement and a draft dated October 10, 1998 of Amendment
No. 2 to the Acquisition Agreement ("Amendment No. 2");
(ii) certain publicly-available historical financial and operating
data concerning the Company, including, but not limited to, (a) the Annual
Report to Shareholders and Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, (b) the Joint Proxy Statement for the Special Meeting
of Shareholders held on August 17, 1998; and certain financial pro-forma
financial data prepared by CST management;
(iii) certain publicly-available historical financial and operating
data for Weatherford including, but not limited to, (a) the Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, (b) the Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998, (c) the Current
Report on Form 8-K dated March 4, 1998 and (d) the Joint Proxy Statement
for the Special Meeting of Shareholders held on August 17, 1998;
(iv) certain information relating to TLC, including historical
financial data for the fiscal years ended June 30, 1993 through June 30,
1998, provided by the management of TLC;
(v) certain information relating to TLC, including financial forecasts
for the fiscal years ending June 30, 1999 through June 30, 2002, prepared
by the management of TLC;
(vi) the financial terms of certain recent transactions we deemed
relevant to our inquiry;
(vii) the historical stock prices and trading volumes of CST Common
Stock and Weatherford Common Stock; and
(viii) such other financial studies, analyses and investigations that
we deemed appropriate.
We have assumed, with your consent, that the draft of the Agreement and the
draft of Amendment No. 2 which we reviewed (both as referred to above) will
conform in all material respects to the definitive forms of the Agreement and
Amendment No. 2.
We have met with members of the senior management of the Company and TLC to
discuss (i) the prospects for the Company's business, (ii) their estimates of
the future financial performance of the Company, (iii) the financial impact of
the Merger on CST and (iv) such other matters that we deemed relevant. We have
also visited selected CST and TLC facilities.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and by TLC, and have not undertaken
any independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or TLC. With
respect to the financial forecasts provided to us by the Company for the Company
and by TLC for TLC, we have assumed that such forecasts (and the assumptions and
bases therefor) have been reasonably prepared and represent the respective
management's best currently available estimate as to the future financial
performance of the Company and TLC. Our opinion assumes that: (i) the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended; (ii) neither CST nor the Acquisition
Sub will recognize any gain or loss for federal income tax purposes as a result
of the receipt by Weatherford of CST Common Stock in exchange for Weatherford
Common Stock in the Merger; and (iii) the holders of CST Common Stock will not
recognize any gain or loss for federal income tax purposes as a result of the
receipt of Weatherford Common Stock as partial consideration for their CST
Common Stock in the Merger. Prudential
E-2
<PAGE> 213
PRUDENTIAL SECURITIES INCORPORATED
[PRUDENTIAL SECURITIES LOGO]
Securities has assumed that such taxes are the only relevant taxes for purposes
of the Prudential Securities Opinion other than taxes that may be applicable to
the Cash Consideration as set forth in such opinion.
For purposes of our opinion, we have assumed that the stockholders of CST
at the effective time of the Merger will be legally entitled to compel
performance by C2 of the C2 Agreement in accordance with its terms in a legal
proceeding brought by such stockholders and we have further assumed that the C2
Agreement will not be amended or modified. In addition, we have assumed that all
Weatherford Common Stock Purchases will be executed in open market transactions
on a nationally recognized securities exchange or in such other transactions
having terms that are at least as favorable as would have been obtained in such
open market purchases at the time of such other transactions.
Our engagement by the Company was limited to reviewing the financial terms
of the transactions described herein, and, accordingly, our opinion does not
address, nor should it be construed to address, the relative merits of the
Transaction or alternative business strategies that may be available to the
Company. In addition, this opinion does not in any manner address the prices at
which Weatherford Common Stock or C2 Common Stock will trade following
consummation of the Merger or the liquidity of the market that may exist for the
C2 Common Stock. Further, our opinion is necessarily based on economic,
financial and market conditions as they exist and can only be evaluated as of
the date hereof. For purposes of rendering this opinion, we have assumed that
the Company will not consummate the Transaction under circumstances where the
closing price of Weatherford Common Stock is less than $13.00 per share on the
closing date of the Merger.
As you know, we have been retained by the Company to render this opinion in
connection with the Merger and will receive a fee for such services, the
majority of which fee is contingent upon the consummation of the Merger. In the
ordinary course of business we may actively trade the shares of CST Common Stock
and Weatherford Common Stock for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are for the use of the
Independent Committee of the Board of Directors and the Board of Directors of
the Company. This opinion does not constitute a recommendation to the
stockholders of the Company as to how such stockholders should vote in
connection with the Merger or as to any other action such stockholders should
take regarding the Merger. This opinion may not be reproduced, summarized,
excerpted from or otherwise publicly referred to or disclosed in any manner,
without our prior written consent; except that the Company may include this
opinion in its entirety (a) in any proxy statement, or information statement
relating to the Merger sent to the Company's stockholders or (b) in a
registration statement filed under the Securities Act of 1933 with respect to
the C2 Common Stock to be issued pursuant to the C2 Optional Purchase.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Transaction is fair to the stockholders of the Company from
a financial point of view.
Very truly yours,
/s/ PRUDENTIAL SECURITIES INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
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APPENDIX G
[AMERICAN APPRAISAL ASSOCIATES LOGO]
<TABLE>
<S> <C> <C> <C> <C>
UNITED STATES INTERNATIONAL
Arcadia Los Angeles Argentina Morocco
Atlanta Milwaukee American Appraisal Associates(R) Brazil Peru
Boston Minneapolis 411 East Wisconsin Avenue Canada Philippines
Buffalo New Orleans Suite 1900 China Poland
Charlotte New York P.O. Box 664 Czech Republic Portugal
Chicago Philadelphia Milwaukee, Wisconsin 53201-0664 England Russia
Cincinnati Pittsburgh Telephone (414) 271-7240 Hong Kong Spain
Dallas Princeton Hungary Taiwan
Denver Rolling Meadows Italy Thailand
Detroit St. Louis Japan Venezuela
Houston San Francisco Mexico
Irvine Tampa
</TABLE>
December 1, 1997
Boards of Directors
Christiana Companies, Inc.
EVI, Inc. and
C2, Inc.
This letter is furnished at the request of Christiana Companies, Inc.
("CST") regarding the proposed restructuring (the "Restructuring") of Total
Logistic Control, LLC ("TLC").
OVERVIEW
We understand that CST currently holds 100% of the member interests of TLC
(the "TLC Member Interest"). Pursuant to the Restructuring, CST intends to sell
two-thirds ( 2/3) of its TLC Member Interest to a new company, C2, Inc. ("C2").
We also understand that as part of the Restructuring, CST has a put exercisable
after five years from the Restructuring (the "Put") to sell its remaining
one-third TLC Member Interests to C2.
As part of the Restructuring, TLC intends to enter into a $65.0 million
revolving line of credit (the "Revolver" or "the Financing") with a group of
banks led by Firstar Bank Milwaukee, N.A. (Firstar Bank Milwaukee, N.A. and the
banks collectively referred to herein as "the Banks"). We understand that the
Financing will be used to refinance (the "Refinancing") existing debt of TLC,
and as part of the Restructuring, TLC will pay a $20.0 million dividend (the
"Dividend") to CST and repay a $3.0 million subordinated note to CST (the
"Subordinated Note"), thereby drawing an additional $23.0 million on the
Revolver over and above the amount needed for the Refinancing.
We understand that there will be a number of other transactions involving
CST as well as CST and EVI, Inc. ("EVI") which are not a part of this Opinion.
The transactions contemplated as a result of the Restructuring, the
Revolver, the Dividend, the Refinancing, the repayment of the Subordinated Note
and the Financing and the payment of related fees and expenses are collectively
referred to as the "Transaction".
SOLVENCY TESTS AND DEFINITIONS
In connection with the Transaction, you have requested that we render a
written opinion (the "Opinion") addressed to the Board of Directors of CST and
EVI and C2, as to whether, assuming the Transaction has been consummated
substantially as proposed after, and giving effect to, the consummation of the
Transaction:
(a) The fair value of the aggregate assets of TLC will exceed its
respective total liabilities (including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities);
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(b) The present fair saleable value of the aggregate assets of TLC
will be greater than its respective probable liabilities on its debts as
such debts become absolute and matured;
(c) TLC will be able to pay its respective debts and other
liabilities, including contingent liabilities and other commitments, as
they mature; and
(d) TLC will not have unreasonably small capital for the business in
which it is engaged, as managements of TLC and CST have indicated such
business is now conducted and proposed to be conducted following the
consummation of the Transaction.
For purposes of the Opinion, the following terms will have meanings set
forth below:
(1) "Fair value" means the amount at which the aggregate assets would
change hands between a willing buyer and a willing seller, within a
commercially reasonable period of time, each having reasonable knowledge of
the relevant facts, neither being under any compulsion to act, with equity
to both;
(2) "Present fair saleable value" means the amount that may be
realized if the aggregate assets are sold with reasonable promptness in an
arm's-length transaction under present conditions in a current market for
the sale of assets of a comparable business enterprise;
(3) "Contingent liabilities" of TLC means the maximum estimated amount
of contingent liabilities which contingent liabilities have been identified
to us by responsible officers and employees of TLC and CST, their
respective accountants and financial advisors, and such other experts as we
deemed necessary to consult, and valued by AAA after consultation with
responsible officers and employees of TLC and CST, and/or such industry,
economic and other experts as we deemed necessary to consult (the valuation
of contingent liabilities to be computed in light of all of the facts and
circumstances existing at the time of such valuation as an amount that can
reasonably be expected to become an actual or matured liability), which
contingent liabilities may not meet the criteria for accrual under
Statement of Financial Accounting Standards No. 5 and therefore may not be
recorded as liabilities under Generally Accepting Accounting Principles
("GAAP");
(4) "Able to pay its debts as they mature" means that assuming the
Transaction has been consummated as proposed (and taking into consideration
additional borrowing capacity under TLC's Revolver) during the period
covered July 1, 1997 through June 30, 2002 covered by the financial
projections faxed to American Appraisal Associates, Inc. on November 17,
1997 and prepared by CST and TLC management (the "Financial Projections"),
TLC will have positive cash flow after paying its scheduled anticipated
indebtedness; the realization of current assets in the ordinary course of
business will be sufficient to pay recurring current debt, short-term debt,
long-term debt service and other contractual obligations, including
contingent liabilities, as such obligations mature; and the cash flow will
be sufficient to provide cash necessary to repay TLC's long-term
indebtedness as such debt matures; and
(5) "Will not have unreasonably small capital with which to conduct
its business" means that TLC will not lack sufficient capital for the needs
and anticipated needs for capital of its business, including contingent
liabilities, as management of TLC and CST have indicated it is, and
proposed to be, conducted following the consummation of the Transaction.
No representation is made herein as to the sufficiency of the above
definitions for any purpose; such definitions are used solely for setting forth
the scope of our Opinion.
VALUATION METHODOLOGY
In rendering our Opinion, we have valued the aggregate assets of TLC, on a
going concern basis, immediately after, and giving effect to the Transaction and
the associated indebtedness incurred or remaining outstanding in connection
therewith. The valuation included the aggregate assets of the business of TLC or
total invested capital as represented by the total net working capital, tangible
plant, property and equipment, and intangible assets of the business enterprise.
We believe that this is a reasonable basis to value TLC.
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Nothing has come to our attention that causes us to believe that TLC, after the
Transaction, is not a going concern.
The determination of fair value and present fair saleable value was based
on the generally accepted valuation principles used in the market and discounted
cash flow approaches, described as follows:
Market Approach -- Based on correlation of (a) current stock market
prices of publicly held companies whose businesses are similar to that of
TLC and premiums paid over market price by acquirors of total or
controlling ownership in such businesses; and (b) acquisition prices paid
for total ownership positions in business whose lines of business are
similar to that of TLC.
Discounted Cash Flow Approach -- Based on the present value of TLC's
future debt-free operating cash flow as estimated by the management of TLC
contained in the Financial Projections. The present value is determined by
discounting the projected operating cash flow at a rate of return that
reflects the financial and business risks of TLC.
Our Opinion of fair value and present fair saleable value is subject to the
following conditions:
(i) Any sale of TLC, including the underlying assets thereof, will be
completed as the sale of an ongoing business entity;
(ii) A "commercially reasonable period" of time means at least twelve
months for a willing buyer and a willing seller to agree on price and
terms, plus the time necessary to complete the sale of TLC;
(iii) "Reasonable promptness" means a period of time of nine to twelve
months for a willing buyer and a willing seller to agree on price and
terms, plus the time necessary to complete the sale of TLC; and
(iv) In determining the fair value and present fair saleable value of
the assets of TLC, any taxes or transaction costs which may be owed by TLC
as a result of the Transaction, other than those specifically identified in
the Financial Projections were not considered.
While we believe that TLC would be marketable as a separate business
enterprise, we have not been requested to identify, and have not identified,
potential purchasers or to ascertain the actual prices and terms of which TLC
can currently be sold. Furthermore, because the sale of any business enterprise
involves numerous assumptions and uncertainties, not all of which can be
quantified or ascertained prior to engaging in an actual selling effort, we
express no opinion as to whether TLC could actually be sold for amounts we
believe to be equivalent to the fair value and present fair saleable values.
FINANCIAL RESULTS AND PROJECTIONS
In connection with the analysis underlying the Opinion, we were provided
historical and projected operating results (the Financial Projections as
previously defined). In addition to this information, we were provided other
operating data and information all of which has been accepted, without
independent verification, as representing a fair statement of historical and
projected results of TLC, in the opinion of the managements of TLC and CST.
However, in the course of our investigation, nothing has led us to believe that
our acceptance and reliance on such operating data and information was
unreasonable.
Although we have not independently verified the accuracy and completeness
of the Financial Projections and forecasts, or any of the assumptions,
estimates, or judgments referred to therein, or the basis therefore, and
although no assurances can be given that such Financial Projections and
forecasts can be realized or that actual results will not vary materially from
those projected, nothing has come to our attention during the course of our
engagement which led us to believe that any information reviewed by us or
presented to us in connection with our rendering of the Opinion is unreasonable
in any material respect or that it was unreasonable for us to utilize and rely
upon the financial projections, financial statements, assumptions, description
of the business and liabilities, estimates and judgments of the management of
TLC and CST, and their respective counsel, accountants and financial advisors.
Our Opinion is necessarily based on business,
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economic, market and other conditions as they currently exist and as they can be
evaluated by us at the date of this Opinion.
CONTINGENT LIABILITIES
In determining the amount that would be required to pay the total
liabilities of TLC as such liabilities become absolute and mature for purposes
of Opinion (b) below, we have applied valuation techniques, including present
value analysis, using appropriate rates over appropriate periods, to the amounts
that will be required from time to time to pay such liabilities and contingent
liabilities as they become absolute and mature based on their scheduled
maturities.
In the course of our investigation of identified contingent liabilities,
the areas brought to our attention by the management of TLC included, but were
not limited to: (i) the adequacy of the corporate safety and insurance program;
(ii) lawsuits or claims filed and or pending against TLC; (iii) environmental
matters; (iv) customer concentration; and (v) liabilities of TLC in connection
with the Agreement and Plan of Merger by and among EVI, Christiana Acquisition
Co., C2 and CST, anticipated to be dated and signed on December 4, 1997 (the
"Merger Agreement"), and the Proposed Agreement among EVI, CST, TLC, and C2
regarding the purchase of TLC Member Interests anticipated to be dated and
signed on December 4, 1997 (the "TLC Acquisition Agreement").
We have determined that reserves for the contingent liabilities have been
made in the pro forma consolidated balance sheet as of September 30, 1997 (the
"Pro Forma Balance Sheet") prepared and furnished to us by the management of
TLC, and provisions for the ongoing expenses related to these issues have been
included with the projection of income and expenses presented in the Financial
Projections, and are considered in our valuation study as ongoing business
operating expenses. We have taken these identified contingent liabilities into
account in rendering our Opinion and have concluded that such liabilities and
ongoing expenses do not require any qualification of our Opinion. Our conclusion
is based on, among other things: (i) our review of various acquisition
transactions, including leveraged transactions and significant debt-financed
recapitalization transactions, involving corporations engaged in businesses
similar to those of TLC; (ii) the opinion of the managements of TLC and CST that
the issues concerning various lawsuits, claims and other identified contingent
liabilities will not have a material adverse effect on the financial position of
TLC; and (iii) our discussions with the managements of TLC and CST, their
accountants, consultants and counsel concerning, and our investigation of, the
various lawsuits, claims and other contingent liabilities identified to us.
We have assumed that as of the effective date of the closing of the
Transaction, the total identified liabilities of TLC will be only those
liabilities set forth in its respective Pro Forma Balance Sheet and incorporated
in the Financial Projections that were prepared by TLC and CST and furnished to
us by the managements of TLC and CST and their financial advisors. In the course
of our investigation, nothing came to our attention which caused us to believe
such assumptions to be unreasonable. The Pro Forma Balance Sheet is the
unaudited Pro Forma Opening Balance Sheet for TLC as of September 30, 1997
reflecting the closing of the Transaction, as reflected in the Financial
Projections and adjusted to give effect to (a) the planned financing of the
Transaction; and (b) the application of the proceeds of the financing and
restated by us to reflect the fair value and present fair saleable value of TLC.
TLC's and CST's management have represented to us, and we have relied on
the representations of the managements of TLC and CST that no adverse changes
have occurred since their preparation which would materially impact the content
of TLC's Pro Forma Balance Sheet and Financial Projections. Nothing has come to
our attention which would lead us to believe our reliance on such
representations to be unreasonable.
OPINION CONDITIONS AND ASSUMPTIONS
We have assumed, without independent verification, that the Pro Forma
Balance Sheet and Financial Projections provided to us have been reasonably
prepared and reflect the best currently available estimates, after the
consummation of the Transaction, of the future financial results and conditions
of TLC, and that there has been no material adverse change in the assets,
financial condition, business or prospects of TLC,
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since the date of the most recent financial statements made available to us.
Nothing has come to our attention which would lead us to believe that the
foregoing assumption is unreasonable. Further our Opinion is subject to the
following assumptions:
(i) The Transaction is consummated as described herein;
(ii) Pursuant to the terms and conditions of the various financing
documents, the operating cash flow of TLC will be made available and used
to satisfy its obligations as they mature;
(iii) Our opinion of TLC's ability to be able to pay its debts and
other liabilities including contingent liabilities and other commitments,
as they mature, is limited to the period of time of the Financial
Projections;
(iv) Any indebtedness of TLC is permitted to be refinanced in
conformity with common business practice to the extent consistent with
covenants in the various Financing documents;
OPINION DUE DILIGENCE
In connection with our Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
(i) Reviewed the Transaction documents including but not limited to
the following: (a) draft of the Credit Agreement among Total Logistic
Control, LLC, as Borrower and Firstar Bank Milwaukee, N.A., as Agent for
the Banks; (b) the Merger Agreement; and (c) the TLC Acquisition Agreement.
(ii) Reviewed the Financial Projections prepared by CST and TLC and
inquired of managements of CST and TLC as to the foundation for any such
projections and the basic assumptions made in the preparation of the
Financial Projections relating to the type of business, geographic markets,
economic conditions, and capital facilities and working capital
requirements;
(iii) Reviewed audited and unaudited historical financial statements
of TLC including income statements, balance sheets and cash flow statements
as provided by management of and their accounting firm:
(iv) Discussed historical and projected operating results and industry
data, including the impact of future trends on the industry and TLC, as
well as the effects of Financing and the Transaction with management of CST
and TLC;
(v) Reviewed internal financial analyses and other internally
generated data with CST and TLC including asset valuations of TLC, if any;
(vi) Inquired of management of CST and TLC as to estimated levels of
cash and working capital to be required by TLC after the Transaction;
(vii) Reviewed certain publicly available economic, financial and
market information as it relates to the business operations of TLC;
(viii) Reviewed information regarding businesses similar to TLC and
investigated the financial terms and post-transaction performance of recent
acquisitions;
(ix) Discussed all of the foregoing information, where appropriate,
with management of CST and TLC and their respective employees and agents;
(x) Met with members of the senior management of CST and TLC, to
discuss the business, properties, past history, results of operations and
prospects of TLC, including discussions of the competitive environment in
which TLC will operate;
(xi) Held discussions with representatives of CST's and TLC's
independent accounting firm, financial advisors and counsel to discuss
certain matters; and
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(xii) Conducted such other studies, analyses and investigations as we
deemed relevant or necessary for purposes of the Opinion.
OPINION
Based on the foregoing, and in reliance thereon, it is our opinion as of
this date that, assuming the Transaction has been consummated as proposed,
immediately after giving effect to, the consummation of the Transaction:
(a) The fair value of the aggregate assets of TLC exceed its
respective total liabilities (including, without limitation, subordinated,
unmatured, unliquidated, disputed and contingent liabilities);
(b) The present fair saleable value of the aggregate assets of TLC is
greater than its respective probable liabilities on its debts as such debts
become absolute and matured;
(c) TLC is able to pay its respective debts and other liabilities,
including contingent liabilities and other commitments, as they mature; and
(d) TLC does not have unreasonably small capital for the business in
which it is engaged, as managements of TLC and CST have indicated such
business is now conducted and proposed to be conducted following the
consummation of the Transaction.
It is understood that this Opinion is solely for the information of the
above mentioned addressees, their successors, assignees, participants, title
companies delivering policies or commitments with respect to the Financing and
transferees, and is not to be quoted, or referred to, in whole or in part, in
any written document other than a reference in (i) the filing and disclosure of
the Opinion with the Securities and Exchange Commission (the "SEC") and any
state securities commission or blue sky authority, or other governmental
authority or agency if such filing or disclosure is required pursuant to the
rules and regulations thereof, or required by applicable law in the opinion of
TLC's counsel; (ii) the use or disclosure of the Opinion upon the demand, order
or request of any court, administrative or governmental agency or regulatory
body (whether or not such demand, order or request has the force of law) or as
may be required or appropriate in response to any summons, subpoena, or
discovery requests; (iii) the attachment of this Opinion as an exhibit to the
Transaction documents governing the Financing; (iv) the disclosure of this
Opinion in connection with (A) the Transaction; (B) the prospective sale,
assignment, participation or any other disposition by the Banks or any right of
interest in the Financing; (C) an audit of TLC by an independent public
accountant or any administrative agency or regulation body; or (D) the exercise
of any right or remedy, defense or claim by TLC in any litigation, or any
governmental proceeding or investigation to which TLC is subject or purported to
be subject; (v) the disclosure of the Opinion as may be requested, required or
ordered in, or to protect TLC's interest in, any litigation, governmental
proceeding or investigation to which any of such persons or entities is subject
or purported to be subject; or (vi) the disclosure of the Opinion as otherwise
required by, or reasonably determined by TLC to be required by any law, order,
regulation or ruling to TLC.
Very truly yours,
AMERICAN APPRAISAL ASSOCIATES, INC.
/s/ NANCY M. CZAPLINSKI
Nancy M. Czaplinski
Assistant Vice President
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APPENDIX H
DISSENTERS' RIGHTS PROVISIONS OF THE
WISCONSIN BUSINESS CORPORATION LAW
180.1301 DEFINITIONS. In Sections 180.1301 to 180.1331:
(1) "Beneficial shareholder" means a person who is a beneficial owner of
shares held by a nominee as the shareholder.
(1m) "Business combination" has the meaning given in Section 180.1130(3).
(2) "Corporation" means the issuer corporation or, if the corporate action
giving rise to dissenters' rights under Section 180.1302 is a merger or share
exchange that has been effectuated, the surviving domestic corporation or
foreign corporation of the merger or the acquiring domestic corporation or
foreign corporation of the share exchange.
(3) "Dissenter" means a shareholder or beneficial shareholder who is
entitled to dissent from corporate action under Section 180.1302 and who
exercises that right when and in the manner required by Sections 180.1320 to
180.1328.
(4) "Fair value", with respect to a dissenter's shares other than in a
business combination, means the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion would be inequitable. "Fair value", with respect to a dissenter's
shares in a business combination, means market value, as defined in
Section 180.1130(9)(a)1. to 4.
(5) "Interest" means interest from the effectuation date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all of the circumstances.
(6) "Issuer corporation" means a domestic corporation that is the issuer of
the shares held by a dissenter before the corporate action.
180.1302 RIGHT TO DISSENT. (1) Except as provided in sub. (4) and Section
180.1008(3), a shareholder or beneficial shareholder may dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the issuer corporation
is a party if any of the following applies:
1. Shareholder approval is required for the merger by Section
180.1103 or by the articles of incorporation.
2. The issuer corporation is a subsidiary that is merged with its
parent under Section 180.1104.
(b) Consummation of a plan of share exchange if the issuer
corporation's shares will be acquired, and the shareholder or the
shareholder holding shares on behalf of the beneficial shareholder is
entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the issuer corporation other than in the usual and
regular course of business, including a sale in dissolution, but not
including any of the following:
1. A sale pursuant to court order.
2. A sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale.
(d) Except as provided in sub. (2), any other corporate action taken
pursuant to a shareholder vote to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides
that the voting or nonvoting shareholder or beneficial shareholder may
dissent and obtain payment for his or her shares.
(2) Except as provided in sub. (4) and Section 180.1008(3), the
articles of incorporation may allow a shareholder or beneficial shareholder
to dissent from an amendment of the articles of incorporation and
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obtain payment of the fair value of his or her shares if the amendment
materially and adversely affects rights in respect of a dissenter's shares
because it does any of the following:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(c) Alters or abolishes a preemptive right of the holder of shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder or
beneficial shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under Section 180.0604.
(3) Notwithstanding sub.(1)(a) to (c), if the issuer corporation is a
statutory close corporation under Sections 180.1801 to 180.1837, a shareholder
of the statutory close corporation may dissent from a corporate action and
obtain payment of the fair value of his or her shares, to the extent permitted
under sub. (1)(d) or (2) or Section 180.1803, 180.1813(1)(d) or (2)(b),
180.1815(3) or 180.1829(1)(c).
(4) Except in a business combination or unless the articles of
incorporation provide otherwise, subs. (1) and (2) do not apply to the holders
of shares of any class or series if the shares of the class or series are
registered on a national securities exchange or quoted on the national
association of securities dealers, inc., automated quotations system on the
record date fixed to determine the shareholders entitled to notice of a
shareholders meeting at which shareholders are to vote on the proposed corporate
action.
(5) Except as provided in Section 180.1833, a shareholder or beneficial
shareholder entitled to dissent and obtain payment for his or her shares under
Sections 180.1301 to 180.1331 may not challenge the corporate action creating
his or her entitlement unless the action is unlawful or fraudulent with respect
to the shareholder, beneficial shareholder or issuer corporation.
180.1303 DISSENT BY SHAREHOLDERS AND BENEFICIAL SHAREHOLDERS. (1) A shareholder
may assert dissenters' rights as to fewer than all of the shares registered in
his or her name only if the shareholder dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he or she asserts
dissenters' rights. The rights of a shareholder who under this subsection
asserts dissenters' rights as to fewer than all of the shares registered in his
or her name are determined as if the shares as to which he or she dissents and
his or her other shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his or her behalf only if the beneficial shareholder does all of the
following:
(a) Submits to the corporation the shareholder's written consent to
the dissent not later than the time that the beneficial shareholder asserts
dissenters' rights.
(b) Submits the consent under par.(a) with respect to all shares of
which he or she is the beneficial shareholder.
180.1320 NOTICE OF DISSENTERS' RIGHTS. (1) If proposed corporate action
creating dissenters' rights under Section 180.1302 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that shareholders and
beneficial shareholders are or may be entitled to assert dissenters' rights
under Sections 180.1301 to 180.1331 and shall be accompanied by a copy of those
sections.
(2) If corporate action creating dissenters' rights under Section 180.1302
is authorized without a vote of shareholders, the corporation shall notify, in
writing and in accordance with Section 180.0141, all shareholders entitled to
assert dissenters' rights that the action was authorized and send them the
dissenters' notice described in Section 180.1322.
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180.1321 NOTICE OF INTENT TO DEMAND PAYMENT. (1) If proposed corporate action
creating dissenters' rights under Section 180.1302 is submitted to a vote at a
shareholders' meeting, a shareholder or beneficial shareholder who wishes to
assert dissenters' rights shall do all of the following:
(a) Deliver to the Issuer corporation before the vote is taken written
notice that complies with Section 180.0141 of the shareholder's or
beneficial shareholder's intent to demand payment for his or her shares if
the proposed action is effectuated.
(b) Not vote his or her shares in favor of the proposed action.
(2) A shareholder or beneficial shareholder who fails to satisfy sub.(1) is
not entitled to payment for his or her shares under Sections 180.1301 to
180.1331.
180.1322 DISSENTERS' NOTICE. (1) If proposed corporate action creating
dissenters' rights under Section 180.1302 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders and beneficial shareholders who satisfied Section 180.1321.
(2) The dissenters' notice shall be sent no later than 10 days after the
corporate action is authorized at a shareholders' meeting or without a vote of
shareholders, whichever is applicable. The dissenters' notice shall comply with
Section 180.0141 and shall include or have attached all of the following:
(a) A statement indicating where the shareholder or beneficial
shareholder must send the payment demand and where and when certificates
for certificated shares must be deposited.
(b) For holders of uncertificated shares, an explanation of the extent
to which transfer of the shares will be restricted after the payment demand
is received.
(c) A form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the shareholder or beneficial
shareholder asserting dissenters' rights to certify whether he or she
acquired beneficial ownership of the shares before that date.
(d) A date by which the corporation must receive the payment demand,
which may not be fewer than 30 days nor more than 60 days after the date on
which the dissenters' notice is delivered.
(3) A copy of Sections 180.1301 to 180.1331.
180.1323 DUTY TO DEMAND PAYMENT. (1) A shareholder or beneficial shareholder
who is sent a dissenters' notice described in Section 180.1322, or a beneficial
shareholder whose shares are held by a nominee who is sent a dissenters' notice
described in Section 180.1322, must demand payment in writing and certify
whether he or she acquired beneficial ownership of the shares before the date
specified in the dissenters' notice under Section 180.1322(2)(c). A shareholder
or beneficial shareholder with certificated shares must also deposit his or her
certificates in accordance with the terms of the notice.
(2) A shareholder or beneficial shareholder with certificated shares who
demands payment and deposits his or her share certificates under sub. (1)
retains all other rights of a shareholder or beneficial shareholder until these
rights are canceled or modified by the effectuation of the corporate action.
(3) A shareholder or beneficial shareholder with certificated or
uncertificated shares who does not demand payment by the date set in the
dissenters' notice, or a shareholder or beneficial shareholder with certificated
shares who does not deposit his or her share certificates where required and by
the date set in the dissenters' notice, is not entitled to payments for his or
her shares under Sections 180.1301 to 180.1331.
180.1324 RESTRICTIONS ON UNCERTIFICATED SHARES. (1) The issuer corporation may
restrict the transfer of uncertificated shares from the date that the demand for
payment for those shares is received until the corporate action is effectuated
or the restrictions released under Section 180.1326.
(2) The shareholder or beneficial shareholder who asserts dissenters'
rights as to uncertificated shares retains all of the rights of a shareholder or
beneficial shareholder, other than those restricted under sub. (1), until these
rights are canceled or modified by the effectuation of the corporate action.
180.1325 PAYMENT. (1) Except as provided in Section 180.1327, as soon as the
corporate action is effectuated or upon receipt of a payment demand, whichever
is later, the corporation shall pay each shareholder or beneficial
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shareholder who has complied with Section 180.1323 the amount that the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
(2) The payment shall be accompanied by all of the following:
(a) the corporation's latest available financial statements, audited
and including footnote disclosure if available, but including not less than
a balance sheet as of the end of a fiscal year ending not more than 16
months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
(b) A statement of the corporation's estimate of the fair value of the
shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter's right to demand payment under
Section 180.1328 if the dissenter is dissatisfied with the payment.
(e) A copy of Sections 180.1301 to 180.1331.
180.1326 FAILURE TO TAKE ACTION. (1) If an issuer corporation does not
effectuate the corporate action within 60 days after the date set under
Section 180.1322 for demanding payment, the issuer corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the issuer corporation effectuates the corporate action, the
corporation shall deliver a new dissenters' notice under Section 180.1322 and
repeat the payment demand procedure.
180.1327 AFTER-ACQUIRED SHARES. (1) A corporation may elect to withhold payment
required by Section 180.1325 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date specified in the dissenters'
notice under Section 180.1322 (2)(c) as the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent that the corporation elects to withhold payment under
sub. (1) after effectuating the corporate action, it shall estimate the fair
value of the shares, plus accrued interest, and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his or her demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under Section 180.1328 if
the dissenter is dissatisfied with the offer.
180.1328 PROCEDURE IF DISSENTER DISSATISFIED WITH PAYMENT OR OFFER. (1) A
dissenter may, in the manner provided in sub. (2), notify the corporation of the
dissenter's estimate of the fair value of his or her shares and amount of
interest due, and demand payment of his or her estimate, less any payment
received under Section 180.1325, or reject the offer under Section 180.1327 and
demand payment of the fair value of his or her shares and interest due, if any
of the following applies:
(a) The dissenter believes that the amount paid under Section 180.1325
or offered under Section 180.1327 is less than the fair value of his or her
shares or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under Section 180.1325
within 60 days after the date set under Section 180.1322 for demanding
payment.
(c) The issuer corporation, having failed to effectuate the corporate
action, does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within 60 days after the date
set under Section 180.1322 for demanding payment.
(2) A dissenter waives his or her right to demand payment under this
section unless the dissenter notifies the corporation of his or her demand under
sub. (1) in writing within 30 days after the corporation made or offered payment
for his or her shares. The notice shall comply with Section 180.0141.
180.1330 COURT ACTION. (1) If a demand for payment under Section 180.1328
remains unsettled, the corporation shall bring a special proceeding within 60
days after receiving the payment demand under Section 180.1328 and petition the
court to determine the fair value of the shares and accrued interest. If the
corporation does not bring the special proceeding within the 60-day period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
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(2) The corporation shall bring the special proceeding in the circuit court
for the county where its principal office or, if none in this state, its
registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall bring the special proceeding
in the county in this state in which was located the registered office of the
issuer corporation that merged with or whose shares were acquired by the foreign
corporation.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the special proceeding.
Each party to the special proceeding shall be served with a copy of the petition
as provided in Section 801.14.
(4) The jurisdiction of the court in which the special proceeding is
brought under sub. (2) is plenary and exclusive. The court may appoint one or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. An appraiser has the power described in the order
appointing him or her or in any amendment to the order. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the special proceeding is entitled to
judgment for any of the following:
(a) The amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount paid by the corporation.
(b) The fair value, plus accrued interest, of his or her shares
acquired on or after the date specified in the dissenter's notice under
Section 180.1322 (2)(c), for which the corporation elected to withhold
payment under Section 180.1327.
180.1331 COURT COSTS AND COUNSEL FEES. (1) (a) Notwithstanding Sections 814.01
to 814.04, the court in a special proceeding brought under Section 180.1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court and shall assess
the costs against the corporation, except as provided in par. (b).
(b) Notwithstanding Sections 814.01 and 814.04, the court may assess costs
against all or some of the dissenters, in amounts that the court finds to be
equitable, to the extent that the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under Section 180.1328.
(2) The parties shall bear their own expenses of the proceeding, except
that, notwithstanding Sections 814.01 to 814.04, the court may also assess the
fees and expenses of counsel and experts for the respective parties, in amounts
that the court finds to be equitable, as follows:
(a) Against the corporation and in favor of any dissenter if the court
finds that the corporation did not substantially comply with
Sections 180.1320 to 180.1328.
(b) Against the corporation or against a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this chapter.
(3) Notwithstanding Sections 814.01 to 814.04, if the court finds that the
services of counsel and experts for any dissenter were of substantial benefit to
other dissenters similarly situated, the court may award to these counsel and
experts reasonable fees to be paid out of the amounts awarded the dissenters who
were benefited.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. The
Registrant's Amended and Restated Certificate of Incorporation, as amended,
provides that the Registrant's directors are not liable to the Registrant or its
stockholders for monetary damages for breach of their fiduciary duty, subject to
the described exceptions specified by Delaware law.
Section 145 of the Delaware General Corporation Law grants to the
Registrant the power to indemnify each officer and director of the Registrant
against liabilities and expenses incurred by reason of the fact that he is or
was an officer or director of the Registrant if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Amended and Restated
By-laws of the Registrant provide for indemnification of each officer and
director of the Registrant to the fullest extent permitted by Delaware law.
Messrs. David J. Butters and Robert B. Millard, employees of Lehman Brothers
Inc. ("Lehman"), constitute two of the eight members of the Board of Directors
of the Registrant. Under the restated certificates of incorporation, as amended
to date, of Lehman and its parent, Lehman Brothers Holdings Inc. ("Holdings"),
both Delaware corporations, Messrs. Butters and Millard, in their capacity as
directors of the Registrant, are to be indemnified by Lehman and Holdings to the
fullest extent permitted by Delaware law. Messrs. Butters and Millard are
serving as directors of the Registrant at the request of Lehman and Holdings.
Section 145 of the Delaware General Corporation Law also empowers the
Registrant to purchase and maintain insurance on behalf of any person who is or
was an officer or director of the Registrant against liability asserted against
or incurred by him in any such capacity, whether or not the Registrant would
have the power to indemnify such officer or director against such liability
under the provisions of Section 145. The Registrant has purchased and maintains
a directors' and officers' liability policy for such purposes. Messrs. Butters
and Millard are insured against certain liabilities which they may incur in
their capacity as directors pursuant to insurance maintained by Holdings.
Under the terms of the Agreement dated December 12, 1997, as amended, by
and among the Registrant, Christiana Companies, Inc. ("Christiana"), Total
Logistic Control, LLC ("Logistic") and C2, Inc., Logistic and C2 have agreed to
indemnify the directors and officers of the Registrant for any liability
relating to any claim or damage by any stockholder of Christiana or Weatherford
with respect to the Merger or the Logistic Sale or the transactions relating
thereto, including any claims and liabilities arising under the securities laws
and claims with respect to the Joint Proxy Statement/Prospectus.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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2.1 -- Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.1 to
Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086,
filed March 9, 1998).
2.2 -- Amendment No. 1 dated as of April 17, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.2 to Form
8-K, File 1-13086, filed April 21, 1998).
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2.3 -- Amendment No. 2 dated as of April 22, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
as amended by and between EVI, Inc. and Weatherford
Enterra, Inc. (incorporated by reference to Exhibit No.
2.3 to Form 8-K, File 1-13086, filed April 23, 1998).
2.4 -- Share Purchase Agreement made and entered into as of
January 30, 1998, by and among the shareholders of Nika
Enterprises Ltd., an Alberta corporation, listed on the
signature pages thereto and EVI Oil Tools Canada Ltd., an
Alberta corporation (incorporated by reference to Exhibit
No. 2.1 to the Form 8-K, File 1-13086, filed March 3,
1998).
2.5 -- Agreement and Plan of Merger dated as of December 12,
1997, by and among EVI, Inc., Christiana Acquisition,
Inc., Christiana Companies, Inc. and C2, Inc.
(incorporated by reference to Exhibit No. 2.1 to Form
8-K, File 1-13086, filed December 31, 1997).
2.6 -- Agreement dated as of December 12, 1997, by and among
EVI, Inc., Christiana Companies, Inc., Total Logistic
Control, LLC and C2, Inc. (incorporated by reference to
Exhibit No. 2.2 to Form 8-K, File 1-13086, filed December
31, 1997).
2.7 -- Letter Agreement dated December 12, 1997, by and among
EVI, Inc., Christiana Acquisition, Inc., Christiana
Companies, Inc. and C2, Inc. (incorporated by reference
to Exhibit No. 2.3 to Form 8-K, File 1-13086, filed
December 31, 1997).
2.8 -- Amended and Restated Arrangement Agreement by and between
Taro Industries Limited, and EVI, Inc. and 756745 Alberta
Ltd. And 759572 Alberta Ltd. dated as of December 5, 1997
(incorporated by reference to Exhibit No. 2.4 to Form
8-K, File 1-13086, filed December 31, 1997).
2.9 -- Stock Purchase Agreement dated as of October 9, 1997,
between EVI, Inc. and PACCAR Inc (incorporated by
reference to Exhibit No. 2.1 to Form 8-K, File 1-13086,
filed October 21, 1997).
2.10 -- Stock Purchase Agreement dated as of October 9, 1997,
among certain shareholders of BMW Monarch (Lloydminster)
Ltd., the shareholders of BMW Pump Inc., the shareholder
of Makelki Holdings Ltd., the shareholder of 589979
Alberta Ltd., the shareholders of 600969 Alberta Ltd.,
the shareholders of 391862 Alberta Ltd. and EVI, Inc.
(incorporated by reference to Exhibit No. 2.2 to Form
8-K, File 1-13086, filed October 21, 1997).
2.11 -- Agreement and Plan of Merger dated as of July 16, 1997,
as amended, by and among XLS Holding, Inc., EVI, Inc. and
GPXL, Inc. (incorporated by reference to Exhibit No. 2.1
to Form 8-K, File 1-13086, filed August 26, 1997).
2.12 -- Stock Purchase Agreement dated as of February 21, 1997,
among Seigo Arai, Kanematsu USA Inc. and Energy Ventures,
Inc. (incorporated by reference to Exhibit No. 2.1 to
Form 8-K, File 1-13086, filed March 17, 1997).
2.13 -- Agreement and Plan of Merger dated as of December 5,
1996, among Energy Ventures, Inc., GulfMark Acquisition
Co., GulfMark International, Inc. and New GulfMark
International, Inc. (incorporated by reference to Exhibit
No. 2.2 to Form 8-K, File 1-13086, filed December 26,
1996).
2.14 -- Agreement and Plan of Distribution dated as of December
5, 1996, by and among GulfMark International, Inc., New
GulfMark International, Inc. and Energy Ventures, Inc.
(incorporated by reference to Exhibit No. 2.3 to Form
8-K, File 1-13086, filed December 26, 1996).
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2.15 -- First Amendment to Agreement and Plan of Merger dated as
of March 27, 1997, by and among Energy Ventures, Inc.,
GulfMark Acquisition Co., GulfMark International, Inc.
and GulfMark Offshore, Inc. (incorporated by reference to
Exhibit No. 2.3 to the Registration Statement on Form
S-4, as amended (Reg. No. 333-24133)).
2.16 -- Stock Purchase Agreement dated as of September 14, 1996,
by and among Parker Drilling Company and Energy Ventures,
Inc. (incorporated by reference to Exhibit 2.1 to Form
8-K, File 1-13086, filed October 3, 1996).
2.17 -- Agreement and Plan of Merger dated as of June 20, 1996
between Energy Ventures, Inc., TCA Acquisition, Inc. and
Tubular Corporation of America (incorporated by reference
to Exhibit No. 2.1 to Form 8-K, File 1-13086, filed June
24, 1996).
2.18 -- Amendment No. 1 dated as of May 26, 1998, to the
Agreement and Plan of Merger dated as of December 12,
1997 and to the Agreement dated as of December 12, 1997,
by and among EVI, Inc., Christiana Acquisition, Inc.,
Christiana Companies, Inc., C2, Inc. and Total Logistic
Control, LLC (incorporated by reference to Exhibit 2.18
to the Registration Statement on Form S-4, as amended
(Reg. No. 333-58741)).
+2.19 -- Amended and Restated Agreement and Plan of Merger among
Weatherford International, Inc., Christiana Acquisition,
Inc., Christiana Companies, Inc. and C2, Inc. dated as of
October 14, 1998.
+2.20 -- Amendment No. 2 to Logistic Purchase Agreement by and
among Weatherford International, Inc., Total Logistic
Control, LLC, Christiana Companies, Inc. and C2, Inc.
dated as of October 12, 1998.
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit No. 3.1
to Form 8-K, File 1-13086, filed June 2, 1998).
3.2 -- Amended and Restated By-laws of the Registrant, as
amended (incorporated by reference to Exhibit No. 3.2 to
Form 8-K, File 1-13086, filed June 2, 1998).
+3.3 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant.
4.1 -- See Exhibit Nos. 3.1, 3.2 and 3.3 for provisions of the
Amended and Restated Certificate of Incorporation, as
amended, and Amended and Restated By-laws of the
Registrant defining the rights of the holders of Common
Stock.
4.2 -- Amended and Restated Credit Agreement dated as of May 27,
1998, among EVI Weatherford, Inc., EVI Oil Tools Canada
Ltd., Chase Bank of Texas, National Association, as U.S.
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent and Canadian Agent, ABN AMRO Bank,
N.V., as Syndication Agent, and the other Lenders defined
therein, including the forms of Notes (incorporated by
reference to Exhibit No. 4.1 to Form 8-K, File 1-13086,
filed June 16, 1998).
4.3 -- Indenture dated March 15, 1994, among Energy Ventures,
Inc., as Issuer, the Subsidiary Guarantors party thereto,
as Guarantors, and Chemical Bank, as Trustee
(incorporated by reference to Form 8-K, File 1-13086,
filed April 5, 1994).
4.4 -- Specimen 10 1/4% Senior Note due 2004 of Energy Ventures,
Inc. (incorporated by reference to Form 8-K, File
1-13086, filed April 5, 1994).
4.5 -- First Supplemental Indenture by and among Energy
Ventures, Inc., Prideco and Chemical Bank, as trustee,
dated June 30, 1995 (incorporated by reference to Exhibit
No. 4.4 to the Registration Statement on Form S-3 (Reg.
No. 33-61933)).
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4.6 -- Second Supplemental Indenture by and among Energy
Ventures, Inc., EVI Arrow, Inc., EVI Watson, Inc. and The
Chase Manhattan Bank, as trustee, dated effective as of
December 6, 1996 (incorporated by reference to Exhibit
4.6 to Form 10-K, File 1-13086, filed March 20, 1997).
4.7 -- Third Supplemental Indenture by and among EVI, Inc.,
Ercon, Inc. and The Chase Manhattan Bank, as trustee,
dated effective as of May 1, 1997 (incorporated by
reference to Exhibit 99.2 to Form 8-K, File 1-13086,
filed October 27, 1997).
4.8 -- Fourth Supplemental Indenture by and among EVI, Inc., XLS
Holding, Inc., XL Systems, Inc. and The Chase Manhattan
Bank, as trustee, dated effective as of August 25, 1997
(incorporated by reference to Exhibit 99.3 to Form 8-K,
File 1-13086, filed October 27, 1997).
4.9 -- Fifth Supplemental Indenture by and between EVI, Inc. and
The Chase Manhattan Bank dated as of December 12, 1997
(including the Form of Note and Form of Exchange Note)
(incorporated by reference to Exhibit 4.1 to Form 8-K,
File 1-13086, filed December 31, 1997).
4.10 -- Indenture dated as of October 15, 1997, between EVI, Inc.
and The Chase Manhattan Bank, as Trustee (incorporated by
reference to Exhibit No. 4.13 to the Registration
Statement on Form S-3 (Reg. No. 333-45207)).
4.11 -- First Supplemental Indenture dated as of October 28,
1997, between EVI, Inc. and The Chase Manhattan Bank, as
Trustee (including Form of Debenture) (incorporated by
reference to Exhibit 4.2 to Form 8-K, File 1-13086, filed
November 5, 1997).
4.12 -- Registration Rights Agreement dated November 3, 1997, by
and among EVI, Inc., Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation,
Credit Suisse First Boston Corporation, Lehman Brothers
Inc., Prudential Securities Incorporated and Schroder &
Co. Inc. (incorporated by reference to Exhibit 4.3 to
Form 8-K, File 1-13086, filed November 5, 1997).
4.13 -- Indenture dated May 17, 1996, between Weatherford
Enterra, Inc. and Bank of Montreal Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to
Weatherford Enterra, Inc.'s Current Report on Form 8-K,
File No. 1-7867, dated May 28, 1996).
4.14 -- First Supplemental Indenture dated and effective as of
May 27, 1998, by and among EVI Weatherford, Inc., the
successor by merger to Weatherford Enterra, Inc., and
Bank of Montreal Trust Company, as Trustee (incorporated
by reference to Exhibit No. 4.1 to Form 8-K, File
1-13086, filed June 2, 1998).
4.15 -- Form of Weatherford Enterra, Inc.'s 7 1/4% Notes Due May
15, 2006 (incorporated by reference to Exhibit 4.2 to
Weatherford Enterra, Inc.'s Current Report on Form 8-K,
File No. 1-7867, dated May 28, 1996).
*4.16 -- Participation Agreement dated December 8, 1998 by and
among Weatherford Enterra Compression Company, L.P., ABN
AMRO Bank N.V., as Administrative Agent, Arranger and
Syndication Agent, Chase Bank of Texas, National
Association, and the Lessors listed on Schedule I
thereto.
*4.17 -- Master Lease Intended as Security dated as of December 8,
1998 between Weatherford Enterra Compression Company,
L.P., as Lessee, and ABN AMRO Bank N.V., as
Administrative Agent for the Lessors.
*4.18 -- Guaranty Agreement dated as of December 8, 1998 between
Weatherford International, Inc. and ABN AMRO Bank N.V.,
as Administrative Agent for the Lessors.
*5.1 -- Opinion of Fulbright & Jaworski L.L.P., regarding
legality of securities.
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*8.1 -- Opinion of Arthur Andersen LLP, regarding certain tax
matters.
*23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit No. 5.1).
*23.2 -- Consent of Arthur Andersen LLP, with respect to the Tax
Opinion (included in Exhibit No. 8.1).
*23.3 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Weatherford International, Inc.
*23.4 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Weatherford Enterra, Inc.
*23.5 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Christiana Companies, Inc.
*23.6 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark Retained Assets.
*23.7 -- Consent of Ernst & Young LLP, with respect to the
consolidated financial statements of Trico Industries,
Inc.
*23.8 -- Consent of Arthur Andersen LLP, with respect to the
combined financial statements of BMW Monarch
(Lloydminster) Ltd. and BMW Pump, Inc.
*23.9 -- Consent of Morgan Stanley & Co. Incorporated with respect
to their fairness opinion (included in the Morgan Stanley
Opinion attached as Appendix D to the Joint Proxy
Statement/Prospectus).
*23.10 -- Consent of Prudential Securities Incorporated with
respect to their fairness opinion (included in the
Prudential Securities Opinion attached as Appendix E to
the Joint Proxy Statement/Prospectus).
+23.11 -- Consent of American Appraisal Associates, Inc. with
respect to their appraisal opinion.
+24.1 -- Powers of Attorney (included on signature page).
+99.1 -- Form of Proxy card for use at Special Meeting of
Stockholders of Weatherford International, Inc.
+99.2 -- Form of Proxy card for use at Special Meeting of
Shareholders of Christiana Companies, Inc.
*99.3 -- Form of Letter of Transmittal for use by shareholders of
Christiana Companies, Inc.
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Registrant and its subsidiaries
because the total amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of any such
agreements to the Securities and Exchange Commission upon request.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form; and
(2) Every prospectus (a) that is filed pursuant to paragraph (1)
immediately preceding, or (b) that purports to meet the requirements of
section 10(a)(3) of the Securities Act, and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 231
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on December 23, 1998.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ BERNARD J. DUROC-DANNER
----------------------------------
Bernard J. Duroc-Danner
President, Chief Executive
Officer,
Chairman of the Board and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BERNARD J. DUROC-DANNER President, Chief Executive December 23, 1998
- ----------------------------------------------------- Officer, Chairman of the
Bernard J. Duroc-Danner Board and Director
(Principal Executive
Officer)
/s/ JAMES G. KILEY Senior Vice President and December 23, 1998
- ----------------------------------------------------- Chief Financial Officer
James G. Kiley (Principal Financial
Officer)
/s/ FRANCES R. POWELL Vice President, Accounting December 23, 1998
- ----------------------------------------------------- and Controller (Principal
Frances R. Powell Accounting Officer)
Director
- -----------------------------------------------------
David J. Butters
* Director December 23, 1998
- -----------------------------------------------------
Sheldon B. Lubar
* Director December 23, 1998
- -----------------------------------------------------
Robert B. Millard
* Director December 23, 1998
- -----------------------------------------------------
Robert A. Rayne
* Director December 23, 1998
- -----------------------------------------------------
Philip Burguieres
* Director December 23, 1998
- -----------------------------------------------------
William E. Macaulay
* Director December 23, 1998
- -----------------------------------------------------
Robert K. Moses, Jr.
*By: /s/ JAMES G. KILEY
-------------------------------------------------
James G. Kiley
As Attorney-in-Fact
</TABLE>
II-8
<PAGE> 233
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.1 to
Amendment No. 1 to Form 8-K on Form 8-K/A, File 1-13086,
filed March 9, 1998).
2.2 -- Amendment No. 1 dated as of April 17, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
by and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.2 to Form
8-K, File 1-13086, filed April 21, 1998).
2.3 -- Amendment No. 2 dated as of April 22, 1998, to the
Agreement and Plan of Merger dated as of March 4, 1998,
as amended by and between EVI, Inc. and Weatherford
Enterra, Inc. (incorporated by reference to Exhibit No.
2.3 to Form 8-K, File 1-13086, filed April 23, 1998).
2.4 -- Share Purchase Agreement made and entered into as of
January 30, 1998, by and among the shareholders of Nika
Enterprises Ltd., an Alberta corporation, listed on the
signature pages thereto and EVI Oil Tools Canada Ltd., an
Alberta corporation (incorporated by reference to Exhibit
No. 2.1 to the Form 8-K, File 1-13086, filed March 3,
1998).
2.5 -- Agreement and Plan of Merger dated as of December 12,
1997, by and among EVI, Inc., Christiana Acquisition,
Inc., Christiana Companies, Inc. and C2, Inc.
(incorporated by reference to Exhibit No. 2.1 to Form
8-K, File 1-13086, filed December 31, 1997).
2.6 -- Agreement dated as of December 12, 1997, by and among
EVI, Inc., Christiana Companies, Inc., Total Logistic
Control, LLC and C2, Inc. (incorporated by reference to
Exhibit No. 2.2 to Form 8-K, File 1-13086, filed December
31, 1997).
2.7 -- Letter Agreement dated December 12, 1997, by and among
EVI, Inc., Christiana Acquisition, Inc., Christiana
Companies, Inc. and C2, Inc. (incorporated by reference
to Exhibit No. 2.3 to Form 8-K, File 1-13086, filed
December 31, 1997).
2.8 -- Amended and Restated Arrangement Agreement by and between
Taro Industries Limited, and EVI, Inc. and 756745 Alberta
Ltd. And 759572 Alberta Ltd. dated as of December 5, 1997
(incorporated by reference to Exhibit No. 2.4 to Form
8-K, File 1-13086, filed December 31, 1997).
2.9 -- Stock Purchase Agreement dated as of October 9, 1997,
between EVI, Inc. and PACCAR Inc (incorporated by
reference to Exhibit No. 2.1 to Form 8-K, File 1-13086,
filed October 21, 1997).
2.10 -- Stock Purchase Agreement dated as of October 9, 1997,
among certain shareholders of BMW Monarch (Lloydminster)
Ltd., the shareholders of BMW Pump Inc., the shareholder
of Makelki Holdings Ltd., the shareholder of 589979
Alberta Ltd., the shareholders of 600969 Alberta Ltd.,
the shareholders of 391862 Alberta Ltd. and EVI, Inc.
(incorporated by reference to Exhibit No. 2.2 to Form
8-K, File 1-13086, filed October 21, 1997).
2.11 -- Agreement and Plan of Merger dated as of July 16, 1997,
as amended, by and among XLS Holding, Inc., EVI, Inc. and
GPXL, Inc. (incorporated by reference to Exhibit No. 2.1
to Form 8-K, File 1-13086, filed August 26, 1997).
</TABLE>
<PAGE> 234
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
2.12 -- Stock Purchase Agreement dated as of February 21, 1997,
among Seigo Arai, Kanematsu USA Inc. and Energy Ventures,
Inc. (incorporated by reference to Exhibit No. 2.1 to
Form 8-K, File 1-13086, filed March 17, 1997).
2.13 -- Agreement and Plan of Merger dated as of December 5,
1996, among Energy Ventures, Inc., GulfMark Acquisition
Co., GulfMark International, Inc. and New GulfMark
International, Inc. (incorporated by reference to Exhibit
No. 2.2 to Form 8-K, File 1-13086, filed December 26,
1996).
2.14 -- Agreement and Plan of Distribution dated as of December
5, 1996, by and among GulfMark International, Inc., New
GulfMark International, Inc. and Energy Ventures, Inc.
(incorporated by reference to Exhibit No. 2.3 to Form
8-K, File 1-13086, filed December 26, 1996).
2.15 -- First Amendment to Agreement and Plan of Merger dated as
of March 27, 1997, by and among Energy Ventures, Inc.,
GulfMark Acquisition Co., GulfMark International, Inc.
and GulfMark Offshore, Inc. (incorporated by reference to
Exhibit No. 2.3 to the Registration Statement on Form
S-4, as amended (Reg. No. 333-24133)).
2.16 -- Stock Purchase Agreement dated as of September 14, 1996,
by and among Parker Drilling Company and Energy Ventures,
Inc. (incorporated by reference to Exhibit 2.1 to Form
8-K, File 1-13086, filed October 3, 1996).
2.17 -- Agreement and Plan of Merger dated as of June 20, 1996
between Energy Ventures, Inc., TCA Acquisition, Inc. and
Tubular Corporation of America (incorporated by reference
to Exhibit No. 2.1 to Form 8-K, File 1-13086, filed June
24, 1996).
2.18 -- Amendment No. 1 dated as of May 26, 1998, to the
Agreement and Plan of Merger dated as of December 12,
1997 and to the Agreement dated as of December 12, 1997,
by and among EVI, Inc., Christiana Acquisition, Inc.,
Christiana Companies, Inc., C2, Inc. and Total Logistic
Control, LLC (incorporated by reference to Exhibit 2.18
to the Registration Statement on Form S-4, as amended
(Reg. No. 333-58741)).
+2.19 -- Amended and Restated Agreement and Plan of Merger among
Weatherford International, Inc., Christiana Acquisition,
Inc., Christiana Companies, Inc. and C2, Inc. dated as of
October 14, 1998.
+2.20 -- Amendment No. 2 to Logistic Purchase Agreement by and
among Weatherford International, Inc., Total Logistic
Control, LLC, Christiana Companies, Inc. and C2, Inc.
dated as of October 12, 1998.
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit No. 3.1
to Form 8-K, File 1-13086, filed June 2, 1998).
3.2 -- Amended and Restated By-laws of the Registrant, as
amended (incorporated by reference to Exhibit No. 3.2 to
Form 8-K, File 1-13086, filed June 2, 1998).
+3.3 -- Certificate of Amendment to Amended and Restated
Certificate of Incorporation of the Registrant.
4.1 -- See Exhibit Nos. 3.1, 3.2 and 3.3 for provisions of the
Amended and Restated Certificate of Incorporation, as
amended, and Amended and Restated By-laws of the
Registrant defining the rights of the holders of Common
Stock.
</TABLE>
<PAGE> 235
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.2 -- Amended and Restated Credit Agreement dated as of May 27,
1998, among EVI Weatherford, Inc., EVI Oil Tools Canada
Ltd., Chase Bank of Texas, National Association, as U.S.
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent and Canadian Agent, ABN AMRO Bank,
N.V., as Syndication Agent, and the other Lenders defined
therein, including the forms of Notes (incorporated by
reference to Exhibit No. 4.1 to Form 8-K, File 1-13086,
filed June 16, 1998).
4.3 -- Indenture dated March 15, 1994, among Energy Ventures,
Inc., as Issuer, the Subsidiary Guarantors party thereto,
as Guarantors, and Chemical Bank, as Trustee
(incorporated by reference to Form 8-K, File 1-13086,
filed April 5, 1994).
4.4 -- Specimen 10 1/4% Senior Note due 2004 of Energy Ventures,
Inc. (incorporated by reference to Form 8-K, File
1-13086, filed April 5, 1994).
4.5 -- First Supplemental Indenture by and among Energy
Ventures, Inc., Prideco and Chemical Bank, as trustee,
dated June 30, 1995 (incorporated by reference to Exhibit
No. 4.4 to the Registration Statement on Form S-3 (Reg.
No. 33-61933)).
4.6 -- Second Supplemental Indenture by and among Energy
Ventures, Inc., EVI Arrow, Inc., EVI Watson, Inc. and The
Chase Manhattan Bank, as trustee, dated effective as of
December 6, 1996 (incorporated by reference to Exhibit
4.6 to Form 10-K, File 1-13086, filed March 20, 1997).
4.7 -- Third Supplemental Indenture by and among EVI, Inc.,
Ercon, Inc. and The Chase Manhattan Bank, as trustee,
dated effective as of May 1, 1997 (incorporated by
reference to Exhibit 99.2 to Form 8-K, File 1-13086,
filed October 27, 1997).
4.8 -- Fourth Supplemental Indenture by and among EVI, Inc., XLS
Holding, Inc., XL Systems, Inc. and The Chase Manhattan
Bank, as trustee, dated effective as of August 25, 1997
(incorporated by reference to Exhibit 99.3 to Form 8-K,
File 1-13086, filed October 27, 1997).
4.9 -- Fifth Supplemental Indenture by and between EVI, Inc. and
The Chase Manhattan Bank dated as of December 12, 1997
(including the Form of Note and Form of Exchange Note)
(incorporated by reference to Exhibit 4.1 to Form 8-K,
File 1-13086, filed December 31, 1997).
4.10 -- Indenture dated as of October 15, 1997, between EVI, Inc.
and The Chase Manhattan Bank, as Trustee (incorporated by
reference to Exhibit No. 4.13 to the Registration
Statement on Form S-3 (Reg. No. 333-45207)).
4.11 -- First Supplemental Indenture dated as of October 28,
1997, between EVI, Inc. and The Chase Manhattan Bank, as
Trustee (including Form of Debenture) (incorporated by
reference to Exhibit 4.2 to Form 8-K, File 1-13086, filed
November 5, 1997).
4.12 -- Registration Rights Agreement dated November 3, 1997, by
and among EVI, Inc., Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation,
Credit Suisse First Boston Corporation, Lehman Brothers
Inc., Prudential Securities Incorporated and Schroder &
Co. Inc. (incorporated by reference to Exhibit 4.3 to
Form 8-K, File 1-13086, filed November 5, 1997).
4.13 -- Indenture dated May 17, 1996, between Weatherford
Enterra, Inc. and Bank of Montreal Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to
Weatherford Enterra, Inc.'s Current Report on Form 8-K,
File No. 1-7867, dated May 28, 1996).
</TABLE>
<PAGE> 236
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.14 -- First Supplemental Indenture dated and effective as of
May 27, 1998, by and among EVI Weatherford, Inc., the
successor by merger to Weatherford Enterra, Inc., and
Bank of Montreal Trust Company, as Trustee (incorporated
by reference to Exhibit No. 4.1 to Form 8-K, File
1-13086, filed June 2, 1998).
4.15 -- Form of Weatherford Enterra, Inc.'s 7 1/4% Notes Due May
15, 2006 (incorporated by reference to Exhibit 4.2 to
Weatherford Enterra, Inc.'s Current Report on Form 8-K,
File No. 1-7867, dated May 28, 1996).
*4.16 -- Participation Agreement dated December 8, 1998 by and
among Weatherford Enterra Compression Company, L.P., ABN
AMRO Bank N.V., as Administrative Agent, Arranger and
Syndication Agent, Chase Bank of Texas, National
Association, and the Lessors listed on Schedule I
thereto.
*4.17 -- Master Lease Intended as Security dated as of December 8,
1998 between Weatherford Enterra Compression Company,
L.P., as Lessee, and ABN AMRO Bank N.V., as
Administrative Agent for the Lessors.
*4.18 -- Guaranty Agreement dated as of December 8, 1998 between
Weatherford International, Inc. and ABN AMRO Bank N.V.,
as Administrative Agent for the Lessors.
*5.1 -- Opinion of Fulbright & Jaworski L.L.P., regarding
legality of securities.
*8.1 -- Opinion of Arthur Andersen LLP, regarding certain tax
matters.
*23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit No. 5.1).
*23.2 -- Consent of Arthur Andersen LLP, with respect to the Tax
Opinion (included in Exhibit No. 8.1).
*23.3 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Weatherford International, Inc.
*23.4 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Weatherford Enterra, Inc.
*23.5 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of Christiana Companies, Inc.
*23.6 -- Consent of Arthur Andersen LLP, with respect to the
financial statements of GulfMark Retained Assets.
*23.7 -- Consent of Ernst & Young LLP, with respect to the
consolidated financial statements of Trico Industries,
Inc.
*23.8 -- Consent of Arthur Andersen LLP, with respect to the
combined financial statements of BMW Monarch
(Lloydminster) Ltd. and BMW Pump, Inc.
*23.9 -- Consent of Morgan Stanley & Co. Incorporated with respect
to their fairness opinion (included in the Morgan Stanley
Opinion attached as Appendix D to the Joint Proxy
Statement/Prospectus).
*23.10 -- Consent of Prudential Securities Incorporated with
respect to their fairness opinion (included in the
Prudential Securities Opinion attached as Appendix E to
the Joint Proxy Statement/Prospectus).
+23.11 -- Consent of American Appraisal Associates, Inc. with
respect to their appraisal opinion.
+24.1 -- Powers of Attorney (included on signature page).
+99.1 -- Form of Proxy card for use at Special Meeting of
Stockholders of Weatherford International, Inc.
</TABLE>
<PAGE> 237
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
+99.2 -- Form of Proxy card for use at Special Meeting of
Shareholders of Christiana Companies, Inc.
*99.3 -- Form of Letter of Transmittal for use by shareholders of
Christiana Companies, Inc.
</TABLE>
- ---------------
* Filed herewith.
+ Previously filed.
<PAGE> 1
EXHIBIT 4.16
PARTICIPATION AGREEMENT
Dated as of December 8, 1998
Entered Into By and Among
WEATHERFORD ENTERRA COMPRESSION COMPANY, L.P.,
as Lessee,
ABN AMRO BANK N.V.,
not individually, except as expressly
set forth herein, but as Administrative Agent,
Arranger and Syndication Agent,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Documentation Agent,
and
The Lessors Listed on
Schedule I Hereto
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions................................................................................ 1.
ARTICLE II Purchase and Lease of Equipment............................................................ 2.
Section 2.1 Fundings; Payment of Purchase Price and Capitalized
Transaction Costs.................................................................. 2.
Section 2.2 Application of Funds; Sale and Lease of Equipment...................................... 3.
Section 2.3 Time and Place of Delivery Dates....................................................... 3.
Section 2.4 Arrangement Fee......................................................................... 3.
Section 2.5 Commitment Fee......................................................................... 4.
ARTICLE III Conditions to Delivery Date Closings....................................................... 4.
Section 3.1 Delivery Date Notice................................................................... 4.
Section 3.2 Appraisals............................................................................. 4.
Section 3.3 Participation Agreement................................................................ 5.
Section 3.4 Lease.................................................................................. 5.
Section 3.5 Lease Supplement....................................................................... 5.
Section 3.6 Financial Reports...................................................................... 5.
Section 3.7 Financing Statements................................................................... 5.
Section 3.8 Guaranty................................................................................ 5.
Section 3.9 Transaction Costs; Fees................................................................ 5.
Section 3.10 Opinions of Counsel................................................................... 6.
Section 3.11 Corporate Status and Proceedings...................................................... 6.
Section 3.12 Consents and Approvals................................................................ 6.
Section 3.13 Payment of Impositions................................................................ 6.
Section 3.14 Search Reports........................................................................ 6.
Section 3.15 Insurance............................................................................. 6.
Section 3.16 Proceedings Satisfactory, Etc......................................................... 7.
Section 3.17 Absence of Material Adverse Effect.................................................... 7.
Section 3.18 Representations and Warranties True; Absence of Defaults.............................. 7.
Section 3.19 Legal Requirements..................................................................... 7.
Section 3.20 Bills of Sale.......................................................................... 7.
Section 3.21 Title.................................................................................. 7.
ARTICLE IV General Provisions......................................................................... 7.
Section 4.1 Nature of Transaction.................................................................. 7.
Section 4.2 Replacements........................................................................... 8.
ARTICLE V Representations and Warranties............................................................. 8.
Section 5.1 Representations and Warranties of Lessee............................................... 8.
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 5.2 Representations and Warranties of Lessors............................................. 13.
Section 5.3 Representations and Warranties of Administrative Agent................................ 14.
ARTICLE VI Covenants................................................................................. 15.
Section 6.1 Affirmative Covenants of Lessee........................................................ 15.
Section 6.2 Negative Covenants of Lessee.......................................................... 18.
Section 6.3 Covenants of Agents and Lessors....................................................... 20.
ARTICLE VII General Indemnities............................................................................ 20.
Section 7.1 Indemnity............................................................................. 20.
Section 7.2 Excessive Use Indemnity............................................................... 21.
Section 7.3 Increased Capital Costs............................................................... 21.
Section 7.4 LIBO Rate Unlawful.................................................................... 22.
Section 7.5 Funding Losses........................................................................ 22.
Section 7.6 Actions of Affected Lessors........................................................... 23.
ARTICLE VIII General Tax Indemnity......................................................................... 23.
Section 8.1 General Tax Indemnity................................................................. 23.
Section 8.2 Contest............................................................................... 24.
Section 8.3 Gross Up.............................................................................. 25.
Section 8.4 Tax Returns........................................................................... 25.
Section 8.5 Withholding Tax Exemption............................................................. 26.
ARTICLE IX Administrative Agent............................................................................ 27.
Section 9.1 Appointment of Administrative Agent; Powers and
Authorization to Take Certain Actions............................................. 27.
Section 9.2 Reliance.............................................................................. 28.
Section 9.3 Action Upon Instructions Generally.................................................... 28.
Section 9.4 Indemnification....................................................................... 29.
Section 9.5 Independent Credit Investigation...................................................... 29.
Section 9.6 Refusal to Act........................................................................ 30.
Section 9.7 Resignation of Administrative Agent; Appointment of Successor......................... 30.
Section 9.8 Separate Administrative Agent......................................................... 30.
Section 9.9 Termination of Agency................................................................. 31.
Section 9.10 Compensation of Agency............................................................... 31.
Section 9.11 Limitations.......................................................................... 31.
ARTICLE X Amendments to Operative Agreements........................................................ 32.
Section 10.1 Amendments to Operative Agreements With Consent of Lessors........................... 32.
Section 10.2 Amendments to Operative Agreements Affecting
Administrative Agent............................................................ 33.
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI Miscellaneous............................................................................. 33.
Section 11.1 Survival of Covenants................................................................ 33.
Section 11.2 APPLICABLE LAW....................................................................... 34.
Section 11.3 Distribution and Application of Rents and Other Payments............................. 34.
Section 11.4 Notices.............................................................................. 34.
Section 11.5 Transaction Costs; Other Expenses.................................................... 35.
Section 11.6 Counterparts......................................................................... 36.
Section 11.7 Severability......................................................................... 36.
Section 11.8 Successors and Assigns; Transfers.................................................... 36.
SECTION 11.9 JURY TRIAL........................................................................... 38.
Section 11.10 Captions; Table of Contents......................................................... 38.
Section 11.11 FINAL AGREEMENT..................................................................... 38.
Section 11.12 No Third. Party Beneficiaries...................................................... 38.
Section 11.13 Further Assurances.................................................................. 39.
Section 11.14 Reproduction of Documents........................................................... 39.
Section 11.15 Consideration for Consents to Waivers and Amendments................................ 39.
Section 11.16 Submission to Jurisdiction.......................................................... 39.
</TABLE>
-iii-
<PAGE> 5
LIST OF SCHEDULES AND EXHIBITS
Schedule I - Commitments of Lessors; Payment Instructions
Schedule II - Description of Equipment
Schedule X - Definitions
Exhibit A - Form of Lease
Schedule I - Description of Equipment
Exhibit A - Form of Lease Supplement
Exhibit B - Form of Delivery Date Notice
Schedule I - Equipment List and Purchase Price
Exhibit C - Form of Opinion of Lessee's Special Counsel
Exhibit D - Form of Officer's Certificate
Exhibit E - Form of Compliance Certificate
Exhibit F - Form of Investor's Letter
-iv-
<PAGE> 6
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT, dated as of December 8, 1998 (this
"Participation Agreement"), is entered into by and among WEATHERFORD ENTERRA
COMPRESSION COMPANY, L.P., a Delaware limited partnership, as Lessee ("Lessee"),
ABN AMRO BANK N.V., a bank organized under the laws of the Netherlands, not in
its individual capacity, except as otherwise expressly provided herein, but
solely as Administrative Agent for the Lessors (the "Administrative Agent"), ABN
AMRO BANK N.V., as Syndication Agent and Arranger (in such capacities, the
"Syndication Agent" and the "Arranger", respectively), CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as Documentation Agent (in such capacity, the
"Documentation Agent"), and the several Lessors listed on Schedule I hereto
(together with their respective permitted successors, assigns and transferees,
each a "Lessor" and collectively the "Lessors").
WHEREAS, subject to the terms and conditions hereof, on each Delivery
Date Lessee will transfer to Administrative Agent, for the benefit of Lessors,
and Administrative Agent, on behalf of Lessors, will purchase and receive from
Lessee, certain gas compressor Equipment described on Schedule II hereto;
WHEREAS, upon the transfer of the Equipment on each Delivery Date,
Administrative Agent, on behalf of Lessors, will lease such Equipment to Lessee
and Lessee will lease such Equipment from Administrative Agent, for the benefit
of Lessors, pursuant to the terms of the Lease substantially in the form of
Exhibit A hereto; and
WHEREAS, on each Delivery Date Lessee shall execute and deliver to
Administrative Agent a Lease Supplement in the form of Exhibit A to the Lease
covering the Equipment purchased on such Delivery Date;
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Capitalized terms used but not defined herein (including those used in
the foregoing recitals) shall have the meanings specified in Schedule X hereto
unless the context otherwise requires, which Schedule X shall for all purposes
constitute a part of this Participation Agreement.
-1-
<PAGE> 7
ARTICLE II
Purchase and Lease of Equipment
Section 2.1 Fundings; Payment of Purchase Price and Capitalized
Transaction Costs.
(a) Subject to the terms and conditions hereinafter set forth, and in
reliance on the representations and warranties contained herein or made pursuant
hereto, upon receipt of each Delivery Date Notice during the Interim Period,
each Lessor shall transfer to Administrative Agent on the specified Delivery
Date an amount equal to the product of the aggregate Purchase Price of the
Equipment plus all Capitalized Transaction Costs specified in such Delivery Date
Notice, multiplied by such Lessor's Commitment Percentage (each such transfer
being referred to herein as a "Funding"). In no event shall any Lessor be
required to provide funds under this Participation Agreement in an aggregate
amount exceeding such Lessor's Commitment. In no event shall Lessors be required
to provide funds under the Participation Agreement in an aggregate amount
exceeding the Appraised Value of the Equipment plus all Capitalized Transaction
Costs.
(b) Remittances pursuant to this Section 2.1 shall be made in
immediately available federal funds by wire transfer to the account of
Administrative Agent set forth below (or as otherwise specified by
Administrative Agent to each Lessor from time to time not less than three
Business Days prior to the date of the requested Funding) and must be received
by Administrative Agent by 2:00 p.m., New York time on the applicable Delivery
Date:
Bank: ABN AMRO Bank N.V.
New York Branch
New York, NY
ABA Routing #: 026009580
Account #: ____________________
Payee: ABN AMRO Bank N.V.
Reference: Weatherford Enterra Compression Company, L.P.
(c) Unless Administrative Agent shall have been notified in writing by
any Lessor prior to any Delivery Date that such Lessor will not make available
the amount which would constitute its Commitment Percentage of the total
Purchase Price of the Equipment plus all Capitalized Transaction Costs specified
in a Delivery Date Notice, Administrative Agent may assume that such Lessor is
making such amount available to Administrative Agent, and Administrative Agent
may, in reliance upon such assumption, take such actions as are provided for in
Section 2.2. If any Lessor (a "Defaulting Lessor") fails to make such amount
available to Administrative Agent by the required time on the Delivery Date
therefor, such Defaulting Lessor shall pay to Administrative Agent, on demand,
such amount with interest thereon at a rate equal to the daily average Federal
Funds Effective Rate for the period until such Defaulting Lessor makes such
amount immediately available to Administrative Agent. A certificate of
Administrative Agent submitted to any Lessor with respect to any amounts owing
under this Section 2.1 shall be conclusive in the absence of manifest error.
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If such Defaulting Lessor's share of such Funding is not made available to
Administrative Agent by such Defaulting Lessor within three (3) Business Days of
such Delivery Date, Administrative Agent shall also be entitled to recover such
amount with interest thereon at the Alternate Base Rate plus the Applicable
Margin, on demand, from Lessee, to the extent Administrative Agent has advanced
a corresponding amount of the Funding to purchase Equipment to be leased to
Lessee.
Section 2.2 Application of Funds; Sale and Lease of Equipment. On each
Delivery Date, upon (a) receipt by Administrative Agent of all amounts to be
paid by the Lessors pursuant to Section 2.1, and (b) satisfaction or waiver of
each of the conditions set forth in Article III, (i) Administrative Agent shall
purchase, for the benefit of the Lessors, the Equipment to be acquired on such
Delivery Date and pay the Capitalized Transaction Costs, as specified in the
relevant Delivery Date Notice delivered pursuant to Section 3.1, (ii) in
consideration therefor, Administrative Agent, on behalf of the Lessors, shall
pay, from the funds made available by the Lessors pursuant to Section 2.1, an
amount equal to the aggregate Purchase Price of the Equipment being so sold and
purchased plus all Capitalized Transaction Costs related thereto in immediately
available federal funds remitted by wire transfer to the account specified by
Lessee in the relevant Delivery Date Notice, and (iii) Administrative Agent, on
behalf of the Lessors, shall lease to Lessee the Equipment so purchased by
Administrative Agent and Lessee shall accept delivery of and lease from
Administrative Agent such Equipment pursuant to the Lease. Each Lessor shall
hold an undivided interest in the Equipment equal to such Lessor's Investment
Percentage.
Section 2.3 Time and Place of Delivery Dates. Each Delivery Date
Closing shall take place on the Delivery Date set forth in the relevant Delivery
Date Notice, and the Initial Delivery Date Closing shall take place at the
offices of Winston & Strawn, 35 W. Wacker Drive, Chicago, Illinois at 10:00 a.m.
Chicago time, subject to the following:
(i) no more than twelve Fundings and twelve Delivery Dates may
occur;
(ii) the Initial Delivery Date shall occur on a Business Day
on or prior to December 31, 1998;
(iii) each Subsequent Delivery Date shall occur on the monthly
anniversary of the previous Delivery Date or, if such date is not a
Business Day, on the first Business Day after such date;
(iv) in no event shall the aggregate amount advanced by the
Lessors exceed the Total Commitment; and
(v) in no event shall the last Delivery Date be later than the
first annual anniversary of the Initial Delivery Date.
Section 2.4 Arrangement Fee. Lessee shall pay the Arrangement Fee to
Administrative Agent and Documentation Agent on the Initial Delivery Date.
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Section 2.5 Commitment Fee. On the last Business Day of each March,
June, September and December, Lessee shall pay to Administrative Agent, for the
pro rata benefit of the Lessors, a commitment fee (the "Commitment Fee") equal
to the amount accrued on the unfunded portion of the Total Commitment from the
date hereof through such payment date and remaining unpaid at the rate of
two-tenths of one percent (.20%) per annum calculated on a 360-day year basis.
ARTICLE III
Conditions to Delivery Date Closings
The obligation of each Lessor and Administrative Agent to perform its
obligations on any Delivery Date, and of each Lessor to make its Funding, shall
be subject to the fulfillment to the satisfaction of (including, with respect to
writings, such writings being in form and substance reasonably satisfactory to
the addressee or beneficiary thereof), or the waiver in writing by, each Lessor
and Administrative Agent of the conditions precedent set forth in this Article
III on or prior to such Delivery Date (except that the obligation of any party
hereto shall not be subject to the performance or compliance of such party or of
any of such party's Affiliates).
Section 3.1 Delivery Date Notice. Lessee shall have delivered to
Administrative Agent and each Lessor, not later than 1:00 p.m. Eastern time not
later than the third (3rd) Business Day prior to the proposed Delivery Date, an
irrevocable notice (a "Delivery Date Notice") substantially in the form of
Exhibit B, specifying (i) the proposed Delivery Date, (ii) a description
(including model, make, serial number and location) of each item of Equipment to
be purchased on such Delivery Date and a representation and warranty that as of
the date Lessee takes possession of each such item of Equipment and at all times
thereafter, such item of Equipment will be equipment or inventory leased or held
for lease, (iii) the amount of the Advance being requested, specifying the
respective Purchase Prices of such Equipment and all Capitalized Transaction
Costs related thereto, (iv) the initial Rent Period for any such Advance to bear
interest at the LIBO Rate; and (v) the payees of such Advance and wire transfer
instructions for the disbursement of funds. All Equipment shall be acceptable to
the Required Lessors.
Section 3.2 Appraisals. At least three Business Days prior to each
Delivery Date, Administrative Agent and each Lessor shall have received an
Appraisal to their reasonable satisfaction opining:
(a) that the aggregate Appraised Value of the Equipment delivered prior
to such Delivery Date and the Equipment to be delivered on such Delivery Date is
reasonably expected to exceed the aggregate of all outstanding Advances as of
such Delivery Date, including the Advances to be funded on such Delivery Date.
(b) that the remaining economic useful life of each item of Equipment
is not less than six and seven tenths (6 7/10) years from the Lease Commencement
Date; and
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(c) that the values set forth in clause (a) above assume an increase
for inflation of 2.1% per annum, and that such inflation assumption is
reasonable.
Section 3.3 Participation Agreement. On or prior to the Documentation
Date, each of the Participants shall have received a fully executed counterpart
of this Participation Agreement.
Section 3.4 Lease. On or prior to the Documentation Date, each
Participant shall have received a fully executed counterpart of the Lease.
Section 3.5 Lease Supplement. On each Delivery Date, Lessee shall
execute and deliver to Administrative Agent and each Lessor a Lease Supplement
in form and substance reasonably satisfactory to Lessors and substantially in
the form of Exhibit A to the Lease (each, a "Lease Supplement"); provided,
however, with respect to each Lease Supplement, only Administrative Agent shall
receive the Lease Supplement marked "Counterpart No. 1 - Administrative Agent's
Original Copy". The Lease Supplement to be executed and delivered by Lessee on
each Delivery Date shall set forth in Schedule I thereto, a description of, the
location of and the Purchase Price for the Equipment covered thereby.
Section 3.6 Financial Reports. Lessee has delivered to Administrative
Agent and Lessors copies of the financial statements of Guarantor dated December
31, 1997, March 31, 1998, June 30, 1998 and September 30, 1998 prepared in
accordance with GAAP, applied on a consistent basis throughout the periods
covered thereby and on a basis consistent with prior periods (except as
disclosed therein and except, with respect to quarterly financial statements,
for notes thereto).
Section 3.7 Financing Statements. On or prior to each Delivery Date,
Administrative Agent shall have received from Lessee duly executed financing
statements covering all of Lessee's Equipment that Lessee intends to lease on
such Delivery Date, identifying Lessee as debtor and Administrative Agent as
secured party for the benefit of the Lessors, and describing the Lease as a
secured transaction, and such financing statements shall have been filed in (a)
the jurisdiction in which Lessee has its principal office and (b) each
jurisdiction in which any such Equipment is or is to be located.
Section 3.8 Guaranty. On or prior to the Documentation Date, each of
the Participants shall have received a fully executed counterpart of the
Guaranty.
Section 3.9 Transaction Costs; Fees. On or prior to each Delivery Date,
Lessor, on behalf of Lessee, shall have paid to Administrative Agent, for the
benefit of Administrative Agent and the Lessors, or to Documentation Agent, as
the case may be, as Capitalized Transaction Costs any Transaction Costs invoiced
and not previously paid. Such payment shall be made by wire transfer of
immediately available funds to the account specified for Administrative Agent at
Schedule I or as otherwise directed by Administrative Agent or Documentation
Agent.
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Section 3.10 Opinions of Counsel. On or prior to the Initial Delivery
Date, each Lessor and Administrative Agent shall have received the opinion of
Fulbright & Jaworski, L.L.P., special counsel for Lessee and Guarantor,
substantially to the effect of the matters set forth in Exhibit C. By its
execution hereof, Lessee expressly instructs Fulbright & Jaworski, L.L.P. to
execute and deliver such opinion to Administrative Agent and the Lessors.
Section 3.11 Corporate Status and Proceedings. On or prior to the
Initial Delivery Date, Administrative Agent shall have received:
(a) certificates of existence and good standing with respect to Lessee
and Guarantor from the Secretary of State of the State of its incorporation and
as to Lessee, from the State in which it has its principal place of business and
chief executive office, dated no earlier than the 15th day prior to the Initial
Delivery Date; and
(b) with respect to Lessee and Guarantor, an Officer's Certificate
substantially in the form of Exhibit D, dated the Initial Delivery Date, with
respect to such Person's governing documents, resolutions and incumbent
officers, representations and warranties and absence of defaults.
Section 3.12 Consents and Approvals. On or prior to the Initial
Delivery Date, all necessary consents, approvals and authorizations of, and
declarations, registrations and filings with, Authorities and nongovernmental
Persons required to consummate the transactions contemplated by this Agreement
and the other Operative Agreements shall have been obtained or made by Lessee
and shall be in full force and effect.
Section 3.13 Payment of Impositions. All Impositions payable on or
prior to each Delivery Date in connection with the execution, delivery,
recording or filing of any of the Operative Agreements, in connection with the
filing of any of the financing statements, and any other documents, in
connection with the consummation of any other transactions contemplated hereby
or by any of the other Operative Agreements, shall have been paid in full by
Lessee.
Section 3.14 Search Reports. Prior to each Delivery Date,
Administrative Agent shall have received reports acceptable to Administrative
Agent and counsel to the Lessors as to Lessee by the office of the Secretaries
of State and the appropriate county filing or recording offices (if applicable)
of each jurisdiction contemplated by Section 3.7, each dated as close to the
relevant Delivery Date as practicable, in respect of a search of the applicable
UCC files and any indices of Liens maintained by such offices (including, if
applicable, indices of judgment, revenue and tax liens).
Section 3.15 Insurance. On or prior to the Initial Delivery Date,
Administrative Agent shall have received (and each Lessor shall have received a
copy of) current certificates to the effect that insurance complying with
Section 7.1 of the Lease is in full force and effect, and there shall be no past
due premiums in respect of any such insurance.
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Section 3.16 Proceedings Satisfactory, Etc. All proceedings taken in
connection with such Delivery Date and all documents relating thereto shall be
reasonably satisfactory to each Participant and its counsel, and each
Participant and its counsel shall have received copies of such documents as such
Participant or its counsel may reasonably request in connection therewith, all
in form and substance reasonably satisfactory to such Participant and its
counsel.
Section 3.17 Absence of Material Adverse Effect. Since September 30,
1998, no Material Adverse Effect shall have occurred and be continuing.
Section 3.18 Representations and Warranties True; Absence of Defaults.
Each of the representations and warranties made by or on behalf of Lessee and
Guarantor under the Operative Agreements shall be true on and as of the
Documentation Date and each Delivery Date, and no Incipient Default or Event of
Default shall have occurred and be continuing on and as of the Documentation
Date and each Delivery Date.
Section 3.19 Legal Requirements. As of the Documentation Date and each
Delivery Date, the transactions contemplated by the Operative Agreements do not
and will not violate in any respect any Requirement of Law that would reasonably
be expected to have a Material Adverse Effect and do not and will not subject
the Administrative Agent or any Lessor to any adverse regulatory prohibitions or
constraints.
Section 3.20 Bills of Sale. On or prior to each Delivery Date, there
shall have been delivered to the Administrative Agent a bill of sale (each, a
"Bill of Sale"), in form and substance reasonably acceptable to the
Administrative Agent, with respect to each item of Equipment being purchased on
such Delivery Date, conveying title to such piece of Equipment to the
Administrative Agent, for the benefit of the Lessors, subject only to the
Permitted Liens.
Section 3.21 Title. The Administrative Agent, for the benefit of the
Lessors, shall have good and valid title to the Equipment being acquired on such
Delivery Date subject only to the Permitted Liens, and the Lessee shall have
granted the security interest pursuant to the Lease with respect to such
Equipment.
ARTICLE IV
General Provisions
Section 4.1 Nature of Transaction. It is the intent of the Participants
that: (a) the transaction contemplated hereby constitutes an operating lease
from Administrative Agent and Lessors to Lessee for purposes of Lessee's
financial reporting, (b) the transaction contemplated hereby preserves ownership
in the Equipment in Lessee for purposes of Federal and state income tax,
bankruptcy and UCC purposes, (c) the Lease grants a security interest in the
Equipment and the other Collateral to Administrative Agent for the benefit of
Administrative Agent and the Lessors, and (d) the
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obligations of Lessee to pay Fixed Rent and Variable Rent shall be treated as
payments of principal and interest, respectively. Nevertheless, Lessee
acknowledges and agrees that neither Administrative Agent nor any Lessor has
made any representations or warranties concerning the tax, accounting or legal
characteristics of the Operative Agreements and that Lessee has obtained and
relied upon such tax, accounting and legal advice concerning the Operative
Agreements as it deems appropriate. Except as specifically provided for herein
or in the Lease, Administrative Agent, for the benefit of the Lessors, shall
retain an interest in the Equipment, free and clear of all Liens other than
Permitted Liens, as security for the obligations of Lessee under the Operative
Agreements. Lessee shall not have any right, title or interest in the Equipment
except as expressly set forth in this Agreement or in the Lease.
Section 4.2 Replacements. Lessors hereby agree that they shall instruct
Administrative Agent to release a Part or Equipment from the Lease and evidence
such release by the execution and delivery of a termination statement or
amendment to an existing UCC financing statement and such other documents as may
be required to release the replaced Part or Equipment from the Lease and which
are in form and substance satisfactory to the Required Lessors subject to the
satisfaction of the conditions set forth in the Lease with respect to the
release of such Part or Equipment.
ARTICLE V
Representations and Warranties
Section 5.1 Representations and Warranties of Lessee. As of the
Documentation Date and each Delivery Date, Lessee makes the representations and
warranties set forth in this Section 5.1 to Administrative Agent and each
Lessor:
(a) Title. Administrative Agent, for the benefit of the Lessors, shall
have good and valid title to each item of Equipment listed on Schedule I to the
applicable Delivery Date Notice, and each such item of Equipment and all of the
other Collateral is free from all Liens except for Permitted Liens.
(b) Perfection of Security Interests. No filing, recordation or
registration is necessary or advisable in order to perfect the security interest
of Administrative Agent, for the benefit of the Lessors, in the Equipment and
other Collateral referred to in the foregoing subsection (a) other than (i) as
of the applicable Delivery Date, in the case of Equipment located in the United
States, the filing or recording of financing statements under Article 9 of the
applicable UCC in the jurisdictions in the United States contemplated by Section
3.7, provided, that no financing statement filings are required by the foregoing
after the applicable Delivery Date except in the jurisdiction constituting the
Lessee's principal place of business or (ii) in the case of any Sublease, if
requested by the Agent after the occurrence and during the continuance of an
Event of Default, the delivery to Administrative Agent of the chattel paper
original of any Sublease, and upon the actions described
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in the foregoing clauses (i) and (ii) the security interests in the Equipment
and the other Collateral are enforceable, properly perfected, first-priority
Liens, subject only to Permitted Liens.
(c) Appraisal Data. The information provided by Lessee to the Appraiser
and forming the basis for the conclusions set forth in the Appraisal, taken as a
whole, was true and correct in all material respects and did not omit any
information necessary to make the information provided not materially misleading
as of the time provided.
(d) Limited Partnership Existence. Lessee is a limited partnership duly
formed validly existing and in good standing under the laws of the State of
Delaware, and Lessee is duly qualified or licensed and in good standing as a
foreign limited partnership authorized to do business in each state where,
because of the nature of its activities or properties, such qualification or
licensing is required, except for such jurisdictions where the failure to be so
qualified or licensed would not have a Material Adverse Effect.
(e) Limited Partnership Authority. Lessee has all requisite limited
partnership power and authority to execute, deliver, and perform its obligations
under each Operative Agreement to which it is a party.
(f) Authorization; Non-Contravention. The execution and delivery by
Lessee of the Operative Agreements to which it is or will be a party, and the
performance by Lessee of its obligations under such Operative Agreements, have
been duly authorized by all necessary corporate action (including any necessary
stockholder action) on its part, and do not and will not: (i) violate any
provision of any law, rule or regulation or of any order, writ, judgment,
decree, determination or award, which violation or violations would have,
individually or in the aggregate, a Material Adverse Effect; (ii) violate any
provision of the certificate of limited partnership or limited partnership
agreement of Lessee; (iii) result in a breach of or constitute a default under
any indenture, loan or credit agreement, or any other agreement or instrument to
which Lessee is a party or by which Lessee or its properties may be bound or
affected, which breaches or default would have, individually or in the
aggregate, a Material Adverse Effect; or (iv) result in, or require, the
creation or imposition of any Lien of any nature upon or with respect to any of
the properties now owned or hereafter acquired by Lessee (other than the
security interest contemplated by the Lease); and Lessee is not in default under
or in violation of its certificate of limited partnership or limited partnership
agreement.
(g) Binding Effect. Each of the Operative Agreements to which Lessee is
or will be a party constitutes the legal, valid and binding obligation of
Lessee, enforceable against Lessee, in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, arrangement,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(h) Absence of Litigation, etc. Other than as described in filings made
by the Guarantor with the Securities and Exchange Commission pursuant to the
Exchange Act, as of the
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Documentation Date, there is no litigation (including, without limitation,
derivative actions), arbitration or governmental proceedings pending or, to the
knowledge of Lessee, threatened against Lessee or Guarantor or any stockholder
or equity holder of Lessee in which there is a reasonable possibility of an
adverse decision which would have a Material Adverse Effect.
(i) Consents, etc. No authorization, consent, approval, license or
formal exemption from, nor any filing, declaration or registration with, any
Authority, is or will be required in connection with the execution and delivery
by Lessee or Guarantor of the Operative Agreements to which it is or will be a
party, the performance by Lessee or Guarantor of its obligations under such
Operative Agreements or the ownership, leasing, operation and maintenance of the
Equipment as contemplated by the Operative Agreements, except as described in
Section 5.1(b).
(j) Location of Offices. The principal place of business and chief
executive office (as such term is used in Article 9 of the UCC) of Lessee is
located at 5 Post Oak Park, Suite 1760, Houston, Texas 77027.
(k) ERISA. Relying upon the accuracy of the representations in Section
5.2(a) hereof, the execution and delivery of the Operative Agreements by Lessee
and Guarantor will not involve any prohibited transaction within the meaning of
ERISA or Section 4975 of the Code.
(l) Taxes. Lessee has filed or caused to be filed all United States
Federal and all other material tax returns that are required to be filed by
Lessee, and has paid or caused to be paid all taxes shown to be due and payable
on such returns or on any assessment received by Lessee, to the extent that such
taxes have become due and payable, except to the extent that taxes due, but
unpaid, are being contested in good faith by Lessee by appropriate action or
proceeding and has established or caused to be established reserves that are
adequate for the payment thereof in accordance with GAAP.
(m) Compliance with Laws. The Equipment, the properties from which it
is operated and serviced and the current operation thereof and thereon do not
violate any laws, rules, regulations, or orders of any Authorities that are
applicable thereto, including, without limitation, any thereof relating to
matters of occupational safety and health or Environmental Laws, except for such
violations as would not have, individually or in the aggregate, a Material
Adverse Effect.
(n) Disclosure. Neither this Participation Agreement, nor any offering
materials, nor the other Operative Agreements to which Lessee or Guarantor is or
will be a party nor the other documents and certificates furnished pursuant to
this Participation Agreement to Administrative Agent, Documentation Agent or the
Lessors, in connection with the transactions contemplated by this Participation
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein, in the light of the circumstances under which they were made, not
misleading as of the time furnished.
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(o) Impositions. No sales, use, excise, transfer or other tax, fee or
imposition shall result from the manufacture, transfer, lease or delivery of any
Equipment on or before any Delivery Date, except such taxes, fees or impositions
that have been paid in full by or on behalf of Lessee on or prior to the
applicable Delivery Date. The transactions contemplated by the Operative
Agreements are not subject to the U.S. federal excise tax imposed by Section
4051(a) of the Code.
(p) Certain Equipment Matters. Lessee is in the business of selling,
leasing or holding for lease the Equipment and the Equipment constitutes
"inventory" under any applicable UCC.
(q) Environmental Matters.
(1) The Equipment being acquired on such Delivery Date does
not contain any Hazardous Substances (other than lubricating oil and natural
gas) in amounts or concentrations which (i) constitute a material violation of,
or (ii) would reasonably be expected to give rise to material liability under,
any Environmental Law.
(2) The Equipment being acquired on such Delivery Date is in
compliance in all material respects with all applicable Environmental Laws.
(3) Neither Lessee nor any of its Subsidiaries has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability asserting or identifying an actual or potential material
non-compliance with Environmental Laws with respect to the Equipment being
acquired on such Delivery Date, nor does the Lessee have knowledge that any such
notice will be received or is being threatened.
(4) No judicial proceeding or governmental or administrative
action is pending or, to the best knowledge of the Lessee, threatened, under any
Environmental Law to which the Lessee or any Subsidiary is or, to Lessee's
knowledge, will be named as a party with respect to the Equipment being acquired
on such Delivery Date, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
the Equipment being acquired on such Delivery Date.
(5) There has been no release or governmental notification or
request for information regarding a release or a threat of release of Hazardous
Substances at or from the Equipment being acquired on such Delivery Date, or
arising from, or generated by, operation of the Equipment being acquired on such
Delivery Date, in violation of or in amounts or in a manner that would
reasonably be expected to give rise to any material liability under any
Environmental Laws.
(r) Holding Company. Lessee is not subject to regulation as a "holding
company," an "affiliate" of a "holding company", or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
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(s) Investment Company Act. Lessee is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(t) Intellectual Property. To Lessee's knowledge or as represented in
writing by a vendor of the Equipment which writing has been provided to
Administrative Agent, there are no patents, patent rights, trademarks, service
marks, trade names, copyrights (other than software, that is not embedded in the
Equipment, used by Lessee in connection with accounting for and maintaining the
Equipment) licenses or other intellectual property rights with respect to the
Equipment, or proprietary, patented or patentable modifications or Parts used in
connection with the Equipment, the unavailability of which would have a material
adverse effect on the current Fair Market Value of the Equipment.
(u) Subjection to Regulation. Neither Administrative Agent,
Documentation Agent nor any Lessor will, solely by reason of entering into the
Operative Agreements or the consummation and performance of the transactions
contemplated thereby (other than upon the exercise of remedies under the Lease)
(i) be required to qualify to do business in any jurisdiction, (ii) become
subject to ongoing regulation by any Authority as a company engaged in the
business of Lessee in any jurisdiction or (iii) become subject to any other
ongoing regulation of its operations by any Authority (other than any taxing
Authority).
(v) Use of Proceeds. The use of the proceeds from the transaction
contemplated by the Operative Agreements will not violate or result in any
violation of Section 7 of the Exchange Act or any regulations issued pursuant
thereto, including, without limitation, Regulations T, U and X of the Board.
(w) Absence of Defaults. No Incipient Default or Event of Default has
occurred and is continuing and, since September 30, 1998, there has occurred no
Material Adverse Effect.
(x) Absence of Casualty. No Casualty has occurred with respect to the
Equipment being delivered on such Delivery Date.
(y) Insurance. All insurance coverages required by Section 7.1 of the
Lease are in full force and effect and there are no past due premiums in respect
of any such insurance.
(z) Financial Reports. The financial statements delivered by Guarantor
to Administrative Agent pursuant to Section 3.6 were prepared in accordance with
GAAP applied on a consistent basis and fairly present the financial condition of
Guarantor and its consolidated Subsidiaries at the dates thereof and the
consolidated results of their operations for the periods covered thereby. There
are no liabilities, contingent or otherwise, known to Lessee or Guarantor, not
disclosed in such financial statements as footnotes that individually, or in the
aggregate, would have a Material Adverse Effect.
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(aa) Private Offering. Neither Lessee nor Guarantor, nor anyone acting
on behalf of either of them, has taken or will take any action which will
subject the issue and sale of any interest being acquired by Administrative
Agent or the Lessors under the Operative Agreements to the requirements of
Section 5 of the Securities Act, and, assuming the truth and accuracy of the
representations set forth in Section 5.2(b), the issuance, sale and delivery of
such interests under the circumstances contemplated by this Agreement do not
require the registration of such interests under the Securities Act or the
qualification of any of the Operative Agreements under the Trust Indenture Act
of 1939, as amended.
(bb) Brokers, etc. Neither Guarantor nor Lessee has engaged or
authorized any broker, finder, investment banker or other third party to act on
its behalf, directly or indirectly, as a broker, finder, investment banker,
administrative agent or in any other like capacity in connection with any of the
Operative Agreements or the transactions contemplated thereby. Lessee shall be
responsible for, and shall indemnify, defend and hold Administrative Agent and
each Lessor harmless from and against any and all claims, liabilities or demands
by any Person for broker's, finder's, investment banker's or administrative
agent's fees, commissions or other entitlements with respect to the Operative
Agreements and the transactions contemplated thereby (except to the extent
arising from a breach of Sections 5.2(c) or 5.3(f)).
(cc) Subsidiaries. Lessee has no Subsidiaries.
(dd) Year 2000 Matters. The Guarantor has developed a plan to ensure
that the systems of the Guarantor and its Material Subsidiaries, including the
Lessee, are compliant in all material respects with the requirements to process
transactions in the year 2000. The Guarantor and its Material Subsidiaries plan
to achieve year 2000 compliance through a combination of upgrading to new
releases of existing software and replacement of existing software with new
fully compliant systems by mid-1999. The expenses and capital expenditures of
the Guarantor and its Material Subsidiaries associated with achieving year 2000
compliance would not reasonably be expected to have a Material Adverse Effect.
The Guarantor and its Material Subsidiaries are currently gathering information
from their key suppliers, vendors and financial institutions regarding year 2000
compliance.
(ee) Solvency. Lessee is not insolvent (as defined in Section 101 (29)
of Title 11 of the United States Code) and will not be rendered so insolvent as
a result of the transactions contemplated hereby or referred to herein.
Section 5.2 Representations and Warranties of Lessors. Each Lessor
hereby represents and warrants severally but not jointly to the other
Participants as set forth in this Section 5.2.
(a) ERISA. Such Lessor is not and will not be funding any of its
Commitment or performing any of its obligations under the Operative Agreements
with the assets of an "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA, or a "plan" (as defined in Section
4975(e)(1) of the Code).
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(b) Investment. The interest being acquired by such Lessor under the
Operative Agreements is being acquired for its own account, without any view to
the distribution thereof or any interest therein, provided that such Lessor
shall be entitled to assign, transfer or convey its interest in accordance with
Section 11.8.
(c) Brokers, etc. Such Lessor has not engaged or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker, finder, investment banker, administrative agent or in
any other like capacity in connection with any of the Operative Agreements or
the transactions contemplated thereby. Such Lessor shall be responsible for, and
shall indemnify, defend and hold Administrative Agent, each other Lessor and
Lessee harmless from and against any and all claims, liabilities or demands by
any Person for broker's, finder's, investment banker's or administrative agent's
fees, commissions or other entitlements with respect to the Operative Agreements
and the transactions contemplated thereby (except to the extent arising from a
breach of Sections 5.1(cc) or 5.3(f)).
Section 5.3 Representations and Warranties of Administrative Agent. ABN
AMRO Bank N.V., in its individual capacity as Administrative Agent, hereby
represents and warrants to the other Participants as set forth in this Section
5.2.
(a) Organization and Authority. Administrative Agent is a corporation
duly organized and validly existing in good standing under the laws of the
Netherlands and has the corporate power and authority to enter into and perform
its obligations under the Operative Agreements.
(b) Authorization; Binding Effect. The Operative Agreements to which
Administrative Agent is or will be a party have been or will be, on the date
required to be delivered hereby, duly authorized, executed and delivered by
Administrative Agent, and this Participation Agreement is, and such other
Operative Agreements are, or, when so executed and delivered by Administrative
Agent will be, valid, legal and binding agreements of Administrative Agent,
enforceable against Administrative Agent in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
(c) Non-Contravention. Neither the execution and delivery by
Administrative Agent of the Operative Agreements to which it is or will be a
party, either in its individual capacity, as Administrative Agent, or both, nor
compliance with the terms and provisions thereof, conflicts with, results in a
breach of, constitutes a default under (with or without the giving of notice or
lapse of time or both), or violates any of the terms, conditions or provisions
of: (i) the charter or governing documents of Administrative Agent; (ii) any
bond, debenture, note, mortgage, indenture, agreement, lease or other instrument
to which Administrative Agent, either in its individual capacity, as
Administrative Agent or both, is now a party or by which it or its property,
either in its individual capacity, as Administrative Agent or both, is bound or
affected, where such conflict, breach, default or violation would be reasonably
likely to materially and adversely affect the ability of Administrative Agent,
either in its individual capacity, as Administrative Agent or both, to perform
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its obligations under any Operative Agreement to which it is or will be a party,
either in its individual capacity, as Administrative Agent or both; or (iii) any
of the terms, conditions or provisions of any law, rule, regulation, order,
injunction or decree of any Authority applicable to it in its individual
capacity, as Administrative Agent or both, where such conflict, breach, default
or violation would be reasonably likely to materially and adversely affect the
ability of Administrative Agent, either in its individual capacity, as
Administrative Agent or both, to perform its obligations under any Operative
Agreement to which it is or will be a party.
(d) Absence of Litigation, etc. There is no litigation, arbitration or
governmental proceedings pending or, to the best knowledge of Administrative
Agent, threatened against it which would be reasonably likely to materially and
adversely affect Administrative Agent's ability to perform its obligations under
the Operative Agreements to which it is party.
(e) Consents, etc. No authorization, consent, approval, license or
formal exemption from, nor any filing, declaration or registration with, any
Authority, is or will be required in connection with the execution and delivery
by Administrative Agent of the Operative Agreements to which it is party or the
performance by Administrative Agent of its obligations under such Operative
Agreements.
(f) Brokers, etc. Administrative Agent has not engaged or authorized
any broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker, administrative
agent or in any other like capacity in connection with any of the Operative
Agreements or the transactions contemplated thereby. Administrative Agent shall
be responsible for, and shall indemnify, defend and hold each Lessor and Lessee
harmless from and against any and all claims, liabilities or demands by any
Person for broker's, finder's, investment banker's or administrative agent's
fees, commissions or other entitlements with respect to the Operative Agreements
and the transactions contemplated thereby (except to the extent arising from a
breach of Sections 5.1(cc) or 5.2(c)).
ARTICLE VI
Covenants
Section 6.1 Affirmative Covenants of Lessee. Lessee covenants and
agrees with Lessors and Administrative Agent that during the Lease Term, and, if
Lessee has not purchased the Equipment pursuant to the Lease, for 90 days
thereafter, Lessee shall comply with each of the following provisions of this
Section 6.1.
(a) Limited Partnership Existence, etc. Subject to Section 6.2(h),
Lessee shall do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and powers and its power
and authority to perform its obligations under the Operative Agreements,
including, without limitation, any necessary qualification or licensing in any
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foreign jurisdiction, except where the failure to be so qualified would not have
a Material Adverse Effect.
(b) Compliance With Laws. Lessee shall comply with all applicable
statutes, regulations, franchises, and orders of, and all applicable
restrictions imposed by, any Authority, in respect of the conduct of its
business and the ownership of its properties (including, without limitation,
applicable statutes, rules, ordinances, regulations and orders relating to
Environmental Laws), except for such instances of non-compliance which would not
have, individually or in the aggregate, a Material Adverse Effect.
(c) Punctual Payment. Lessee shall duly and punctually pay or cause to
be paid all Rent and all fees and other amounts from time to time owing
hereunder and under the other Operative Agreements, all in accordance with the
terms of this Agreement and the other Operative Agreements.
(d) Records and Accounts. Lessee shall keep true consolidated records
and books of account in which full, true and correct entries will be made in
accordance with GAAP and adequate accounts and reserves for all taxes (including
income taxes), all depreciation, depletion, obsolescence and amortization of its
properties, all contingencies, and all other reserves will be established.
(e) Change of Name or Location. Lessee shall furnish to Administrative
Agent notice on or before the 30th day prior to any relocation of its chief
executive office or principal place of business, or change of its name.
(f) Perfection and Maintenance of Security Interest. Lessee, at its
expense, shall cause, as soon as possible, but in any event no later than the
10th day after any request, financing statements (and continuation statements
with respect thereto) and all other documents necessary or reasonably requested
by Administrative Agent in connection with the establishment and perfection of
the security interest of Administrative Agent in the Collateral, to be recorded
or filed at the locations contemplated by Section 3.7, and in such manner, and,
at its expense, shall take, or shall cause to be taken, all such other action as
may be necessary or reasonably requested by Administrative Agent or the Required
Lessors in order to establish, preserve, protect and perfect the rights, titles
and interests of Administrative Agent, on behalf of the Lessors, to the
Collateral.
(g) Financial Statements, Certificates and Information.
(i) As soon as practicable and, in any event, within 120 days
after the end of each fiscal year of Lessee, Lessee shall deliver to
Administrative Agent and each Lessor consolidated balance sheets of
Lessee and its Subsidiaries as at the end of such fiscal year, and
consolidated statements of income for the fiscal year then ended, all
in reasonable detail, prepared in accordance with GAAP consistently
applied, and certified by a senior vice president or the principal
financial or principal accounting officer of Lessee.
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(ii) As soon as practicable and, in any event, within 60 days
after the end of each of the first three fiscal quarters in each fiscal
year of Lessee, Lessee shall deliver to Administrative Agent and each
Lessor consolidated balance sheets of Lessee and its Subsidiaries as at
the end of such fiscal quarter, and consolidated statements of income
for the portion of the fiscal year then ended, all in reasonable
detail, prepared in accordance with GAAP consistently applied, and
certified by a senior vice president or the principal financial or
principal accounting officer of Lessee, but subject, however, to normal
year-end adjustments and the notes thereto.
(iii) Concurrently with the delivery of each financial
statement pursuant to paragraphs (i) and (ii) of this Section 6.1(g),
Lessee shall deliver to Administrative Agent and each Lessor a
certificate substantially in the form of Exhibit E (a Compliance
Certificate) signed on behalf of Lessee by a senior vice president.
(h) Default and Acceleration of Material Debt. Lessee agrees that if an
Incipient Default or an Event of Default shall occur, or if an event or
condition shall occur that results in the acceleration of the maturity of
Indebtedness of Lessee in amounts exceeding twenty five million dollars
($25,000,000), or in the event that such acceleration should occur with respect
to Indebtedness of any Affiliates of Lessee, Lessee shall promptly notify
Administrative Agent thereof.
(i) ERISA Events. Promptly upon Lessee's becoming aware of the
occurrence of any matter or matters referred to in the following clauses (i),
(ii) and (iii) involving liability that may reasonably be expected to exceed,
individually or in the aggregate, $25,000,000, Lessee shall notify
Administrative Agent and each of the Lessors in writing specifying the nature
thereof, what action Lessee is taking or proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service with respect
thereto: (i) a "Reportable Event" as such term is defined in Section 4043 of
ERISA, (ii) an "Accumulated Funding Deficiency" as such term is defined in
Section 302 of ERISA, or (iii) a "Prohibited Transaction", as such term is
defined in Section 4975 of the Code or described in Section 406 of ERISA, in
connection with any Pension Plan (or any trust created thereunder).
(j) Notice of Defaults. Promptly upon, but in no event later than ten
(10) Business Days after Lessee shall have obtained Actual Knowledge thereof,
Lessee shall notify Administrative Agent and each Lessor in writing of the
existence of an Incipient Default or Event of Default, which notice shall
describe the nature of such Incipient Default or Event of Default and the action
Lessee is taking with respect thereto.
(k) Notice of Proceedings. Promptly upon Lessee's becoming aware of any
threatened or pending claim, action, suit, investigation or court or
administrative proceeding involving Lessee or any of its Subsidiaries which
would reasonably be expected to result in a Material Adverse Effect, Lessee
shall notify Administrative Agent and each of the Lessors specifying its nature
and the action Lessee is taking with respect thereto.
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(l) Additional Information. Promptly upon receipt of a written request
from Administrative Agent or any Lessor, Lessee shall deliver to such requesting
party such other data and information as from time to time may be reasonably
requested.
(m) Reports to Lessors. Lessee shall, concurrently with any notice,
delivery or other communication required to be delivered to Administrative Agent
pursuant to any Operative Agreement, deliver a copy of such notice, delivery or
other communication to each Lessor at such Lessor's current address.
(n) Payment of Taxes. Lessee and its Subsidiaries shall promptly pay
and discharge all taxes, assessments and governmental charges or levies imposed
upon them or upon their income or profit or upon any property, real, personal or
mixed, belonging to them, provided that neither Lessee nor any Subsidiary shall
be required to pay any such tax, assessment, charge or levy if the same shall
not at the time be due and payable or can be paid thereafter without penalty or
if the validity thereof shall currently be contested in good faith by
appropriate proceedings diligently pursued and if Lessee or such Subsidiary, as
the case may be, shall have set aside on its books reserves deemed by it
adequate with respect to such tax, assessment, charge or levy. Nothing in this
Section shall be deemed to modify or restrict Lessee's obligations under Article
VIII hereof.
Section 6.2 Negative Covenants of Lessee. Lessee covenants and agrees
with Lessors and Administrative Agent that during the Lease Term, and, if Lessee
has not purchased the Equipment pursuant to the Lease, for 90 days thereafter,
Lessee shall not and shall not permit any of its Subsidiaries to:
(a) Liens. Create, incur, assume or permit to exist any Liens
on the Equipment, except for Permitted Liens.
(b) Merger, Consolidation or Sale of Assets, Etc. Lessee will
not wind up, liquidate or dissolve its affairs, or effect any merger or
consolidation, and Lessee will not, and will not permit any consolidated
Subsidiary to, sell, lease or otherwise dispose of all or substantially all of
its property or assets (other than sales of inventory in the ordinary course of
business) except that this Section 6.2(b) shall not prohibit any of the
following transactions, or any agreement to effect the same:
(i) if, at the time thereof and immediately after
giving effect thereto, no Event of Default or Default shall have
occurred and be continuing, the merger of any other Person with and
into Lessee or a Subsidiary, if, (A) in any transaction involving
Lessee, Lessee is the surviving Person; (B) in any other transaction, a
Wholly-Owned Subsidiary is the surviving entity and Lessee and its
Subsidiaries shall be in compliance, on a pro forma basis after giving
effect to such transaction, with the covenants contained in this
Section 6.2 recomputed as of the last day of the most recently ended
fiscal quarter of Lessee and its Subsidiaries as if such transaction
had occurred on the first day of each relevant period for testing such
compliance, and Lessee (with respect to any merger with a Person not a
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consolidated Subsidiary of Lessee) shall have delivered to the Agents
an officer's certificate to such effect;
(ii) transactions and transfers of assets among or
between Lessee and/or Wholly-Owned Subsidiaries or among and between
Wholly-Owned Subsidiaries, in each case, not prohibited by Section
6.2(f); and
(iii) dispositions not otherwise permitted hereunder
which are made for fair market value; provided that (i) at the time of
any disposition, no Default or Event of Default shall exist or shall
result from such disposition, (ii) the aggregate sales price from such
disposition shall be paid in cash or otherwise on payment terms
satisfactory to Lessee or such Subsidiary, and (iii) the aggregate book
value of all assets of Lessee and its Subsidiaries, taken as a whole,
shall not be reduced at any time to an amount which is less than 80% of
the aggregate book value of all assets of Lessee and its Subsidiaries,
taken as a whole, on March 31, 1998, as reflected on Lessee's pro forma
balance sheet dated March 31, 1998.
(c) ERISA. Permit any Plan maintained by it to (i) engage in
any "prohibited transaction" (as defined in Section 4975 of the Code) which
could reasonably be expected to result in material liability for excise taxes or
fiduciary liability under Section 406 of ERISA, (ii) incur any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) whether or not waived,
or (iii) terminate any Plan in a manner that could result in the imposition of a
lien or encumbrance on the assets of Lessee or any of its Subsidiaries pursuant
to Section 4068 of ERISA.
(d) Public Utility Holding Company. Directly or indirectly
own, control or hold with power to vote any "voting security" of an "electric
utility company" or a "gas utility company" or of a "holding company" holding
any "voting security" of either the foregoing, as such terms are defined in the
Public Utility Holding Company Act of 1935.
(e) Transactions with Affiliates. Lessee will not, and will
not permit any consolidated Subsidiary to, directly or indirectly, conduct any
business or enter into, renew, extend or permit to exist any transaction
(including the purchase, sale, lease or exchange of any assets or the rendering
of any service) or series of related transactions with any Person who is not
either (i) Guarantor or one of Guarantor's consolidated Subsidiaries or (ii)
Weatherford\Al-Rushaid Limited or Weatherford Saudi Arabia Limited, on terms
that are less favorable to Lessee or such consolidated Subsidiary, as the case
may be, than would be available in a comparable arm's length transaction.
Notwithstanding the foregoing, the restrictions set forth in this covenant will
not apply to (i) the payment of reasonable and customary regular fees to
directors of the General Partner of the Lessee who are not employees of Lessee;
(ii) loans and advances to officers, directors and employees of Lessee and the
Subsidiaries for travel, entertainment and moving and other relocation expenses
made in direct furtherance and in the ordinary course of business of Lessee and
the Subsidiaries; (iii) any other transaction with any employee, officer or
director of Lessee or any of the Subsidiaries pursuant to employee benefit or
compensation arrangements entered into in the ordinary course of business and
approved by the General Partner of Lessee or the Board of Directors of such
Subsidiary
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permitted by this Agreement; and (iv) customary underwriting or similar
transactions with an investment banking Affiliate.
Section 6.3 Covenants of Agents and Lessors. Administrative Agent and
Documentation Agent, each in its individual capacity, and each of the Lessors,
severally covenants and agrees with each of the other parties that: (a) it will
not directly or indirectly create, incur, assume or suffer to exist any Lessor
Liens arising by, through or under it on the Collateral, other than Permitted
Lessor Liens; (b) it will, at its own cost and expense, promptly take such
action in its individual capacity as may be necessary to discharge fully such
Lessor Liens created by it on the Collateral, other than Permitted Lessor Liens;
(c) it will not, except in compliance with the Operative Agreements, sell,
transfer or otherwise dispose of all or any part of the Equipment or the other
Collateral; and (d) it will not claim any depreciation with respect to the
Equipment during the term of the Lease.
ARTICLE VII
General Indemnities
Section 7.1 Indemnity. Whether or not the transactions contemplated
hereby are consummated, to the fullest extent permitted by applicable law,
Lessee waives and releases any claims now or hereafter existing against
Indemnitees on account of, and shall indemnify, reimburse and hold the
Indemnitees harmless on an after-tax basis from, any and all claims by third
parties (including, but not limited to, claims relating to trademark or patent
infringement and claims based upon negligence, strict liability in tort,
violation of laws, including, without limitation, Environmental Laws, statutes,
rules, codes or orders or claims arising out of any loss or damage to any
property or death or injury to any Person), any losses, damages or obligations
owing to third parties, any penalties, liabilities, demands, suits, judgments or
causes of action, and all legal proceedings (either administrative or judicial),
in each case whether or not the Indemnitee is a party thereto, and any costs or
expenses in connection therewith (including costs incurred in connection with
discovery) or in connection with the enforcement of this indemnity (including
reasonable attorneys' fees and expenses, and fees and expenses of internal
counsel, incurred by the Indemnitees), including, in each case, matters based on
or arising from the negligence of Indemnitees (subject to the proviso below),
which may be imposed on, incurred by or asserted against the Indemnitees in any
way relating to or arising in any manner out of:
(a) the registration, purchase, manufacture, financing, refinancing,
acceptance, rejection, transfer of title, taking or foreclosure of a security
interest in, ownership, delivery, condition, lease, sublease, assignment,
storage, transportation, possession, use, operation, return or other disposition
of any of the Equipment, or any defect in any such Equipment, arising from the
material or any article used therein or from the design, testing or use thereof,
or from any maintenance, service, repair, modification, overhaul or testing of
any such Equipment regardless of when such defect shall be discovered, whether
or not such Equipment is in the possession of Lessee and no matter where it is
located; or
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(b) this Participation Agreement, any other Operative Agreement or any
document or certificate delivered in connection therewith, the enforcement
hereof or thereof or the consummation of the transactions contemplated hereby or
thereby;
provided that Lessee shall not be obligated to indemnify an Indemnitee for any
such claim, loss, damage, liability, obligation, penalty, demand or suit to the
extent the same results directly from:
(i) the willful misconduct or gross negligence of such
Indemnitee; (provided that the failure of the Administrative Agent to
prominently display its Texas sales tax permit in its Houston, Texas
office shall not constitute willful misconduct or gross negligence for
this purpose);
(ii) the creation or existence of a Lessor Lien attributable
to such Indemnitee;
(iii) any claim or liability to the extent it arises solely
out of events occurring after Lessee's discharge of all its obligations
under the Lease; or
(iv) any Impositions described in Section 8.1 except any
amount necessary under this Section 7.1 to hold the Indemnitee harmless
(subject to Section 8.3) from all Impositions required to be paid by
such Indemnitee with respect to the receipt or accrual of such
indemnity under the laws of any Authority in the United States;
provided, however, that nothing in the preceding proviso shall be deemed to
exclude or limit any claim that any Indemnitee may have under any Operative
Agreement or applicable laws from Lessee for breach of its representations,
warranties or covenants.
Section 7.2 Excessive Use Indemnity. In the event that at the end of
the Lease Term: (a) Lessee elects the Sale Option; and (b) after paying to
Administrative Agent any amounts due under Section 11.3 of the Lease,
Administrative Agent does not have sufficient funds to reduce the Lease Balance
to zero, then Lessee shall promptly pay over to Administrative Agent the
shortfall unless Lessee delivers a report from the Appraiser in form and
substance satisfactory to the Required Lessors which establishes that the
decline in value in each item of Equipment which was sold pursuant to the Sale
Option from that amount anticipated for such date in the Appraiser's report
delivered with respect to such Equipment on the applicable Delivery Date was not
due to extraordinary use, failure to maintain or replace, failure to use,
workmanship or method of installation or removal or any other cause or condition
within the power of Lessee to control or effect (each an "Excessive Use").
Section 7.3 Increased Capital Costs. If any change in, or the adoption,
effectiveness, interpretation, reinterpretation or phase-in of, any law or
regulation, directive, guideline, decision or request (whether or not having the
force of law) of any court, central bank regulator or other Authority ("Change
in Law") affects or would affect the amount of capital required or expected to
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be maintained by any Lessor directly or by its parent company (including,
without limitation, any reserve requirements specified under regulations issued
from time to time by the Board of Governors of the Federal Reserve System and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities" as defined in Regulation D of such Board of
Governors) on account of the execution, delivery and performance hereof or of
the Lease or the transactions contemplated in the Operative Agreements, and such
Lessor determines (in its sole and absolute discretion) that the rate of return
on it or its parent's capital as a consequence of the Funding made by such
Lessor hereunder to pay its share of the Purchase Price plus Capitalized
Transaction Costs is reduced to a level below that which such Lessor or its
parent could have achieved but for the occurrence of any such circumstances,
then, in any such case, upon written notification from time to time by Lessor to
Lessee, Lessee shall, within five (5) Business Days following receipt of the
statement referred to in the next sentence, pay directly to such Lessor
additional amounts sufficient to compensate Lessor or its parent for such
reduction in rate of return (subject to Section 8.3). A statement of a Lessor as
to any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be presumed correct.
In determining such amount, each Lessor shall use any method of averaging or
attribution that it (in its reasonable discretion) shall deem applicable.
Lessee shall have the right, if it receives from any Lessor any notice referred
to in this Section 7.3, upon three (3) Business Days notice to Administrative
Agent (which shall notify each Lessor), to convert the Interest Rate from the
LIBO Rate to the Alternate Base Rate at the end of the then current Rent Period.
Each Lessor will notify Lessee through the Administrative Agent of any event
occurring after the date of this Agreement which would entitle such Lessor to
compensation pursuant to this section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
Section 7.4 LIBO Rate Unlawful. If any Lessor shall determine in good
faith (which determination shall, upon notice thereof to Lessee, be conclusive
and binding on Lessee) that a Change in Law makes it unlawful, or the central
bank or other Authority asserts that it is unlawful, for such Lessor to make,
continue or maintain any amount of such Lessor's Funding on a LIBO Rate basis,
the obligations of such Lessor to make, continue or maintain any such Funding
shall, upon such determination, forthwith be suspended until such Lessor shall
notify Lessee that the circumstances causing such suspension no longer exist,
and all Variable Rent allocable to such Lessor, commencing with the Rent Period
in which such notice is given, shall automatically be determined on an Alternate
Base Rate plus the Applicable Margin basis beginning on the next immediately
succeeding Payment Date with respect thereto or sooner, if required by such law
or assertion.
Section 7.5 Funding Losses. Lessee agrees to reimburse each Lessor for
any loss or expense incurred (including any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lessor to make, continue or maintain any portion of its Outstanding Investment
as a LIBO Rate financing) as a result of (i) the failure of any Delivery Date
Closing to occur on the Delivery Date specified in the applicable Delivery Date
Notice, (ii) any payment of all or any portion of the Lease Balance for any
reason on a date other than a Payment Date or (iii) any transfer pursuant to
Section 7.6 on a date other than a Payment Date. Each Lessor
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shall promptly notify Lessee in writing of the amount of any claim under this
Section 7.5, the reason or reasons therefor and the additional amount required
fully to compensate such Lessor for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be presumed correct.
Section 7.6 Actions of Affected Lessors. Each Lessor shall use
reasonable efforts (including reasonable efforts to change the booking office
for this transaction) to avoid or minimize any amounts which might otherwise be
payable pursuant to Section 7.3; provided, however, that such efforts shall not
be deemed by such Lessor, in its sole discretion, to be disadvantageous to it.
In the event that such reasonable efforts are insufficient to avoid or minimize
such amounts that might be payable pursuant to Section 7.3, then such Lessor
(the "Affected Lessor") shall use its reasonable efforts to transfer to any
other Lessor approved by Lessee (which itself is not then an Affected Lessor)
its rights and obligations hereunder; provided, however, that such transfer
shall not be deemed by such Affected Lessor, in its sole discretion, to be
disadvantageous to it (other than the economic disadvantage of ceasing to be a
Lessor). In the event that the Affected Lessor is unable, or otherwise is
unwilling, so to transfer its rights and obligations, Lessee may designate an
alternate financial institution to purchase the Affected Lessor's rights and
obligations hereunder, at the amount of such Lessor's Outstanding Investment
plus accrued Variable Rent, indemnities, and other amounts owing to such Lessor
and, subject to the provisions of Sections 7.5 and 11.8, the Affected Lessor
shall transfer its rights and obligations to such alternate financial
institution and such alternate financial institution shall become a Lessor
hereunder.
ARTICLE VIII
General Tax Indemnity
Section 8.1 General Tax Indemnity. Lessee agrees to pay or reimburse
Indemnitees for, and to indemnify and hold Indemnitees harmless on an after tax
basis from, all Impositions arising at, or relating to, any time prior to or
during the Interim Period or the Base Period or any Renewal Term, if any, or
upon any termination of the Lease or prior to, or upon the return of, the
Equipment to Administrative Agent, and levied or imposed upon Indemnitees or the
Equipment or other Collateral directly or otherwise, by any Federal, state,
provincial or local government or taxing authority in the United States or by
any foreign country or foreign or international taxing authority upon or with
respect to: (a) the Equipment or any other Collateral; (b) the exportation,
importation, manufacture, financing, refinancing, registration, purchase,
ownership, delivery, condition, lease, sublease, assignment, storage,
transportation, possession, use, operation, maintenance, repair, return, sale
(including to Administrative Agent or any Lessee pursuant to the Operative
Agreements), transfer of title or other disposition thereof; (c) the rentals,
receipts, or earnings arising from any of the Equipment; or (d) the Lease, this
Participation Agreement or any payment made thereunder; provided that this
Section 8.1 shall not apply to: (i) Impositions which are based upon or measured
by the Indemnitee's net income, except any such Imposition imposed upon the
Indemnitee by a state or foreign government or taxing authority by reason of the
presence of Equipment or any other
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Collateral therein; (ii) Impositions characterized under local law as franchise,
net worth, or shareholder's capital (excluding, however, any value added,
license, property or similar Impositions and any such Imposition imposed upon an
Indemnitee by a State or foreign government or taxing authority by reason of the
presence of Equipment or any other Collateral therein); and (iii) Impositions
based upon the voluntary transfer, assignment or disposition by Administrative
Agent or any Lessor of any interest in any of the Equipment (other than any
deemed transfer of any interest in any of the Equipment as a result of the
syndication of the transaction contemplated hereby, a transfer of any interest
in any of the Equipment pursuant to the exercise of remedies under the Operative
Agreements, transfers of any interest in any of the Equipment pursuant to the
exercise of the Lessee Purchase Option or Sale Option, a transfer of any
interest in any of the Equipment to Lessee or otherwise pursuant to the Lease);
and (iv) Impositions resulting from the gross negligence, willful misconduct or
fraud of such Indemnitee (provided that the failure of the Administrative Agent
to prominently display its Texas sales tax permit in its Houston, Texas office
shall not constitute willful misconduct or gross negligence for this purpose).
Notwithstanding the foregoing provisions of this Section 8.1, Lessee shall pay
or reimburse, and indemnify and hold harmless, any Lessor which has complied
with Section 8.5, from any deduction or withholding of any United States Federal
income or other tax.
Section 8.2 Contest. Lessee shall pay on or before the time or times
prescribed by law any Impositions (except any Impositions excluded by Section
8.1); provided, however, that Lessee shall be under no obligation to pay any
such Imposition so long as the payment of such Imposition is not delinquent or
is being contested by a Permitted Contest. If any claim or claims is or are made
against any Indemnitee for any Imposition which is subject to indemnification as
provided in Section 8.1, such Indemnitee shall as soon as practicable notify
Lessee and if, in the reasonable opinion of tax counsel acceptable to the
Indemnitee there exists a reasonable basis to contest such Imposition and if the
provisos of the definition of "Permitted Contest" continue to be satisfied and
so long as no Event of Default exists and no income tax or unindemnified claim
is also involved, and the Lessee admits in writing its duty to indemnify for
such claim, Lessee at its expense may, to the extent permitted by applicable law
to pursue such claim in its own name, contest such imposition, and subsequently
may appeal any adverse determination, in the appropriate administrative and
legal forums. If the above described conditions are satisfied but the claim
involves income tax or an unindemnified claim or must be pursued in the name of
the Indemnitee, and the amount at issue exceeds $25,000, then upon the request
of Lessee to such Indemnitee, the Indemnitee, at Lessee's expense, shall contest
any such Imposition through applicable administrative forums. Lessee shall pay
all expenses incurred by the Indemnitee in contesting any such Imposition
including, without limitation, all reasonable attorneys' and accountants' fees,
including the allocated costs of internal counsel, upon demand by the
Indemnitee. Lessee shall have the right to consult with respect to the conduct
of any proceedings controlled by the Indemnitee and Indemnitee shall consider
such consultations in good faith; provided, however, that such consultation
shall not interfere with the Indemnitee's control of such contest. Lessee shall
in all events be kept informed, to the extent practicable, of material
developments relative to such proceedings. The Indemnitee shall have the right
to participate in the conduct of any proceedings controlled by Lessee and the
Indemnitee shall in all events be kept informed, to the extent practicable, of
material developments relative to such
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proceedings. The Indemnitees agree that a contested claim for which Lessee would
be required to make a reimbursement payment hereunder will not be settled or
compromised without Lessee's prior written consent (which consent shall neither
be unreasonably delayed nor withheld other than in good faith), unless the
provisos of the definition of "Permitted Contest" would not continue to be
satisfied, an Event of Default occurs or the Indemnitee waives its right to
indemnification with respect thereto. The failure of an Indemnitee to timely
contest a claim against it for any Imposition which is subject to
indemnification under Section 8.1 and for which it has an obligation to Lessee
to contest under this Section 8.2 in the manner required by applicable law or
regulations where Lessee has timely requested that such Indemnitee contest such
claim shall relieve Lessee of its obligations to such Indemnitee under Section
8.1 with respect to such claim only to the extent such failure precludes
contest. If applicable law requires the payment of a contested Imposition as a
condition to, or regardless of, its being contested, and Lessee chooses to
contest such Imposition or to direct the Indemnitee to contest such Imposition
in accordance with this Section, then Lessee shall provide the Indemnitee with
the funds to pay such Imposition, such provision of funds to be deemed a
non-interest bearing loan by Lessee to the Indemnitee to be repaid by any
recovery of such Imposition from such contest and any remaining unpaid amount
not recovered to offset Lessee's obligation to indemnify the Indemnitee for such
Imposition. In the event that the Indemnitee receives a refund (or like
adjustment) in respect of any Imposition for which the Indemnitee has been
reimbursed by Lessee, the Indemnitee shall immediately remit the amount of such
refund (or like adjustment) to Lessee, net of all costs and expenses incurred by
such Indemnitee.
Section 8.3 Gross Up. If an Indemnitee shall not be entitled to an
immediate corresponding and equal deduction with respect to any payment or
Imposition which Lessee is required to pay or reimburse under Article VII,
Section 8.1 or Section 8.2 (each such payment or reimbursement under Article
VII, Section 8.1 or Section 8.2, an "original payment") and which original
payment constitutes income to such Indemnitee, then Lessee shall pay to such
Indemnitee on demand the amount of such original payment on a gross-up basis
such that, after subtracting all Impositions imposed on such Indemnitee with
respect to such original payment by Lessee (including any Impositions otherwise
excluded by Section 8.1 and assuming for this purpose that such Indemnitee was
subject to taxation at the maximum marginal Federal, state and local tax rates
applicable to such Indemnitee for the year in which such income is taxable),
such payments shall be equal to the original payment to be received (net of any
credits, deductions or other tax benefits then actually recognized that arise
from the payment by such Indemnitee of any amount, including taxes, for which
the payment to be received is made).
Section 8.4 Tax Returns. Except as otherwise provided in the third
sentence below, Lessee shall prepare and file (whether or not it is a legal
obligation of an Indemnitee) all tax returns or reports that may be required
with respect to any Impositions assessed, charged or imposed on the Equipment or
the Lease, including, but not limited to sales and use taxes, property taxes (ad
valorem and real property) and any other tax or charge based upon the ownership,
leasing, subleasing, rental, sale, purchase, possession, use, operation,
delivery, return or other disposition of any of the Equipment or upon the
rentals or the receipts therefrom (excluding, however, any tax based upon the
net income of an Indemnitee). Lessee may notify in writing all applicable
Authorities having
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jurisdiction with respect to personal property taxes that Lessee is the
appropriate party for receiving notices of (or copies of, if such Authority is
required by law to notify Administrative Agent) assessment, appeal and payment
with respect to the Equipment. If an Indemnitee is obligated by law to file any
such reports or returns, then Lessee shall at least 20 days before the same are
due, prepare the same and forward them to the Indemnitee, as appropriate, with
detailed instructions as to how to comply with all applicable filing
requirements, together with funds in the amount of any payment required pursuant
thereto. Indemnitee shall forward to Lessee at its address listed in Section
11.4 copies of all assessment and valuation notices it receives as soon as
practicable; provided that Indemnitee's failure to deliver such notices on a
timely basis shall not relieve Lessee of any obligations hereunder. The
Participants agree that neither they nor any corporation controlled by them, or
under common control with them, directly or indirectly will at any time take any
action or with respect to the filing of any income tax return, including an
amended income tax return, inconsistent with the intention of the parties
expressed in Section 4.1(b) and (d) hereof.
Section 8.5 Withholding Tax Exemption. Upon the execution of this
Agreement, each Lessor that is not incorporated under the laws of the United
States or a State thereof shall, and with respect to any date on which any
Indemnitee transfers any right, title or interest in the Equipment to a
transferee that is not incorporated under the laws of the United States or a
State thereof, such transferee shall deliver, at least five (5) Business Days
prior to any such transfer, to Lessee and Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lessor is entitled to receive payments under
this Agreement and the other Operative Agreements without deduction or
withholding of any United States Federal income taxes. Each Lessor which so
delivers a Form 1001 or 4224 further undertakes to deliver to Lessee and
Administrative Agent two additional copies of such form (or a successor form) on
or before the date that such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Lessee or Administrative Agent, in each case certifying
that such Lessor is entitled to receive payments under this Agreement and the
other Operative Agreements without deduction or withholding of any United States
Federal income taxes, unless prior to the date on which any such delivery would
otherwise be required any change in treaty, law or regulation or in the
interpretation thereof by the applicable taxing Authority occurring after such
Lessor became a Lessor hereunder has rendered all such forms inapplicable and no
successor forms having substantially the same effect as Forms 1001 and 4224 have
been adopted by the IRS, and such Lessor advises Lessee and Administrative Agent
in writing that, as a result of such change in treaty, law or regulation or
interpretation, it is not capable of receiving payments without any withholding
of United States Federal income tax. In the event that any Indemnitee ceases to
be exempt from withholding of any United States Federal income taxes due to a
change in treaty, law, regulation or in the interpretation thereof by the
applicable taxing Authority, such Indemnitee shall, at the request of Lessee, if
such additional amounts can be reduced or eliminated, by transferring the
Equipment or any other Collateral to any branch or lending office of such
Indemnitee without incurring any adverse regulatory consequences or cost for
which Lessee is not willing on or prior to the transfer to indemnify such
Indemnitee and which does not adversely interfere with the business of such
branch or lending office, effect such transfer.
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ARTICLE IX
Administrative Agent
Section 9.1 Appointment of Administrative Agent; Powers and
Authorization to Take Certain Actions.
(a) Each Lessor irrevocably appoints and authorizes ABN AMRO Bank N.V.
to act as its administrative agent hereunder, with such powers as are
specifically delegated to Administrative Agent by the terms hereof, together
with such other powers as are reasonably incidental thereto. Each Lessor
authorizes and directs Administrative Agent to, and Administrative Agent agrees
for the benefit of the Lessors that it will, on the Documentation Date, the
Initial Delivery Date and each other Delivery Date, accept the documents
described in Article III of this Participation Agreement. Administrative Agent
accepts the agency hereby created applicable to it and agrees to receive all
payments and proceeds pursuant to the Operative Agreements and disburse such
payments or proceeds in accordance with the Operative Agreements. Administrative
Agent shall have no duties or responsibilities except those expressly set forth
in the Lease and this Participation Agreement. Administrative Agent shall not be
responsible to any Lessor (or to any other Person) (i) for any recitals,
statements, representations or warranties of any party contained in the Lease,
this Participation Agreement, or in any certificate or other document referred
to or provided for in, or received by any of them under, the Operative
Agreements, other than the representations and warranties made by Administrative
Agent in Section 5.3, or (ii) for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Collateral or the title
thereto (subject to Administrative Agent's obligations under Section 6.3) or of
the Lease or any other document referred to or provided for therein or (iii) for
any failure by Lessee, any Lessor or any other third party (other than
Administrative Agent) to perform any of its obligations under any Operative
Agreement. Administrative Agent may employ agents, trustees or
attorneys-in-fact, may vest any of them with any property, title, right or power
deemed necessary for the purposes of such appointment and shall not be
responsible for the negligence or misconduct of any of them selected by it.
Neither Administrative Agent nor any of its directors, officers, employees or
agents shall be liable or responsible for any action taken or omitted to be
taken by it or them hereunder, or in connection herewith, except for its or
their own gross negligence or willful misconduct.
(b) Administrative Agent shall not have any duty or obligation to
manage, control, use, operate, store, lease, sell, dispose of or otherwise deal
with any Equipment, any other Collateral or the Lease, or to otherwise take or
refrain from taking any action under, or in connection with, this Agreement, the
Lease or any related document to which Administrative Agent is a party, except
as expressly provided by the terms hereof, and no implied duties of any kind
shall be read into any Operative Agreement against Administrative Agent. The
permissive right of Administrative Agent to take actions enumerated in this
Agreement and the Lease shall never be construed as a duty, unless
Administrative Agent is instructed or directed to exercise, perform or enforce
one or more rights by the Required Lessors (provided that Administrative Agent
has received indemnification reasonably
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satisfactory to it). No provision of the Operative Agreements shall require
Administrative Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its obligations under the
Operative Agreements, or in the exercise of any of its rights or powers
thereunder. It is understood and agreed that the duties of Administrative Agent
are ministerial in nature.
(c) Except as specifically provided herein, Administrative Agent is
acting hereunder solely as administrative agent and is not responsible to any
party hereto in its individual capacity, except with respect to any claim
arising from Administrative Agent's gross negligence or willful misconduct
(provided that the failure of the Administrative Agent to prominently display
its Texas sales tax permit in its Houston, Texas office shall not constitute
willful misconduct or gross negligence for this purpose) or any breach of a
representation or covenant made in its individual capacity.
(d) Administrative Agent may accept deposits from, lend money to and
otherwise deal with Lessee or any of its Affiliates with the same rights as it
would have if it were not the named Administrative Agent hereunder.
Section 9.2 Reliance. Administrative Agent may rely upon, and shall not
be bound or obligated to make any investigation into the facts or matters stated
in, any certificate, notice or other communication (including any communication
by telephone, telecopy, telex, telegram, e-mail or cable) reasonably believed by
it to be genuine and correct and to have been made, signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by Administrative
Agent (including any expert selected by Administrative Agent to aid
Administrative Agent in any calculations required in connection with its duties
under the Operative Agreements).
Section 9.3 Action Upon Instructions Generally. Subject to Sections 9.4
and 9.6, upon written instructions of the Required Lessors, Administrative Agent
shall, on behalf of the Lessors, give such notice or direction, exercise such
right, remedy or power hereunder or in respect of any Equipment, and give such
consent or enter into such amendment to any document to which it is a party as
Administrative Agent as may be specified in such instructions. Administrative
Agent shall deliver to each Lessor a copy of each notice, report and certificate
received by Administrative Agent pursuant to the Operative Agreements.
Administrative Agent shall have no obligation to investigate or determine
whether there has been an Event of Default or an Incipient Default.
Administrative Agent shall not be deemed to have notice or knowledge of an Event
of Default or Incipient Default unless a Responsible Officer of Administrative
Agent is notified in writing of such Event of Default or Incipient Default. If
Administrative Agent receives notice of an Event of Default, Administrative
Agent shall give prompt notice thereof, at Lessee's expense, to each Lessor.
Subject to Sections 9.4 and 9.6 and Article X, Administrative Agent shall take
action or refrain from taking action with respect to such Event of Default as
directed by the Required Lessors; provided that, unless and until Administrative
Agent receives such directions, Administrative Agent may refrain from taking any
action, or may act in its discretion, with respect to such Event of Default.
Prior to the date the Lease
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Balance shall have become due and payable by acceleration pursuant to Section
8.2 of the Lease, Required Lessors may deliver written instructions to
Administrative Agent to waive, and Administrative Agent shall waive pursuant
thereto, any Event of Default and its consequences; provided that in the absence
of written instructions from all Lessors, Administrative Agent shall not waive
any (i) Payment Default or (ii) covenant or provision which, under Section 10.1,
cannot be modified or amended without the consent of all Lessors. As to any
matters not expressly provided for by this Agreement, Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions signed by the Required Lessors and
such instructions of the Required Lessors and any action taken or failure to act
pursuant thereto shall be binding on each Lessor.
Section 9.4 Indemnification. Each Lessor shall reimburse and hold
Administrative Agent harmless, ratably in accordance with its Outstanding
Investment at the time the indemnification is required to be given (but only to
the extent that any such indemnified amounts have not in fact been paid to
Administrative Agent by, or on behalf of, Lessee in accordance with Section
7.1), from any and all claims, losses, damages, obligations, penalties,
liabilities, demands, suits, judgments, or causes of action, and all legal
proceedings, and any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal counsel of
Administrative Agent and all other reasonable attorneys' fees and expenses
incurred by Administrative Agent, in any way relating to or arising in any
manner out of (i) any Operative Agreement, the enforcement hereof or thereof or
the consummation of the transactions contemplated thereby, or (ii) instructions
from the Required Lessors (including, without limitation, the costs and expenses
that Lessee is obligated to and does not pay hereunder), provided that no Lessor
shall be liable for any of the foregoing to the extent they arise from (a) the
gross negligence or willful misconduct of Administrative Agent (provided that
the failure of the Administrative Agent to prominently display its Texas sales
tax permit in its Houston, Texas office shall not constitute willful misconduct
or gross negligence for this purpose), (b) the inaccuracy of any representation
or warranty or breach of any covenant given by Administrative Agent in Section
5.3 or Section 6.3 hereof or in the Lease, (c) in the case of Administrative
Agent's handling of funds, the failure to act with the same care as
Administrative Agent uses in handling its own funds or (d) any taxes, fees or
other charges payable by Administrative Agent based on or measured by any fees,
commissions or compensation received by it for acting as Administrative Agent in
connection with the transactions contemplated by the Operative Agreements.
Section 9.5 Independent Credit Investigation. Each Lessor by entering
into this Agreement agrees that it has, independently and without reliance on
Administrative Agent or any other Lessor and based on such documents and
information as it has deemed appropriate, made its own credit analysis of Lessee
and its own decision to enter into this Agreement and each of the other
Operative Agreements to which it is a party and that it will, independently and
without reliance upon Administrative Agent or any other Lessor, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking action under this
Agreement and any related documents to which it is a party. Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by Lessee of any other
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document referred to (directly or indirectly) or provided for herein or to
inspect the properties or books of Lessee. Except for notices or statements
which Administrative Agent is expressly required to give under this Agreement
and for notices, reports and other documents and information expressly required
to be furnished to Administrative Agent alone (and not also to each Lessor, it
being understood that Administrative Agent shall forward copies of same to each
Lessor) hereunder or under any other Operative Agreement, Administrative Agent
shall not have any duty or responsibility to provide any Lessor with copies of
notices or with any credit or other information concerning the affairs,
financial condition or business of Lessee (or any of its affiliates) that may
come into the possession of Administrative Agent or any of its Affiliates.
Section 9.6 Refusal to Act. Except for notices and actions expressly
required of Administrative Agent hereunder and except for the performance of its
covenants in Section 6.3, Administrative Agent shall in all cases be fully
justified in failing or refusing to act unless (a) it is indemnified to its
reasonable satisfaction by the Lessors against any and all liability and
reasonable expense which may be incurred by it by reason of taking or continuing
to take any such action (provided that such indemnity shall not be required to
extend to liability or expense arising from any matter described in clauses (a)
through (d) of Section 9.4, it being understood that no action taken by
Administrative Agent in accordance with the instructions of the Required Lessors
shall be deemed to constitute any such matter) and (b) it is reasonably
satisfied that such action is not contrary to any Operative Agreement or to any
applicable law.
Section 9.7 Resignation of Administrative Agent; Appointment of
Successor. Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, Administrative Agent may resign at any
time by giving notice thereof to each Lessor and Lessee. Upon any such
resignation, the Required Lessors at the time of the resignation shall have the
right (with the reasonable, prompt approval of Lessee unless an Event of Default
shall be continuing) to appoint a successor Administrative Agent which shall be
a financial institution having a combined capital and surplus of not less than
$100,000,000. If, within 30 calendar days after the retiring Administrative
Agent's giving of notice of resignation, a successor Administrative Agent is not
so appointed and does not accept such appointment, then the retiring
Administrative Agent may appoint a successor Administrative Agent and transfer
to such successor Administrative Agent all rights and obligations of the
retiring Administrative Agent. Such successor Administrative Agent shall be a
financial institution having combined capital and surplus of not less than
$100,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent and the retiring
Administrative Agent shall be discharged from duties and obligations as
Administrative Agent thereafter arising hereunder and under any related
document. If the retiring Administrative Agent does not appoint a successor, any
Lessor shall be entitled to apply to a court of competent jurisdiction for such
appointment, and such court may thereupon appoint a successor to act until such
time, if any, as a successor shall have been appointed as above provided.
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Section 9.8 Separate Administrative Agent. The Required Lessors may,
and if they fail to do so at any time when they are so required, Administrative
Agent may, for the purpose of meeting any legal requirements of any jurisdiction
in which any Equipment or Collateral may be located, appoint one or more
individuals or corporations either to act as co-agent jointly with
Administrative Agent or to act as separate administrative agent of all or any
part of the Equipment or Collateral or the Lease, and vest in such individuals
or corporations, in such capacity, such title to the Equipment or Collateral or
the Lease or any part thereof, and such rights or duties as Administrative Agent
may consider necessary or desirable. Administrative Agent shall not be required
to qualify to do business in any jurisdiction where it is not now so qualified.
Administrative Agent shall execute, acknowledge and deliver all such instruments
as may be required by any such co-agent or separate administrative agent more
fully confirming such title, rights or duties to such co-agent or separate
administrative agent. Upon the acceptance in writing of such appointment by any
such co-agent or separate administrative agent, it, she or he shall be vested
with such interest in the Equipment or Collateral and the Lease or any part
thereof, and with such rights and duties, not inconsistent with the provisions
of the Operative Agreements, as shall be specified in the instrument of
appointment, jointly with Administrative Agent (except insofar as local law
makes it necessary for any such co-agent or separate administrative agent to act
alone), subject to all terms of the Operative Agreements. Any co-agent or
separate administrative agent, to the fullest extent permitted by legal
requirements of the relevant jurisdiction, at any time, by an instrument in
writing, shall constitute Administrative Agent its attorney-in-fact and
administrative agent, with full power and authority to do all acts and things
and to exercise all discretion on its behalf and in its name. If any co-agent or
separate administrative agent shall die, become incapable of acting, resign or
be removed, the interest in the Equipment or Collateral and the Lease and all
rights and duties of such co-agent or separate administrative agent shall, so
far as permitted by law, vest in and be exercised by Administrative Agent,
without the appointment of a successor to such co-agent or separate
administrative agent.
Section 9.9 Termination of Agency. The agency created hereby shall
terminate upon the final disposition by Administrative Agent of all Collateral
at any time subject hereto and the final distribution by Administrative Agent of
all moneys or other property or proceeds received pursuant to the Lease in
accordance with its terms, provided that at such time Lessee shall have complied
fully with all the terms hereof.
Section 9.10 Compensation of Agency. As compensation for the
performance of Administrative Agent's obligations hereunder, Lessee shall pay to
Administrative Agent, on the Initial Delivery Date and on each anniversary of
the Initial Delivery Date occurring during the Lease Term, a fee (the "Agency
Fee") in the amount referred to in the Fee Letter Agreement.
Section 9.11 Limitations. It is expressly understood and agreed by and
among the parties hereto that, except as otherwise provided herein or in the
other Operative Agreements: (a) this Participation Agreement and the other
Operative Agreements to which Administrative Agent is a party are executed by
Administrative Agent, not in its individual capacity (except with respect to the
representations and covenants of Administrative Agent in Sections 5.3 and 6.3),
but solely as Administrative Agent under the Operative Agreements in the
exercise of the power and authority
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conferred and vested in it as such Administrative Agent; (b) each and all of the
undertakings and agreements herein made on the part of Administrative Agent are
each and every one of them made and intended not as personal undertakings and
agreements by Administrative Agent, or for the purpose or with the intention of
binding Administrative Agent personally, but are made and intended for the
purpose of binding only the Collateral unless expressly provided otherwise; (c)
actions to be taken by Administrative Agent pursuant to its obligations under
the Operative Agreements may, in certain circumstances, be taken by
Administrative Agent only upon specific authority of the Lessors; (d) nothing
contained in the Operative Agreements shall be construed as creating any
liability on Administrative Agent, individually or personally, or any
incorporator or any past, present or future subscriber to the capital stock of,
or stockholder, officer or director, employee or agent of, Administrative Agent
to perform any covenants either express or implied contained herein, all such
liability, if any, being expressly waived by the other parties hereto and by any
Person claiming by, through or under them; and (e) so far as Administrative
Agent, individually or personally, is concerned, the other parties hereto and
any Person claiming by, through or under them shall look solely to the
Collateral and Lessee for the performance of any obligation under any of the
instruments referred to herein; provided, however, that nothing in this Section
9.11 shall be construed to limit in scope or substance the general corporate
liability of Administrative Agent in respect of its gross negligence or willful
misconduct (provided that the failure of the Administrative Agent to prominently
display its Texas sales tax permit in its Houston, Texas office shall not
constitute willful misconduct or gross negligence for this purpose) or those
representations, warranties and covenants of Administrative Agent in its
individual capacity set forth herein or in any of the other agreements
contemplated hereby.
ARTICLE X
Amendments to Operative Agreements
Section 10.1 Amendments to Operative Agreements With Consent of
Lessors. This Participation Agreement and each of the other Operative Agreements
shall be changed, waived, discharged or terminated with respect to Lessee and
each Lessor upon the ratification in writing of such change, waiver, discharge
or termination by Lessee, Guarantor (as to the Guaranty only) and the Required
Lessors, in which case such change, waiver, discharge or termination shall be
effective as to each Lessor, Guarantor and Lessee; provided no such change,
waiver, discharge or termination shall, without the written ratification of each
Lessor:
(i) modify any of the provisions of this Section 10.1 or
Article III, change the definitions of "Commitment", "Commitment
Percentage", "Total Commitment" or "Required Lessors" or modify or
waive any provision of an Operative Agreement requiring action by the
foregoing, or release any Collateral or the Guaranty (except as
otherwise specifically provided in any Operative Agreement);
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(ii) modify, amend, waive or supplement any of the provisions
of Articles III, VII, VIII (except as otherwise expressly provided in
Section 9.3 hereof), X or XI, Sections 13.9 or 13.10 of the Lease or
Section 11.3 hereof, provided that the Required Lessors may waive an
Event of Default other than a Payment Default;
(iii) reduce, modify, amend or waive any indemnities in favor
of any Participant, whether pursuant to Articles VII or VIII or
otherwise (except that any Person may consent to any reduction,
modification, amendment or waiver of any indemnity payable to it);
(iv) modify, postpone, reduce or forgive, in whole or in part,
any Rent payment (other than pursuant to the terms of any Operative
Agreement), Lease Balance, Lessor Risk Amount, Lessee Risk Amount,
interest or, subject to clause (iii) above, any other amount payable
under the Lease or Participation Agreement, or modify the definition or
method of calculation of any Rent payment (other than pursuant to the
terms of any Operative Agreement), Lease Balance, Lessor Risk Amount,
Lessee Risk Amount or other amount payable hereunder;
(v) consent to any assignment of the Lease releasing Lessee
from its obligations in respect of the payments due pursuant to the
Operative Agreements or changing the absolute and unconditional
character of such obligations; or
(vi) permit the creation of any Lien on the Collateral or any
part thereof except as contemplated in the Operative Agreements, or
deprive any Lessor of the benefit of the security interest in the
Collateral granted by Lessee.
Section 10.2 Amendments to Operative Agreements Affecting
Administrative Agent. Without the prior written consent of Administrative Agent,
no amendment of, supplement to, or waiver or modification of, any Operative
Agreement shall adversely affect Administrative Agent's rights or immunities or
modify or increase the duties or obligations of Administrative Agent with
respect to any Operative Agreement.
ARTICLE XI
Miscellaneous
Section 11.1 Survival of Covenants. All claims pertaining to the
representations, warranties, covenants or indemnities of the Participants shall
survive the termination of the Lease to the extent such claims arose out of
events occurring or conditions existing prior to any such termination. Without
limiting the foregoing, the provisions of Article VII and Article VIII hereof
shall survive the termination of the Lease.
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Section 11.2 APPLICABLE LAW. THIS PARTICIPATION AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT-OF-LAWS PROVISIONS THEREOF.
Section 11.3 Distribution and Application of Rents and Other Payments.
Except as otherwise specifically provided for in the Lease or in Articles VII
and VIII hereof, all amounts of money received or realized by Administrative
Agent pursuant to the Lease which are to be distributed to the Lessors (after
payment of accrued but unpaid fees and expenses and indemnification payments
payable to Administrative Agent in its capacity as Administrative Agent that
remain unpaid for 30 days or more) shall be distributed to each Lessor pro rata,
in accordance with each Lessor's Outstanding Investment and without preference
or priority of any Lessor over another; provided, however, that in the case such
moneys are insufficient to pay in full the whole amount due, owing and unpaid,
then application shall be made in the manner set forth in Section 8.4 of the
Lease. All payments to the Lessors shall be made in accordance with Section 3.2
of the Lease.
Section 11.4 Notices. All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other communications required
or permitted by the terms hereof shall be in writing and shall be deemed to have
been duly given when delivered personally, by facsimile (and confirmed, which
confirmation may be mechanical), nationally recognized overnight courier or
otherwise actually received or 5 Business Days after being deposited in the
United States mail certified, postage prepaid, addressed as follows:
If to Lessee:
Weatherford Enterra Compression Company, L.P.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: General Counsel
Fax: (713) 297-8488
If to Guarantor:
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attn: General Counsel
Fax: (713) 297-8488
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<PAGE> 40
If to Administrative Agent:
ABN AMRO Bank N.V.
Syndications
1325 Avenue of the Americas
New York, New York 10019
Attn: Linda Boardman
Fax: 212-314-1711
With a copy to:
ABN AMRO Bank N.V.
208 South LaSalle Street, Suite 1500
Chicago, Illinois 60604-1003
Attn: Credit Administration
Fax: (312) 992-5111
and
ABN AMRO Bank N.V.
3 Riverway
Suite 1700
Houston, Texas 77027
Attn: Deanna Breland
Fax: (713) 679-7533
If to Documentation Agent:
Chase Bank of Texas, National Association
600 Travis Street
Twentieth Floor
Houston, Texas 77002
Attn: Ki Allen
Fax: (713) 216-4227
If to the Lessors, to their respective addresses set forth on Schedule
I hereto or at such other place as any such party may designate by notice given
in accordance with this Section 11.4.
Section 11.5 Transaction Costs; Other Expenses. Lessee shall pay or
cause to be capitalized all Transaction Costs whether or not the transactions
contemplated hereby close. In addition, Lessee shall pay or reimburse
Administrative Agent and the Lessors for all other out-of-pocket costs and
expenses (including allocated fees of internal counsel) reasonably incurred in
connection with: (a) entering into, or the giving or (in the case of any
amendments, supplements, waivers or consents
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<PAGE> 41
proposed by Lessee or Guarantor) withholding of, any future amendments,
supplements, waivers or consents with respect to the Operative Agreements
(including without limitation any legal services rendered in connection with or
arising under Section 6.1 hereof), it being understood that Lessee shall only be
required to pay for one firm of legal counsel to Administrative Agent and
Lessors in respect of any transaction under this clause (a); (b) any Casualty or
termination of the Lease or any other Operative Agreement; (c) the negotiation
and documentation of any restructuring or "workout," whether or not consummated,
of any Operative Agreement; (d) the enforcement of the rights or remedies under
the Operative Agreements; (e) further assurances requested pursuant to Section
11.13 hereof or any similar provision in other Operative Agreements; (f) any and
all out-of-pocket expenses of Administrative Agent in connection with the Sale
Option described in Section 11.3 of the Lease; (g) any transfer by
Administrative Agent or a Lessor of any interest in the Operative Agreements
during the continuance of an Event of Default; and (h) the fees referred to
herein.
Section 11.6 Counterparts. This Participation Agreement may be executed
in any number of counterparts and by different parties hereto on separate
counterparts, each executed counterpart constituting an original but all
together one agreement.
Section 11.7 Severability. Whenever possible, each provision of this
Participation Agreement shall be interpreted in such manner as to be effective
and valid under applicable law; but if any provision of this Participation
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Participation Agreement.
Section 11.8 Successors and Assigns; Transfers. This Participation
Agreement shall be binding upon the parties hereto and their respective
successors and assigns, and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Lessee may not assign any of
its rights and obligations under any Operative Agreement except as expressly
provided in the Operative Agreements.
No Lessor shall assign, convey or otherwise transfer (including
pursuant to a participation) all or any portion of its right, title or interest
in, to or under any of the Operative Agreements, any Collateral and its interest
in the Equipment without the consent of Administrative Agent and, in the absence
of a continuing Event of Default, Lessee, except that without the prior written
consent of Administrative Agent or Lessee (x) any bank or similar financial or
commercial lending institution may pledge its interest in the ordinary course of
its business, provided, that no transfer upon a foreclosure pursuant to such a
pledge may occur unless the other provisions of this Section are complied with,
(y) any Lessor may transfer all or any portion of its interest to (A) any other
existing Lessor or (B) any Affiliate of such transferring Lessor and (z) any
Lessor may transfer any or all of such right, title and interest upon the
satisfaction of each of the following conditions:
(a) Required Notice and Effective Date. Any Lessor desiring to effect a
transfer of its interest hereunder shall give written notice of each such
proposed transfer to Lessee and
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<PAGE> 42
Administrative Agent at least ten (10) days prior to such proposed transfer,
setting forth the name of such proposed transferee, the percentage or interest
to be retained by such Lessor, if any, and the date on which such transfer is
proposed to become effective. Except in the case of a transfer by a Lessor to
another existing Lessor or by a Lessor to an Affiliate, the transferring Lessor
shall pay to Administrative Agent a transfer fee of $3,000. In the event of a
transfer under this Section 11.8, any expenses incurred by the transferee in
connection with its review of the Operative Agreements and its investigation of
the transactions contemplated thereby shall be borne by such transferee or the
relevant Lessor, as they may determine, but shall not be considered costs and
expenses which Lessee is obligated to pay or reimburse under Section 11.5,
unless such transfer is being made pursuant to Section 7.6. No Lessor shall
effect a transfer of its interests hereunder to any Person not incorporated
under the laws of the United States or a State thereof unless such Person
delivers to the Administrative Agent, for the benefit of the Lessee, upon the
closing of such transfer, Forms 1001 or 4224 (or successor forms), in each case
certifying that such transferee is entitled to receive payments hereunder and
under the other Operative Agreements without deduction or withholding of any
United States Federal income taxes. The Administrative Agent shall transmit such
Forms to the Lessee immediately after such closing.
(b) Assumption of Obligations. Any transferee pursuant to this Section
11.8 shall have executed and delivered to Administrative Agent a letter
substantially in the form of the Investor's Letter attached hereto as Exhibit F,
and thereupon the obligations of the transferring Lessor under the Operative
Agreements shall be proportionately released and reduced to the extent of such
transfer. Upon any such transfer as above provided, the transferee shall be
deemed to be bound by all obligations (whether or not yet accrued) under, and to
have become a party to, all Operative Agreements to which its transferor was a
party, shall be deemed the pertinent "Lessor" for all purposes of the Operative
Agreements and shall be deemed to have made that portion of the payments
pursuant to the Participation Agreement previously made or deemed to have been
made by the transferor represented by the interest being conveyed; and each
reference herein and in the other Operative Agreements to the pertinent "Lessor"
shall thereafter be deemed a reference to the transferee, to the extent of such
transfer, for all purposes. Upon any such transfer, Administrative Agent shall
deliver to each Lessor and Lessee a new Schedule I to this Participation
Agreement, revised to reflect the relevant information for such new Lessor and
the Commitment of such new Lessor (and the revised Commitment of the transferor
Lessor if it shall not have transferred its entire interest).
(c) Employee Benefit Plans. No Lessor may make any such assignment,
conveyance or transfer to or in connection with any arrangement or understanding
in any way involving any employee benefit plan (or its related trust), as
defined in Section 3(3) of ERISA, or with the assets of any such plan (or its
related trust), as defined in Section 4975(e)(1) of the Code (other than a
governmental plan, as defined in Section 3(32) of ERISA), with respect to which
Lessee or such Lessor or any of their Affiliates is a party in interest within
the meaning of ERISA or a "disqualified person" within the meaning of the Code.
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<PAGE> 43
(d) Amount of Commitment. Unless Lessee shall consent otherwise, no
Lessor may make any such assignment, conveyance or transfer if, as a consequence
thereof, the transferor (if such Lessor retains any part of its Commitment) or
transferee Lessor would have a combined Commitment and Outstanding Investment of
less than $5,000,000.
(e) Representations and Warranties. Notwithstanding anything to the
contrary set forth above, no Lessor may assign, convey or transfer its interest
to any Person, unless such Person shall have delivered to Administrative Agent
and Lessee a certificate confirming the accuracy of the representations and
warranties set forth in Section 5.2 with respect to such Person (other than as
such representation or warranty relates to the execution and delivery of
Operative Agreements).
Each transferee of a Lessor pursuant to this Section 11.8 shall be
entitled to the benefits of Articles VII and VIII; provided that no such
transferee shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lessor would have been entitled to receive in
respect of the amount of the Commitment transferred by such transferor Lessor to
such transferee if such transfer had not occurred.
SECTION 11.9 JURY TRIAL. THE PARTIES WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP
EXISTING IN CONNECTION WITH THIS PARTICIPATION AGREEMENT OR ANY OPERATIVE
AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
Section 11.10 Captions; Table of Contents. Section captions and the
table of contents used in this Participation Agreement (including the exhibits
and schedules) are for convenience of reference only and shall not affect the
construction of this Participation Agreement.
Section 11.11 FINAL AGREEMENT. THIS PARTICIPATION AGREEMENT, TOGETHER
WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENT THE ENTIRE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND IN
THE OTHER OPERATIVE AGREEMENTS. THIS PARTICIPATION AGREEMENT CANNOT BE MODIFIED,
SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 11.12 No Third-Party Beneficiaries. Nothing in this
Participation Agreement or the other Operative Agreements shall be deemed to
create any right in any Person not a party hereto or
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<PAGE> 44
thereto (other than as set forth in Section 13.8 of the Lease and the permitted
successors and assigns of Lessors, Administrative Agent and Lessee), and such
agreements shall not be construed in any respect to be a contract in whole or in
part for the benefit of any third party except as aforesaid.
Section 11.13 Further Assurances. Lessee, at its expense, will promptly
and duly execute and deliver all such documents and take such further action as
may be necessary or appropriate in order to effect the intent or purpose of this
Participation Agreement and the other Operative Agreements and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessors and Administrative Agent for the benefit of the Lessors, including,
without limitation, if requested by Required Lessors at the expense of Lessee,
the recording or filing of any Operative Agreement or any other document in
accordance with the laws of the appropriate jurisdictions.
Section 11.14 Reproduction of Documents. This Participation Agreement,
all documents constituting Schedules or Exhibits hereto, and all documents
relating hereto received by a party hereto, including, without limitation: (a)
consents, waivers and modifications that may hereafter be executed; (b) the
Bills of Sale and all other documents received by the Lessors or Administrative
Agent in connection with the receipt and/or acquisition of the Equipment; and
(c) financial statements, certificates, and other information previously or
hereafter furnished to Administrative Agent or any Lessor may be reproduced by
the party receiving the same by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. Each of the
Participants agrees and stipulates that, to the extent permitted by law, any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such party in the
regular course of business) and that, to the extent permitted by law, any
enlargement, facsimile, or further reproduction of such reproduction shall
likewise be admissible in evidence.
Section 11.15 Consideration for Consents to Waivers and Amendments.
Lessee hereby agrees that it will not, and that it will not permit any of its
Affiliates to, offer or give any consideration or benefit of any kind whatsoever
to any Lessor in connection with, in exchange for, or as an inducement to, such
Lessor's consent to any waiver in respect of, any modification or amendment of,
any supplement to, or any other consent or approval under, any Operative
Agreement unless such consideration or benefit is offered ratably to all
Lessors.
Section 11.16 Submission to Jurisdiction. Any suit by Administrative
Agent or any Lessor to enforce any claim arising out of the Operative Agreements
may be brought in any state or Federal court located in New York, New York
having subject matter jurisdiction, and with respect to any such claim, each
Participant hereby irrevocably: (a) submits to the jurisdiction of such courts;
and (b) consents to the service of process out of said courts by mailing a copy
thereof, by registered mail, postage prepaid, to such Participant at its address
specified in this Participation Agreement, and agrees that such service, to the
fullest extent permitted by law: (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding; and (ii)
shall be taken and held to be valid personal service upon and personal delivery
to it. Lessee irrevocably waives, to the
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<PAGE> 45
fullest extent permitted by law: (A) any claim, or any objection, that it now or
hereafter may have, that venue is not proper with respect to any such suit,
action or proceeding brought in such a court located in New York, New York
including, without limitation, any claim that any such suit, action or
proceeding brought in such court has been brought in an inconvenient forum; and
(B) any claim that Lessee is not subject to personal jurisdiction or service of
process in such forum. Lessee agrees that any suit to enforce any claim arising
out of the Operative Agreements or any course of conduct or dealing of
Administrative Agent or any Lessor shall be brought and maintained exclusively
in any state or Federal court located in New York, New York. Nothing in this
Section 11.16 shall affect the right of Administrative Agent or any Lessor to
bring any action or proceeding against Lessee or any Equipment or other
Collateral in the courts of any other jurisdiction. Lessee agrees that a final
judgment in any action or proceeding in a state or Federal court within the
United States may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by law.
[Remainder of page intentionally left blank.]
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<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered as of the date first above written.
WEATHERFORD ENTERRA COMPRESSION
COMPANY, L.P., as Lessee
By: /s/ Curtis W. Huff
------------------------------------
Name Printed: Curtis W. Huff
---------------------------
Title: Senior Vice President and Secretary
----------------------------------
ABN AMRO BANK N.V., not individually,
but solely as Administrative Agent for
the Lessors, Syndication Agent, and
Arranger
By: /s/ Elizabeth B. McClellan
------------------------------------
Name Printed: Elizabeth B. McClellan
---------------------------
Title: Vice President
----------------------------------
By: /s/ Laurie D. Flom
------------------------------------
Name Printed: Laurie D. Flom
---------------------------
Title: Vice President
----------------------------------
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Documentation Agent
By: /s/ Ki Allen
------------------------------------
Name Printed: Ki Allen
---------------------------
Title: Vice President
----------------------------------
LESSORS:
ABN AMRO BANK N.V.
By: /s/ Elizabeth B. McClellan
------------------------------------
Name Printed: Elizabeth B. McClellan
---------------------------
Title: Vice President
----------------------------------
By: /s/ Laurie D. Flom
------------------------------------
Name Printed: Laurie D. Flom
---------------------------
Title: Vice President
----------------------------------
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<PAGE> 47
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Ki Allen
------------------------------------
Name Printed: Ki Allen
---------------------------
Title: Vice President
----------------------------------
BANQUE NATIONALE DE PARIS
By: /s/ Warren Ross
------------------------------------
Name Printed: Warren Ross
---------------------------
Title: Assistant Vice President
----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Helen A. Carr
------------------------------------
Name Printed: Helen A. Carr
---------------------------
Title: Vice President
----------------------------------
FIRST UNION NATIONAL BANK
By: /s/ Robert R. Wetteroff
------------------------------------
Name Printed: Robert R. Wetteroff
---------------------------
Title: Senior Vice President
----------------------------------
SUNTRUST BANK, ATLANTA
By: /s/ Steven J. Newby
------------------------------------
Name Printed: Steven J. Newby
---------------------------
Title: Corporate Banking Officer
----------------------------------
By: /s/ John A. Fields, Jr.
------------------------------------
Name Printed: John A. Fields, Jr.
---------------------------
Title: First Vice President
----------------------------------
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<PAGE> 48
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Amy Rick
------------------------------------
Name Printed: Amy Rick
--------------------------
Title: Vice President
---------------------------------
By: /s/ R. Temhave
------------------------------------
Name Printed: R. Temhave
--------------------------
Title: /s/ Senior Vice President
---------------------------------
THE BANK OF NOVIA SCOTIA
By: /s/ F. C. H. Ashby
------------------------------------
Name Printed: F. C. H. Ashby
--------------------------
Title: Senior Manager Loan Operations
---------------------------------
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG,
CAYMAN ISLANDS BRANCH
By: /s/ Mark K. Connelly
------------------------------------
Name Printed: Mark K. Connelly
--------------------------
Title: Vice President
---------------------------------
By: /s/ Wolfgang Bollman
------------------------------------
Name Printed: Wolfgang Bollman
--------------------------
Title: Senior Vice President
---------------------------------
THE ROYAL BANK OF SCOTLAND PLC
By: /s/ Derek Busby
------------------------------------
Name Printed: Derek Busby
--------------------------
Title: Corporate Manager
---------------------------------
THE BANK OF NEW YORK
By: /s/ Helen L. Sarro
------------------------------------
Name Printed: Helen L. Sarro
--------------------------
Title: Assistant Vice President
---------------------------------
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<PAGE> 49
SCHEDULE I
TO
PARTICIPATION AGREEMENT
AGENT AND LESSOR ADDRESSES; LESSOR COMMITMENTS
ADMINISTRATIVE AGENT AND
SYNDICATION AGENT: ABN AMRO BANK N.V.
(address set forth in Section 11.4)
DOCUMENTATION AGENT: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(address set forth in Section 11.4)
LESSORS:
1. ABN AMRO BANK N.V.
Commitment: $30,000,000; Commitment Percentage: 15.00000000%
Address for Notices ABN AMRO Bank N.V.
1325 Avenue of the Americas, Ninth Floor
New York, NY 10019
Attention: Agency Services
Linda Boardman
Facsimile: (212) 314-1712
Telephone: (212) 314-1724
Payment Instructions
ABN AMRO Bank N.V.
ABA Routing #026009580
F/O ABN AMRO Bank N.V.
Chicago CPU
Account #650-001-1789-41
Reference: Weatherford Enterra Compression Company, L.P.
2. CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
Commitment: $20,000,000; Commitment Percentage: 10.00000000%
<PAGE> 50
Address for Notices
600 Travis Street
Twentieth Floor
Houston, Texas 77002
Attention: Ki Allen
Facsimile: (713) 216-4227
Telephone:(713) 216-3657
Payment Instructions
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
ABA Routing #113000609
For Further Credit to: Commercial Loan Clearing Account
Account #0010-038-1673
Reference: Weatherford Enterra Compression Company, L.P.
3. BANQUE NATIONALE DE PARIS
Commitment: $20,000,000; Commitment Percentage: 10.00000000%
Address for Notices
333 Clay Street
Suite 3400
Houston, TX 77002
Attention: Warren Ross
Facsimile: 713-659-1414
Telephone: 713-951-1224
Payment Instructions
BANQUE NATIONALE DE PARIS
ABA Routing# 026007689
For further credit to: BNP Houston Agency
Account #141011-001-69
Reference: Weatherford Enterra Compression Company, L.P.
Contact: Donna Rose
4. THE FIRST NATIONAL BANK OF CHICAGO
Commitment: $20,000,000; Commitment Percentage: 10.00000000%
Address for Notices
1100 Louisiana Street
Suite 3200
Houston, TX 77002
Attention: Wendy Conwell
Facsimile: 713-654-7300
Telephone: 713-654-7345
<PAGE> 51
Payment Instructions
THE FIRST NATIONAL BANK OF CHICAGO
ABA Routing# 071000013
Name of Account: DES Incoming Clearing A/C
Account #75217653
Reference: Weatherford Enterra Compression Company, L.P.
Contact: John Beirne
5. FIRST UNION NATIONAL BANK
Commitment: $20,000,000; Commitment Percentage: 10.00000000%
Address for Notices
1001 Fannin Street
Suite 2255
Houston, TX 77002
Attention: Scott Huffman
Facsimile: 713-650-6354
Telephone: 713-650-6402
Payment Instructions
FIRST UNION NATIONAL BANK
ABA Routing# 053000219
For further credit to: Attn: Debbie Blank RC3027
Account #465906
Reference: Weatherford Enterra Compression Company, L.P.
6. SUNTRUST BANK, ATLANTA
Commitment: $20,000,000; Commitment Percentage: 10.00000000%
Address for Notices
26 Park Place Drive
24th Floor MC - 120
Atlanta, GA 30303
Attention: John Fields
Facsimile: 404-827-6270
Telephone: 404-724-8667
Payment Instructions
SUNTRUST BANK
ABA Routing# 06100064
For further credit to: Wire Clearing
Account # 4088000112
Reference: Weatherford Enterra Compression Company, L.P.
Contact: Diane Grey
<PAGE> 52
7. BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
Commitment: $15,000,000; Commitment Percentage: 7.5%
Address for Notices
565 Fifth Avenue
29th Floor
New York, NY 10017
Attention: Christine Renard
Facsimile: 212-880-1040
Telephone: 212-880-1033
Payment Instructions
CHASE MANHATTAN BANK
ABA Routing# 021-000-021
For further credit to: Bank Austria Creditanstalt
Account #400921944
Reference: Weatherford Enterra Compression Company, L.P.
8. THE BANK OF NOVA SCOTIA
Commitment: $15,000,000; Commitment Percentage: 7.5%
Address for Notices
1100 Louisiana Street
Suite3000
Houston, TX 77002
Attention: Spencer Smith
Facsimile: 713-752-2425
Telephone: 713-752-0900
Payment Instructions
THE BANK OF NOVA SCOTIA
ABA Routing# 026002532
For further credit to: Atlanta Agency
Account #0606634
Reference: Weatherford Enterra Compression Company, L.P.
9. DG BANK
Commitment: $15,000,000; Commitment Percentage: 7.5%
Address for Notices
609 Fifth Avenue
New York, NY 10017
Attention: Mark K. Connelly
Facsimile: 212-745-1556
Telephone: 212-745-1560
<PAGE> 53
Payment Instructions
DG BANK
ABA Routing#845
Federal Reserve Bank of New York
Account #026008455
Reference: Weatherford Enterra Compression Company, L.P.
10. THE ROYAL BANK OF SCOTLAND PLC
Commitment: $15,000,000; Commitment Percentage: 7.5%
Address for Notices
P.O. Box 72
9 Rubislaw Terrace
Aberdeen AB10 1YR Scotland
Attention: Derek Busby
Facsimile: 01224 624042
Telephone:01224 625615
Payment Instructions
Northern Trust Company New York
S.W.I.F.T. Address - CNORUS33
Account #10408320230
For Account of Royal Bank of Scotland, London
Reference: Weatherford Enterra Compression Company, L.P.
11. THE BANK OF NEW YORK
Commitment: $10,000,000; Commitment Percentage: 5%
Address for Notices
1 Wall Street
22nd Floor
New York, NY 10286
Attention: Helen Sarro
Facsimile: 212-635-6434
Telephone: 212-635-6898
Payment Instructions
THE BANK OF NEW YORK
ABA Routing# 021000018
GLA#111-556
Reference: Weatherford Enterra Compression Company, L.P.
<PAGE> 54
SCHEDULE II
TO
PARTICIPATION AGREEMENT
DESCRIPTION OF EQUIPMENT
<PAGE> 55
SCHEDULE X
TO
PARTICIPATION AGREEMENT
DEFINITIONS
The following terms (or other terms used or defined in any Operative
Agreement which have meanings substantially similar or equivalent to the
meanings assigned to such terms) shall have the following meanings for all
purposes, and such meanings shall be equally applicable both to the singular and
plural forms of the terms defined. Reference to schedules and exhibits in this
Schedule X shall mean Schedules and Exhibits attached to the Participation
Agreement, except as otherwise indicated. All references to "the Equipment" or
"all of the Equipment" or words of similar import shall be deemed to refer to
all Equipment covered by the Lease Supplements then in effect.
Accounting Terms; Changes in GAAP. All accounting and financial terms
used herein and not otherwise defined herein and the compliance with each
covenant contained herein which relates to financial matters shall be determined
in accordance with GAAP applied by the Guarantor on a consistent basis, except
to the extent that a deviation therefrom is expressly stated. Should there be a
change in GAAP from that in effect on the Documentation Date, such that the
defined terms set forth in this Schedule X or the covenants set forth in the
Guaranty would then be calculated in a different manner or with different
components or would render the same not meaningful criteria for evaluating the
matters contemplated to be evidenced by such covenants, (a) the Guarantor, the
Lessee and the Lessors agree, within the 60-day period following any such
change, to negotiate in good faith and enter into an amendment to the Operative
Agreements in order to conform the defined terms set forth in this Section X or
the covenants set forth in the Guaranty, or both, in such respects as shall
reasonably be deemed necessary by the Required Lessors so that the criteria for
evaluating the matters contemplated to be evidenced by such covenants are
substantially the same criteria as were effective prior to any such change in
GAAP, and (b) the Guarantor shall be deemed to be in compliance with such
covenants during the 60-day period following any such change, or until the
earlier date of execution of such amendment, if and to the extent that the
Guarantor would have been in compliance therewith under GAAP as in effect
immediately prior to such change.
Interpretation. (a) In the Operative Agreements, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
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(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to the applicable Operative Agreement as
a whole and not to any particular Article, Section or other
subdivision;
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Agreements, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, provided that nothing in this clause (iv) is intended to
authorize any assignment not otherwise permitted by the Operative
Agreements;
(v) except as expressly provided to the contrary in the
applicable Operative Agreement, reference to any agreement, document or
instrument shall mean such agreement, document or instrument as
amended, supplemented or modified and in effect from time to time in
accordance with the terms thereof;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit shall mean such Article or
Section or such Schedule or Exhibit of the applicable Operative
Agreement;
(vii) the word "including" (and with correlative meaning
"include") shall mean including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of
time, except as expressly provided to the contrary, the word "from"
shall mean "from and including" and the word "to" shall mean "to but
excluding"; and
(ix) reference to any law, rule or regulation shall mean such
as amended, modified, codified or reenacted, in whole or in part, and
in effect from time to time.
(b) The Article and Section headings and the Table of
Contents of any Operative Agreement are for convenience only and shall
not affect the construction thereof.
(c) No provision of any Operative Agreement shall be
interpreted or construed against any Person solely because that Person
or its legal representative drafted such provision.
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DEFINITIONS
"Actions" shall mean collectively, all actions, causes of action,
suits, proceedings (including any investigations, litigation or inquiries),
claims, demands or arbitration.
"Actual Knowledge" shall mean, as to any matter with respect to any
Person, the actual knowledge of such matter by a Responsible Officer of such
Person and shall include, without limitation, receipt of a notice of such matter
by any such Responsible Officer.
"Administrative Agent" shall mean ABN AMRO Bank N .V.
"Advances" shall mean any funds advanced by Administrative Agent to
purchase Equipment on behalf of Lessee pursuant to Section 2.2 of the
Participation Agreement.
"Affected Lessor" shall have the meaning provided in Section 7.6 of the
Participation Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling" and
"controlled"), when used with respect to any Person, shall mean the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise. No
Person shall be considered an Affiliate of Administrative Agent unless such
Person directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, Administrative Agent solely in
its capacity as agent under the Lease.
"Agency Fee" shall have the meaning provided in Section 9.10 of the
Participation Agreement.
"Agent's Corporate Office" shall mean the principal corporate office of
Administrative Agent, which office is, on the date the Participation Agreement
is executed by all parties thereto, located at the address for Administrative
Agent set forth in Section 11.4 of the Participation Agreement.
"Agents" shall mean Administrative Agent and Documentation Agent,
collectively, and "Agent" shall mean either Administrative Agent or
Documentation Agent, as applicable.
"Allocation Fraction" of any item of Equipment shall mean a fraction,
the numerator of which is the Purchase Price of such Equipment and the
denominator of which is the aggregate Purchase Price of all of the Equipment
then subject to the Lease, including such Equipment.
"Alter" shall have the meaning provided in Section 5.5(a) of the Lease.
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"Alternate Base Rate" shall mean, for any period, an interest rate per
annum equal to the greater of (a) the prime rate for that day for loans
denominated in Dollars quoted by the Administrative Agent and (b)(i) the Federal
Funds Effective Rate most recently determined by Administrative Agent plus (ii)
one-half of one percent (0.50%). If said rate changes from time to time after
the date of the Participation Agreement, the Alternate Base Rate shall be
automatically increased or decreased, if appropriate and as the case may be,
without notice to Lessee or any Lessor, as of the effective time of each change.
"Applicable Margin" shall mean at any time and from time to time, a
percentage per annum equal to the applicable percentage set forth below for the
Performance Level set forth below:
<TABLE>
<CAPTION>
PERFORMANCE LIBOR RATE ALTERNATE BASE RATE
LEVEL APPLICABLE MARGIN APPLICABLE MARGIN
----------- ----------------- -------------------
<S> <C> <C>
I .700% 0
II .750% 0
III .825% 0
IV .950% 0
V 1.20% 0
</TABLE>
The Applicable Margin Percentage for each LIBO Rate Funding made pursuant to the
Participation Agreement shall be determined by reference to the Performance
Level in effect from time to time.
"Appraisal" shall mean each appraisal of the Equipment from an
Appraiser received pursuant to the terms of the Participation Agreement or the
Lease.
"Appraised Value" shall mean, with respect to any item of Equipment as
of any date of determination, the value in use of such Equipment at the end of
the Base Period as set forth on the Appraisal therefor.
"Appraiser" shall mean American Appraisal Associates, Inc., or such
other Person as is selected by Lessee and Administrative Agent.
"Arrangement Fee" shall mean the arrangement fee referred to in the Fee
Letter Agreement.
"Arranger" shall mean ABN AMRO Bank N.V.
"Assumed Interest Rate" shall mean, as of the date of any Funding, the
Interest Rate that would have been applicable for purposes of calculating
Variable Rent under the Lease in the event that the Delivery Date to which such
Funding relates had occurred on such date.
"Assurance" shall mean, as to any Person, any guaranty or other
contingent liability of such Person (other than any endorsement for collection
or deposit in the ordinary course of business) or
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obligations as an account party in respect of letters of credit, direct or
indirect, with respect to any obligation of another Person, through an agreement
or otherwise, including (a) any other endorsement or discount with recourse or
undertaking substantially equivalent to or having economic effect similar to a
guarantee in respect of any such obligation and (b) any agreement (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligation, (ii) to purchase securities or to purchase, sell or lease property
(whether as lessee or lessor), products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or non-delivery of the securities, property, products, materials or
supplies, or transportation or services or (iii) to make any loan, advance or
capital contribution to or other investment in, or to otherwise provide funds to
or for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment or
expense) or to assure a minimum equity, working capital or other balance sheet
condition in respect of any such obligation. The amount of any Assurance shall
be an amount equal to the lesser of the stated or determinable amount of the
primary obligation in respect of which such Assurance is made or, if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Authority" shall mean any: (a) Federal, state, local or (if any
Equipment or any component thereof has been moved outside of the United States)
foreign, tribunal, legislative body, governmental subdivision, administrative
agency or other governmental authority; or (b) arbitrator or panel of
arbitrators, in the case of each of clause (a) and (b) having or exercising
jurisdiction over Lessee, Administrative Agent, any Lessor or any Equipment (or
any component thereof).
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as the
same may be amended and together with any successor statutes.
"Bankruptcy Law" means the Bankruptcy Code, and any applicable Federal,
state, local or other jurisdictional insolvency, reorganization, moratorium,
fraudulent conveyance or similar Law now or hereafter in effect for the relief
of debtors.
"Base Period" shall mean the period commencing on the Documentation
Date ending on the fifth anniversary thereof.
"Basic Rent" shall mean all installments of Fixed Rent, if any, and
Variable Rent due and payable by Lessee on each Payment Date during the Base
Period or Renewal Term, if any.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Board of Directors" shall mean, with respect to any Person, the Board
of Directors of such Person (or of its (managing) general partner or managing
member, as the case may be), or any committee thereof duly authorized to act on
behalf of such Board of Directors.
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"Business Day" shall mean any day on which:
(i) Federal and state chartered banks in Chicago, Illinois,
New York, New York and Houston, Texas are open for commercial banking
business; and
(ii) solely with respect to determinations of Variable Rent
and Rent Periods, dealings in Dollars are carried on in the London
interbank market.
"Business Transfer" shall have the meaning provided in Section 13.10 of
the Lease.
"Capital Lease" shall mean, as to any Person, any lease in respect of
which the rental obligation of such Person constitutes a Capitalized Lease
Obligation.
"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents (however designated) of such Person's equity, including all
common stock and preferred stock, any limited or general partnership interest
and any limited liability company membership.
"Capitalized Lease Obligation" shall mean, with respect to any Person,
the obligation of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal property that is
required to be classified and accounted for as a capital lease obligation on a
balance sheet of such Person under GAAP and, for purposes of the Operative
Agreements, the amount of such obligation at any date will be the capitalized
amount thereof at such date, determined in accordance with GAAP.
"Capitalized Transaction Costs" shall mean Transaction Costs which are
capitalized under the terms of the Participation Agreement and Lease.
"Casualty" shall mean any of the following events in respect of any
item of Equipment: (a) the loss of such Equipment or the use thereof due to
theft, disappearance, destruction, damage beyond repair or rendition of such
Equipment permanently unfit for normal use for any reason whatsoever; (b) any
damage to such Equipment which results in an insurance settlement with respect
to such Equipment on the basis of a total loss; (c) the permanent condemnation,
confiscation or seizure of, or requisition of title to or use of, such
Equipment; (d) as a result of any rule, regulation, order or other action by any
Authority, the use of such Equipment in the normal course of business shall have
been prohibited, directly or indirectly, for a period of six consecutive months,
unless Lessee, prior to the expiration of such six-month period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such Equipment by the Lessee
thereof or, in any event, if use of such Equipment shall have been prohibited,
directly or indirectly, for a period of twelve consecutive months; or (e) the
operation or location of such Equipment, while under requisition for use by any
Authority, in any area excluded from coverage by any insurance policy then in
effect with respect to such Equipment required by the
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terms of Section 7.1 of the Lease, if Lessee shall be unable to obtain indemnity
in lieu thereof from such Authority; provided that for the purpose of the
foregoing clause (e), if such Equipment shall be returned to Lessee prior to the
Casualty Settlement Date in such condition that a Casualty would not otherwise
be deemed to exist with respect thereto, then such event shall, at the option of
Lessee, not constitute a Casualty.
"Casualty Amount" of any Equipment shall mean, with respect to any
Casualty, an amount equal to the product of (a) the Lease Balance on the date of
such Casualty and (b) the Allocation Fraction of such Equipment.
"Casualty Notice" shall have the meaning provided in Section 6.1 of the
Lease.
"Casualty Proceeds" shall have the meaning provided in Section 6.2 of
the Lease.
"Casualty Settlement Date" shall have the meaning provided in Section
6.1(a) of the Lease.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act.
"Change of Control" shall mean an event or series of events by which
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act as in effect on the Execution Date) or related persons constituting
a "group" (as such term is used in Rule 13d-5 under the Exchange Act in effect
on the Execution Date) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, as in effect on the Documentation Date,
except that a person or such group shall be deemed to have "beneficial
ownership" of all shares that any such person or such group has the right to
acquire without condition, other than the passage of time, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 50% or more of the total voting power of the Voting Stock of the
Guarantor; (b) the Guarantor consolidates with or merges into another Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any Person consolidates with, or merges into, the Guarantor, in each
of the foregoing cases, in a transaction not otherwise permitted by Section 4.02
of the Guaranty; (c) the Guarantor conveys, transfers or leases all or
substantially all of its assets to any Person; (d) the stockholders of the
Guarantor approve any plan of liquidation or dissolution of the Guarantor; or
(e) during any period of twelve consecutive months, individuals who, at the
beginning of such period, constituted the Board of Directors of the Guarantor
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Guarantor, as
applicable, was approved by a vote of not less than a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Guarantor then in office.
"Change of Control Event" shall mean (a) the execution of any
definitive agreement which when fully performed by the parties thereto, would
result in a Change of Control; or (b) the
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commencement of a tender offer pursuant to Section 14(d) of the Exchange Act
that would result in a Change of Control if completed.
"Code" shall mean the Internal Revenue Code of 1986, as amended, from
time to time, and the regulations promulgated thereunder.
"Collateral" shall mean all of Lessee's right, title and interest in
and to each of the following, whether now existing or hereafter arising or
acquired, and wherever located:
(a) the Equipment;
(b) the Subleases;
(c) all contracts necessary to purchase, operate and maintain
the Equipment, including all warranties;
(d) any rebate, offset or other similar rights under a
purchase order, invoice or purchase agreement with any manufacturer of
any Equipment;
(e) a copy of all books, manuals, logs, records, writings,
data bases, information and other property relating to, used or useful
in connection with, evidencing, embodying or incorporating any of the
foregoing; and
(f) all products, accessions and proceeds of and from any and
all of the foregoing Collateral (including proceeds which constitute
property of the types described in subsections (a), (b), (c), (d) and
(e) above and, to the extent not otherwise included, all payments under
insurance (whether or not Lessor is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Collateral.
"Commitment(s)" for each Lessor shall mean the amount set forth in
Schedule I to the Participation Agreement across from the name of such Lessor.
"Commitment Fee" shall have the meaning provided in Section 2.5 of the
Participation Agreement.
"Commitment Percentage" shall mean, with respect to each Lessor, the
quotient (expressed as a percentage) of such Lessor's Commitment divided by the
Total Commitment.
"consolidated" shall mean any Person whose financial condition and
results of operations are required in accordance with GAAP to be shown on a
consolidated basis with the financial condition and results of operations of the
Guarantor or Lessee, as the case may be.
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"Consolidated EBITDA" shall mean, for any period, the Consolidated Net
Income of the Guarantor and its consolidated Subsidiaries for such period,
increased (to the extent deducted in determining Consolidated Net Income) by the
sum of (a) all income taxes (including state franchise taxes based on income) of
the Guarantor and its consolidated Subsidiaries paid or accrued according to
GAAP for such period; (b) Consolidated Interest Expense of the Guarantor and its
consolidated Subsidiaries for such period; (c) depreciation and amortization of
the Guarantor and its consolidated Subsidiaries for such period determined in
accordance with GAAP; and (d) other non-cash charges (excluding any such
non-cash charges to the extent they require an accrual of, or reserve for, cash
charges for any future periods) for such period determined in accordance with
GAAP, and decreased (to the extent added in determining Consolidated Net Income)
by any non-cash credits for such period determined in accordance with GAAP.
"Consolidated Indebtedness" shall mean, at the date of any
determination thereof, Indebtedness of the Guarantor and its consolidated
Subsidiaries (other than Interest Rate Risk Indebtedness, Derivatives
Obligations, and contingent obligations in respect of letters of credit)
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean (without duplication), with
respect to the Guarantor and its consolidated Subsidiaries for any period, the
aggregate amount of interest, whether expensed or capitalized, paid, accrued or
scheduled to be paid or accrued during such period in respect of (i) all
Indebtedness of the Guarantor and its consolidated Subsidiaries, plus (ii) the
Debentures, all determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of the Guarantor shall mean, for any period,
the net income or loss of the Guarantor and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided, that there
shall be excluded, without limitation, from such net income (to the extent
otherwise included therein):
(a) net extraordinary gains and losses;
(b) net gains or losses in respect of dispositions of assets
other than in the ordinary course of business;
(c) the net income of any Person in which the Guarantor or any
consolidated Subsidiary has a joint equity interest, except to the
extent of the amount of dividends or other distributions actually paid
in cash to the Guarantor or such Subsidiary by such other Person during
such period;
(d) the net income of any Person accrued prior to the date it
becomes a consolidated Subsidiary or is merged into or consolidated
with the Guarantor or any consolidated Subsidiary or prior to the date
its assets are acquired by the Guarantor or any of the consolidated
Subsidiaries, except that the foregoing shall not apply to any business
acquisition accounted for as a pooling of interests;
SX-9
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(e) the net income of any consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar
distributions by that consolidated Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary;
(f) any gains or losses attributable to write-ups or
write-downs of assets other than in the ordinary course of business;
(g) foreign currency translations or adjustments; and
(h) pooling and restructuring charges incurred as a result of
the Merger.
"Corporation" shall mean corporations, joint stock associations and
business trusts.
"Credit Agreement" shall mean the Guarantor's Amended and Restated
Credit Agreement dated as of May 27, 1998, as it may from time to time be
amended, modified, restated or supplemented.
"Debenture Indenture" shall mean the Indenture dated as of October 15,
1997, from the Guarantor to The Chase Manhattan Bank, as Trustee, as amended and
supplemented to the Documentation Date.
"Debentures" shall mean the Guarantor's 5% Convertible Subordinated
Preferred Equivalent Debentures due 2027 issued pursuant to the Debenture
Indenture.
"Defaulting Lessor" shall have the meaning provided in Section 2.1(c)
of the Participation Agreement.
"Default Rate" shall mean, at any time, the rate per annum which is two
percent (2%) higher than the Interest Rate then in effect.
"Delivery Date(s)" shall mean each of the actual dates during the
Interim Period on which the transactions contemplated in Article II of the
Participation Agreement are completed.
"Delivery Date Closing" shall mean, with respect to a Delivery Date,
the completion of those transactions described in Article II of the
Participation Agreement.
"Delivery Date Notice" shall have the meaning provided in Section 3.1
of the Participation Agreement.
"Deposit Account" shall have the meaning provided in Section 6.2 of the
Lease.
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"Derivatives Obligations" shall mean, as to any Person all obligations
of such Person in respect of any swap transaction, forward rate transaction,
commodity swap, commodity option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of foregoing
transactions) or any combination of the foregoing transactions, entered into in
the ordinary course of business of such Person for the purpose of hedging and
not for speculative purposes.
"Distributions" shall mean, for any period of measurement, and include
with respect to any Corporation the following: (a) the declaration or payment of
any dividend or distribution on or in respect of shares of any class of capital
stock of such Corporation, except dividends payable solely in shares of such
Corporation's capital stock; and (b) any other loan, dividend, or distribution
for any purpose from such Corporation (however characterized), including
inter-company loans (other than loans to a Subsidiary by Lessee or another
Subsidiary) and guarantees, to or for the benefit of any or all of its
shareholders, whether paid on or in respect of shares of any class of the
capital stock of such Corporation or otherwise.
"Documentation Agent" shall mean Chase Bank of Texas, National
Association.
"Documentation Date" shall mean the date of execution and delivery of
the Lease, the Participation Agreement and the Guaranty.
"Dollar" and the sign "$" mean lawful money of the United States.
"Environmental Claim" shall mean any claim, notice of claim, complaint,
notice of violation, letter, or other assertion or inquiry of any kind
concerning any asserted or actual violation of or liability under any
Environmental Law or any asserted or actual violation or liability relating to
any Hazardous Substance.
"Environmental Law" shall mean all federal, state, provincial or local
laws, statutes, rules, regulations, ordinances and codes, together with all
final administrative orders, licenses, authorizations and permits of, and
written agreements with, any Governmental Authorities, in each case relating to
the protection of the environment or the disposal of hazardous waste.
"Environmental Violation" shall mean any activity, occurrence or
condition that violates or results in non-compliance with any applicable
Environmental Laws or results in a written complaint or other written claim from
a Governmental Authority with respect to any Environmental Laws.
"Equipment" shall mean each item of Equipment listed on Schedule I to
any Lease Supplement, and any substitutions therefor, replacements thereof and
additions thereto from time to time pursuant to the Operative Agreements.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules, regulations, rulings and
interpretations adopted by the U.S.
Department of Labor thereunder.
"ERISA Affiliate" shall mean (a) all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Guarantor, are treated as a single
employer under Section 414 of the Code and (b) any Subsidiary of the Guarantor.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Event of Default" shall have the meaning provided in Section 8.1 of
the Lease.
"FDIC" shall mean the Federal Deposit Insurance Corporation (or any
successor).
"Federal Funds Effective Rate" shall mean, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a Business
Day, the average of quotations for such day on such transaction received by
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Fee Letter Agreement" shall mean that certain letter agreement
regarding fees dated October 29, 1998 from Administrative Agent and
Documentation Agent to Guarantor.
"Fixed Rent" shall mean, for each Renewal Term, that portion of the
installment of Rent payable on such Payment Date representing amortization of
the Purchase Price for the Equipment and Capitalized Transaction Costs, if any,
as determined by Lessors pursuant to Section 3.1(b) of the Lease.
"Funding" shall have the meaning provided in Section 2.1 of the
Participation Agreement.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time as set forth in the opinions, statements and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, the Financial Accounting Standards Board.
"Governmental Authority" shall mean any governmental authority of the
United States of America, any State of the United States, or of any other
foreign jurisdiction and any political subdivision of any of the foregoing, and
any central bank, agency, department, commission, board, bureau, court or other
tribunal having or lawfully asserting jurisdiction over either Agent, any
Lessor, the Guarantor, Lessee or any Equipment (or any component thereof).
"Guarantor" shall mean Weatherford International, Inc., a Delaware
corporation.
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"Guarantor Debt Rating" shall mean, with respect to the Guarantor as of
any date of determination, the rating that has been most recently announced by
either S&P or Moody's, as the case may be, for any non-credit enhanced long-term
senior debt issued or to be issued by the Guarantor. For purposes of the
foregoing:
(a) if only one of S&P and Moody's shall have in effect a
Guarantor Debt Rating, the Applicable Margin shall be determined by
reference to the available rating;
(b) if, at any time, neither S&P nor Moody's shall have in
effect a Guarantor Debt Rating, the Applicable Margin shall be set in
accordance with Performance Level V under the definition of "Applicable
Margin";
(c) if the ratings established by S&P and Moody's shall fall
within different Performance Levels, the Applicable Margin shall be
based upon the lower rating; provided, however, that, if the higher of
such ratings is two or more Performance Levels above the lower of such
ratings, the Applicable Margin shall be based upon the rating that is
one Performance Level above the lower rating;
(d) if any rating established by S&P or Moody's shall be
changed, such change shall be effective as of the date on which such
change is announced publicly by the rating agency making such change;
and
(e) if S&P or Moody's shall change the basis on which ratings
are established by it, each reference to the Guarantor Debt Rating
announced by S&P or Moody's shall refer to the then equivalent rating
by S&P or Moody's, as the case may be.
"Guaranty" or Guaranty Agreement" shall mean the Guaranty Agreement
dated as of the Documentation Date between the Guarantor and Administrative
Agent, for the benefit of Lessors.
"Guaranty Default" shall have the meaning provided in Section 5.01 of
the Guaranty.
"Hazardous Substance" shall mean any hazardous materials, hazardous
waste, hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law, including, without limitation, polychlorinated
biphenyls.
"Impositions" shall mean all fees (including, but not limited to,
license, documentation, recording or registration fees) and taxes (including but
not limited to all income, sales, use, lease, sublease, gross receipts, personal
property, occupational, value added or other taxes, levies, imposts, duties,
assessments, charges or withholdings of any nature whatsoever), together with
any penalties, fines or additions to tax or interest thereon.
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"Incipient Default" shall mean an event or condition which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default.
"Indebtedness" shall mean (without duplication), with respect to any
Person, (a) any liability (other than the Debentures) of such Person (i) for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or under any reimbursement
obligation relating to a letter of credit, bankers' acceptance or note purchase
facility, (ii) evidenced by a bond, note, debenture or similar instrument, (iii)
for the balance deferred and unpaid of the purchase price for any property or
any obligation upon which interest charges are customarily paid (except for
trade payables arising in the ordinary course of business), or (iv) for the
payment of money relating to the principal portion of any Capitalized Lease
Obligation; (b) any obligation of any Person secured by (or for which the holder
of such obligation has an existing right, contingent or otherwise, to be secured
by) a consensual Lien on property owned or acquired, whether or not any
obligation secured thereby has been assumed, by such Person; (c) all net
obligations of such Person as of the date of a required calculation of any
Derivatives Obligations; (d) all Assurances of such Person of the Indebtedness
of any other Person of the type referred to in clause (a) or (c); (e) Interest
Rate Risk Indebtedness of such Person; and (f) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to above.
"Indemnitee(s)" shall mean each of Administrative Agent, Arranger,
Syndication Agent and Documentation Agent, in both their individual and agent
capacities, the Lessors, any Affiliate of any of them and any assignee, officer,
director, employee, attorney or agent of any of them.
"Initial Delivery Date" shall mean the first Delivery Date completed
pursuant to Article II of the Participation Agreement.
"Interest Coverage Ratio" shall mean, at the end of each fiscal
quarter, the ratio of (a) Consolidated EBITDA for the fiscal quarter then ended
and for the immediately preceding three fiscal quarters to (b) Consolidated
Interest Expense (excluding interest accrued in respect of the Debentures but
not actually paid in cash) for such four fiscal quarters.
"Interest Rate" shall mean the rate per annum equal to the sum of the
LIBO Rate for such Rent Period plus the Applicable Margin, unless and to the
extent that the Alternate Base Rate plus the Applicable Margin shall apply as a
result of the application of provisions of Section 7.3 or 7.4 of the
Participation Agreement.
"Interest Rate Risk Indebtedness" shall mean all obligations and
Indebtedness of the Guarantor with respect to the program for the hedging of
interest rate risk provided for in any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or similar arrangement
entered into by the Guarantor for the purpose of reducing the Guarantor's
exposure to interest rate fluctuations and not for speculative purposes,
approved in writing by Administrative Agent (such approval not to be
unreasonably withheld), as it may from time to time be amended, modified,
restated or supplemented.
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"Interim Period" shall mean the period commencing on the Documentation
Date and ending on the first anniversary thereof.
"Investment" shall mean the purchase or acquisition of any share of
capital stock, partnership interest, evidence of indebtedness or other equity of
any other Person; any loan, advance or extension of credit to, or contribution
to the capital of, any other Person (other than cash equivalents and other than
extensions of credit resulting from the sale of goods (where Lessee retains
title to or a security interest in any equipment sold) or rendering of services
in the ordinary course of the Lessee's equipment leasing business); any real
estate held for sale or investment; any commodities futures contracts held other
than in connection with bona fide hedging transactions; any other investment in
any other Person; and the making of any commitment or acquisition of any option
to make an Investment.
"Investment Percentage" shall mean, with respect to each Lessor as of
any date of determination, the quotient (expressed as a percentage) of such
Lessor's Outstanding Investment divided by the Lease Balance.
"IRS" shall mean the Internal Revenue Service.
"ISDA" shall mean the International Swaps and Derivatives Association,
Inc.
"Law" shall mean collectively, any law (including any zoning law or
ordinance, ERISA, or any Environmental Law), treaty, statute, rule, regulation,
ordinance, order, directive, code, interpretation, judgment, decree, injunction,
write, determination, award, permit, license, authorization, direction,
requirement or decision of or agreement with or by any Governmental Authority.
"Lease" shall mean that certain Master Lease Intended as Security,
dated as of December __, 1998 by and between Administrative Agent and Lessee,
substantially in the form of Exhibit A to the Participation Agreement, as
amended, modified or supplemented from time to time in accordance with the
Participation Agreement.
"Lease Balance" shall mean, as of any determination date, the aggregate
Purchase Price of all of the Equipment plus all Capitalized Transaction Costs,
minus all amounts of Fixed Rent, if any, actually paid to the date of
determination and all Reduction Amounts actually paid to the date of
determination.
"Lease Commencement Date" shall have the meaning provided in Section
2.2 of the Lease.
"Lease Supplement" shall have the meaning provided in Section 3.5 of
the Participation Agreement.
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"Lease Term" shall mean the Base Period (including the Interim Period)
and all exercised Renewal Terms, if agreed to by the parties.
"Lessee" shall mean Weatherford Enterra Compression Company, L.P., a
Delaware limited partnership.
"Lessee Purchase Option" shall have the meaning provided in Section
11.1(b) of the Lease.
"Lessee Risk Amount" shall mean, on any date, an amount equal to the
product of (i) eighty-five and one-half percent (85.5%) times (ii) the aggregate
Purchase Price of all Equipment subject to the Lease plus all Capitalized
Transaction Costs.
"Lessor Commitment" shall mean, with respect to each Lessor, the amount
set forth opposite such Lessor's name on Schedule I to the Participation
Agreement.
"Lessor Liens" shall mean Liens or other conveyances resulting from any
act of or claim against Agent in its individual capacity (or any Person claiming
by, through or under Administrative Agent in its individual capacity) or any
Lessor, in each case arising out of any event or condition not related to the
exercise of such Person's rights or the performance of its duties expressly
provided under any Operative Agreement.
"Lessor Risk Amount" shall mean, on any date, an amount equal to the
product of (i) fourteen and one-half percent (14.5%) times (ii) the aggregate
Purchase Price of all Equipment subject to the Lease plus all Capitalized
Transaction Costs.
"Lessors" shall mean each of the Persons identified as a Lessor in
Schedule I to the Participation Agreement and those Persons to whom the
interests in the Lease and the Collateral shall have been transferred or
assigned by a Lessor from time to time in accordance with the provisions of the
Lease and the Participation Agreement.
"LIBO Rate" shall mean, relative to any Rent Period with respect to the
Lease Balance, the rate per annum determined by Administrative Agent to be:
(a) the offered rate per annum at which deposits in United
States Dollars appear on the Telerate Page 3750 (or any successor
page), or
(b) if such offered rate is not available, then the rate per
annum at which deposits in United States Dollars appear on the Reuters
Screen LIBO Page (or any successor page), or
(c) if neither of the foregoing offered rates is available,
the average (rounded upwards, if necessary, to the nearest 1/16 of 1%)
of the rates per annum at which Dollar deposits in immediately
available funds are offered to the Administrative Agent in the
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London interbank market, determined in any case as of 11:00 a.m.
(London time) two Business Days prior to the beginning of such Rent
Period for delivery on the first day of such Rent Period, and in an
amount approximately equal to the amount of the Lease Balance and for a
period approximately equal to such Rent Period.
"Lien" shall mean any lien, mortgage, pledge, assignment (including any
assignment of rights to receive payments of money), security interest, charge or
encumbrance of any kind including any conditional sale or other title retention
agreement or any lease (excluding, however (except with respect to the
Equipment) any lease that is not a Capital Lease) in the nature thereof (whether
voluntary or involuntary and whether imposed or created by operation of law or
otherwise), and any agreement to give a lien, mortgage, pledge, assignment
(including any assignment of rights to receive payments of money), security
interest, charge or other encumbrance of any kind; provided, however, that
"Lien" shall not include or cover (i) setoff rights and other standard
arrangements for netting payment obligations in the settlement of obligations,
arising under ISDA standard documents or otherwise customary in swap or hedging
transactions; and (ii) setoff rights of banks party to Derivative Obligations
which rights arise in the ordinary course of customary banking relationships.
"Material Adverse Effect" shall mean, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) and after taking into
account actual insurance coverage and effective indemnification with respect to
such occurrence, (a) a material adverse effect on the financial condition,
business or operations of the Guarantor and its consolidated Subsidiaries taken
as a whole, (b) the impairment of (i) the ability of the Lessee and the
Guarantor collectively to perform their payment or other material obligations
under the Lease, the Guaranty or any other Operative Agreement or (ii) the
ability of either Administrative Agent or the Lessors to realize the material
benefits intended to be provided by the Guarantor and the Lessee (taken as a
whole) under the Operative Agreements or (c) the subjection of either Agent or
any Lessor to any civil or criminal liability arising in connection with the
Operative Agreements.
"Material Subsidiary" shall mean, at any date, a consolidated
Subsidiary the Capital Stock of which is owned by the Guarantor and/or one or
more Subsidiaries and that either (a) has total assets in excess of 5% of the
total assets of the Guarantor and its consolidated Subsidiaries, in each case as
determined in accordance with GAAP or (b) has gross net revenues in excess of 5%
of the consolidated gross revenues of the Guarantor and its consolidated
Subsidiaries based, in each case, on the most recent audited consolidated
financial statements of the Guarantor.
"Merger" shall have the meaning provided in the introduction to the
Credit Agreement.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean any plan which is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA).
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"Net Worth" shall mean, as to the Guarantor and the Subsidiaries, on a
consolidated basis, at any date of determination thereof, the sum of (a) the par
value or stated value of its Capital Stock, plus (b) capital in excess of par or
stated value of shares of its Capital Stock, plus (or minus in the case of a
deficit), (c) retained earnings or accumulated deficit, as the case may be, plus
(d) and any other account which, in accordance with GAAP, constitutes
stockholders' equity, excluding (e) any treasury stock, and (f) the effects upon
net worth resulting from the translation of foreign currency denominated assets
into Dollars.
"Officer's Certificate" shall mean a certificate executed on behalf of
any entity by its President, one of its Vice Presidents, its Chief Financial
Officer, its Treasurer, its Assistant Treasurer or its Controller.
"Operative Agreement(s)" shall mean the Participation Agreement, the
Lease, the Lease Supplements, the Delivery Date Notices, the Guaranty, the
Subleases, the Bills of Sale and each UCC financing statement filed or to be
filed from time to time with respect to the security interests created pursuant
to the Lease.
"Other Lessors" shall have the meaning provided in Section 11.3 of the
Lease.
"Outstanding Investment" of any Lessor as of any date of determination
shall mean the aggregate amount funded by such Lessor pursuant to Section 2.1 of
the Participation Agreement (but excluding amounts returned to such Lessor
pursuant to Section 2.4 of the Participation Agreement), reduced by all Fixed
Rent, if any, paid to Administrative Agent for the account of such Lessor and
all Reduction Amounts paid to Administrative Agent for the account of such
Lessor.
"Part(s)" shall mean all parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature that may from
time to time be incorporated or installed in or attached to any Equipment.
"Partial Casualty" shall mean any loss, damage, destruction, taking by
eminent domain, loss of use or theft of any portion of a Equipment which does
not constitute a Casualty.
"Participant(s)" shall mean any or all of the parties to the
Participation Agreement.
"Participation Agreement" shall mean the Participation Agreement, dated
as of December 8, 1998, entered into among Lessee, Agents, Arranger and Lessors,
as amended, modified or supplemented from time to time in accordance with its
terms.
"Payment Date" shall mean with respect to the Base Period and each
Renewal Term, if any, (a) as to any Basic Rent calculated based on the Alternate
Base Rate, the last Business Day of each March, June, September and December to
occur while such Basic Rent is calculated based on the Alternate Base Rate, (b)
as to any Basic Rent calculated based on the LIBO Rate having a Rent Period of
three months or less, the last day of such Rent Period and (c) as to any Basic
Rent
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calculated based on the LIBO Rate having a Rent Period longer than three months,
each day which is three months after the first day of such Rent Period and the
last day of such Rent Period.
"Payment Default" shall mean an Event of Default described in Section
8.1(a) of the Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Pension Plan" shall mean, with respect to any Person, a "pension plan"
as such term is defined in section 3(2) of ERISA which is subject to Title IV of
ERISA and to which such Person may have any liability or contingent liability,
including, but not limited to, liability by reason of having been a substantial
employer within the meaning of section 4063 of ERISA at any time during the
preceding five years, or by reason or being deemed to be a contributing sponsor
under section 4069 of ERISA.
"Performance Level" shall mean a reference to one of Performance Level
I, Performance Level II, Performance Level III, Performance Level IV or
Performance Level V.
"Performance Level I" shall mean, at any date of determination, the
Guarantor shall have a Guarantor Debt Rating in effect on such date of at least
A- by S&P and at least A3 by Moody's.
"Performance Level II" shall mean, at any date of determination, (a)
the Performance Level does not meet the requirements of Performance Level I and
(b) the Guarantor shall have a Guarantor Debt Rating in effect on such date of
at least BBB+ by S&P and at least Baa1 by Moody's.
"Performance Level III" shall mean, at any date of determination, (a)
the Performance Level does not meet the requirements of Performance Level I or
Performance Level II and (b) the Guarantor shall have a Guarantor Debt Rating in
effect on such date of at least BBB by S&P and at least Baa2 by Moody's.
"Performance Level IV" shall mean, at any date of determination, (a)
the Performance Level does not meet the requirements of Performance Level I,
Performance Level II or Performance Level III and (b) the Guarantor shall have a
Guarantor Debt Rating in effect on such date of at least BBB- by S&P and at
least Baa3 by Moody's.
"Performance Level V" shall mean, at any date of determination, the
Performance Level does not meet the requirements of Performance Level I,
Performance Level II, Performance Level III or Performance Level IV.
"Permitted Contest" shall mean actions taken by a Person to contest in
good faith, by appropriate proceedings initiated timely and diligently
prosecuted, the legality, validity or applicability to the Equipment or any
interest therein of any Person of: (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or administrative requirements; (b)
any term or
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condition of, or any revocation or amendment of, or other proceeding relating
to, any authorization or other consent, approval or other action by any
Authority; or (c) any Lien or Imposition; provided that the initiation and
prosecution of such contest would not: (i) result in, or materially increase the
risk of, the imposition of any criminal liability on any Indemnitee; (ii)
materially and adversely affect the security interests created by the Lease or
the right, title or interest of Administrative Agent or any Lessor in or to any
of the Equipment or the right of Administrative Agent or any Lessor to receive
payment of Rent or the Lease Balance or any interest therein; or (iii)
materially and adversely affect the fair market value, utility or remaining
useful life of the Equipment or any interest therein or the continued economic
operation thereof; and provided further that in any event adequate reserves in
accordance with GAAP are maintained against any adverse determination of such
contest.
"Permitted Lessor Liens" shall mean Lessor Liens: (a) for taxes of
Administrative Agent or Documentation Agent or a Lessor either not yet due or
being challenged by a Permitted Contest; (b) arising out of judgments or awards
against Administrative Agent or Documentation Agent or a Lessor with respect to
which at the time an appeal or proceeding for review is being prosecuted by a
Permitted Contest; and (c) arising out of Liens arising voluntarily (but
excluding consensual security interests created by way of the Lessors) in the
ordinary course of business of Administrative Agent or Documentation Agent or a
Lessor for amounts the payment of which is either not delinquent or is being
contested by a Permitted Contest.
"Permitted Liens" shall mean:
(a) when used with respect to the Lessee and the Equipment in
the Operative Agreements:
(i) any rights (including, without limitation,
security interests) in favor of Administrative Agent or Lessors under
the Operative Agreements and any rights of any Persons entitled to use
of the Collateral in accordance with Section 5.2 of the Lease; (ii) any
Lien, (including, without limitation, Liens of landlords, carriers,
warehousemen, mechanics, repairmen or materialmen) in favor of any
Person securing payment of the price of goods or services provided in
the ordinary course of business for amounts the payment of which is not
overdue or is being contested in good faith by appropriate proceedings
promptly initiated and diligently prosecuted, so long as such
proceedings do not involve any reasonable danger of sale, forfeiture or
loss of all or any material part of the Collateral and do not
materially adversely affect any Lien created in favor of Lessor under
the Lease; (iii) any Lessor Lien or any Lien arising out of any breach
by any Lessor of its obligations under the Operative Agreements; and
(iv) any Lien for current taxes, assessments or other governmental
charges which are not delinquent or the validity of which is being
contested by a Permitted Contest; (v) attachments, judgments and other
similar Liens arising in connection with court proceedings, provided
the execution or other enforcement of such Liens is effectively stayed
and the claims secured hereby are being contested in good faith and by
appropriate proceedings; (vi) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases,
zoning and land use restrictions and other similar
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title exceptions or encumbrances affecting real property that were not
incurred in connection with the incurrence of indebtedness, so long as
such Liens do not involve a reasonable danger of sale, forfeiture or
loss of all or any material portion of the Collateral and do not
materially adversely affect any Lien created in favor of Lessor under
the Lease; (vii) any Lien incurred in the ordinary course of business
to secure performance of statutory obligations; and (viii) Subleases
permitted under the Lease; and
(b) when used with respect to the Guarantor and its
Subsidiaries (other than, as to the Equipment only, the Lessee) in the
Guaranty:
(i) Liens, not otherwise permitted under any other
provision of this definition, securing Indebtedness permitted under the
Guaranty in an aggregate principal amount at any time outstanding which
does not exceed 12% of Net Worth; (ii) Liens for taxes or unpaid
utilities not yet delinquent or which are being contested in good faith
by appropriate proceedings; provided that adequate reserves with
respect thereto are maintained on the books of the Guarantor or the
Subsidiaries, as the case may be, in conformity with GAAP; (iii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business and not
overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings; (iv) pledges or deposits or
deemed trusts in connection with workers' compensation, unemployment
insurance, pension, employment or other social security legislation;
(v) easements, rights-of-way, use restrictions, minor defects or
irregularities in title, reservations (including reservations in any
original grant from any government of any land or interests therein and
statutory exceptions to title) and other similar encumbrances incurred
in the ordinary course of business which, in the aggregate, are not
substantial in amount and which do not in any case materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Guarantor or any
Subsidiary; (vi) judgment and attachment Liens not giving rise to an
Event of Default or Liens created by or existing from any litigation or
legal proceeding that are currently being contested in good faith by
appropriate proceedings, promptly instituted and diligently conducted,
and for which adequate reserves have been made to the extent required
by GAAP; (vii) Liens on the assets of any entity or asset existing at
the time such asset or entity is acquired by the Guarantor or any
Subsidiary, whether by merger, consolidation, purchase of assets or
otherwise; provided that such Liens (i) are not created, incurred or
assumed by such entity in contemplation of such entity's being acquired
by the Guarantor or any Subsidiary; (ii) do not extend to any other
assets of the Guarantor or any Subsidiary; and (iii) the Indebtedness
secured by such Lien is permitted pursuant to this Guaranty; (viii)
Liens securing Indebtedness of the Guarantor or its Subsidiaries not
prohibited by Section 4.04 of the Guaranty incurred to finance the
acquisition of fixed or capital assets, provided that (A) such Liens
shall be created not more than 90 days after the acquisition of such
fixed or capital assets, (B) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness and (C)
the Liens are not modified to secure other Indebtedness and the amount
of Indebtedness secured thereby is not increased; (ix) Liens incurred
to secure the
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performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, government contracts, performance and return-of-money
bonds and other obligations of a like nature incurred in the ordinary
course of business (exclusive of obligations for the payment of
borrowed money); (x) leases or subleases granted to others not
interfering in any material respect with the business of the Guarantor
or any Subsidiary; (xi) Liens to secure obligations arising from
statutory or regulatory requirements; (xii) any interest or title of a
lessor in property subject to any Capitalized Lease Obligation or
operating lease which, in each case, is permitted under the Guaranty;
(xiii) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of the Guarantor or any Subsidiary on deposit with or in
possession of such bank; (xiv) any renewal or refinancing of or
substitution for, or any extension or modification of any maturity date
for any Indebtedness secured by, any Lien permitted by any of the
preceding clauses; provided that the debt secured is not increased nor
the Lien extended to any additional assets; and (xv) Liens granted or
Letters of Credit issued in connection with the obligations of Grant
Prideco, Inc. incurred in connection with the TBT Leases (as such terms
are defined in the Credit Agreement).
"Person" shall mean any individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or other entity, or any Governmental
Authority.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Guarantor or Lessee or any ERISA
Affiliate for employees of the Guarantor or any ERISA Affiliate or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Guarantor or any ERISA Affiliate is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Purchase Price" shall mean, for any item of Equipment, the purchase
price therefor set forth in the Lease Supplement pursuant to which such item of
Equipment is subjected to the Lease.
"Reduction Amount" shall mean amounts paid by Lessee to Administrative
Agent, for the benefit of the Lessors, for the purchase of any Equipment
pursuant to Section 6.1 or 6.2 of the Lease, provided that "Reduction Amounts"
shall not include any Rents, or any costs, expenses or taxes to be paid by
Lessee in connection with any such purchase, sale or transfer.
"Regulation U" shall mean Regulation U of the Board (respecting margin
credit extended by banks), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
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"Regulation X" shall mean Regulation X of the Board (respecting
borrowers who obtain margin credit), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Related Person" shall mean, with respect to any Person, any trade or
business (whether or not incorporated) which, together with such Person, is
under common control as described in section 414 of the Code.
"Release" shall mean any release, pumping, pouring, emptying,
injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
"Renewal Option" shall mean the meaning provided in Section 11.1(a) of
the Lease.
"Renewal Rent" shall mean, with respect to the Lease or any Lease
Supplement (as the context may require), all payments of Fixed Rent and Variable
Rent due and payable by Lessee on each Payment Date during the applicable
Renewal Term, if any, as agreed to by the parties to the Lease.
"Renewal Term" shall have the meaning provided in Section 2.3 of the
Lease.
"Rent" shall mean Basic Rent and/or Renewal Rent, as the context may
require.
"Rent Period" shall mean, for the Base Period or any Renewal Term, the
period beginning on the first day of such Base Period or Renewal Term and ending
on (but excluding) the date which numerically corresponds to such date one, two,
three or six months thereafter and each successive period of one, two, three or
six months commencing on the last day of such preceding one, two, three or six
month period and ending on (but excluding) such numerically corresponding day;
provided, however, that (a) if such Rent Period would otherwise end on a day
which is not a Business Day, then such Rent Period shall end on the next
following Business Day, unless (solely for purposes of determining Rent Periods
in connection with calculating Variable Rent on a LIBO Rate basis) such next
following Business Day is the first Business Day of a calendar month, in which
case such Rent Period shall end on the Business Day immediately preceding such
numerically corresponding day, and (b) no Rent Period may end later than the
last day of the Lease Term.
"Replaced Part" shall have the meaning provided in Section 5.4(a) of
the Lease.
"Replacement Equipment" shall mean any item of Equipment duly
substituted for another item of Equipment in accordance with the provisions of
the Operative Agreements, as contemplated by Sections 6.1 and 6.2 of the Lease.
"Replacement Part" shall have the meaning provided in Section 5.4(a) of
the Lease.
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"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by the PBGC.
"Requirement of Law" shall mean, as to any Person, any law, treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Required Lessors" shall mean, at a particular time, the holders of at
least 51% of the aggregate Outstanding Investment.
"Responsible Officer" of any Person shall mean (a) when used in the
definition of the term "Actual Knowledge": (i) in the case of any business
corporation, the chairman of the board of directors of such corporation if such
chairman is an officer of such corporation, the president, any vice president or
any assistant vice president of such corporation, the secretary or any assistant
secretary of such corporation or the treasurer or any assistant treasurer of
such corporation; (ii) in the case of any partnership, a general partner (if
such general partner is an individual), or a Responsible Officer of a corporate
general partner, of such partnership or the general manager of such partnership
or any assistant general manager of such partnership; and (iii) in the case of
any commercial bank or trust company, the chairman or vice chairman of the board
of directors or trustees of such bank or trust company, the chairman or vice
chairman of the executive committee of the board of directors or trustees of
such bank or trust company, the president, any vice president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or any assistant trust officer of such
bank or trust company, the controller or any assistant controller of such bank
or trust company, any executive or senior assistant or second vice president of
such bank or trust company or any other individual who is employed by such bank
or trust company and customarily performs functions similar to those performed
by any of the other officers of such bank or trust company referred to herein,
and (b) when used in the Guaranty or otherwise with respect to either the
Guarantor or the Lessee, the President, the chief financial officer, the
controller or any vice president of such Person or an individual specifically
authorized by the Board of Directors of such Person to sign on behalf of such
Person.
"S&P" shall mean Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Sale Option" shall have the meaning provided in Section 11.1(c) of the
Lease.
"Schedule X" shall mean this Schedule to the Participation Agreement.
"Securities Act" shall have the meaning provided in Section 5.1(cc) of
the Participation Agreement.
"Sublease" shall mean a sublease of Equipment entered into in
accordance with Section 5.2 of the Lease.
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"Sublessee" shall mean the lessees or sublessee under any Sublease.
"Subsequent Delivery Date" shall mean each of the dates scheduled for a
Delivery Date Closing pursuant to a Delivery Date Notice occurring following the
Initial Delivery Date.
"Subsequent Delivery Date Closing" shall mean the Delivery Date Closing
relating to a Subsequent Delivery Date.
"Subsequent Delivery Date Notice" shall mean a Delivery Date Notice
relating to a Subsequent Delivery Date.
"Subsidiary" shall mean (a) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such Person, by one or
more subsidiaries of such Person or by such Person and one or more subsidiaries
of such Person, (b) a partnership in which such Person or a subsidiary of such
Person is, at the date of determination, a general or limited partner of such
partnership, but only if such Person or its subsidiary is entitled to receive
more than 50% of the assets of such partnership upon its dissolution, or (c) any
other Person (other than a corporation or partnership) in which such Person,
directly or indirectly, at the date of determination thereof, has (i) at least a
majority ownership interest or (ii) the power to elect or direct the election of
a majority of the directors or other governing body of such Person. Unless the
context otherwise clearly requires, references in the Guaranty or the
Participation Agreement to a "Subsidiary" or the "Subsidiaries" refer to a
Subsidiary or the Subsidiaries of the Guarantor or the Lessee, as the case may
be.
"Syndication Agent" shall mean ABN AMRO Bank N.V.
"Termination Date" shall mean the date the Lease Term, including any
Renewal Term, ends with respect to the Equipment pursuant to (a) Article VIII of
the Lease relating to termination as a result of an Event of Default, (b)
Article X of the Lease relating to early termination, or (c) Section 11.1 of the
Lease relating to the exercise of the Lessee Purchase Option or Sale Option.
"Total Capitalization" shall mean, at any date, the sum of Consolidated
Indebtedness and Net Worth and the outstanding principal amount of the
Debentures at such date.
"Total Commitment" shall mean $200,000,000.
"Transaction Costs" shall mean, without duplication,
(i) the Commitment Fee;
(ii) a fee in respect of legal fees of Winston &
Strawn reasonably incurred on behalf of Administrative Agent
in connection with the negotiation, execution and delivery of
the Operative Agreements, and the transactions contemplated
thereby, and
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<PAGE> 80
the reasonable out-of-pocket expenses of Winston & Strawn in
connection with the foregoing;
(iii) the fees and expenses of the Appraiser;
(iv) the Arrangement Fee;
(v) the Agency Fee;
(vi) the upfront participation fee payable to the
Lessors; and
(vii) all costs of lien searches and perfection of a
first priority security interest in the Collateral.
"Transferree" shall have the meaning provided in Section 13.10 of the
Lease.
"UCC" shall mean the Uniform Commercial Code, as in effect from time to
time in any applicable jurisdiction.
"Variable Rent" shall mean, with respect to each Rent Period occurring
during the Base Period or any Renewal Term, an amount equal to interest accrued
on the Lease Balance outstanding during such period at the Interest Rate.
"Voting Stock" shall mean, with respect to any Person, securities of
any class or classes of Capital Stock in such Person entitling holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors or other governing body of such Person.
"Welfare Plan" shall mean, with respect to any Person, a "welfare plan"
as such term is defined in section 3(1) of ERISA to which such Person or any
Related Person to such Person may have any liability or contingent liability.
"Wholly-Owned Subsidiary" as to any Person shall mean, a Subsidiary of
which all issued and outstanding Capital Stock (excluding directors' qualifying
shares) is directly or indirectly owned by such Person.
SX-26
<PAGE> 1
EXHIBIT 4.17
MASTER LEASE INTENDED AS SECURITY
Dated as of December 8, 1998
between
WEATHERFORD ENTERRA
COMPRESSION COMPANY, L.P.,
as Lessee
and
ABN AMRO BANK N.V.,
as Administrative Agent for the Lessors
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Delivery and Acceptance..................................................................................1
Section 1.1 Transfer....................................................................................1
Section 1.2 Acceptance Procedure........................................................................2
ARTICLE II
Lease Term...............................................................................................2
Section 2.1 Interim and Base Periods....................................................................2
Section 2.2 Lease Commencement Date.....................................................................2
Section 2.3 Lease Renewal...............................................................................2
ARTICLE III
Rent; Other Economic Provisions..........................................................................2
Section 3.1 Rent Payments...............................................................................2
Section 3.2 Place and Manner of Payment.................................................................3
Section 3.3 Net Lease...................................................................................3
ARTICLE IV
Warranties...............................................................................................4
Section 4.1 Warranty Disclaimer.........................................................................4
Section 4.2 Quiet Enjoyment.............................................................................5
ARTICLE V
Possession, Assignment, Use and
Maintenance of Equipment.................................................................................5
Section 5.1 Restriction on Lessee's Possession and Use..................................................5
Section 5.2 Subleases...................................................................................5
Section 5.3 Maintenance.................................................................................6
Section 5.4 Repair, Replacement and Substitution........................................................7
Section 5.5 Alterations, Modifications and Additions; Removable Parts...................................8
Section 5.6 Inspection of Collateral....................................................................9
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
Risk of Loss; Replacement; Waiver and Indemnity..........................................................9
Section 6.1 Casualty....................................................................................9
Section 6.2 Casualty Proceeds..........................................................................10
ARTICLE VII
Insurance...............................................................................................10
Section 7.1 Required Coverages.........................................................................10
Section 7.2 Delivery of Insurance Certificates.........................................................11
ARTICLE VIII
Default.................................................................................................11
Section 8.1 Events of Default..........................................................................11
Section 8.2 Remedies...................................................................................14
Section 8.3 Additional Remedies........................................................................15
Section 8.4 Proceeds of Sale; Deficiency...............................................................15
Section 8.5 Right to Perform Lessee's Agreements.......................................................16
ARTICLE IX
Return of Equipment.....................................................................................16
ARTICLE X
Early Termination.......................................................................................17
ARTICLE XI
Lease Termination.......................................................................................17
Section 11.1 Options...................................................................................17
Section 11.2 Lessee Purchase Option....................................................................18
Section 11.3 Sale Option...............................................................................18
ARTICLE XII
Ownership, Grant of Security
Interest to Lessor and Further Assurances...............................................................20
Section 12.1 Grant of Security Interest................................................................20
Section 12.2 Retention of Proceeds in the Case of Default..............................................21
Section 12.3 AttorneyinFact............................................................................21
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 12.4 Release of Liens..........................................................................22
ARTICLE XIII
Miscellaneous...........................................................................................22
Section 13.1 No Waiver.................................................................................22
Section 13.2 Survival of Covenants.....................................................................22
Section 13.3 APPLICABLE LAW............................................................................22
Section 13.4 Effect and Modification of Lease..........................................................22
Section 13.5 Notices...................................................................................23
Section 13.6 Counterparts..............................................................................23
Section 13.7 Severability..............................................................................23
Section 13.8 Successors and Assigns: Benefit of Agreement.............................................23
Section 13.9 Assignment by Administrative Agent........................................................23
Section 13.10 Assignment by Lessee.....................................................................23
Section 13.11 Jury Trial...............................................................................24
Section 13.12 Section Headings; Table of Contents......................................................24
Section 13.13 Final Agreement..........................................................................24
Section 13.14 Timeliness of Performance................................................................24
</TABLE>
SCHEDULE I EQUIPMENT LIST
EXHIBIT A FORM OF LEASE SUPPLEMENT
-iii-
<PAGE> 5
MASTER LEASE INTENDED AS SECURITY
THIS MASTER LEASE INTENDED AS SECURITY (as amended, modified, restated
or supplemented from time to time, this "Lease") dated as of December 8, 1998 is
between WEATHERFORD ENTERRA COMPRESSION COMPANY, L.P., a Delaware limited
partnership, as Lessee ("Lessee"), with its principal office at 5 Post Oak Park,
Suite 1760, Houston, Texas 77027, and ABN AMRO BANK N.V., a bank organized under
the laws of the Netherlands, as administrative agent ("Administrative Agent")
for the benefit of the Lessors.
WHEREAS, pursuant to the terms and conditions set forth herein and in
that certain Participation Agreement, dated as of December 8, 1998 (the
"Participation Agreement"), by and among Lessee, Administrative Agent,
Syndication Agent, Arranger, Chase Bank of Texas, National Association, as
Documentation Agent and the Lessors named therein, the Participants have agreed
that Administrative Agent, on behalf of the Lessors, will lease to Lessee and
Lessee will lease from Administrative Agent, on behalf of the Lessors, certain
personal property described in Schedule I hereto and replacements thereto;
WHEREAS, capitalized terms used but not otherwise defined herein
(including those used in the foregoing recitals) shall have the meanings
specified in Schedule X to the Participation Agreement, unless the context
otherwise requires;
WHEREAS, Lessee shall enter into Lease Supplements with Administrative
Agent, on behalf of the Lessors, covering certain of the Equipment identified on
Schedule I hereto;
WHEREAS, each Lease Supplement executed by Administrative Agent, on
behalf of the Lessors, and Lessee shall be incorporated herein by reference;
WHEREAS, to secure Lessee's obligations under this Lease and the other
Operative Agreements, Lessee will grant to Administrative Agent, on behalf of
the Lessors, a security interest in the Collateral.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Delivery and Acceptance
Section 1.1 Transfer, Acceptance and Lease of Equipment. On each
Delivery Date, subject to the satisfaction or waiver of the conditions set forth
in Article III of the Participation Agreement, (a) the seller of the Equipment
to be delivered on such Delivery Date shall sell, assign, transfer and
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<PAGE> 6
set over unto Administrative Agent, on behalf of the Lessors, the Equipment to
be delivered on such Delivery Date and covered by the Delivery Date Notice
delivered by Lessee with respect thereto and the Lease Supplement to be
delivered with respect thereto pursuant to Article III of the Participation
Agreement, (b) Administrative Agent hereby agrees to accept delivery on such
Delivery Date of the Equipment to be so delivered pursuant to the terms of the
Participation Agreement and simultaneously to lease such Equipment to Lessee
under this Lease and the Lease Supplement, and (c) Lessee hereby agrees,
expressly for the direct benefit of Administrative Agent and the Lessors, to
lease from Administrative Agent hereunder, for the Lease Term, such Equipment to
be delivered on such Delivery Date.
Section 1.2 Acceptance Procedure. Administrative Agent hereby
authorizes one or more employees or officers of Lessee, as the authorized
representative or representatives of Administrative Agent, to accept delivery of
the Equipment identified on the Delivery Date Notice executed by Lessee in
connection with each Delivery Date. Lessee hereby agrees that such acceptance of
delivery by such authorized representative or representatives on each Delivery
Date shall, without further act, constitute the irrevocable acceptance by Lessee
of the Equipment which is the subject of such Delivery Date Notice for all
purposes of this Lease and the other Operative Agreements on the terms set forth
therein and herein.
ARTICLE II
Lease Term
Section 2.1 Interim and Base Periods. Unless earlier terminated, the
term of this Lease shall consist of (a) the Interim Period, (b) the Base Period;
and (c) any Renewal Terms, if any, (collectively, the "Lease Term").
Section 2.2 Lease Commencement Date. The lease commencement date shall
be the Initial Delivery Date (the "Lease Commencement Date").
Section 2.3 Lease Renewal. Lessee may elect to renew this Lease on
terms and conditions mutually acceptable to Lessee and Lessors and upon receipt
of an Appraisal satisfactory to Lessors and upon the consent of all Lessors
(each, a "Renewal Term").
ARTICLE III
Rent; Other Economic Provisions
Section 3.1 Rent Payments. Lessee shall pay to Administrative Agent,
for the benefit of the Lessors, the amounts of Basic Rent or Renewal Rent, as
applicable, determined in accordance with this Section 3.1. Scheduled
installments of Basic Rent and Renewal Rent may be adjusted pursuant
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<PAGE> 7
to Section 6.1. Except to the extent computations of interest are based upon
application of the Alternate Base Rate, all computations of interest pursuant to
the Operative Agreements shall be made on the basis of actual number of days
elapsed in a 360-day year.
(a) Basic Rent. On each Payment Date during the Base Period, Lessee
shall pay to Administrative Agent, for the benefit of the Lessors, Basic Rent
consisting of the amount of Variable Rent accrued on the Lease Balance during
the Rent Period ended on such Payment Date.
(b) Renewal Rent. On each Payment Date during any Renewal Term in
effect, if any, Lessee shall pay to Administrative Agent, for the benefit of the
Lessors, Renewal Rent under each Lease Supplement to which Lessee is a party,
consisting of the amount of Fixed Rent, if any, and Variable Rent determined by
Lessors based upon the results of the Appraisal required to be delivered under
Section 11.1(a) in connection with Lessee's exercise of its Renewal Option.
(c) Selection of Rent Periods. During the Base Period or any Renewal
Term, if any, Lessee shall notify Administrative Agent not less than three
Business Days prior to the expiration of a Rent Period of its selection of one
or more Rent Periods to follow such expiring Rent Period and the amount of the
Lease Balance applicable to each such Rent Period so selected. Each such
notification shall be irrevocable.
Section 3.2 Place and Manner of Payment. Rent and all other sums due to
Administrative Agent for the benefit of any Lessor hereunder shall be paid in
immediately available funds to Administrative Agent, in accordance with the
Administrative Agent's wire transfer instructions as it may from time to time
specify to Lessee in a notice pursuant to this Lease. All such payments shall be
received by Administrative Agent or such Lessor, as applicable, not later than
12:00 noon, Eastern time, on the date due; funds received after such time shall
for all purposes under the Operative Agreements be deemed to have been received
by Administrative Agent or such Lessor on the next succeeding Business Day. Any
payments received by Administrative Agent not later than 12:00 noon Eastern
time, shall be paid by Administrative Agent to the Lessors in immediately
available funds no later than 1:00 p.m. Eastern time on the same day and any
payments received by Administrative Agent from or on behalf of Lessee after
12:00 noon Eastern time, shall be paid to Lessors as soon after receipt as
practicable, but not later than 1:00 p.m. Eastern time on the next succeeding
Business Day. Lessee shall pay to Administrative Agent, for the benefit of the
Lessors, or to a Lessor in the case of payments to a Lessor, on demand, interest
at the rate per annum which is 2% above the Interest Rate in effect from time to
time on any overdue amount of Rent, or any other payment due under this Lease
and (to the extent permitted by applicable law) interest from the date due (not
taking into account any grace period) until payment is made.
Section 3.3 Net Lease. This Lease is a net lease and Lessee's
obligation to pay all Rent, indemnities and other amounts payable hereunder
shall be absolute and unconditional under any and all circumstances and, without
limiting the generality of the foregoing, Lessee shall not be entitled to any
abatement or reduction of Rent or any setoff against Rent, indemnity or other
amount, whether arising by reason of any past, present or future claims of any
nature by Lessee against Administrative
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<PAGE> 8
Agent, Documentation Agent, Syndication Agent, Arranger or any Lessor. Except as
otherwise expressly provided herein, this Lease shall not terminate, nor shall
the obligations of Lessee be otherwise affected: (a) by reason of any defect in,
damage to, or loss of possession or use, obsolescence or destruction, of any or
all of the Equipment, however caused; or (b) by the taking or requisitioning of
any or all of the Equipment by condemnation or otherwise; or (c) by the
invalidity or unenforceability or lack of due authorization by Administrative
Agent, any Lessor or Lessee or other infirmity of this Lease; or (d) by lack of
power or authority of Administrative Agent, Documentation Agent, Syndication
Agent, Arranger or any Lessor to enter into this Lease or any other Operative
Agreement; or (e) by the attachment of any Lien of any third party to any item
of Equipment; or (f) by any prohibition or restriction of or interference with
Lessee's use of any or all of the Equipment by any Person; or (g) by the
insolvency of or the commencement by or against Administrative Agent, any Lessor
or Lessee of any bankruptcy, reorganization or similar proceeding; or (h) by any
other cause, whether similar or dissimilar to the foregoing. It is the intention
of the parties that all Rent, indemnities and other amounts payable by Lessee
hereunder shall be payable in all events in the manner and at the times herein
provided unless Lessee's obligations in respect thereof have been terminated or
modified pursuant to the express provisions of this Lease. To the extent
permitted by applicable law, Lessee hereby waives any and all rights which it
may now have or which may at any time be conferred upon it, by statute or
otherwise, to terminate, cancel, quit or surrender this Lease, in whole or in
part, except strictly in accordance with the express terms hereof. Each rental,
indemnity or other payment made by Lessee hereunder or under the other Operative
Agreements, shall be final, and Lessee shall not seek to recover all or any part
of such payment from Lessor for any reason whatsoever. Without affecting
Lessee's obligation to pay Rent, or other amounts payable hereunder or under the
other Operative Agreements, Lessee may seek damages for a breach by
Administrative Agent or any Lessor of its obligations under this Lease or the
Participation Agreement.
ARTICLE IV
Warranties
Section 4.1 Warranty Disclaimer. LESSEE ACKNOWLEDGES AND AGREES THAT:
(a) EACH ITEM OF EQUIPMENT IS LEASED AS-IS AND WHERE-IS; (b) EACH ITEM OF
EQUIPMENT LEASED BY IT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY LESSEE; (c) LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS PURPOSES;
(d) LESSOR IS NOT A MANUFACTURER THEREOF OR A DEALER IN PROPERTY OF SUCH KIND;
AND (e) LESSOR HAS NOT MADE NOR SHALL IT BE DEEMED TO HAVE MADE: (i) ANY
REPRESENTATION OR WARRANTY OR COVENANT WITH RESPECT TO THE TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONDITION, QUALITY,
DESCRIPTION, DURABILITY OR SUITABILITY OF ANY ITEM OF EQUIPMENT IN ANY RESPECT
OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF LESSEE; OR (ii) ANY OTHER
REPRESENTATION OR
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<PAGE> 9
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY ITEM OF
EQUIPMENT.
Section 4.2 Quiet Enjoyment. In the absence of an Event of Default that
has occurred and is continuing, neither any Lessor nor the Administrative Agent
nor any Person acting by, through or under any of such Persons, shall take any
actions to interfere with Lessee's quiet enjoyment of the Equipment during the
Lease Term.
ARTICLE V
Possession, Assignment, Use and
Maintenance of Equipment
Section 5.1 Restriction on Lessee's Possession and Use. Lessee shall
not nor shall Lessee permit any Sublessee to: (a) use, operate, maintain or
store any item of Equipment or any portion thereof in violation of any
applicable insurance policy or law or regulation of any Authority; (b) except as
permitted by Section 6.1, abandon any item of Equipment; (c) except as permitted
by Section 5.2, sublease or assign, without the prior written consent of
Administrative Agent, any item of Equipment or permit the operation thereof by
anyone other than Lessee; (d) except as set forth in Section 5.2, sell, assign
or transfer any of its rights hereunder or in any item of Equipment, or directly
or indirectly create, incur or suffer to exist any Lien, on any of its rights
hereunder or in any item of Equipment, except for Permitted Liens; and (e) use,
operate, sublease, maintain or store any item of Equipment or any portion
thereof outside of the United States. Lessee will defend the transfer of the
Equipment by the seller thereof to Administrative Agent, for the benefit of the
Lessors or Administrative Agent against the claims or demands of all Persons
(other than Lessor Liens).
Section 5.2 Subleases. So long as no Event of Default shall have
occurred and be continuing, Lessee may sublease one or more items of Equipment
to any other Person; provided that such items of Equipment (whether one or more)
are maintained in the United States or its territorial waters; and provided
further that any Sublease entered into pursuant to this Section 5.2 shall
satisfy each of the following conditions:
(a) such Sublease shall be expressly subordinate and subject to this
Lease and the Liens created hereunder;
(b) such Sublease shall be in writing and shall expressly prohibit any
further assignment, sublease or transfer of any rights or interests in the
Equipment;
(c) such Sublease shall not contain a purchase option in favor of the
Sublessee or any other provision pursuant to which the Sublessee may obtain
record or beneficial title to the Equipment leased thereunder from Lessee of
such Equipment;
-5-
<PAGE> 10
(d) such Sublease shall prohibit the Sublessee from making any
alterations or modifications to the Equipment that would violate this Lease;
(e) such Sublease shall not adversely affect the Lessors' interests and
rights in the Lease or the Equipment;
(f) such Sublease shall require the Sublessee to maintain the Equipment
in accordance with Section 5.3 and to engage in activities with the Equipment in
a manner consistent with the Equipment's intended purpose and in accordance with
the Equipment's specifications;
(g) on or before execution and delivery of such Sublease, Lessee shall
execute and deliver to Administrative Agent a security agreement, in a form
approved by Administrative Agent, whereby Lessee grants to Administrative Agent,
for the benefit of the Lessors, a security interest in all of Lessee's rights,
title and interest in, to and under such Sublease, as Collateral for Lessee's
obligations under the Operative Agreements. Upon the occurrence and during the
continuance of an Event of Default, Lessee shall deliver to Administrative Agent
an executed original counterpart of each Sublease upon the execution and
delivery thereof, marked as the sole original execution counterpart for Uniform
Commercial Code purposes, and Lessee shall, at its own cost and expense, do any
further act and execute, acknowledge, deliver, file, register and record any
further documents which Administrative Agent may reasonably request in order to
create, perfect, preserve and protect Administrative Agent's and Lessor's
security interest in such Sublease. Any payments received by Administrative
Agent from any Sublessee pursuant to this Section shall be credited to those
amounts owing by Lessee under the Lease;
(h) Lessee shall not, without Administrative Agent's prior written
consent, permit or consent to any renewal or extension of a Sublease at any time
when an Event of Default has occurred and is continuing; and
(i) Upon request by Administrative Agent at the direction of Required
Lessors, Lessee shall provide Administrative Agent with (i) a list of each
Sublease entered into by Lessee, which list shall include a description of the
Equipment to be leased thereunder, and (ii) if an Event of Default has occurred
and is continuing, copies of each Sublease.
The liability of Lessee with respect to this Lease, the Lease Supplements and
each of the other Operative Agreements shall not be altered or affected in any
way by the existence of any Sublease.
Section 5.3 Maintenance. At all times during the term of this Lease,
Lessee shall at its expense or shall cause each Sublessee to: (a) maintain,
manage and monitor the Equipment in compliance in all material respects with all
applicable requirements of law, and any Authority and in compliance with all
insurance policies; (b) maintain each item of Equipment (or cause such Equipment
to be maintained) in as good operating order, repair and condition in accordance
with customary industry practices with respect to comparable equipment and
consistent with Lessee's maintenance practices with respect to comparable
equipment not covered by this Lease, ordinary
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<PAGE> 11
wear and tear excepted; (c) maintain, manage and monitor the Equipment in
accordance with the terms of all applicable contracts (including, without
limitation, service contracts and insurance contracts) in a manner consistent
with Lessee's customary practices; and (d) conduct all scheduled maintenance of
the Equipment in conformity with Lessee's maintenance procedures then in effect
for similar equipment owned or leased by Lessee, and applicable warranty
guidelines. Lessee shall in any event maintain the Equipment (or cause the
Equipment to be maintained) in at least as good a condition as comparable
equipment owned or leased by Lessee or any of its Affiliates. Lessee will
maintain or cause to be maintained, and shall permit Administrative Agent and
Lessors to inspect, any records, logs and other materials required by any
Authority having jurisdiction to be maintained or filed in respect of any item
of Equipment.
Section 5.4 Repair, Replacement and Substitution.
(a) As soon as practicable after a Partial Casualty to any item of
Equipment, Lessee shall repair and rebuild the affected portions of such
Equipment (or cause such affected portions to be repaired and rebuilt) to the
condition required to be maintained by Section 5.3. In the event that any Part
which may from time to time be incorporated or installed in or attached to any
item of Equipment becomes at any time worn out, damaged or permanently rendered
unfit for use for any reason whatsoever (unless such event constitutes a
Casualty, in which event the provisions of Section 6.1 hereof shall apply),
Lessee, at no charge to Administrative Agent or any Lessor, will promptly
replace, or cause to be replaced, such Part with a replacement Part (a
"Replacement Part") in accordance with Lessee's customary practices, but in any
event subject to Section 5.3. In addition, Lessee may, at its own cost and
expense, remove in the ordinary course of maintenance, service, repair, overhaul
or testing, any Part, whether or not worn out, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use; provided, that
Lessee will, at its own cost and expense, replace such Part with a Replacement
Part as promptly as is commercially reasonable. All Replacement Parts shall be
free and clear of all Liens (other than Permitted Liens) and shall be in as good
operating condition as, and shall have a value and utility at least equal to,
the Parts replaced, assuming such replaced Parts and the applicable item of
Equipment were in the condition and repair required to be maintained by the
terms of Section 5.3. Any Part at any time removed from any item of Equipment
shall remain the property of Administrative Agent, for the benefit of the
Lessors (subject to this Lease), no matter where located, until such time as
such Part shall be replaced by a Part which has been incorporated or installed
in or attached to such Equipment and which meets the requirements for a
Replacement Part specified above. Immediately upon any Replacement Part becoming
incorporated or installed in or attached to any such Equipment as above
provided, without further act: (i) title to the replaced Part (the "Replaced
Part") shall thereupon vest in Lessee, free and clear of all rights of
Administrative Agent, for the benefit of the Lessors, and shall no longer be
deemed a Part hereunder; (ii) such Replacement Part shall thereupon vest in
Lessors, as provided in Section 12.1 (in the same manner as the underlying
applicable item of Equipment); and (iii) such Replacement Part shall become
subject to this Lease, the security interest created hereunder, and the
applicable Lease Supplement, and shall be deemed part of such Equipment for all
purposes hereof to the same extent as the Parts incorporated or installed in or
attached to such Equipment on the date such Equipment became subject to this
Lease.
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<PAGE> 12
(b) Upon the satisfaction of the conditions specified in Section
5.4(a), and the Replacement Part becoming subject to this Lease and the security
interest created hereunder, Administrative Agent, on behalf of the Lessors,
shall execute and deliver to Lessee such documents as may be reasonably
necessary to release the Replaced Part from the terms and scope of this Lease
(but without representations or warranties, except that the Replaced Part is
free and clear of all Lessor Liens), in such form as may be reasonably requested
by Lessee and are in form and substance satisfactory to the Required Lessors,
all at the expense of Lessee.
(c) Provided no Event of Default has occurred or is continuing and if
this Lease shall not have previously terminated, Lessee shall have the option,
as hereinafter provided, to substitute equipment of "like kind" and of at least
equal value and utility ("Substituted Equipment"), for Equipment subject to this
Lease, provided, that (i) the aggregate Purchase Price of Equipment so
substituted over the Lease Term shall not exceed fifteen percent (15%) of the
aggregate Purchase Price of all of the Equipment originally subject to this
Lease without the consent of Administrative Agent and (ii) a new Appraisal for
the Equipment satisfactory to Required Lessors shall be delivered to the
Administrative Agent. On the date of any such substitution, Lessee shall deliver
to Lessor a Lease Supplement identifying such Substituted Equipment and transfer
to Lessor all right, title and interest in and to the Substituted Equipment.
Such Substituted Equipment shall become subject to this Lease and the security
interest created hereunder and Lessee shall execute and deliver such financing
statements and other documents as may be reasonably requested by Lessor to
reflect such security interest. Upon the substitution of Equipment as provided
herein, Lessor shall transfer to Lessee at Lessee's expense all of Lessor's
right, title and interest in and to the original Equipment subject to the
substitution without any representation or warranty.
Section 5.5 Alterations, Modifications and Additions; Removable Parts.
(a) Except as provided in Sections 5.3 and 5.4, Lessee shall not
remove, replace or alter any item of Equipment or affix or place any accessory,
equipment or device on any item of Equipment (such actions shall be hereafter
referred to collectively as "Alter") if such removal, replacement, alteration or
addition would materially impair the originally intended function or use or
materially reduce the value or useful life of such Equipment; provided, that
Lessee, at its own expense, will make, or cause to be made, any alteration,
improvement, modification or addition to or in respect of any item of Equipment
that may be necessary, from time to time, to comply in all material respects
with any applicable Law or to comply with any provision of any insurance policy
required to be maintained under Section 7.1 (any Parts being used to comply with
this provision shall be hereafter referred to as "Mandatory Parts"). All Parts
affixed to or installed as a part of any item of Equipment, excluding temporary
replacements, shall thereupon become subject to the security interest under this
Lease. If no Event of Default has occurred and is continuing, Lessee may remove,
at its expense, any Part at any time during the term of this Lease (such Part, a
"Removable Part") without any requirement to replace such Removable Part: (i)
which is in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to any item of Equipment on
the date such item became subject to this Lease or any Part in replacement of or
substitution for any such Part originally incorporated or installed or attached
to such Equipment;
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(ii) which is not a Mandatory Part; and (iii) which can be removed from any item
of Equipment without causing damage to such Equipment or diminishing or
impairing the value, utility or condition which such Equipment would have had at
such time had such addition not occurred; provided, that: (x) such removal will
not materially impair the value, use or useful life which such Equipment would
have had at such time had such Part not been affixed or placed to or on such
Equipment and (y) such Part is not necessary for the continued normal use of
such Equipment. Lessee shall repair all damage to any item of Equipment
resulting from any alteration so that such Equipment shall continue to be fit
for its intended purpose (ordinary wear and tear excepted). Neither
Administrative Agent nor any Lessor shall have any obligation to pay for or to
reimburse Lessee for any alteration required or permitted by this Section 5.5.
(b) As provided in Section 4.1 of the Participation Agreement and
Section 12.1 of this Lease, all Parts incorporated or installed in or attached
or added to any item of Equipment as the result of alterations, modifications or
additions under this Section 5.5, except Removable Parts, shall, without further
act, vest in Administrative Agent, for the benefit of the Lessors, to secure
Lessee's performance of its obligations under the Operative Agreements, in the
manner provided in clause (ii) of Section 5.4(a) and the other applicable
provisions of Section 5.4 shall apply with respect to such Parts. Upon the
removal by Lessee of any Removable Part as provided herein, such Removable Part
shall no longer be deemed part of the Equipment from which it was removed. Any
Removable Part not removed by Lessee as provided herein prior to the end of the
Lease Term shall become the property of Lessor at such time.
Section 5.6 Inspection of Collateral. Administrative Agent, the Lessors
and each of their agents and representatives shall have the right during regular
business hours, upon reasonable notice, to inspect any Collateral, including
without limitation any documentation related to the Collateral.
ARTICLE VI
Risk of Loss; Replacement; Waiver and Indemnity
Section 6.1 Casualty. Upon a Casualty, Lessee shall give prompt written
notice thereof (a "Casualty Notice") to Administrative Agent, which notice shall
specify whether Lessee will:
(a) repay a portion of the Lease Balance equal to the Casualty Amount
together with all Variable Rent accrued on such portion of the Lease Balance to
the date of payment, which repayment shall be made no later than the next
scheduled Payment Date occurring after such Casualty or, if such Casualty occurs
during the last 5 Business Days of a Rent Period, then no later than the second
Payment Date occurring after such Casualty, provided that in any event such
repayment shall be made no later than the last day of the Lease Term (the
"Casualty Settlement Date"); or
(b) replace the Equipment with respect to which the Casualty has
occurred pursuant to the provisions of Section 5.4 (treating such Equipment, for
these purposes, in the same manner as
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a Part), provided that upon the occurrence and during the continuance of an
Event of Default or an Incipient Default, Lessee shall be obligated, at the
option of the Required Lessors, to make the payments referred to in clause (a)
above and shall not be entitled to exercise any right or election of replacement
as set forth in this clause (b).
If Lessee has elected, or is required, to pay the Casualty Amount
pursuant to clause (a) above, Lessee shall continue to make all payments of Rent
due under the Lease Supplement until and including the Casualty Settlement Date.
Upon payment of the Casualty Amount in respect of any item of Equipment
suffering a Casualty on such Casualty Settlement Date, the remaining scheduled
payments of Fixed Rent, if any, shall each be reduced by an amount equal to the
product of the scheduled amount of such Fixed Rent prior to the receipt of such
payment by Administrative Agent multiplied by the Allocation Fraction under the
Lease Supplement of the Equipment suffering such Casualty.
Section 6.2 Casualty Proceeds. All proceeds of any casualty insurance
or condemnation proceeds ("Casualty Proceeds") paid or payable to Lessee or any
Affiliate of Lessee by reason of a Casualty or Partial Casualty to any item of
Equipment shall be deposited into a deposit account established by
Administrative Agent, for the benefit of the Lessors (the "Deposit Account"),
for purposes of funding Lessee's compliance with the applicable provisions of
Section 5.4 or 6.1 with respect to such Casualty or Partial Casualty. The
balance in the Deposit Account shall be invested in overnight cash equivalent
investments. Any Casualty Proceeds paid to Administrative Agent with respect to
any item of Equipment suffering a Casualty or a Partial Casualty shall also be
deposited in the Deposit Account. Any moneys in the Deposit Account and all
proceeds thereof attributable to a Casualty or Partial Casualty shall be
remitted promptly to Lessee upon Lessee's written certification to Lessor that
the proceeds of the Deposit Account have been, or are to be, used to comply with
Section 6.1 or Section 5.4, as applicable. Notwithstanding the foregoing
provisions of this Section 6.2, and provided that no Incipient Default
consisting of an event described in Section 8.1 (a) or (g) and no Event of
Default has occurred and is continuing, if the aggregate amount of Casualty
Proceeds at any one time outstanding is $1,000,000 or less, then Lessee shall
receive such Casualty Proceeds directly, without delivery to Administrative
Agent; provided, that such Casualty Proceeds are applied in accordance with the
requirements of Section 6.1 or Section 5.4, as applicable. Notwithstanding any
Casualty, all of Lessee's obligations under this Lease and the Lease Supplement
(including its obligation to make all payments of Rent as they become due) shall
continue unabated and in full force and effect as provided in this Lease.
Without limiting the foregoing, Lessee's obligations under Section 5.4 shall not
be affected by the amount of any Casualty Proceeds received by Lessee.
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ARTICLE VII
Insurance
Section 7.1 Required Coverages. At its own expense, Lessee will
maintain or cause to be maintained, with financially responsible companies
selected by Lessee and having an A.M. Best rating of "A" or better or otherwise
acceptable to the Required Lessors, insurance with respect to its property and
business against such liabilities, casualties, risks and contingencies and in
such types and amounts as is customary for Guarantor as to similar equipment
owned, located or operated by it, but in the case of property damage, in no
event less than the Lease Balance. Such insurance shall (i) name Administrative
Agent and Lessors as additional insured parties or, in the case of property
insurance, loss payees thereunder as specified above (without any representation
or warranty by, or obligation upon, Administrative Agent or any Lessor) as their
respective interests may appear, (ii) contain the agreement by the insurer that
any loss thereunder shall be payable to Administrative Agent and Lessors
notwithstanding any action, inaction or breach of representation or warranty by
Lessee or any other Person having an interest in any item of Equipment
(including, without limitation, Administrative Agent or any Lessor), (iii)
provide that there shall be no recourse against Administrative Agent or any
Lessor for payment of premiums or other amounts with respect thereto, (iv)
provide that insurer shall give Administrative Agent and each Lessor at least 30
days' prior written notice of cancellation, lapse or reduction of limits, (v) be
primary with respect to any other insurance carried by or available to
Administrative Agent and the Lessors, (vi) provide that the insurer shall waive
any right of subrogation, setoff, counterclaim, or other deduction, whether by
attachment or otherwise, against Administrative Agent or any Lessor, and (vii)
contain a cross-liability clause providing for coverage of Administrative Agent
and each Lessor as if separate policies had been issued to each of them,
provided, however, that such provision shall not increase the total limits of
liability over those specified herein. Lessee will notify Administrative Agent
and Lessors promptly of any policy cancellation, reduction in policy limits,
modification or amendment.
Section 7.2 Delivery of Insurance Certificates. On or before the
Initial Delivery Date, Lessee shall deliver to Administrative Agent certificates
of insurance satisfactory to Administrative Agent and Lessors evidencing the
existence of all insurance required to be maintained hereunder and setting forth
the respective coverages, limits of liability, carrier, policy number and period
of coverage. Thereafter, throughout the Lease Term, at the time each of Lessee's
insurance policies is renewed (but in no event less frequently than once each
year), Lessee shall deliver to Administrative Agent, for the benefit of Lessors,
certificates of insurance evidencing that all insurance required by Section 7.1
to be maintained by Lessee with respect to the Equipment is in effect within ten
(10) days after renewal.
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ARTICLE VIII
Default
Section 8.1 Events of Default. The following shall constitute events of
default (each an "Event of Default") hereunder and under each Lease Supplement
then in effect (whether any such event shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any Authority):
(a) (i) any payment of Rent, or any other payment payable by Lessee
hereunder or by Lessee under any other Operative Agreement (including without
limitation, any amount payable pursuant to Article VII or VIII of the
Participation Agreement) other than a payment due on the Termination Date shall
not be paid when due, and such payment shall be overdue for a period of five
Business Days or (ii) any payment due on the Termination Date shall not be paid
when due;
(b) any representation or warranty made by or on behalf of Lessee
contained in any Operative Agreement or in any certificate, letter or other
writing or instrument furnished or delivered to Agents or Lessors pursuant
thereto shall at any time prove to have been incorrect in any material respect
when made, deemed made or reaffirmed, as the case may be;
(c) Lessee shall default in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
Section 7.1, Article IX, X or XI or Section 13.10 of this Lease or under Section
6.1(a) or (f) of the Participation Agreement (except to the extent that Section
13.10 incorporates Section 5.2, in which case clause (e) of this Section 8.1
shall apply);
(d) Lessee shall default in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
Section 6.2 of the Participation Agreement and such default shall not have been
remedied within 10 Business Days after notice thereof shall have been given to
Lessee by Administrative Agent;
(e) Lessee shall default in the performance or observance of any other
term, covenant, condition or agreement on its part to be performed or observed
hereunder or under any other Operative Agreement (and not constituting an Event
of Default under any other clause of this Section 8.1), and such default shall
continue unremedied for a period of 30 days after the earlier to occur of (i)
written notice thereof by either Agent or any Lessor to Lessee or (ii) Lessee
has Actual Knowledge thereof;
(f)(i) Lessee shall generally fail to pay, or admit in writing its
inability to pay, its debts as they become due, or shall voluntarily commence
any case or proceeding or file any petition under any bankruptcy, insolvency or
similar law or seeking dissolution, liquidation or reorganization or the
appointment of a receiver, agent, custodian or liquidator for itself or a
substantial portion of its
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property, assets or business or to effect a plan or other arrangement with its
creditors, or shall file any answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be adjudicated
bankrupt, or shall make a general assignment for the benefit of creditors, or
shall consent to, or acquiesce in the appointment of, a receiver, agent,
custodian or liquidator for itself or a substantial portion of its property,
assets or business; or (ii) corporate action shall be taken by Lessee for the
purpose of effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition shall be
commenced or filed against Lessee under any bankruptcy, insolvency or similar
law or seeking the dissolution, liquidation or reorganization of Lessee or the
appointment of a receiver, agent, custodian or liquidator for Lessee or of a
substantial part of the property, assets or business of Lessee, or any writ,
judgment, warrant of attachment, execution or similar process shall be issued or
levied against a substantial part of the property, assets or business of Lessee,
and such proceedings or petition shall not be dismissed or stayed, or such writ,
judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement, filing or
levy, as the case may be;
(h) any Plan shall incur an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA) which (individually
or collectively) exceeds $25,000,000, whether or not waived, or a waiver of the
minimum funding standard or extension of any amortization period is sought or
granted under Section 412 of the Code with respect to a Plan; any proceeding
shall have occurred or is reasonably likely to occur by the PBGC under Section
4069(a) of ERISA to impose liability on Lessee, any consolidated Subsidiary or
an ERISA Affiliate which (individually or collectively) exceeds $25,000,000; any
required contribution to a Plan or Multiemployer Plan in excess of $25,000,000
shall not have been made within 15 days of the date such contribution is due; or
Lessee, any consolidated Subsidiary or any ERISA Affiliate has incurred or is
reasonably likely to incur a liability to or on account of a Plan or
Multiemployer Plan under Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA,
and there shall result (individually or collectively) from any such event or
events a material risk of either (i) the imposition of a Lien(s) upon, or the
granting of a security interest(s) in, the assets of Lessee, any consolidated
Subsidiary and/or an ERISA Affiliate securing an amount(s) equal to or exceeding
$25,000,000, or (ii) the Lessee, any consolidated Subsidiary and/or an ERISA
Affiliate incurring a liability(ies) or obligation(s) with respect thereto equal
to or exceeding $25,000,000;
(i) any Operative Agreement or the security interest granted under this
Lease shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective or cease to be the legally valid, binding and
enforceable obligation of Lessee or any Affiliate; or Lessee or any Affiliate,
directly or indirectly, shall contest in any manner in any court the
effectiveness, validity, binding nature or enforceability thereof; or the
security interest securing Lessee's obligations under the Operative Agreements
shall, in whole or in part, cease to be a perfected first priority security
interest;
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(j) Lessee or any of its Subsidiaries (i) fails to make (whether as
primary obligor or as guarantor or other surety) any principal payment of or
interest or premium, if any, on any Indebtedness (other than the obligations
under this Lease) beyond any period of grace provided with respect thereto (not
to exceed 30 days), provided that the aggregate amount of all Indebtedness as to
which such a payment default shall occur and be continuing is equal to or
exceeds $25,000,000, or (ii) fails to duly observe, perform or comply with any
agreement with any Person or any term or condition of any instrument, if such
failure, either individually or in the aggregate, shall have caused or shall
have the ability to cause the acceleration of the payment of Indebtedness with
an aggregate face amount which is equal to or exceeds $25,000,000;
(k) a judgment or order shall be entered against Lessee or any of its
Subsidiaries, which with other outstanding judgments and orders entered against
Lessee and its Subsidiaries equals or exceeds $25,000,000 in the aggregate (to
the extent not covered by insurance as to which the respective insurer has
acknowledged coverage), and (i) within 60 days after entry thereof such judgment
shall not have been discharged or execution thereof stayed pending appeal or,
within 60 days after the expiration of any such stay, such judgment shall not
have been discharged, or (ii) any enforcement proceeding shall have been
commenced (and not stayed) by any creditor upon such judgment;
(l) a Guaranty Default shall have occurred and be continuing; or
(m) any of the Equipment having a value in the aggregate in excess of
$1,000,000 shall have been abandoned for a period of at least 30 consecutive
days.
Section 8.2 Remedies. If any Event of Default has occurred and is
continuing, Administrative Agent may (at the direction of the Required Lessors
pursuant to Section 9.3 of the Participation Agreement) exercise in any order
one or more or all of the remedies set forth in this Section 8.2 (it being
understood that no remedy herein conferred is intended to be exclusive of any
other remedy or remedies, but each and every remedy shall be cumulative and
shall be in addition to every other remedy given herein or now or hereafter
existing at law or in equity or by statute):
(a) Administrative Agent may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by Lessee of the
applicable covenants of this Lease or to recover damages for the breach thereof;
(b) Administrative Agent may by notice in writing to Lessee terminate
this Lease, but Lessee shall remain liable as hereinafter provided; and
Administrative Agent may, at its option, do any one or more of the following:
(i) declare the Lease Balance, all accrued Variable Rent and all other amounts
then payable by Lessee under this Lease and the other Operative Agreements to be
immediately due and payable, and recover any other damages and expenses
(including the costs and expenses described in Article VII and Section 11.5 of
the Participation Agreement) in addition thereto which Administrative Agent or
any Lessor shall have sustained by reason of such Event of Default; (ii) enforce
the security interest given hereunder pursuant to the Uniform Commercial Code
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or any other law; (iii) enter upon the premises where any item of Equipment may
be and either remove such Equipment, with any damage to the improvements on such
premises to be borne by Lessee (except to the extent such damage is due to the
willful misconduct or gross negligence of Administrative Agent or its
representatives), or take possession of such Equipment; and (iv) require Lessee
to return the Equipment as provided in Article IX; or
(c) Administrative Agent may require Lessee immediately to purchase the
Equipment for an aggregate purchase price equal to the Lease Balance as of the
most recent Payment Date. Lessee shall also pay to Administrative Agent (i) all
accrued unpaid Rent payable on or prior to such Payment Date; (ii) the pro rata
Variable Rent from the most recent Payment Date to the date of such purchase;
and (iii) all other fees and expenses and other amounts then due and payable
pursuant to this Lease and the other Operative Agreements.
Notwithstanding the foregoing, so long as any Event of Default
described in subsections (a) through (e) and (h) through (m) of Section 8.1
shall have occurred and be continuing, and upon notice by the Administrative
Agent to Lessee that the Administrative Agent seeks to pursue any of the
remedies described in Section 8.2, Lessee may, within one (1) Business Day from
the receipt of such notice, elect to purchase all of the Equipment for an amount
equal to the Lease Balance as of the most recent Payment Date. Lessee shall also
pay to Administrative Agent (i) all accrued unpaid Rent payable on or prior to
such Payment Date; (ii) the pro rata Variable Rent from the most recent Payment
Date to the date of such purchase; and (iii) all other fees and expenses and
other amounts then due and payable pursuant to this Lease and the other
Operative Agreements. The purchase of the Equipment by Lessee pursuant to the
preceding two sentences shall be in immediately available funds within three (3)
Business Days from the date of Lessee's election to purchase the Equipment.
Notwithstanding the foregoing, upon the occurrence of any Event of
Default described in subsection (f) or (g) of Section 8.1, Lessee shall
automatically and immediately be required to purchase all of the Equipment for
an amount equal to the Lease Balance as of the most recent Payment Date. Lessee
shall also pay to Administrative Agent (i) all accrued unpaid Rent payable on or
prior to such Payment Date; (ii) the pro rata Variable Rent from the most recent
Payment Date to the date of such purchase; and (iii) all other fees and expenses
and other amounts then due and payable pursuant to this Lease and the other
Operative Agreements.
Except for notices expressly otherwise provided for in the Operative
Agreements, Lessee hereby waives presentment, demand, protest and notice of any
kind including, without limitation, notices of default, notice of acceleration
and notice of intent to accelerate.
Section 8.3 Additional Remedies. In addition to the remedies set forth
in Section 8.2, if any Event of Default shall occur and be continuing, the
Administrative Agent may (at the direction of the Required Lessors pursuant to
Section 9.3 of the Participation Agreement), but is not required to, sell the
Collateral in one or more sales. Administrative Agent, on behalf of Lessors, may
purchase all or any part of the Collateral at such sale. Lessee acknowledges
that sales for cash or on credit to a wholesaler, retailer or user of such
Collateral, at a public or private auction, are all commercially
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reasonable. Any notice required by law of intended disposition by Administrative
Agent shall be deemed reasonable and properly given if given at least 10 days
before such disposition.
Section 8.4 Proceeds of Sale; Deficiency. All payments received and
amounts held or realized by Administrative Agent at any time when an Event of
Default shall have occurred and be continuing and after, pursuant to Section
8.2, the Lease Balance shall have been accelerated or Lessee is required to
purchase the Equipment, as well as all payments or amounts then held or
thereafter received by Administrative Agent shall be distributed forthwith upon
receipt by the Administrative Agent in the following order of priority:
first: (i) so much of such payments or amounts as shall be
required to reimburse first the Administrative Agent and then any
Lessor for any tax (other than any income tax payable on interest not
required to be indemnified by Lessee under Article VIII of the
Participation Agreement and on fees and other compensation of the
Administrative Agent), expense or other amount owed to Administrative
Agent or any Lessor in connection with the collection or distribution
of such payments or amounts to the extent not previously reimbursed by
Lessee (including, without limitation, the expenses of any sale, taking
or other proceeding, expenses in connection with realizing on any of
the Collateral, reasonable attorneys' fees and expenses (including the
allocated costs of internal counsel), court costs and any other
reasonable expenditures incurred or reasonable expenditures or advances
made by Administrative Agent or any Lessor in the protection, exercise
or enforcement of any right, power or remedy upon such Event of Default
whether pursuant to Section 8.2 or otherwise) shall be so applied by
Administrative Agent first to itself and then to such Lessors; and (ii)
so much of such payments or amounts as shall be required to pay the
reasonable fees and compensation of Administrative Agent in connection
with acting as Administrative Agent not previously paid by Lessee,
shall be distributed to Administrative Agent;
second: so much of such payments or amounts except those
specified in clause third below, which under the terms of this Lease
and the other Operative Agreements have accrued, including, without
limitation, such amounts as shall be required to reimburse the then
existing or prior Lessors for payments made by them to Administrative
Agent pursuant to Section 9.4 of the Participation Agreement (to the
extent not previously reimbursed);
third: so much of such payments or amounts remaining as shall
be required to pay in full, in the following order of application, (a)
all accrued unpaid Variable Rent (including, to the extent permitted by
applicable law, interest on interest) and (b) the aggregate unpaid
Lease Balance, and in case the aggregate amount so to be distributed
shall be insufficient to pay any of the foregoing in full all as
aforesaid then, ratably to the Lessors in accordance with their
respective Commitment Percentages; and
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fourth: so much of such payments or amounts as shall remain
shall be distributed to Lessee.
Section 8.5 Right to Perform Lessee's Agreements. If Lessee fails to
perform any of its agreements contained herein or in any other Operative
Agreement within the time period specified therefor, so long as no Event of
Default has occurred and is continuing, Administrative Agent, upon written
instructions from Required Lessors and receipt by Administrative Agent (and one
or more Lessors) of indemnification satisfactory to it, and, upon 3 Business
Days' prior notice to Lessee, may perform such agreement and the fees and
expenses incurred by Administrative Agent (or one or more Lessors) in connection
with such performance together with interest thereon shall be payable by Lessee
upon demand. Interest on fees and expenses so incurred by Administrative Agent
(or one or more Lessors) shall accrue at the rate provided in Section 3.2 for
overdue payments.
ARTICLE IX
Return of Equipment
If Administrative Agent has terminated this Lease pursuant to Section
8.2, and Lessee has not elected to purchase the Equipment pursuant to Section
8.2 or Articles X or XI, Lessee shall (a) maintain (or cause to be maintained)
the Equipment in the condition required by Section 5.3, store the Equipment for
up to one year following such termination without cost to Administrative Agent
or any Lessor and keep all of the Equipment insured in accordance with Article
VII, and (b) upon such termination forthwith package and deliver without cost to
the Administrative Agent or any Lessor exclusive possession of such Equipment to
Administrative Agent, for the benefit of the Lessors, at a location in the
continental United States (excluding Alaska) designated by Administrative Agent,
together with a copy of an inventory list of the Equipment then subject to the
Lease, all then current plans, specifications and operating, maintenance and
repair manuals relating to the Equipment that have been received or prepared by
Lessee, appropriately protected and in the condition required by Section 5.3
(and in any event in condition to be placed in immediate service), to
Administrative Agent. This Article IX shall survive termination of this Lease.
ARTICLE X
Early Termination
On any scheduled Payment Date after the Lease Commencement Date Lessee
may, at its option, upon at least 30 days' advance written notice from Lessee to
Administrative Agent and the Lessors, purchase all, but not less than all, of
the Equipment subject to all Lease Supplements then in effect for a purchase
price payable in immediately available funds in an amount equal to the Lease
Balance as of such Payment Date. Lessee shall also pay to Administrative Agent
(i) all accrued unpaid Rent payable on or prior to such Payment Date and (ii)
all other fees and expenses and other
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amounts then due and payable pursuant to this Lease and the other Operative
Agreements. Upon the payment in full of such sums by wire transfer of
immediately available funds by Lessee in accordance with the provisions of the
preceding sentence, the obligation of Lessee to pay Rent hereunder shall cease,
the term of this Lease shall end on the date of such payment and Administrative
Agent, on behalf of Lessors, shall execute and deliver to Lessee such documents
as may be reasonably required to release the Equipment from the terms and scope
of this Lease (without representations or warranties, except that the Equipment
is free and clear of Lessor Liens), in such form as may be reasonably requested
by Lessee, all at Lessee's sole cost and expense.
ARTICLE XI
Lease Termination
Section 11.1 Options. Not later than 180 days prior to the last day of
the Base Period or any Renewal Term, if any, Lessee shall, by delivery of
written notice to Administrative Agent, exercise one of the following options:
(a) elect to renew this Lease with respect to all, but not less than
all, of the Equipment then subject hereto (the "Renewal Option") with respect to
the Base Period or Renewal Term then in effect, with each such Renewal Term
commencing on the last day of the Base Period or Renewal Term then in effect,
with such renewal to be effective only if agreed to by Lessors, for such period
of time and upon such terms and conditions as are mutually acceptable to Lessee
and Lessors, provided, that (i) such option shall be exercised only with respect
to the Base Period or Renewal Term then in effect and (ii) in connection with
the exercise of the Renewal Option Lessee shall provide Lessors with an
Appraisal of all of the Equipment subject to this Lease together with its notice
of exercise, which Appraisal shall set forth the Appraisal Values of the
Equipment as of the commencement of each Renewal Term and as of the end of each
Renewal Term and shall be satisfactory to all Lessors; or
(b) purchase in immediately available funds in an amount equal to the
Lease Balance all, but not less than all, of the Equipment then subject to this
Lease on the last day of the Base Term or any Renewal Term, on the terms and
conditions set forth in Section 11.2. (the "Lessee Purchase Option"); provided,
that such option shall be exercised only with respect to all Equipment then
subject to this Lease; or
(c) sell on behalf of the Lessors to a purchaser or purchasers not in
any way affiliated with Lessee all, but not less than all, of the Equipment then
subject to this Lease on the last day of the Base Period or any Renewal Term
then in effect with respect to which such option is exercised, on the terms and
conditions set forth in Section 11.3 (the "Sale Option"); provided, that such
option shall be exercised only with respect to all Equipment then subject to
this Lease.
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Lessee's election of the Lessee Purchase Option will be irrevocable at the time
made, but if Lessee fails to make a timely election, Lessee will be deemed to
have irrevocably elected the Lessee Purchase Option. In addition, the Sale
Option shall automatically be revoked if there exists an Incipient Default or
Event of Default at anytime after the Sale Option is properly elected and
Administrative Agent shall be entitled to exercise all rights and remedies
provided in Article VIII. Lessee may not elect the Sale Option if there exists
on the date the election is made an Event of Default that is continuing or an
Incipient Default.
Section 11.2 Lessee Purchase Option. If Lessee elects the Lessee
Purchase Option, then on the Termination Date Lessee shall purchase all (but not
less than all) of the Equipment for an amount equal to the Lease Balance. Lessee
shall also pay to Administrative Agent all accrued unpaid Rent and all other
amounts, if any then due and owing hereunder. Upon the payment in full of such
sums by wire transfer of immediately available funds by Lessee in accordance
with the provisions of the preceding sentence, the obligation of Lessee to pay
Rent hereunder with respect to such Equipment shall cease, the term of this
Lease with respect to such Equipment shall end on the date of such payment and
Administrative Agent, on behalf of Lessors, shall execute and deliver to Lessee
such documents as may be reasonably required to release such Equipment from the
terms and scope of this Lease (without representations or warranties, except
that such Equipment is free and clear of Lessor Liens), in such form as may be
reasonably requested by Lessee, all at Lessee's sole cost and expense.
Section 11.3 Sale Option. If Lessee elects the Sale Option, then during
the period prior to the Termination Date Lessee, as agent for Administrative
Agent and Lessors and at no expense to Administrative Agent and Lessors, shall
use its commercial best efforts to obtain bids for the purchase of all of the
Equipment in immediately available funds on such Termination Date from
prospective purchasers which are unaffiliated with Lessee and are financially
capable of purchasing the Equipment ("Qualified Purchasers"). Administrative
Agent may also, if it so desires, seek to obtain such bids. All bids received by
Lessee or Administrative Agent, within five Business Days after receipt thereof,
shall be certified to the other in writing setting forth the name and address of
the party submitting each such bid and the amount and terms thereof.
If any bid is received from a Qualified Purchaser for an amount in
excess of the Lessor Risk Amount or if the Required Lessors agree in their sole
and absolute discretion to accept a bid for less than such Lessor Risk Amount,
then on such Termination Date (i) the Equipment shall be sold on an "as-is,"
"where-is" basis (without recourse to or representation or warranty from
Administrative Agent and Lessors, except that the Equipment is free and clear of
Lessor Liens), to the bidder, which is a Qualified Purchaser, selected by Lessee
after consultation with Administrative Agent (the "Purchaser"), provided,
however, that the Required Lessors may not reject the highest bidder if the next
highest bid is not at least equal to such Lessor Risk Amount; (ii) Lessee shall
make the Equipment available to the Purchaser in the same manner and in the same
condition and otherwise in accordance with this Lease as if delivery were made
to Administrative Agent pursuant to Article IX, (iii) such Purchaser shall pay
the sale proceeds in immediately available funds to Administrative Agent for the
benefit of Lessors, to be distributed as provided in the next paragraph
-19-
<PAGE> 24
of this Section, (iv) Lessee shall pay to Administrative Agent, for the benefit
of Lessors, in immediately available funds (x) all accrued unpaid Rent and all
other amounts, if any then due and owing under this Lease, and (y) an amount
equal to the excess, if any, of (A) the Lease Balance as of the Termination Date
over (B) the sale proceeds (but in no event shall such amount payable by Lessee
under this clause (y) exceed the Lessee Risk Amount), to be distributed as
provided in the next paragraph of this Section, (v) title to such Equipment
shall be transferred to such Purchaser, free and clear of Lessor Liens, and (vi)
Administrative Agent, on behalf of Lessors, shall execute and deliver to
Purchaser such documents as may be reasonably required to release such Equipment
from the terms and scope of this Lease (without representations or warranties,
except that such Equipment is free and clear of Lessor Liens), in such form as
may be reasonably requested by Purchaser.
Sales proceeds referred to in clause (iii) of the preceding paragraph
and other amounts referred to in clause (iv)(y) of the preceding paragraph shall
be distributed as follows, provided that if ABN AMRO Bank N.V.'s proportionate
share of the Total Commitment increases or decreases from its current Commitment
of fifteen percent (15%), a corresponding adjustment shall be made to the
percentages set forth in clauses (a) and (b) below:
(a) all sales proceeds up to the Lessor Risk Amount shall be
distributed 78.81% to the Lessors (other than ABN AMRO Bank N.V.) (the
"Other Lessors") on a pro rata basis, and 21.19% to ABN AMRO Bank N.V.;
(b) all sales proceeds in excess of the Lessor Risk Amount (up
to the Lessee Risk Amount) and the amount calculated under clause
(iv)(y) of the immediately preceding paragraph shall be distributed
86.05% to the Other Lessors on a pro rata basis, and 13.95% to ABN AMRO
Bank N.V.; and
(c) all sales proceeds remaining after payment of the Lease
Balance, plus all Rent and other amounts due and payable under this
Lease and any other Operative Agreement, shall be distributed to
Lessee.
If (x) Administrative Agent does not receive any bid in excess of the
aggregate Lessor Risk Amount from a Qualified Purchaser or Administrative Agent
does not accept any bids received for less than the Lessor Risk Amount prior to
the Termination Date, Lessee shall have the option to, or (y) the proposed sale
to the Purchaser is not consummated prior to the Termination Date, Lessee shall
be required to, purchase such Equipment by paying to Administrative Agent within
ten (10) Business Days of the Termination Date, in immediately available funds
in an amount equal to the Lease Balance as of the Termination Date. In the event
Lessee exercises such option or is so required to purchase such Equipment,
Lessee shall also pay to Administrative Agent (i) all accrued unpaid Rent
payable on such Termination Date; (ii) the pro rata Variable Rent from the
Termination Date to the date of such purchase; and (iii) all other fees and
expenses and other amounts then due and payable pursuant to this Lease and the
other Operative Agreements. If Lessee has the option to, but does not so elect
to, purchase all of the Equipment pursuant to the immediately preceding
sentence, Lessee shall pay to Administrative Agent an amount equal to (i) the
Lessee Risk Amount
-20-
<PAGE> 25
plus (ii) the indemnity for Excessive Use set forth in Section 7.2 of the
Participation Agreement; Administrative Agent shall retain title to such
Equipment and Lessee shall return such Equipment to Administrative Agent in
accordance with Article IX.
ARTICLE XII
Ownership, Grant of Security
Interest to Lessor and Further Assurances
Section 12.1 Grant of Security Interest. Lessee hereby assigns, grants
and pledges to Administrative Agent, for the benefit of the Lessors, a security
interest in all of Lessee's right, title and interest, whether now or hereafter
existing or acquired, in the Collateral, to secure the payment and performance
of all obligations of Lessee now or hereafter existing under this Lease or any
other Operative Agreement. Lessee shall, at its expense, do any further act and
execute, acknowledge, deliver, file, register and record any further documents
which Administrative Agent or any Lessor may reasonably request in order to
protect its title to and perfected security interest in the Collateral, subject
to no Liens other than Permitted Liens, and Administrative Agent's rights and
benefits under this Lease. Lessee shall promptly and duly execute and deliver to
Administrative Agent such documents and assurances and take such further action
as Administrative Agent or any Lessor may from time to time reasonably request
in order to carry out more effectively the intent and purpose of this Lease and
the other Operative Agreements, to establish and protect the rights and remedies
created or intended to be created in favor of Administrative Agent hereunder and
thereunder, and to establish, perfect and maintain the right, title and interest
of Administrative Agent, for the benefit of the Lessors, in and to the
Collateral, subject to no Lien other than Permitted Liens, or of such financing
statements or fixture filings or other documents with respect hereto as
Administrative Agent or any Lessor may from time to time reasonably request, and
Lessee agrees to execute and deliver promptly such of the foregoing financing
statements and fixture filings or other documents as may require execution by
Lessee. Without limiting the foregoing, on and after the date Lessee elects or
is deemed to have elected the Sale Option, Administrative Agent shall have the
unconditional right to demand the execution and delivery by Lessee of bills of
sale with respect to the Equipment leased by Lessee or such documentation as may
be necessary to cause title to the Equipment to be recorded in the name of
Administrative Agent, for the benefit of the Lessors. To the extent permitted by
applicable laws, Lessee hereby authorizes any such financing statements and
other documents to be filed without the necessity of the signature of Lessee, if
Lessee has failed to sign any such instrument within 10 days after request
therefor by Administrative Agent or any Lessor. Upon Lessee's request,
Administrative Agent shall at such time as all of the obligations of Lessee
under this Lease or any other Operative Agreements have been indefeasibly paid
or performed in full (other than Lessee's contingent obligations, if any, under
Articles VII and VIII of the Participation Agreement), execute and deliver such
bills of sale (without representations or warranties, except as to the absence
of Lessor Liens), termination statements and other appropriate documentation
reasonably requested by Lessee, all at Lessee's expense, to evidence
Administrative Agent's transfer of title to and release of its security interest
in the Collateral. At such time,
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<PAGE> 26
Administrative Agent shall execute and deliver to Lessee such documents as may
be reasonably necessary (without representations or warranties, except that the
Equipment is free and clear of Lessor Liens) to transfer title to and release
Administrative Agent's security interest in the Equipment. Any such sale of the
Equipment to either Lessee or a third party shall be on an AS-IS, WHERE-IS basis
(without representations or warranties, except that the Equipment is free and
clear of Lessor Liens).
Section 12.2 Retention of Proceeds in the Case of Default. If Lessee
would be entitled to any amount (including any Casualty Proceeds or Partial
Casualty Proceeds) but for the existence of any Event of Default or Incipient
Default, Administrative Agent shall hold such amount as part of the Collateral
and shall be entitled to apply such amounts against any amounts due hereunder;
provided, that Administrative Agent shall distribute such amount or transfer
such Equipment in accordance with the other terms of this Lease if and when no
Event of Default is then continuing or Incipient Default exists.
Section 12.3 Attorney-in-Fact. Lessee hereby irrevocably appoints
Administrative Agent as Lessee's attorney-in-fact, with full authority in the
place and stead of Lessee and in the name of Lessee or otherwise, from time to
time in Administrative Agent's discretion, upon the occurrence and during the
continuance of an Event of Default, to take any action (including any action
that Lessee is entitled to take) and to execute any instrument which
Administrative Agent or the Required Lessors may deem necessary or advisable to
accomplish the purposes of this Lease (subject to any limitations set forth in
the Operative Agreements), including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for money due and to become due under or in
connection with the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with the foregoing clause (a);
(c) to file any claim or take any action or institute any proceedings
which Administrative Agent may deem to be necessary or advisable for the
collection thereof or to enforce compliance with the terms and conditions of any
Collateral; and
(d) to perform any affirmative obligations of Lessee hereunder.
Lessee hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 12.3 is irrevocable and coupled with an
interest.
Section 12.4 Release of Liens. Upon the replacement or substitution of
any item of Equipment or Part or Sublease, or the payment of all amounts
required pursuant to Section 6.1 in connection with a Casualty, in each case in
compliance with the applicable provisions of the Lease, such Equipment or Part
or Sublease shall be released from the security interest created hereunder as
provided in Section 5.4(b) or (c).
-22-
<PAGE> 27
ARTICLE XIII
Miscellaneous
Section 13.1 No Waiver. No delay or omission in the exercise of any
right, power or remedy accruing to Administrative Agent and/or the Lessors upon
any breach or default of Lessee hereunder shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein or of or in any similar breach or default thereafter
occurring, nor shall any single or partial exercise of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of Administrative Agent or the Lessors of any breach or default under
this Lease must be specifically set forth in writing and must satisfy the
requirements set forth in Article X of the Participation Agreement with respect
to approval by Administrative Agent or the Lessors.
Section 13.2 Survival of Covenants. All claims pertaining to the
representations, warranties and covenants of Lessee under Articles II, III, IV,
V, VI, VII, X, XI and XIII shall survive the termination of this Lease to the
extent such claims arose out of events occurring or conditions existing prior to
any such termination.
Section 13.3 APPLICABLE LAW. THIS LEASE SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE CONFLICT-OF-LAWS PROVISIONS THEREOF.
Section 13.4 Effect and Modification of Lease. No variation,
modification, amendment or waiver of this Lease, including any schedules or
exhibits hereto, or any other Operative Agreement to which Administrative Agent
or any Lessor is a party shall be valid unless the same shall have been entered
into in accordance with Article X of the Participation Agreement.
Section 13.5 Notices. All notices, demands, requests, consents,
approvals and other instruments hereunder shall be in writing and shall be
deemed to have been properly given if given as provided for in Section 11.4 of
the Participation Agreement.
Section 13.6 Counterparts. This Lease has been executed in several
counterparts. One counterpart has been prominently marked "Administrative
Agent's Copy." Only the counterpart marked "Administrative Agent's Copy" shall
evidence a monetary obligation of or shall be deemed to be an original or to be
chattel paper for purposes of the Uniform Commercial Code, and such copy shall
be held by Administrative Agent.
Section 13.7 Severability. Whenever possible, each provision of this
Lease shall be interpreted in such manner as to be effective and valid under
applicable law; but if any provision of
-23-
<PAGE> 28
this Lease shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Lease.
Section 13.8 Successors and Assigns: Benefit of Agreement. This Lease
shall be binding upon each of the parties hereto and, subject to Sections 13.9
and 13.10 hereof, its respective successors and assigns, and shall inure to the
benefit of each of the parties hereto and its respective successors and
permitted assigns.
It is expressly understood and agreed that Administrative Agent is
entering into this Lease for the benefit of the Lessors, who are third party
beneficiaries of this Lease and each Lease Supplement.
Section 13.9 Assignment by Administrative Agent. Administrative Agent
shall not sell, assign, transfer or otherwise dispose of its rights or delegate
its obligations under this Lease to any other Person except as permitted or
required by the Participation Agreement.
Section 13.10 Assignment by Lessee. Lessee shall not sell, assign,
transfer or otherwise dispose of its rights or delegate its obligations under
this Lease to any other Person, except as permitted or required by Section 5.2
hereof or the Participation Agreement. Notwithstanding the foregoing,
Administrative Agent, on behalf of Lessors, acknowledges and agrees that (i)
Lessee intends to transfer its gas compression business after the Initial
Delivery Date to a joint venture entity to be formed with General Electric
Capital Corporation or an Affiliate thereof (the "Transferee") as previously
disclosed to Lessors (the "Business Transfer") and that the Business Transfer
will involve transfer of the Equipment and Lessee's rights and obligations under
the Operative Agreements to the Transferee, and (ii) Administrative Agent and
Lessors intend to permit such a transfer provided that: (A) no Event of Default
has occurred and is continuing or will result therefrom, (B) the Transferee
assumes the obligations of Lessee under the Operative Agreements and makes
representations and warranties to Administrative Agent and Lessors similar to
those made by Lessee in the Operative Agreements pursuant to an instrument
satisfactory to Lessors, (C) the structure of the Business Transfer and the
Transferee will be as has been previously represented to Administrative Agent
and Lessors by Guarantor and (D) Lessee, Transferee and Guarantor, as
applicable, enter into such amendments to, and affirmations of their obligations
under, the Operative Agreements (including amendments to, and filings of,
applicable UCC financing statements) as Administrative Agent and Lessors shall
reasonably request in order to effectively carry out the terms of the Business
Transfer and protect the interests of Administrative Agent and Lessors in the
Collateral and under the Operative Agreements.
Section 13.11 Jury Trial. THE PARTIES WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
LEASE OR ANY RELATED DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY
-24-
<PAGE> 29
RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY RELATED DOCUMENT AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
Section 13.12 Section Headings; Table of Contents. Section headings and
the table of contents used in this Lease (including the schedule) are for
convenience of reference only and shall not affect the construction of this
Lease.
Section 13.13 Final Agreement. THIS LEASE, TOGETHER WITH THE OTHER
OPERATIVE AGREEMENTS, REPRESENTS THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THE LEASE AND THE OTHER
OPERATIVE AGREEMENTS. THIS LEASE CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED,
RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE
PARTIES HERETO IN ACCORDANCE WITH THE TERMS OF THE PARTICIPATION AGREEMENT.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 13.14 Timeliness of Performance. The provisions of Articles
VIII and XI pertaining to the delivery of notice and the performance of certain
events on dates required by Articles VIII and XI are to be strictly adhered to
by the parties hereto.
[Remainder of page intentionally left blank.]
-25-
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed and delivered as of the date first above written.
WEATHERFORD ENTERRA
COMPRESSION COMPANY, L.P., as Lessee
By: /s/ Curtis W. Huff
-------------------------------
Name Printed: Curtis W. Huff
----------------------
Title: Senior Vice President and
Secretary
------------------------------
ABN AMRO BANK N.V., as Administrative
Agent for the Lessors
By: /s/ Elizabeth B. McClellan
---------------------------------
Name Printed: Elizabeth B. McClellan
------------------------
Title: Vice President
-------------------------------
By: /s/ Laurie D. Flom
---------------------------------
Name Printed: Laurie D. Flom
------------------------
Title: Vice President
-------------------------------
-26-
<PAGE> 31
SCHEDULE I TO LEASE
Equipment
See attached.
<PAGE> 32
EXHIBIT A TO LEASE
[FORM OF LEASE SUPPLEMENT]
LEASE SUPPLEMENT
LEASE SUPPLEMENT dated as of December 8, 1998 (this "Lease Supplement")
between WEATHERFORD ENTERRA COMPRESSION COMPANY, L.P., a Delaware limited
partnership (the "Lessee"), and ABN AMRO BANK N.V., a bank organized under the
laws of the Netherlands (the "Administrative Agent"), as Administrative Agent
for the Lessors;
W I T N E S S E T H:
WHEREAS, Lessee and Administrative Agent have heretofore entered into
that certain Master Lease Intended as Security dated as of December 8, 1998 (the
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Lease; and
WHEREAS, the Lease provides for the execution and delivery of Lease
Supplements substantially in the form hereof for the purpose of confirming the
acceptance and lease of certain Equipment, specifying the Rent applicable to
such Equipment and setting forth certain other matters, all as required pursuant
to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Administrative Agent and Lessee hereby agree as
follows:
1. Inspection and Approval. Lessee hereby acknowledges and confirms
that it has inspected and approved the Equipment set forth on Schedule I hereto
for all purposes of the Lease and the other Operative Agreements and, as between
the Lessors and Lessee, such Equipment complies in all material respects with
the specifications for such Equipment, is in good working order, repair,
condition and appearance, and without defect therein with respect to design,
manufacture, conditions, operation and fitness for use or in any other respect,
whether or not discoverable by Lessee as of the date hereof. Lessee reaffirms,
as to the Equipment set forth in Schedule I, each of the waivers,
acknowledgments and agreements of Lessee set forth in Section 4.1 of the Lease.
2. Delivery and Acceptance. Administrative Agent hereby confirms
delivery and lease to Lessee on the applicable Delivery Date under the
Participation Agreement, and Lessee hereby confirms acceptance of delivery and
lease from Administrative Agent under the Lease as hereby supplemented, of the
Equipment listed on Schedule I hereto.
Exhibit A-(1)
<PAGE> 33
3. Warranty. Lessee hereby represents and warrants that no event which
would constitute a Casualty under the Lease has occurred with respect to the
Equipment set forth on Schedule 1 hereto as of the date hereof. Lessee hereby
reaffirms each of the representations and warranties set forth in Section 5.1 of
the Participation Agreement as if made on the date hereof (except for such
representations and warranties as are by their express items limited to a
specific date), including that the items of Equipment set forth on Schedule I
hereto are free and clear of all Liens other than Permitted Liens.
4. Term. The term of this Lease Supplement shall commence on the date
hereof and end on the Termination Date.
5. Rent. On each Payment Date during the Base Period and during each
Renewal Term, Lessee shall pay to Administrative Agent, for the benefit of the
Lessors, the amount of the Fixed Rent, if any, and the applicable amount of
Variable Rent.
6. Confirmation. Lessee hereby confirms its agreement, in accordance
with the Lease as supplemented by this Lease Supplement, to pay Rent to Lessor,
for each item of Equipment leased hereunder. Nothing herein shall reduce
Lessee's obligation to make all other payments required under the Lease,
including those payments to be made on the last day of the Lease Term pursuant
to Article XI of the Lease.
7. Incorporation into Lease. This Lease Supplement shall be construed
in connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease, as supplemented by this Lease Supplement,
shall be and remain in full force and effect and shall govern the Equipment
described on Schedule I hereto.
8. References. Any and all notices, requests, certificates and other
instruments executed and delivered concurrently with or after the execution and
delivery of this Lease Supplement may refer to the "Master Lease Intended as
Security, dated as of December 8, 1998," or may identify the Lease in any other
respect without making specific reference to this Lease Supplement, but
nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
9. Counterparts. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
10. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
Exhibit A-(2)
<PAGE> 34
[signature page follows]
Exhibit A-(3)
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Lease
Supplement to be duly executed and delivered on the day and year first above
written.
WEATHERFORD ENTERRA ABN AMRO BANK N.V.,
COMPRESSION COMPANY, L.P., as Administrative Agent for the Lessors
as Lessee
By: /s/ Curtis W. Huff By: /s/ Elizabeth B. McClellan
--------------------------- ----------------------------------
Name Printed: Curtis W. Huff Name Printed: Elizabeth B. McClellan
----------------- ------------------------
Title: Senior Vice President Title: Vice President
and Secretary -------------------------------
------------------------
By: /s/ Laurie D. Flom
----------------------------------
Name Printed: Laurie D. Flom
------------------------
Title: Vice President
-------------------------------
Exhibit A-(4)
<PAGE> 36
SCHEDULE I
TO LEASE SUPPLEMENT
<TABLE>
<CAPTION>
Equipment Purchased by
Administrative Agent on
behalf of Lessors and Subject
to this Lease Supplement Purchase Price
- ----------------------------- --------------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.18
GUARANTY AGREEMENT
dated as of December 8, 1998
between
WEATHERFORD INTERNATIONAL, INC.
and
ABN AMRO BANK N.V.,
as Administrative Agent for the Lessors
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
GUARANTY AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Guaranty Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.03 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01. Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02. Authorization, Validity, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.03. Governmental Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.04. Conflicting or Adverse Agreements or Restrictions . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.05. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.07. Information; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.08. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.09. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.10. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.11. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.12. Requirements of Law; Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.13. Purpose of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.14. Designation of this Guaranty and the Guaranteed Obligations . . . . . . . . . . . . . . . . . . 6
SECTION 2.15. Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.01. Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.02. Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.03. Insurance and Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.04. Payment of Taxes and other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.05. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.06. ERISA Information and Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.07. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.01. Material Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.02. Consolidation, Merger, Sale or Purchase of Assets, Etc. . . . . . . . . . . . . . . . . . . . 10
SECTION 4.03. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.04. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.05. Ownership of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.06. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.07. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.08. Restrictions on Subsidiary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.09. Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
GUARANTY DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.01 Guaranty Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
NATURE OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.01 Nature of Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.02 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.03 The Guarantor's Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.01 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.02 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.03 Non-Discharged Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.02 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.03 Non-Exclusive Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.04 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.05 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.07 Governing Law and Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
<S> <C>
SECTION 8.08 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.09 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.12 Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.13 Interpretation and Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.14 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.15 Reasonableness Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.16 Survival of Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
SCHEDULES
Schedule 2.01 Material Subsidiaries
EXHIBITS
Exhibit 3.01 Form of Compliance Certificate
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<PAGE> 5
GUARANTY AGREEMENT
This GUARANTY AGREEMENT, dated as of December 8, 1998 (as the same may
be amended from time to time, this "Guaranty"), is executed by and between
WEATHERFORD INTERNATIONAL, INC., a Delaware corporation ("Guarantor"), and ABN
AMRO BANK N.V., as Administrative Agent for the Lessors ("Administrative
Agent").
Preliminary Statement
A. As contemplated by (i) the Participation Agreement, dated as
of the date hereof (as amended, the "Participation Agreement"), among
Weatherford Enterra Compression Company, L.P., a Delaware limited partnership,
as Lessee ("Lessee"), Administrative Agent, Syndication Agent, Arranger, Chase
Bank of Texas, National Association, as Documentation Agent and the Lessors
identified therein and (ii) the Master Lease Intended as Security dated as of
the date hereof (as amended, the "Lease"), between the Administrative Agent, as
an administrative agent for the Lessors, and the Lessee, the Administrative
Agent will lease the Equipment to the Lessee, a limited partnership controlled
by the Guarantor. All capitalized terms used and not otherwise defined herein
shall have the meanings assigned to such terms in Schedule X to the
Participation Agreement.
B. The execution, delivery and performance by the Guarantor of
this Guaranty are conditions precedent to the execution, delivery and
performance by the Agents and the Lessors of the Operative Agreements.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and intending to be legally bound by this Guaranty,
the Guarantor and the Administrative Agent hereby agree as follows:
ARTICLE I
GUARANTY AND PAYMENT
SECTION 1.01 Guaranty. The Guarantor hereby unconditionally
and irrevocably guarantees to and agrees with the Administrative Agent,
Documentation Agent, Syndication Agent, Arranger and the Lessors that:
(a) The Rent and all other amounts payable by the Lessee
under the Operative Agreements, including, without limitation, Lease Balance,
Lessee Risk Amount, Termination Value and any and all indemnification
obligations of the Lessee, will be promptly paid in full when due in accordance
with the provisions thereof; and
(b) The Lessee will perform, comply with and observe (or
cause to be performed, complied with or observed) all obligations, covenants,
terms, conditions, indemnities and undertakings required under the Operative
Agreements, in accordance with the provisions thereof.
<PAGE> 6
SECTION 1.02 Guaranty Obligations. As referenced herein, the
"Guaranteed Obligations" shall mean, collectively, the obligations described in
clauses (a) and (b) of Section 1.01.
Payments of Guaranteed Obligations shall be made (or grossed-up, as applicable)
free and clear of all Impositions in the manner set forth in Article VIII of
the Participation Agreement.
SECTION 1.03 Enforcement. Regardless of whether the
Administrative Agent, Documentation Agent, Syndication Agent, Arranger or any
Lessor is (at any time) precluded or stayed from enforcing or exercising any of
its rights or remedies under the Operative Agreements against the Lessee, such
rights and remedies may be enforced directly against the Guarantor (as a
primary obligation of the Guarantor) without the joinder of, demand on or the
taking of any other Action against the Lessee or any other Person. Regardless
of whether the Lessee is precluded or stayed from paying or performing (or
otherwise fails to pay or perform) any of the Guaranteed Obligations (upon
demand by the Administrative Agent), the Guarantor shall pay or perform (or
cause to be paid or performed) such Guaranteed Obligations. Without limiting
the foregoing provisions of this Section 1.03, if enforcement of the rights or
remedies of the Administrative Agent, Documentation Agent, Syndication Agent,
Arranger or any Lessor under the Operative Agreements is dependent upon
delivering notices or taking any other Actions, then Administrative Agent,
Documentation Agent, Syndication Agent, Arranger or such Lessor may deliver
such notices to and take such other Actions with or against the Guarantor (in
lieu of the Lessee) for all purposes under this Guaranty and the other
Operative Agreements. This Section 1.03 should not be construed to (i) impose
any conditions whatsoever on the obligations of the Guarantor under this
Guaranty or (ii) require the Administrative Agent, Documentation Agent,
Syndication Agent, Arranger or any Lessor to first exercise or exhaust remedies
against the Lessee or any other Person before exercising remedies against the
Guarantor pursuant to this Guaranty.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lessors to enter into the
Participation Agreement and the Lease and to make the Fundings, the Guarantor
represents and warrants to the Lessors and the Agents as of the Documentation
Date and each Delivery Date as follows:
SECTION 2.01. Organization and Qualification. The Guarantor
and each Material Subsidiary (a) is a corporation or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (b) has the corporate,
partnership or other power and authority to own its Equipment and to carry on
its business as now conducted and (c) is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect. As
of the Documentation Date, the corporations and other entities named in
Schedule 2.01 are all of the Material Subsidiaries of the Guarantor, such
Schedule (x) accurately reflects (i) the direct
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owner of the Capital Stock of each such Subsidiary and (ii) the percentage of
the issued and outstanding Capital Stock of each such Subsidiary owned by the
Guarantor, and (y) accurately sets forth the jurisdictions of their respective
incorporation or organization and jurisdictions in which they are required to
be qualified as foreign corporations, foreign partnerships or other foreign
entities to do business.
SECTION 2.02. Authorization, Validity, Etc. The Guarantor
has the corporate power and authority to execute, deliver and perform its
obligations hereunder and under the other Operative Agreements to which it is a
party, and all such action has been duly authorized by all necessary corporate
proceedings on its part. This Guaranty has been duly and validly executed and
delivered by the Guarantor and constitutes the valid and legally binding
agreement of the Guarantor enforceable against the Guarantor in accordance with
the terms hereof, and the other Operative Agreements to which the Guarantor is
a party, when duly executed and delivered by or on behalf of the Guarantor,
will constitute valid and legally binding obligations of the Guarantor
enforceable in accordance with the respective terms thereof, except, in each
case, (a) as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws relating
to or affecting the enforcement of creditors' rights generally, and by general
principles of equity which may limit the right to obtain equitable remedies
(regardless of whether such enforceability is a proceeding in equity or at law)
and (b) as to the enforceability of provisions for indemnification for
violation of applicable securities laws, limitations thereon arising as a
matter of law or public policy.
SECTION 2.03. Governmental Consents, Etc. No authorization,
consent, approval, license or exemption of or filing or registration with any
Governmental Authority, is necessary for the valid execution, delivery or
performance by the Guarantor of any Operative Agreement to which it is a party,
except those that have been obtained.
SECTION 2.04. Conflicting or Adverse Agreements or
Restrictions. Neither the execution, delivery and performance by the Guarantor
of the Operative Agreements to which it is a party, nor compliance with the
terms and provisions thereof, nor the extension of the lease facility
contemplated by the Operative Agreements, (a) will breach or violate any
applicable Requirement of Law, (b) will result in any breach or violation of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of its Equipment or assets pursuant to the
terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which it or any of its consolidated Subsidiaries is party or by which any
Equipment or asset of it or any of its consolidated Subsidiaries is bound or to
which it is subject, except for breaches, violations and defaults under clauses
(a) and (b) that collectively will not have a Material Adverse Effect or (c)
will violate any provision of the certificate of incorporation or bylaws of the
Guarantor.
SECTION 2.05. Title to Assets. The Guarantor and each
consolidated Subsidiary has good and indefeasible title to its assets, except
for such defects in title as would not in the
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<PAGE> 8
aggregate have a Material Adverse Effect. As of the Documentation Date, the
property of the Guarantor and the Subsidiaries is subject to no Liens, except
Permitted Liens and immaterial Liens.
SECTION 2.06. Litigation. Except for actions, suits or
proceedings described in the filings made by the Guarantor with the Securities
and Exchange Commission pursuant to the Exchange Act, as of the Documentation
Date and each Delivery Date, there are no actions, suits or proceedings pending
for which service of process has been accomplished or, to the best knowledge of
the Guarantor, threatened with respect to the Guarantor, the Operative
Agreements or any transactions contemplated therein that are reasonably likely
to have (individually or collectively) a Material Adverse Effect.
SECTION 2.07. Information; Financial Statements. All
information heretofore furnished by the Guarantor to the Agents or any Lessor
in connection with this Guaranty or any other Operative Agreement, as affected
by the disclosures made herein, in the other Operative Agreements and in the
filings made by the Guarantor with the Securities and Exchange Commission
pursuant to the Exchange Act, did not as of the date thereof and will not as of
the date of the Initial Delivery Date, when read together and taken as a whole,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not misleading
in any material respect. Since September 30, 1998 there has been no material
adverse change in the financial condition, business or operations of the
Guarantor and the Subsidiaries taken as a whole which could reasonably be
expected to have a Material Adverse Effect.
SECTION 2.08. Investment Company Act. Neither the Guarantor
nor any of the Subsidiaries is, or is regulated as, an "investment company," as
such term is defined in the Investment Company Act of 1940, as amended.
SECTION 2.09. Public Utility Holding Company Act. Neither
the Guarantor nor any of the Subsidiaries is a non-exempt "holding company," or
subject to regulation as such, or, to the knowledge of the Guarantor's
officers, an "affiliate" of a "holding company" or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
SECTION 2.10. ERISA. (a) The Guarantor and each ERISA
Affiliate has maintained and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and would not reasonably be expected to have a Material Adverse Effect.
Neither the Guarantor nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans (as defined in Section 3 of ERISA),
and no event, transaction or condition has occurred or exists that would
reasonably be expected to result in the incurrence of any such liability by the
Guarantor or any ERISA Affiliate, or in the imposition of any Lien on any of
the rights, properties or assets of the Guarantor or any ERISA Affiliate
pursuant to Title I or IV of ERISA Sections 401(a)(29) or 412 of the Code,
other than such liabilities or Liens as would not in the aggregate reasonably
be expected to have a Material Adverse Effect.
4
<PAGE> 9
(b) No accumulated funding deficiency (as defined in
Section 412 of the Code or Section 302 of ERISA), in excess of $25,000,000,
whether or not waived, exists or is expected to be incurred with respect to any
Plan.
(c) The Guarantor and its ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that in the aggregate would reasonably be expected to have a Material
Adverse Effect.
(d) All contributions have been timely made to all
employee benefit plans, as defined in Section 3 of ERISA, except for such
failures as would not reasonably be expected to have a Material Adverse Effect.
SECTION 2.11. Tax Returns and Payments. The Guarantor and
the Material Subsidiaries have caused to be filed all federal income tax
returns and other material tax returns, statements and reports (or obtained
extensions with respect thereto) which are required to be filed and have paid
or deposited or made adequate provision in accordance with GAAP for the payment
of all taxes (including estimated taxes shown on such returns, statements and
reports) which are shown to be due pursuant to such returns, except where the
failure to pay such taxes (collectively for the Guarantor and the Material
Subsidiaries) would not have a Material Adverse Effect. No material income tax
liability of the Guarantor or the Material Subsidiaries has been asserted by
the Internal Revenue Service of the United States or any other Governmental
Authority for any taxes in excess of those already paid, except for taxes which
are being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP have been created on the books of the
Guarantor and the Subsidiaries.
SECTION 2.12. Requirements of Law; Environmental Matters.
(a) The Guarantor and each consolidated Subsidiary is in compliance with all
Requirements of Law, applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all Governmental Authorities in respect of
the conduct of its business and the ownership of its Equipment, except for such
noncompliances which, in the aggregate for the Guarantor and all such
consolidated Subsidiaries, would not have a Material Adverse Effect.
(b) The Guarantor monitors, in the ordinary course of its
business, the effect of existing Environmental Laws, and each claim asserted
against it or any Subsidiary by any Governmental Authority alleging potential
liability or responsibility for violation of any Environmental Law, on its
business operations and properties. As a result thereof, the Guarantor has
reasonably concluded that such Environmental Laws and any such claims would
not, in the aggregate, for the Guarantor and its consolidated Subsidiaries have
a Material Adverse Effect.
SECTION 2.13. Purpose of Advances. (a) All proceeds of the
Advances will be used by Lessee for the purposes set forth in Section 2.2 of
the Participation Agreement.
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<PAGE> 10
(b) None of the proceeds of the Advances will be used
directly or indirectly for the purpose of buying or carrying any "margin stock"
within the meaning of Regulation G or Regulation U (herein called "margin
stock") or for the purpose of reducing or retiring any indebtedness which was
originally incurred to buy or carry a margin stock, or for any other purpose
which might constitute this transaction a "purpose" credit within the meaning
of Regulation G or Regulation U. Neither the Guarantor nor any agent acting on
its behalf has taken or will take any action which might cause this Guaranty or
any other Operative Agreement to violate Regulation G, T, U or X, or any other
regulation of the Board or to violate the Exchange Act. Margin stock did not
on the Documentation Date, and does not constitute more than 25% of the assets
of the Guarantor or Lessee.
SECTION 2.14. Designation of this Guaranty and the Guaranteed
Obligations. This Guaranty and the Guaranteed Obligations hereunder constitute
"Designated Senior Indebtedness" as such phrase is used in the Debenture
Indenture.
SECTION 2.15. Year 2000 Compliance. The Guarantor has
developed a plan to ensure that the systems of the Guarantor and its Material
Subsidiaries are compliant in all material respects with the requirements to
process transactions in the year 2000. The Guarantor and its Material
Subsidiaries plan to achieve year 2000 compliance through a combination of
upgrading to new releases of existing software and replacement of existing
software with new fully compliant systems by mid-1999. The expenses and
capital expenditures of the Guarantor and its Material Subsidiaries associated
with achieving year 2000 compliance would not reasonably be expected to have a
Material Adverse Effect. The Guarantor and its Material Subsidiaries are
currently gathering information from their key suppliers, vendors and financial
institutions regarding year 2000 compliance.
ARTICLE III
AFFIRMATIVE COVENANTS
The Guarantor covenants and agrees that prior to the
termination of this Guaranty it will duly and faithfully perform, and cause its
respective Subsidiaries to perform, each and all of the following covenants:
SECTION 3.01. Information Covenants. The Guarantor will
furnish or cause to be furnished to the Agents and each Lessor:
(a) As soon as available, and in any event within 60 days
after the end of each of the first three quarterly accounting periods in each
fiscal year the Form 10-Q, or its equivalent, of the Guarantor.
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<PAGE> 11
(b) As soon as available, and in any event within 120
days after the close of each fiscal year, the Form 10-K, or its equivalent, of
the Guarantor for such fiscal year and certified by Arthur Andersen LLP or
other independent certified public accountants of recognized national standing
reasonably acceptable to the Agents and the Required Lessors, whose
certification shall be without qualification or limitation.
(c) Intentionally omitted.
(d) Promptly upon the mailing thereof to the shareholders
of the Guarantor generally, copies of all financial statements, reports and
proxy statements so mailed and copies of all press releases.
(e) Promptly, and in any event within ten Business Days
after any Responsible Officer of the Guarantor obtains knowledge of
(i) any event or condition which would reasonably
be expected to have a Material Adverse Effect; or
(ii) any event or condition which constitutes an
Incipient Default or an Event of Default; or
(iii) the occurrence of a Change of Control or
Change of Control Event;
a notice of such event or condition, specifying the nature thereof.
(f) At the time of the delivery of the financial
statements provided for (i) in Sections 3.01(a) and (b), a certificate of a
Responsible Officer of the Guarantor in the form of Exhibit 3.01 to the effect
that no Incipient Default or Event of Default exists or, if any Incipient
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate shall also set forth calculations required to
establish whether the Guarantor was in compliance with the provisions of
Article VIII as at the end of such fiscal quarter or fiscal year, as the case
may be and (ii) in Section 3.01(b), to the extent there has been any change in
the information previously furnished to the Agents and the Lessors on Schedule
2.01, a revised Schedule 2.01.
(g) Intentionally omitted.
(h) Promptly, and in any event within 30 days after any
Responsible Officer of the Guarantor obtains knowledge thereof, notice:
(i) of the occurrence or expected occurrence of
any material Reportable Event with respect to any Plan, a failure to
make any material required contribution to a Plan, any Lien in favor
of the PBGC or a Plan, or any withdrawal from, or the termination,
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<PAGE> 12
reorganization or insolvency (within the meaning of such terms as used
in ERISA) of any Multiemployer Plan, or
(ii) of the institution of proceedings or the
taking of any other action by the PBGC or the Guarantor or any ERISA
Affiliate or any Multiemployer Plan with respect to the withdrawal
from, or the terminating, reorganization or insolvency (within the
meaning of such terms as used in ERISA) of, any Plan which
termination, reorganization or insolvency would reasonably be expected
to have a Material Adverse Effect, except that no notice shall be
required with respect to the merger of a defined contribution plan of
one ERISA Affiliate into a defined contribution plan of another ERISA
Affiliate.
(i) From time to time and with reasonable promptness,
such other information or documents (financial or otherwise) with respect to
the Guarantor or any Subsidiary as either Agent or any Lessor through the
applicable Agent may reasonably request.
SECTION 3.02. Books, Records and Inspections. The Guarantor
will permit, or cause to be permitted, any Lessor, upon written notice, to
visit and inspect any of the properties of the Guarantor and the Subsidiaries,
to examine the corporate books and financial records of the Guarantor and the
Subsidiaries and to discuss the affairs, finances and accounts of any such
corporations with a Responsible Officer of the Guarantor and such Subsidiaries,
all at such reasonable times and as often as such Lessor, through the
Administrative Agent, may reasonably request.
SECTION 3.03. Insurance and Maintenance of Properties. The
Guarantor will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its Equipment and business
against such liabilities, casualties, risks and contingencies (including
business interruption insurance) and in such types and amounts as is customary
in the case of Persons engaged in the same or similar businesses and similarly
situated.
SECTION 3.04. Payment of Taxes and other Claims. The
Guarantor will, and will cause each of the Material Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, all taxes, assessments and governmental charges levied or imposed
upon the Guarantor or such Material Subsidiary or upon the income, profits or
Equipment of the Guarantor or such Material Subsidiary except for (i) such
taxes, assessments as would not, individually or in the aggregate, have a
Material Adverse Effect and (ii) any such tax, assessment or governmental
charge whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP. Nothing herein shall affect the
obligation of the Lessee under the Operative Agreements with respect to
Impositions or the obligation of the Guarantor hereunder with respect to such
Guaranteed Obligations.
SECTION 3.05. Existence. Except as expressly permitted
pursuant to Section 4.02, the Guarantor will do all things necessary to
preserve and keep in full force and effect the corporate existence, rights and
franchises of the Guarantor and each Obligor (as defined in the Credit
Agreement).
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SECTION 3.06. ERISA Information and Compliance. Except with
respect to matters described in clauses (a), (c) and (d) below which would not
reasonably be expected to have a Material Adverse Effect, promptly furnish to
Agents: (a) immediately upon receipt, a copy of any notice of complete or
partial withdrawal liability under ERISA and any notice from the PBGC under
ERISA of an intent to terminate or appoint a trustee to administer any Plan,
(b) if requested by either Agent, promptly after the filing thereof with the
United States Secretary of Labor or the PBGC or the Internal Revenue Service,
copies of each annual and other report with respect to each Plan or any trust
created thereunder, (c) immediately upon becoming aware of the occurrence of
any Reportable Event, or of any "prohibited transaction", as such term is
defined in Section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written notice signed by a Responsible Officer of the
Guarantor or the applicable ERISA Affiliate specifying the nature thereof, what
action the Guarantor or the applicable ERISA Affiliate is taking or proposes to
take with respect thereto, and, when known, any action taken by the PBGC, the
Internal Revenue Service, the Department of Labor or any other applicable
Governmental Authority with respect thereto, (d) promptly after the filing or
receiving thereof by the Guarantor or any ERISA Affiliate, any notice of the
institution of any proceedings or other actions which may result in the
termination of any Plan, and (e) each request for waiver of the funding
standards or extension of the amortization periods required by ERISA or Section
412 of the Code promptly after the request is submitted by the Guarantor or any
ERISA Affiliate to the Secretary of the Treasury, the Department of Labor, the
Internal Revenue Service or any other applicable Governmental Authority. The
Guarantor covenants that it shall and shall cause each ERISA Affiliate to
comply, with respect to each Plan and Multiemployer Plan, with all applicable
provisions of ERISA and the Code, except to the extent that any failure to
comply would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. Subsidiaries. The Guarantor covenants that the
Subsidiaries identified on Schedule 2.01 are the only Material Subsidiaries as
of the Documentation Date. Should any Subsidiary, subsequent to the date
hereof, become a Material Subsidiary, the Guarantor shall deliver to the Agents
and the Lenders a revised Schedule 2.01 as provided in Section 3.01(f).
ARTICLE IV
NEGATIVE COVENANTS
The Guarantor covenants and agrees with the Agents and the
Lessors that prior to the termination of this Guaranty it will duly and
faithfully perform, and cause its respective Subsidiaries to perform, each and
all of the following covenants:
SECTION 4.01. Material Change in Business. The Guarantor and
the Material Subsidiaries, taken as a whole, will not engage in any material
business substantially different from those carried on by the Guarantor and its
consolidated Subsidiaries taken as a whole on the date hereof.
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SECTION 4.02. Consolidation, Merger, Sale or Purchase of
Assets, Etc. The Guarantor will not wind up, liquidate or dissolve its
affairs, or effect any merger or consolidation, and the Guarantor will not, and
will not permit any consolidated Subsidiary to, sell, lease or otherwise
dispose of all or substantially all of its property or assets (other than sales
of inventory in the ordinary course of business) except that this Section 4.02
shall not prohibit any of the following transactions, or any agreement to
effect the same:
(a) if, at the time thereof and immediately after giving
effect thereto, no Event of Default or Default shall have occurred and be
continuing, the merger of any other Person with and into the Guarantor or a
Subsidiary, if,(i) in any transaction involving the Guarantor, the Guarantor is
the surviving Person; or (ii) in any other transaction, a Wholly-Owned
Subsidiary is the surviving entity and the Guarantor and the Subsidiaries shall
be in compliance, on a pro forma basis after giving effect to such transaction,
with the covenants contained in this Article IV recomputed as of the last day
of the most recently ended fiscal quarter of the Guarantor and the Subsidiaries
as if such transaction had occurred on the first day of each relevant period
for testing such compliance, and the Guarantor (with respect to any merger with
a Person not a consolidated Subsidiary of the Guarantor) shall have delivered
to the Agents an officer's certificate to such effect, together with all
relevant financial information and calculations demonstrating such compliance;
(b) transactions and transfers of assets among or between
the Guarantor and/or Wholly-Owned Subsidiaries or among and between
Wholly-Owned Subsidiaries, in each case, not prohibited by Section 4.07; and
(c) dispositions not otherwise permitted hereunder which
are made for fair market value; provided that (i) at the time of any
disposition, no Default or Event of Default shall exist or shall result from
such disposition, (ii) the aggregate sales price from such disposition shall be
paid in cash or otherwise on payment terms satisfactory to the Guarantor or
Subsidiary, and (iii) the aggregate book value of all assets of the Guarantor
and the Subsidiaries, taken as a whole, shall not be reduced at any time to an
amount which is less than 80% of the aggregate book value of all assets of the
Guarantor and the Subsidiaries, taken as a whole, on March 31, 1998, as
reflected on the Guarantor's pro forma balance sheet dated March 31, 1998.
SECTION 4.03. Liens. The Guarantor will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon or with respect to any property or assets of any kind (real or
personal, tangible or intangible) of the Guarantor or any such Subsidiary
whether now owned or hereafter acquired, except Permitted Liens.
SECTION 4.04. Indebtedness. (a) The Guarantor will not
create, incur or assume, or permit any of their respective Subsidiaries to
create, incur or assume any Indebtedness, unless the Guarantor and the
Subsidiaries shall be in compliance, on a pro forma basis after giving effect
to
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such transactions, with the covenants contained in this Article IV recomputed
as of the last day of the most recently ended fiscal quarter of the Guarantor
and the Subsidiaries as if the transaction in question had occurred on the
first day of each relevant period for testing such compliance.
(b) Notwithstanding Section 4.04(a), the aggregate
principal amount of all Indebtedness of all foreign Subsidiaries at any time
outstanding to any Person other than the Guarantor and the Subsidiaries shall
not exceed 12% of Net Worth at such time.
SECTION 4.05. Ownership of Lessee. The Guarantor shall not
at any time cease to own, beneficially and of record, directly or indirectly,
less than 50% of the Capital Stock and 50% of the Voting Stock of the Lessee.
SECTION 4.06. Financial Covenants. (a) The Guarantor will
not permit Consolidated Indebtedness to exceed 50% of the Total Capitalization
at the end of any fiscal quarter.
(b) The Guarantor will not permit the Interest Coverage
Ratio at the end of any fiscal quarter to be less than 3.0 to 1.0.
SECTION 4.07. Limitation on Transactions with Affiliates. The
Guarantor will not, and will not permit any consolidated Subsidiary to,
directly or indirectly, conduct any business or enter into, renew, extend or
permit to exist any transaction (including the purchase, sale, lease or
exchange of any assets or the rendering of any service) or series of related
transactions with any Person who is not either (i) a Borrower or one of the
Guarantor's consolidated Subsidiaries or (ii) Weatherford\Al-Rushaid Limited or
Weatherford Saudi Arabia Limited, on terms that are less favorable to the
Guarantor or such consolidated Subsidiary, as the case may be, than would be
available in a comparable arm's length transaction. Notwithstanding the
foregoing, the restrictions set forth in this covenant will not apply to (i)
the payment of reasonable and customary regular fees to directors of the
Guarantor who are not employees of the Guarantor; (ii) loans and advances to
officers, directors and employees of the Guarantor and the Subsidiaries for
travel, entertainment and moving and other relocation expenses made in direct
furtherance and in the ordinary course of business of the Guarantor and the
Subsidiaries; (iii) any other transaction with any employee, officer or
director of the Guarantor or any of the Subsidiaries pursuant to employee
benefit or compensation arrangements entered into in the ordinary course of
business and approved by the Board of Directors of the Guarantor or the Board
of Directors of such Subsidiary permitted by this Guaranty; and (iv) customary
underwriting or similar transactions with an investment banking Affiliate.
SECTION 4.08. Restrictions on Subsidiary Dividends. The
Guarantor will not and will not permit any consolidated Subsidiary to enter
into any agreement or contract which limits or restricts in any way the payment
of any dividends or distributions by any consolidated Subsidiary of the
Guarantor to the Guarantor or to another consolidated Subsidiary of the
Guarantor.
SECTION 4.09. Debentures. Except as expressly permitted in
writing by the Required Lessors, the Guarantor will not amend, modify or obtain
or grant a waiver of any provision of the Debentures or the Debenture Indenture
with respect to the Debentures if such amendment, modification or waiver would
be adverse to the Lessors.
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ARTICLE V
GUARANTY DEFAULT
SECTION 5.01 Guaranty Default. If any of the following events
shall occur and be continuing, it shall constitute a "Guaranty Default":
(a) The Guarantor shall fail to pay, satisfy and perform
the Guaranteed Obligations pursuant to Section 1.01 (after the passage of any
applicable grace or cure period with respect thereto under the Operative
Agreements); or
(b) any representation or warranty made by or on behalf
of the Guarantor herein, at the direction of the Guarantor or by the Guarantor
in any other Operative Agreement or in any document, certificate or financial
statement delivered in connection with this Guaranty or any other Operative
Agreement shall prove to have been incorrect in any material respect when made
or deemed made or reaffirmed, as the case may be; or
(c) the Guarantor shall fail to perform or observe any
covenant contained in Article IV or fails to give any notice required by
Section 3.01(e); or
(d) the Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in this Guaranty (other than those
specified in Section 5.01(a), Section 5.01(b) or Section 5.01(c)) or any other
Operative Agreement to which it is a party and, in any event, such failure
shall remain unremedied for 30 calendar days after the earlier of (i) written
notice of such failure shall have been given to a Responsible Officer of the
Guarantor by either the Administrative Agent or any Lessor or, (ii) a
Responsible Officer of the Guarantor becomes aware of such failure; or
(e) the Guarantor or any Material Subsidiary (i) fails to
make (whether as primary obligor or as guarantor or other surety) any principal
payment of or interest or premium, if any, on any Indebtedness (including,
without limitation, Indebtedness under the Credit Agreement) or the Debentures
(other than the Guaranteed Obligations) beyond any period of grace provided
with respect thereto (not to exceed 30 days), provided that the aggregate
amount of all Indebtedness as to which such a payment default shall occur and
be continuing is equal to or exceeds $25,000,000, or (ii) fails to duly
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such failure, either individually or in the
aggregate, shall have caused or shall have the ability to cause the
acceleration of the payment of Indebtedness (including, without limitation,
Indebtedness under the Credit Agreement) with an aggregate face amount which is
equal to or exceeds $25,000,000; or
(f) the entry by a court having jurisdiction in the
premises of (i) a decree or order for relief in respect of the Guarantor or any
Material Subsidiary in an involuntary case or proceeding under any applicable
federal, state or foreign bankruptcy, insolvency, reorganization or other
similar
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law or (ii) a decree or order adjudging the Guarantor or any Material
Subsidiary bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Guarantor or any Material Subsidiary under any applicable federal, state
or foreign law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Guarantor or any
Material Subsidiary of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, the continuance of any such decree or
order for relief or any such other decree or order that shall be unstayed and
in effect for a period of 60 consecutive days; or
(g) the commencement by the Guarantor or any Material
Subsidiary of a voluntary case or proceeding under any applicable federal,
state or foreign bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Guarantor or any Material Subsidiary to the entry of a
decree or order for relief in respect of the Guarantor or such Material
Subsidiary in an involuntary case or proceeding under any applicable federal,
state or foreign bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by the Guarantor or any Material Subsidiary of a petition or
answer or consent seeking reorganization or relief under any applicable
federal, state or foreign law, or the consent by the Guarantor or any Material
Subsidiary to the filing of such petition or the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Guarantor or such Material Subsidiary
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the consent to, approval of or the
admission by the Guarantor or any Material Subsidiary in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Guarantor or any Material Subsidiary in furtherance of
any such action; or
(h) there shall be commenced against the Guarantor or any
Material Subsidiary any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against the
assets of the Guarantor or any Material Subsidiaries which equals or exceeds
$25,000,000 in value and which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or
(i) any Operative Agreement shall (other than with the
consent of the Administrative Agent and the Lessors), at any time after its
execution and delivery and for any reason, cease to be in full force and effect
in any material respect, or shall be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Guarantor or the
Guarantor shall deny that it has any or further liability or obligation
thereunder; or
(j) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA)
which (individually or collectively) exceeds $25,000,000, whether or not
waived, or a waiver of the minimum funding standard or extension of any
amortization period is sought or granted under Section 412 of the Code with
respect to a Plan;
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any proceeding shall have occurred or is reasonably likely to occur by the PBGC
under Section 4069(a) of ERISA to impose liability on the Guarantor, any
consolidated Subsidiary or an ERISA Affiliate which (individually or
collectively) exceeds $25,000,000; any required contribution to a Plan or
Multiemployer Plan in excess of $25,000,000 shall not have been made within 15
days of the date such contribution is due; or the Guarantor, any consolidated
Subsidiary or any ERISA Affiliate has incurred or is reasonably likely to incur
a liability to or on account of a Plan or Multiemployer Plan under Section 515,
4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall result (individually
or collectively) from any such event or events a material risk of either (i)
the imposition of a Lien(s) upon, or the granting of a security interest(s) in,
the assets of the Guarantor, any consolidated Subsidiary and/or an ERISA
Affiliate securing an amount(s) equal to or exceeding $25,000,000, or (ii) the
Guarantor, any consolidated Subsidiary and/or an ERISA Affiliate incurring a
liability(ies) or obligation(s) with respect thereto equal to or exceeding
$25,000,000; or
(k) a judgment or order shall be entered against the
Guarantor or any Material Subsidiary, which with other outstanding judgments
and orders entered against the Guarantor and the Material Subsidiaries equals
or exceeds $25,000,000 in the aggregate (to the extent not covered by insurance
as to which the respective insurer has acknowledged coverage), and (i) within
60 days after entry thereof such judgment shall not have been discharged or
execution thereof stayed pending appeal or, within 60 days after the expiration
of any such stay, such judgment shall not have been discharged, or (ii) any
enforcement proceeding shall have been commenced (and not stayed) by any
creditor upon such judgment.
SECTION 5.02 Remedies. A Guaranty Default shall constitute an
Event of Default under the Lease and the other Operative Agreements. If an
Event of Default has occurred and is continuing, the Administrative Agent and
any Lessor (i) shall have and may exercise all rights and remedies available to
it at law or in equity, including the right to apply for injunctive relief to
enforce the terms hereof, and (ii) may exercise any of the rights or remedies
(with respect to such Event of Default, as applicable) granted to the
Administrative Agent or the Lessors under the Operative Agreements. This
Guaranty may be enforced as to any one or more defaults either separately or
cumulatively.
ARTICLE VI
NATURE OF AGREEMENT
SECTION 6.01 Nature of Guaranty. This Guaranty is (a)
irrevocable, unconditional and absolute; (b) a guaranty of payment, performance
and compliance and not of collection; and (c) in no way conditioned or
contingent upon any attempt to collect from or enforce performance or
compliance by the Lessee, any Subsidiary, or any assignees or sublessees of the
Lessee or any Subsidiary, or upon any other event, contingency or circumstance
whatsoever. This Guaranty and the Guaranteed Obligations shall be binding upon
and against the Guarantor without regard to the validity or enforceability of
any of the Operative Agreements or any provision thereof, and the
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Guarantor hereby waives any defense relating to the enforceability of such
Operative Agreements or any provision contained therein. The Guarantor also
agrees to pay to the Agents and the Lessors such further amounts as shall be
sufficient to cover the reasonable costs of collecting or enforcing the
Guaranteed Obligations or otherwise enforcing this Guaranty (including
reasonable fees, expenses and disbursements of their counsel).
SECTION 6.02 Waivers. The Guarantor hereby unconditionally
(a) waives any requirement that the Administrative Agent, any Lessors or any
other Person first make demand upon, or seek to enforce remedies against, any
other Person or any collateral or property of such other Person before
demanding payment from, or seeking to enforce this Guaranty against, the
Guarantor; (b) agrees that this Guaranty shall remain in full effect without
regard to, and shall not be affected or impaired by, any invalidity,
irregularity or unenforceability in whole or in part of, any Operative
Agreement or any other document executed in connection with any Operative
Agreement or any limitation of the liability of the Lessee or any other Person
thereunder, or any limitation on the method or terms of payment thereunder
which may now or hereafter be caused or imposed in any manner whatsoever; and
(c) except for notices expressly required under the Operative Agreements,
waives diligence, notice of intent to accelerate, notice of default and notice
of acceleration, presentment and protest with respect to the payment of any
amount at any time payable under or in connection with the Operative
Agreements. Notice of acceptance of this Guaranty and notice of execution,
delivery and acceptance of any other instrument or agreement referred to herein
are hereby waived by the Guarantor.
SECTION 6.03 The Guarantor's Obligations Unconditional. The
covenants, agreements and duties of the Guarantor set forth in this Guaranty
shall not be subject to any counterclaim, setoff, deduction, diminution,
abatement, stay, recoupment, suspension, deferment, reduction or defense (other
than full and strict compliance or performance by the Guarantor with its
obligations hereunder) based upon any claim that the Guarantor, or any other
Person, may have against the Lessee or any other Person, and shall remain in
full force and effect without regard to, and shall not be released, discharged
or in any way affected by, any circumstance or condition whatsoever (whether or
not the Guarantor or the Lessee shall have knowledge or notice thereof or shall
have assented thereto and notwithstanding the fact that no rights were reserved
against the Guarantor in connection therewith) including
(a) the validity, legality, regularity or enforceability
of the Operative Agreements or any of the Guaranteed Obligations or any other
collateral security therefor or guaranty or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or
any Lessor;
(b) any amendment, modification, renewal, extension,
addition, acceleration, deletion or supplement to, or termination of (in whole
or in part) or other change in or waiver under the Operative Agreements or any
of the agreements referred to therein, or any other instrument or agreement
applicable to any of the parties to such agreements or any assignment,
mortgaging or transfer of any thereof or of any interest therein, or any
furnishing or acceptance of additional security or any release of any security;
or the failure of any security or the failure of any Person to perfect any
interest in any such collateral;
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(c) any failure, omission or delay on the part of the
Administrative Agent or the Lessors or any other Person (i) to enforce, assert
or exercise any right, power or remedy under any instrument or agreement
referred to in clauses (a) or (b) above, or any assignment of any thereof or
(ii) to conform with any term of any such instrument or agreement (and
notwithstanding that any demand for payment of any of the Guaranteed
Obligations made by the Administrative Agent or any Lessor shall have been
rescinded by such party and any of the Guaranteed Obligations continued);
(d) any waiver, consent, extension, indulgence,
compromise, surrender, release or other action or inaction under or in respect
of any instrument or agreement referred to in clauses (a) or (b) above or of
any agreement, covenant, term or condition contained therein or any obligation
or liability of any Lessor or the Administrative Agent, or any exercise or
non-exercise of any right, remedy, power or privilege under or in respect of
any such instrument or agreement or any such obligation or liability (and
notwithstanding that any collateral security, guaranty or right of offset at
any time held by the Administrative Agent or any Lessors or any other Person
for the payment of the Guaranteed Obligations shall have been sold, exchanged,
waived, surrendered or released);
(e) the voluntary or involuntary liquidation,
dissolution, sale of all or substantially all of the assets, marshaling of
assets and liabilities, receivership, conservatorship, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar proceeding with respect to the
Guarantor, the Lessee, the Administrative Agent, any Lessors or any other
Person or any action taken by the Administrative Agent or receiver or by any
court in any such proceeding;
(f) any defect in the title, compliance with
specifications, conditions, design, operation or fitness for use of, or any
damage to or loss or destruction of, or any interruption or cessation in the
use or operation of the Equipment or any portion thereof by the Lessee or any
other Person for any reason whatsoever (including any Casualty or Partial
Casualty) regardless of the duration thereof (even though such duration would
otherwise constitute a frustration of the purpose of the Operative Agreements),
whether or not resulting from accident and whether or not without default on
the part of any other Person;
(g) any assignment of the Operative Agreements or
subletting or sale of the Equipment or any part thereof;
(h) any merger or consolidation of the Guarantor, the
Lessee or any of their Subsidiaries into or with any other corporation, or any
sale, lease, transfer, divestiture or other disposition of any or all of the
assets of the Guarantor, the Lessee or any of their Subsidiaries to any other
Person;
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(i) any change in the ownership of any shares of capital
stock of the Guarantor, the Lessee or any of their Subsidiaries;
(j) any attachment, claim, demand, charge, lien, levy,
order, process, encumbrance or any other happening or event or reason, similar
or dissimilar to the foregoing; or any withholding or diminution at the source,
by reason of any Impositions, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and whether or not valid,
incurred by or against any Person; or any claims, demands, charges or liens of
any nature, foreseen or unforeseen, incurred by any Person, or against any sums
payable under this Guaranty, so that such sums would be rendered inadequate or
would be unavailable to make the payments herein provided;
(k) any order, judgment, decree, ruling or regulation
(whether or not valid) of any court of any Governmental Authority, or any other
action, happening, event or reason whatsoever which shall delay, interfere
with, hinder or prevent, or in any way adversely affect, the performance by the
Guarantor, the Lessee or any of their Subsidiaries under the Operative
Agreements or any assignments thereof;
(l) any action or inaction or election of remedies by the
Administrative Agent or the Lessor or any other Person, including any failure
by the Administrative Agent or any Lessor or any other Person to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Guaranteed Obligations or for this or any Guaranty Equipment subject thereto;
(m) any release, discharge or rejection of the Lessee or
any of its Subsidiaries for performance or payment of their obligations under
the Operative Agreements (including any release, discharge or rejection arising
under any Bankruptcy Law or as a result of any bankruptcy or reorganization
case in which the Guarantor or the Lessee is a debtor);
(n) any other occurrence or circumstance whatsoever,
whether similar or dissimilar to the foregoing and any other circumstances that
might otherwise constitute a legal or equitable defense or discharge of a
guarantor, indemnitor or surety or that might otherwise limit recourse against
the Guarantor;
(o) any change in circumstances, whether or not foreseen
or foreseeable, whether or not imputable to the Guarantor, the Administrative
Agent or any Lessor or any other Person and whether or not such change in
circumstances shall or might in any manner and to any extent vary the risk of
the Guarantor hereunder; or
(p) any other circumstance whatsoever (with or without
notice to or knowledge of the Guarantor, the Lessee or any of their
Subsidiaries) which constitutes, or might be construed to constitute, an
equitable or legal discharge of any of their obligations under the Operative
Agreements, in bankruptcy or in any other instance.
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The obligations of the Guarantor set forth in this Agreement constitute the
full recourse obligations of the Guarantor enforceable against it to the full
extent of all its assets and properties, notwithstanding any provisions in any
agreements from time to time relating to the acquisition, financing and
refinancing by the Administrative Agent or Lessors of their interest in the
Equipment which may limit the liability of the Administrative Agent or Lessors
or any other Person pursuant to such agreements.
ARTICLE VII
BANKRUPTCY
SECTION 7.01 No Subrogation. THE GUARANTOR HEREBY WAIVES,
UNTIL SUCH TIME AS, INDEFEASIBLE PAYMENT IN FULL OF THE GUARANTEED OBLIGATIONS
HAS BEEN MADE, ANY AND ALL RIGHTS OF SUBROGATION, INDEMNITY, CONTRIBUTION OR
REIMBURSEMENT, ANY BENEFIT OF, OR RIGHT TO ENFORCE ANY REMEDY THAT THE
ADMINISTRATIVE AGENT OR ANY LESSOR OR OTHER PERSON NOW HAS OR MAY HEREAFTER
HAVE AGAINST THE LESSEE IN RESPECT OF THE GUARANTEED OBLIGATIONS, OR ANY
EQUIPMENT, NOW OR HEREAFTER HELD BY THE ADMINISTRATIVE AGENT OR ANY LESSOR AS
SECURITY FOR THE GUARANTEED OBLIGATIONS AND ANY AND ALL SIMILAR RIGHTS THE
GUARANTOR MAY HAVE AGAINST THE LESSEE UNDER APPLICABLE LAW OR OTHERWISE. If,
notwithstanding the foregoing, any amount shall be paid to Guarantor on account
of any such subrogation, indemnity, contribution or reimbursement rights at any
time, such amount shall, if paid prior to such indefeasible payment in full of
the Guaranteed Obligations, be held in trust for the benefit of the Lessors and
the Administrative Agent, and shall forthwith be paid to the Administrative
Agent to be credited and applied against the Guaranteed Obligations, whether
matured, unmatured, absolute or contingent, as the Lessors and the
Administrative Agent may see fit in their discretion.
SECTION 7.02 Reinstatement. Notwithstanding anything to the
contrary herein contained, this Agreement, and all obligations of the Guarantor
hereunder, shall continue to be effective or be reinstated, as applicable, if
at any time, payment, or any part thereof, of any or all obligations performed
by the Guarantor, the Lessee or any of their Subsidiaries are rescinded,
invalidated, or otherwise required to be restored or returned by the
Administrative Agent or any Lessor pursuant to any Bankruptcy Law or upon the
insolvency, bankruptcy or reorganization of the Guarantor, the Lessee or any of
their Subsidiaries (or otherwise) all as though such payment or application of
proceeds had not been made. Without limiting the generality of the foregoing,
if, prior to any such rescission, invalidation, declaration, restoration or
return, this Guaranty or any other Operative Agreement shall have been canceled
or surrendered, this Guaranty and the Guaranteed Obligations shall be
reinstated in full force and effect, and such prior cancellation or surrender
shall not diminish, release, discharge, impair or otherwise affect the
obligations of the Guarantor in respect of the amount of the affected payment
or application of proceeds (or any Lien or collateral securing such
obligation).
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SECTION 7.03 Non-Discharged Obligations. Notwithstanding (a)
any modification, discharge or extension of the obligations of the Guarantor
hereunder or the obligations of the Lessee under the Operative Agreements, (b)
any disallowance of all or any portion of the Administrative Agent's or any
Lessor's or other Person's claim for repayment or performance of such
obligations, (c) any use of cash or other collateral pursuant to any Bankruptcy
Law or in any bankruptcy or reorganization case, (d) any agreement or
stipulation as to adequate protection pursuant to any Bankruptcy Law or in any
bankruptcy or reorganization case, (e) any failure by the Administrative Agent
or any Lessor or other Person to file or enforce a claim against the Guarantor
or the Lessee pursuant to any Bankruptcy Law or in any bankruptcy or
reorganization case, or (f) any release, discharge, rejection, amendment,
modification, stay or cure of the Administrative Agent's, the Lessee's,
Guarantor's or any Lessor's or other Person's rights or obligations that may
occur pursuant to any Bankruptcy Law or in any bankruptcy or reorganization
case or proceeding affecting the Guarantor or the Lessee, whether permanent or
temporary, and whether assented to by any Lessor, the Administrative Agent or
any other Person, the Guarantor hereby agrees that the Guarantor shall be
obligated to perform hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Notices. All notices, consents, offers,
directions, approvals, instructions, requests, and other communications given
to any Person pursuant to this Guaranty shall be in writing and be given in the
manner and at the appropriate address set forth in the Participation Agreement
or at such other address as such party shall designate by notice to each of the
other parties to the Operative Agreements.
SECTION 8.02 Representations. The Guarantor represents and
warrants that it is not entitled to immunity from judicial proceedings in a
court of competent jurisdiction located in the United States and agrees that,
should the Administrative Agent or other Person bring any judicial proceedings,
to enforce the liability of the Guarantor under this Guaranty, no immunity from
such proceedings will be claimed by or on behalf of Guarantor or with respect
to the Guarantor's property. Nothing in this Section 8.02 shall affect the
right of the Administrative Agent or any other Person to serve process in any
manner permitted by Law or to commence legal proceedings, or otherwise proceed
against the Guarantor in any court in which the Guarantor is subject to suit.
SECTION 8.03 Non-Exclusive Remedies. No right or remedy of
the Administrative Agent or any Lessor or other Person under any Operative
Agreement shall be exclusive of any other right, power or remedy, but shall be
cumulative and in addition to any other right, power or remedy thereunder or
now or hereafter existing by Law or in equity and the exercise by the
Administrative
19
<PAGE> 24
Agent or any Lessor or other Person of any one or more of such rights, powers
or remedies shall not preclude the simultaneous or further exercise of any or
all of such other rights, powers or remedies. Any failure to insist upon the
strict performance of any provision hereof or to exercise any option, right,
power or remedy contained herein shall not constitute a waiver or
relinquishment thereof for the future. Receipt by the Administrative Agent or
any Lessor or other Person of any amount payable under any Operative Agreement
with knowledge of a Default or Event of Default shall not constitute a waiver
of such Default or Event of Default, and no waiver by the Administrative Agent
or any Lessor or other Person of any provision of the Operative Agreements
shall be deemed to be made unless made in writing.
SECTION 8.04 Amendments and Waivers. All amendments, waivers,
consents, or approvals arising pursuant to this Guaranty shall be consummated
in accordance with Article X of the Participation Agreement. No waiver by any
Lessor or the Administrative Agent of any Default or Event of Default shall in
any way be, or be construed to be, a waiver of any further or subsequent
Default or Event of Default.
SECTION 8.05 Severability. If any provision of this Guaranty
or the application thereof to any Person or circumstance shall be invalid or
unenforceable, then the remaining provisions, or the application of such
provision to Persons or circumstances other than those as to which it is
invalid or enforceable, shall continue to be valid and enforceable.
SECTION 8.06 Further Assurances. The Guarantor hereby agrees
to execute and deliver all such instruments and take all such action as the
Lessors may from time to time reasonably request in order to effectuate fully
the purposes of this Guaranty.
SECTION 8.07 Governing Law and Submission to Jurisdiction.
(a) THIS GUARANTY SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT-OF-LAWS PROVISIONS THEREOF.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY
OPERATIVE AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS GUARANTY, THE GUARANTOR HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS EQUIPMENT, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS. WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
THIS SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE
ADMINISTRATIVE AGENT OR THE LESSORS FROM OBTAINING JURISDICTION OVER THE
GUARANTOR IN ANY COURT OTHERWISE HAVING JURISDICTION.
20
<PAGE> 25
(c) THE GUARANTOR AND EACH OF THE ADMINISTRATIVE AGENT
AND THE LESSORS, BY ACCEPTING THE BENEFITS OF THIS GUARANTY, HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO ANY OPERATIVE
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III)
CERTIFY THAT NO PARTY HERETO OR BENEFICIARY HEREOF, NOR ANY REPRESENTATIVE OR
COUNSEL FOR ANY PARTY HERETO OR BENEFICIARY HEREOF, HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, OR IMPLIED THAT SUCH PARTY OR BENEFICIARY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (IV) ACKNOWLEDGE THAT
IT ENTERED INTO THIS GUARANTY, AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY, BASED UPON, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION.
SECTION 8.08 Benefit. The parties hereto, the Lessors and
their permitted successors and assigns, but no others, shall be bound hereby or
entitled to the benefits hereof.
SECTION 8.09 Entire Agreement. The parties hereto hereby
acknowledge and agree that the Operative Agreements represent all of the
agreements and understandings relating to the transactions contemplated by such
Operative Agreements as between or among the Administrative Agent and any
Lessor on the one hand, and the Guarantor and its Affiliates on the other hand,
and the parties hereto acknowledge and agree that all prior written and oral
agreements or understandings between or among such Persons are hereby
superseded in their entirety.
SECTION 8.10 Headings. The table of contents and the
headings of the Articles, Sections and subsections of this Guaranty are for
convenience only, and shall not limit or otherwise affect the meaning hereof.
SECTION 8.11 Counterparts. The parties may sign this
Guaranty in any number of counterparts and on separate counterparts, each of
which shall be an original but all of which when taken together shall
constitute one and the same instrument.
SECTION 8.12 Construction of Agreement. Unless the context
of this Guaranty clearly requires otherwise, (a) pronouns, wherever used herein
and of whatever gender, shall include natural persons, corporations and
associations of every kind and character, (b) the gender of all
21
<PAGE> 26
words used in this Guaranty shall include the masculine, feminine, and neuter,
(c) the words "includes" or "including" shall mean "including without
limitations," and (d) the words "hereof," "herein," "hereunder" and similar
terms in this Guaranty shall refer to this Guaranty as a whole and not any
particular section or article in which such words appear. All references to
Sections or Articles herein refer to sections or articles of this Guaranty.
All references to Schedules, Exhibits or appendices in this Guaranty are to
schedules, exhibits or appendices attached, each of which is hereby
incorporated by this reference. Unless otherwise specified, all references to
a specific time of day in this Guaranty shall be based upon Eastern Standard
Time or Eastern Daylight Savings Time, as applicable on the date in question.
SECTION 8.13 Interpretation and Reliance. No presumption
will apply in favor of any party hereto in the interpretation of the Operative
Agreements or in the resolution of any ambiguity of any provision hereof or
thereof. The Guarantor acknowledges that it has not relied upon any
statements, representations or warranties of any of the Administrative Agent or
any Lessor, or any of their agents, representatives, counsel, officers or
directors in entering into or guaranteeing any of the Operative Agreements.
SECTION 8.14 Time. TIME IS OF THE ESSENCE IN THIS GUARANTY,
AND THE TERMS HEREIN SHALL BE SO CONSTRUED.
SECTION 8.15 Reasonableness Standard. If and when in this
Guaranty any party is required to exercise any discretion in a "reasonable"
manner, the parties hereto acknowledge that the term "reasonable" or
"reasonably" shall have the meaning given to such term under (and shall be
consistent with any standard of commercial reasonableness implied by) the laws
of the State of New York in effect as of the date hereof.
SECTION 8.16 Survival of Indemnities. All indemnities under
this Guaranty shall survive the termination of this Guaranty and the other
Operative Agreements.
[signature page follows]
22
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty
Agreement to be executed as of the date first set forth above.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
---------------------------------
Name: Curtis W. Huff
--------------------------
Title: Senior Vice President,
General Counsel and
Secretary
-------------------------
ABN AMRO BANK N.V., as Administrative
Agent for the Lessors
By: /s/ Elizabeth B. McClellan
---------------------------------
Name: Elizabeth B. McClellan
--------------------------
Title: Vice President
-------------------------
By: /s/ Laurie D. Flom
---------------------------------
Name: Laurie D. Flom
--------------------------
Title: Vice President
-------------------------
<PAGE> 28
SCHEDULE 2.01
MATERIAL SUBSIDIARIES
<PAGE> 29
EXHIBIT 3.01
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that such officer is the_________ of
Weatherford International, Inc., a D (the "Guarantor"), and that such officer is
authorized to execute this certificate on behalf of the Guarantor pursuant to
the Guaranty Agreement dated as of December ___, 1998 (as restated, amended,
modified, supplemented and in effect from time to time, the "Guaranty"), and
that a review of the Guarantor has been made under such officer's supervision
with a view to determining whether the Guarantor has fulfilled all of its
obligations under the Guaranty and the other Operative Agreements; and on behalf
of the Guarantor further certifies, represents and warrants that to the
knowledge of such officer, after due inquiry (each capitalized term used herein
having the same meaning given to it in the Schedule X to the Participation
Agreement unless otherwise specified):
(a) The representations and warranties made in each
Operative Agreement are true and correct in all material respects on and as of
the time of delivery hereof, with the same force and effect as if made on and
as of the time of delivery hereof, except for such representations and
warranties as are by their express terms limited to a specific date, which
shall be true and correct as of such date.
(b) The financial statements delivered to the Agents
concurrently with this Compliance Certificate have been prepared in accordance
with GAAP consistently followed throughout the period indicated and fairly
present in all material respects the financial condition and results of
operations of the applicable Persons as at the end of, and for, the period
indicated (subject, in the case of quarterly financial statements, to the
absence of footnotes and normal changes resulting from year-end adjustments).
(c) No Default or Event of Default has occurred and is
continuing. In this regard, the compliance with the provisions of Section 4.06
of the Guaranty (or if any Default or Event of Default does exist, attached is
a description of such event) is as follows:
(i) Section 4.06(a) -- Consolidated Indebtedness
to Total Capitalization
Actual Required
------ 50%
(ii) Section 4.06(b) -- Interest Coverage Ratio
Actual Required
------ 3.00 to 1.00
<PAGE> 30
Attached are calculations demonstrating such compliance.
DATED as of December 8, 1998
--------------------
/s/ Curtis W. Huff
----------------------------------
[SIGNATURE OF AUTHORIZED OFFICER
OF THE GUARANTOR]
<PAGE> 1
EXHIBIT 5.1
[FULBRIGHT & JAWORSKI L.L.P. LETTERHEAD]
December 23, 1998
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Ladies and Gentlemen:
We have acted as counsel for Weatherford International, Inc., a
Delaware corporation (the "Company"), in connection with the filing by it of a
Registration Statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission for registration under the Securities Act of
1933, as amended, of up to 5,052,000 shares (the "Shares") of the Company's
common stock, $1.00 par value. The Shares are to be issued in connection with a
proposed merger (the "Merger") of Christiana Acquisition, Inc., a Wisconsin
corporation and wholly owned subsidiary of the Company ("Sub"), with and into
Christiana Companies, Inc., a Wisconsin corporation ("Christiana"), pursuant to
an Amended and Restated Agreement and Plan of Merger dated October 14, 1998 (the
"Merger Agreement"), by and among the Company, Sub, Christiana and C2, Inc., a
Wisconsin corporation.
In connection with the foregoing, we have examined originals or copies
certified or otherwise identified to our satisfaction of the Registration
Statement, the Merger Agreement, the Amended and Restated Certificate of
Incorporation of the Company, as amended, the Amended and Restated By-laws of
the Company, the corporate proceedings with respect to the Merger and the
proposed issuance of the Shares and such other documents and instruments as we
have deemed necessary or appropriate for the expression of the opinions
contained herein.
We have assumed the authenticity and completeness of all records,
certificates and other instruments submitted to us as originals, the conformity
to original documents of all records, certificates and other instruments
submitted to us as copies, the authenticity and completeness of the originals of
those records, certificates and other instruments submitted to us as copies and
the correctness of all statements of fact contained in all records, certificates
and other instruments that we have examined.
Based on the foregoing, and having regard for such legal considerations
as we have deemed relevant, we are of the opinion that the Shares to be issued
by the Company in connection with the Merger have been duly authorized for
issuance and, assuming the Merger is approved by the
<PAGE> 2
Weatherford International, Inc.
December 23, 1998
Page 2
stockholders of the Company and the shareholders of Christiana and the Merger is
effected, the Shares, when issued in accordance with the terms and conditions of
the Merger Agreement, will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the federal laws of the United
States of America and the General Corporation Law of the State of Delaware, and
we are expressing no opinion as to the effect of the laws of any other
jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Joint Proxy Statement/Prospectus contained in the Registration
Statement.
Very truly yours,
Fulbright & Jaworski L.L.P.
<PAGE> 1
December 23, 1998
Board of Directors
Christiana Companies, Inc.
700 North Water Street, Suite 1200
Milwaukee, Wisconsin 53202
Board of Directors
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Re: Merger of Christiana Companies, Inc. and Christiana Acquisition, Inc., a
newly formed subsidiary of Weatherford International, Inc.
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the acquisition of all of the outstanding shares of Christiana
Companies, Inc. ("Christiana") common stock by Weatherford International, Inc.
("Weatherford") in a transaction in which Christiana Acquisition, Inc. ("Sub"),
a newly formed Wisconsin subsidiary of Weatherford, will be merged ("the
Merger") with and into Christiana, and as a result thereof the holders of
Christiana common stock will receive shares of Weatherford voting common stock
and cash. This opinion is effective as of the day and time of the closing of
the Merger.
In rendering our opinion, we have relied upon the accuracy and completeness of
the facts, assumptions and representations (without regard to any limitation
based on knowledge or belief):
(i) set forth herein
(ii) contained in the documents listed on Exhibit A to this opinion, and
(iii) set forth in the representation letters signed by appropriate
officers of Christiana, Weatherford and Sub (attached as Exhibit B)
to be effective as of the day and time of the closing of the Merger.
Christiana, Weatherford and Sub have represented that such facts, assumptions
and representations are true, correct and complete. However, we have not
independently audited or otherwise verified any of these facts, assumptions or
other representations. A misstatement or omission of any fact or a change or
amendment in any of the facts, assumptions or representations we have relied
upon may require a modification of all or a part of this opinion. In addition,
our opinion is based on the facts as represented to us as of the date of this
letter. Any changes in the facts or form of the transactions between the date
of this letter and the actual closing of the transactions may require a
modification of all or part of this opinion. We
<PAGE> 2
Board of Directors
Page 2
December 23, 1998
have no responsibility to update this opinion for events, transactions,
circumstances or changes in any of the facts, assumptions or representations
occurring after this date.
Premise of Opinion
Our opinion is expressed only with respect to what we considered to be the
material federal income tax consequences of the Merger under the conditions
described herein. The opinion expressed herein is based upon our interpretation
of the Internal Revenue Code of 1986, as amended (the "Code"), income tax
regulations thereunder, court decisions, rulings and procedures issued by the
Internal Revenue Service (the "Service") and other authorities that we deemed
relevant, in each case as of the date of this letter. Should there be any
change, including any change having retroactive effect, in any of such
authorities, the opinion expressed herein would necessarily have to be
reevaluated in light of such change. The Service has indicated that regulations
will be issued for certain "inversion" transactions, occurring after September
21, 1994, which depending on the scope and content of those regulations, could
require Christiana and/or its shareholders to recognize gain or income as a
result of the Merger (see Notice 94-93, 1994-2 C.B. 563). We have no
responsibility to update our opinion for changes in applicable law or other
authorities occurring after the effective date of this letter.
We have not considered any non-income tax consequences, or any state, local,
foreign, or other income tax (other than federal income tax) consequences, and
therefore we express no opinion regarding the treatment that would be accorded
the Merger for such purposes. We also express no opinion on non-tax issues,
such as corporate law or securities law matters. The opinion does not address
the tax consequences of the Merger to a Christiana shareholder that has a
special status, including insurance companies; tax-exempt entities; financial
institutions or broker-dealers; foreign corporations; estates and trusts not
subject to U.S. federal income tax on their income regardless of source;
persons who are not citizens or residents of the United States; and persons who
acquired their Christiana common stock as a result of the exercise of an
employee stock option, pursuant to an employee stock purchase plan, or
otherwise as compensation.
Further, our opinion does not address the potential tax ramifications to
Christiana, Weatherford and their affiliates or shareholders of any transaction
other than the Merger.
This opinion is not binding on the Service, and there can be no assurance that
the Service will not take positions contrary to the opinion expressed herein.
Certain Federal Income Tax Consequences of the Merger
Our opinion is limited to the federal income tax consequences of the Merger
that we believe are material to Christiana, the Christiana common shareholders,
Sub and Weatherford. In our opinion:
<PAGE> 3
Board of Directors
Page 3
December 23, 1998
1. The Merger of Sub with and into Christiana, with Christiana being the
surviving corporation in the Merger, will constitute a reorganization
pursuant to Code ss.368(a)(1)(A) and Code ss.368(a)(2)(E).
2. Under Code ss.368(b), Christiana, Weatherford and Sub will be parties to the
reorganization.
3. Neither Weatherford nor Sub will recognize any gain or loss as a result of
the Merger. Code ss.354(a)(1).
4. No gain or loss will be recognized by Christiana on the consummation of the
Merger.
5. The holders of Christiana common stock will recognize no gain or loss as a
result of the receipt of Weatherford voting common stock in exchange for
their Christiana common stock in the Merger pursuant to Code
ss.354(a)(1). The holders of Christiana common stock will recognize gain
to the extent of the cash received in exchange for the Christiana common
stock. Provided that such gain is properly characterized as gain from a
sale or exchange and not as a dividend, the gain recognized will not
exceed the gain realized on the transaction. Codess.354(a)(1) and
Codess.356(a)(1). The gain recognized by the holders of Christiana common
stock, as determined under Codess.356(a)(1), will be capital gain
provided the Christiana stock exchanged would constitute a capital asset
in the hands of the exchanging shareholder and the hypothetical
redemption of stock is not essentially equivalent to a dividend.
Codess.302(b)(1) and Commissioner v. Clark, 489 U.S. 726 (1989).
6. Under Code ss.358(a)(1), the tax basis of the shares of the Weatherford
voting common stock received by the Christiana shareholders in the Merger
will be the same as the basis of the shares of Christiana common stock
surrendered in exchange therefor, decreased by the amount of cash received
by the holder of Christiana stock, and increased by gain recognized in the
transaction.
7. Under Code ss.1223(1), the holding period of the Weatherford voting common
stock received by each holder of Christiana common stock will include the
holding period of the Christiana common stock held by such holder,
provided that such Christiana stock is a capital asset in the hands of
such holder on the date of the Merger.
This opinion is solely for the benefit of Christiana, the Christiana
shareholders, Sub and Weatherford and is not intended to be relied upon by any
other party. Except to the extent expressly permitted hereby, and without the
prior written consent of this firm, this letter may not be quoted in whole or
in part, or otherwise referred to in any documents or delivered to any person
or entity. Any such authorized other party receiving a copy of this letter must
consult and rely upon the advice of their own counsel, accountant or other
advisor.
<PAGE> 4
Board of Directors
Page 4
December 23, 1998
We hereby consent to the filing of this opinion as an exhibit to the Form S-4
Registration/Proxy Statement and to the reference to us in such document.
Very truly yours,
/s/ ARTHUR ANDERSON LLP
ARTHUR ANDERSEN LLP
Attachments
<PAGE> 5
EXHIBIT A
LISTING OF DOCUMENTS
1. Agreement and Plan of Merger, among Christiana Companies, Inc.,
Weatherford International, Inc., successor to EVI, Inc., and Christiana
Acquisition, Inc., dated December 12, 1997, as amended.
2. Form S-4 Registration Statement/Proxy Statement, dated July 8, 1998,
including any exhibits and amendments thereto.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
January 29, 1998 included in Weatherford International, Inc.'s (formerly known
as EVI Weatherford, Inc.) Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1997, and our report dated June 15, 1998 with respect to
Weatherford International, Inc.'s restated financial statements included in
Weatherford International, Inc.'s Current Report on Form 8-K dated June 15, 1998
as amended by Amendment No. 1 to the Current Report on Form 8-K on Form 8-K/A
dated July 20, 1998 and Amendment No. 2 to the Current Report on Form 8-K on
Form 8-K/A dated December 10, 1998 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
December 23, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
March 11, 1998 included in Weatherford Enterra, Inc.'s Form 10-K for the fiscal
year ended December 31, 1997, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
December 23, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
September 23, 1998 included in Christiana Companies, Inc.'s Form 10-K for the
fiscal year ended June 30, 1998, and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
December 23, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
February 26, 1997 on the financial statements of GulfMark Retained Assets (a
business segment of GulfMark International, Inc.) at December 31, 1996 and 1995
and each of the three years in the period ended December 31, 1996 and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
December 23, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 (Amendment No. 2 to Form S-4 no. 333-65663)
and related Joint Proxy Statement/Prospectus of Weatherford International, Inc.
and to the incorporation by reference therein of our report dated January 15,
1998, with respect to the consolidated financial statements of Trico Industries,
Inc. for the years ended December 31, 1996 and 1995 included in Weatherford
International, Inc.'s (formerly EVI Weatherford, Inc.) Amendment No. 1 to Form
8-K dated December 2, 1997 on Form 8-K/A filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
San Antonio, Texas
December 23, 1998
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent chartered accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-4 of our
report dated December 31, 1997 on the combined financial statements of BMW
Monarch (Lloydminster) Ltd. and BMW Pump Inc. included in Weatherford
International, Inc.'s (formerly known as EVI Weatherford, Inc.) Amendment No. 1
to Form 8-K on Form
8-K/A dated December 2, 1997 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Chartered Accountants
Calgary, Alberta, Canada
December 23, 1998
<PAGE> 1
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FORMERLY REPRESENTING
SHARES OF COMMON STOCK, $1.00 PAR VALUE, OF
CHRISTIANA COMPANIES, INC.
IN EXCHANGE FOR SHARES OF COMMON STOCK OF
WEATHERFORD INTERNATIONAL, INC. AND CASH CONSIDERATION (AS DEFINED BELOW)
PURSUANT TO THE MERGER OF
CHRISTIANA ACQUISITION, INC.,
A SUBSIDIARY OF
WEATHERFORD INTERNATIONAL, INC.
WITH
CHRISTIANA COMPANIES, INC.
BACKGROUND. This letter of transmittal serves two purposes. First, it is to
accompany certificates representing the Common Stock, par value $1.00 per share,
of Christiana Companies, Inc., a Wisconsin corporation ("Christiana") when
submitted in connection with the merger (the "Merger") of Christiana
Acquisition, Inc., a Wisconsin corporation and wholly-owned subsidiary of
Weatherford International, Inc., a Delaware corporation ("Weatherford") with and
into Christiana. Second, this letter of transmittal is the means by which a
Christiana shareholder may make an election to purchase Common Stock in C2,
Inc., a Wisconsin corporation ("C2") as described in the C2 Prospectus, dated
January , 1999.
TO BE EFFECTIVE IN MAKING AN ELECTION WITH RESPECT TO THE PURCHASE OF
COMMON STOCK OF C2, THIS FORM LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND
SIGNED IN ACCORDANCE WITH THE INSTRUCTIONS HEREIN, TOGETHER WITH CERTIFICATES
FOR THE COMMON SHARES OF CHRISTIANA COMPANIES, INC. COVERED HEREBY, MUST BE
DELIVERED TO FIRSTAR BANK MILWAUKEE, N.A. NO LATER THAN 5 P.M. CENTRAL TIME, ON
, 1999 AT THE APPROPRIATE ADDRESS SET FORTH BELOW. IF YOU PREVIOUSLY
TENDERED ALL OF YOUR CERTIFICATES TO FIRSTAR BANK MILWAUKEE, N.A. PRIOR TO
AUGUST 17, 1998, YOU NEED NOT DO SO AGAIN.
The address for Firstar Bank Milwaukee, N.A. is Firstar Bank Milwaukee,
N.A., Attention: Corporate Trust Department (by mail: P.O. Box 2077, Milwaukee,
Wisconsin 53201-2077) or if by hand 1555 North RiverCenter Drive, Suite 301,
Milwaukee, Wisconsin.
Questions regarding the Election procedure to purchase shares of C2, Inc.
may be directed to D.F. King & Co., Inc., 77 Water Street, New York, New York
10005, at telephone number (212) 269-5550 or William T. Donovan, President of
Christiana Companies, Inc., at telephone number (414) 291-9000.
PLEASE READ CAREFULLY THE INSTRUCTIONS INCLUDED HEREIN
Name and Address of Registered Owner
(Fill in exactly as name appears on Certificate(s); please print clearly or
type)
<PAGE> 2
TO: FIRSTAR BANK MILWAUKEE, N.A.
1. Christiana Common Stock. In accordance with the Amended and Restated
Agreement and Plan of Merger dated as of October 14, 1998 (the "Agreement"),
relating to the merger (the "Merger") of Christiana Acquisition, Inc., a wholly
owned subsidiary of Weatherford with and into Christiana and pursuant to which
each shareholder of Christiana will receive shares of common stock of
Weatherford and cash consideration of between $3.50 and $4.00 per share (the
"Cash Consideration"), the undersigned hereby submits the certificate(s) listed
below representing shares of common stock, $1.00 par value, of Christiana
("Christiana Common Stock"). The enclosed certificate(s) formerly represented
shares of Christiana Common Stock and are to be exchanged for .85191 of one
share of common stock, $1.00 par value, of Weatherford ("Weatherford Common
Stock") and the Cash Consideration (subject to the undersigned's election to
acquire common stock, $0.01 par value, of C2 ("C2 Common Stock") as provided for
below).
The Agreement provides that if the market price of Weatherford Common Stock
is less than $18.30 per share following the Special Meeting of Christiana
Shareholders, then Christiana will use up to an additional $5.0 million of its
cash to purchase additional shares of Weatherford Common Stock to qualify the
Merger as a partially tax free reorganization (the "Additional Purchases").
If Christiana purchases additional shares of Weatherford Common Stock, the
Cash Consideration to be paid in the Merger could decline by up to $5.0 million,
or approximately $1.00 per share of Christiana Common Stock (from between $3.50
and $4.00 per share to between $2.50 and $3.00 per share). Weatherford and
Christiana will not know whether this reduction will occur, and if so to what
extent, until after the Special Meeting of Christiana Shareholders.
All fractional shares that a holder of Christiana Common Stock would
otherwise be entitled to receive shall be aggregated and if a fractional share
of Weatherford Common Stock results from such aggregation, such fractional share
shall be rounded up or down to the nearest whole share of Weatherford Common
Stock.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
CERTIFICATE INFORMATION
(Attach additional sheets if necessary)
- ------------------------------------------------------------------------------------------------------
Certificate Number Total Number of Shares Represented by
Certificate
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Total Shares:
- ------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
2. C2 Stock. The undersigned hereby makes the following election regarding
the purchase of C2 Stock:
ELECTION TO PURCHASE C2, INC. COMMON STOCK
I understand (i) that I will receive between approximately $3.50 and $4.00
for each share of Christiana Common Stock that I own immediately prior to the
Merger, unless Christiana makes the Additional Purchases, in which case I will
receive between $2.50 and $3.00 per share of Christiana Common Stock; (ii) that
I am entitled to purchase one share of C2 Common Stock at $4.00 per share for
each share of Christiana Common Stock that I own immediately prior to the
Merger; and (iii) that I may purchase more shares of C2, if they are available.
I FURTHER UNDERSTAND THAT BECAUSE THE CASH CONSIDERATION MAY BE LESS THAN
$4.00 PER SHARE OF CHRISTIANA COMMON STOCK, MY ELECTION BELOW MAY RESULT IN THE
NEED FOR ADDITIONAL CASH TO EFFECT MY PURCHASE OF C2 COMMON STOCK. IN THE EVENT
THAT ADDITIONAL CASH IS NEEDED, I AUTHORIZE YOU TO SEND ME AN INVOICE FOR THE
BALANCE DUE. I UNDERSTAND THAT THE INVOICE WILL BE DUE WITHIN 10 DAYS OF
RECEIPT.
I HEREBY ELECT THE FOLLOWING OPTION (CHECK ONE):
1. [ ] I reaffirm my election made pursuant to the prior Letter of
Transmittal mailed in connection with the First Special Meeting of
Shareholders of Christiana held on August 17, 1998.
I hereby cancel my prior election and choose the following:
2. [ ] I do not want to purchase any shares of C2, so please send me all
the proceeds from the sale of Christiana Common Stock to which I am
entitled pursuant to the Merger Agreement.
3. [ ] I want to use the cash (between approximately $3.50 and $4.00 per
share, assuming no Additional Purchases) I will receive to purchase
as many shares of C2 as possible with such cash.
4. [ ] I only want to purchase shares of C2 Common Stock using a
portion of the cash (between approximately $3.50 and $4.00 per
share, assuming no Additional Purchases) to which I am entitled from
the sale of my Christiana Common Stock pursuant to the Merger
Agreement. Please apply the appropriate amount to such purchase and
send me the balance, if any.
5. [ ] I only want to purchase the number of shares of C2 Common Stock to
which I am entitled. Please apply the appropriate amount of cash to
which I am entitled (between approximately $3.50 and $4.00 per
share, assuming no Additional Purchases) from the exchange of my
Christiana Common Stock pursuant to the Merger Agreement and send me
an invoice for the balance due, if any.
6. [ ] I want to purchase the number of shares of C2 to which I am entitled
using the cash to which I am entitled (between approximately $3.50
and $4.00 per share, assuming no Additional Purchases) from the
exchange of my Christiana Common Stock pursuant to the Merger
Agreement. Please apply the appropriate amount of such cash to such
purchase and send me an invoice for the balance due, if any. I also
wish to purchase an additional shares of C2 (if they are
available). Accordingly, I am enclosing the amount set forth below
payable to Firstar Bank Milwaukee, N.A.:
Number of additional C2 shares I want to buy times $4.00 per share:
$
It is understood that such election (the "Election") is subject to (i) the
Instructions included herein, (ii) the C2 Prospectus, receipt of which is hereby
acknowledged, and (iii) the terms, conditions and limitations of the Merger
Agreement.
3. General. The undersigned hereby represents and warrants (and if more
than one, each undersigned represents and warrants jointly and severally) to
Firstar Bank Milwaukee, N.A. that the undersigned has full power and authority
to assign and transfer the shares of Christiana Common Stock made subject to
this Form Letter of Transmittal and to make the Election made herein, and that
there is no lien, restriction, charge or encumbrance against the shares of
Christiana Common Stock made subject hereto.
3
<PAGE> 4
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 8)
To be completed ONLY if certificates and any check are to be issued in the name
of someone other than the registered owner(s) of the Christiana Common Stock
Name
- ------------------------------------------------------
(Please Print or Type)
Address
- ------------------------------------------------------
(Street)
- ------------------------------------------------------
(City) (State) (Zip Code)
- ------------------------------------------------------
(Social Security Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 3)
To be completed ONLY if certificates and any check issued in the name of the
undersigned are to be sent to someone other than the undersigned or to the
undersigned at an address other than that shown above.
Name
- ------------------------------------------------------
(Please Print or Type)
Address
- ------------------------------------------------------
(Street)
- ------------------------------------------------------
(City) (State) (Zip Code)
PLEASE SIGN HERE
(See Instruction 6)
REGARDLESS OF WHETHER YOU COMPLETE THE OTHER BOXES, YOU MUST COMPLETE THIS BOX.
- ------------------------------------------------------
- ------------------------------------------------------
(SIGNATURE(S) OF OWNER(S))
DATE , 1998
-----------------
( )
-------------------------------
(AREA CODE AND TELEPHONE NUMBER)
- ------------------------------------------------------
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
SIGNATURE(S) GUARANTEED,
IF REQUIRED
(See Instructions 6 and 8)
Firm
- ------------------------------------------------------
(Please Print or Type)
- ------------------------------------------------------
(Authorized Signature)
Title
- ------------------------------------------------------
Address
- ------------------------------------------------------
(Street)
- ------------------------------------------------------
(City) (State) (Zip Code)
TO BE EXECUTED ONLY BY NON-UNITED STATES RESIDENTS:
(See Instruction 10)
I hereby certify that the foregoing purchase of C2, Inc. Common Stock
has been effected in accordance with the applicable laws of the jurisdiction
in which I reside.
<TABLE>
<S> <C> <C>
, 1998
------------ ------------------------------------ ------------------------------------------------
Dated Signature Signature for Joint Subscriber (if any)
</TABLE>
<PAGE> 5
SEE INSTRUCTION 13 FOR INSTRUCTIONS CONCERNING THE COMPLETION OF THE SUBSTITUTE
FORM W-9 BELOW.
<TABLE>
<S> <C> <C>
Substitute
Form W-9 REQUEST FOR TAXPAYER
(Rev. December 1996) IDENTIFICATION NUMBER AND CERTIFICATION GIVE FORM TO THE
REQUESTER. DO
Department of the NOT SEND TO
Treasury THE IRS.
Internal Revenue
Service
- ------------------------------------------------------------------------------------------------------------------
Name as shown above on account. (If a joint account, list first and circle the name of the person or entity
whose number you enter in Part I below.)
---------------------------------------------------------------------------------------------------------------
Check appropriate box [ ] INDIVIDUAL/SOLE PROPRIETOR [ ] CORPORATION [ ] PARTNERSHIP [ ]
OTHER -->
-------------------------------
---------------------------------------------------------------------------------------------------------------
Address (number, street, and Apt. or suite no.) Requester's name and
address (optional)
---------------------------------------------------------------------------------------------------------------
City, state, and ZIP code
- ------------------------------------------------------------------------------------------------------------------
PART I TAXPAYER IDENTIFICATION NUMBER (TIN) List account number(s) here (optional)
- -------------------------------------------------------- --------------------------------------------------------
Enter your TIN in the appropriate box. For individuals,
this is your social security number (SSN). PART II For Payees Exempt
From Backup
Social Security number Withholding
-- -- (See the enclosed instructions.)
--------------------------------------------------------
For other entities, it is your employer identification
number (EIN). -->
Social Security number
-- --
-----------------------------------------------------------------------------------------------------------------
</TABLE>
PART III CERTIFICATION
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. -- You must cross out item 2 above if you have
been notified by the IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on your tax
return. For real estate transactions, item 2 does not apply. For mortgage
interest paid, acquisition or abandonment of secured property, cancellation of
debt, contributions to an individual retirement arrangement (IRA), and
generally, payments other than interest and dividends, you are not required to
sign the Certification, but you must provide your correct TIN.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SIGN
HERE SIGNATURE --> DATE -->
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
INSTRUCTIONS
1. TIME IN WHICH TO ELECT. This form or a facsimile thereof should be
submitted, accompanied by the certificates representing shares of Christiana
Common Stock described on the front hereof (unless the certificates were
previously delivered in connection with the Special Meeting on August 17, 1998
and are still held by Firstar Bank Milwaukee, N.A.), to Firstar Bank Milwaukee,
N.A. at the appropriate address set forth on the front hereof, no later than
5:00 P.M., Central Time, on , 1999. Holders of Christiana Common
Stock whose Form Letters of Transmittal and certificates are not so delivered
will not be entitled to make an Election to purchase shares of C2 Common Stock,
but will be entitled to receive the consideration provided for Christiana
shareholders in the Merger.
2. CHANGE OR REVOCATION OF LETTER OF TRANSMITTAL. Any record holder of
Christiana Common Stock may change an Election by delivering a written notice
accompanied by a properly completed, revised Form Letter of Transmittal to
Firstar Bank Milwaukee, N.A. prior to 5:00 P.M., Central Standard Time, on
-- , 1999. Similarly, an Election may be revoked by delivering a
written notice to Firstar Bank Milwaukee, N.A. prior to such time or by
withdrawing prior to such time the certificates previously deposited with
Firstar Bank Milwaukee, N.A.
3. NULLIFICATION OF ELECTION. All Form Letters of Transmittal will be void
and deemed to be of no effect if the Merger is not consummated, and certificates
submitted therewith shall be returned to the persons submitting the same as
promptly as practicable. The undersigned directs Firstar Bank Milwaukee, N.A. to
issue in exchange for the Christiana Common Stock subject hereto the
certificates representing the Weatherford Common Stock and a check for the Cash
Consideration into which such Weatherford Common Stock will be converted in the
Merger in the name(s) of the registered owner(s) of the shares of Christiana
Common Stock subject hereto, unless otherwise indicated under the "Election to
Purchase C2, Inc. Shares" and/or "Special Issuance Instructions" boxes herein.
The undersigned directs Firstar Bank Milwaukee, N.A., unless otherwise indicated
under the "Election to Purchase C2, Inc. Shares" and/or "Special Delivery
Instructions" boxes herein, to mail such certificates and check to the
undersigned at the address shown above.
4. RECEIPT OF CHECKS AND WEATHERFORD COMMON STOCK. As soon as possible
after the date of the Merger, but no later than 30 days thereafter (the "Payment
Date"), the parties to the Merger Agreement shall calculate and agree upon the
Cash Consideration (anticipated to be between approximately $3.50 and $4.00 per
share of Christiana Common Stock assuming no Additional Purchases based upon the
terms of the Merger Agreement as described more fully on the cover page of the
Joint Proxy Statement/Prospectus). On the Payment Date, Weatherford will pay the
Cash Consideration due each Christiana Shareholder to Firstar Bank Milwaukee,
N.A. who shall promptly distribute such cash to each Christiana Shareholder;
provided, however, that if the Firstar Bank Milwaukee, N.A. has authorization
from the Christiana Shareholders pursuant to this Form to apply all or a portion
of the Cash Consideration to the purchase of shares of C2 Common Stock, such
cash shall be so applied. Firstar Bank Milwaukee, N.A. shall, following
instructions from the Christiana Shareholders, either transmit such funds to C2
to purchase shares of C2 Common Stock or transmit such funds to the Christiana
Shareholders.
THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE OPTION AND RISK OF THE
SHAREHOLDER, BUT IF SENT BY MAIL, REGISTERED MAIL, PROPERLY INSURED, IS
SUGGESTED.
5. INADEQUATE SPACE. If there is insufficient space to list all
certificates being submitted to Firstar Bank Milwaukee, N.A. or to respond to
any other information, please attach a separate sheet hereto.
6. SIGNATURES. The signature (or signatures, in the case of certificates
owned by two or more joint holders) on the Form Letter of Transmittal should
correspond exactly with the name(s) as written on the face of the certificates
unless the shares of Christiana Common Stock described on the Form Letter of
Transmittal have been assigned by the registered holder(s), in which event the
Form Letter of Transmittal should be signed in exactly the same form as the name
of the last transferee endorsed on the certificates or on accompanying stock
powers. In addition, in the event of such assignment, the certificates must be
endorsed or
<PAGE> 7
accompanied by appropriate stock powers, signed exactly as the name(s) of the
registered owner(s) appear on the certificate and such signature(s) must be
GUARANTEED as provided in Instruction 8.
IF THE FORM LETTER OF TRANSMITTAL IS SIGNED BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, OFFICER OF A CORPORATION, ATTORNEY-IN-FACT OR IN ANY
OTHER REPRESENTATIVE OR FIDUCIARY CAPACITY, THE PERSON SIGNING MUST GIVE SUCH
PERSON'S FULL TITLE IN SUCH CAPACITY, AND APPROPRIATE EVIDENCE OF AUTHORITY TO
ACT IN SUCH CAPACITY MUST BE FORWARDED WITH THE FORM LETTER OF TRANSMITTAL. FOR
A CORPORATION, APPROPRIATE EVIDENCE OF AUTHORITY OF AN OFFICER WOULD INCLUDE A
CERTIFIED BOARD RESOLUTION.
If shares of Christiana Common Stock are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Form Letters of Transmittal as there are different registrations of
certificates.
7. CHECKS AND NEW CERTIFICATES IN SAME NAME. If checks or certificates
representing Weatherford Common Stock are to be payable to the order of or
registered in exactly the same name that appears on the certificates
representing shares of Christiana Common Stock being submitted herewith, the
shareholder will not be required to endorse the old certificates or to make
payment of transfer taxes.
8. CHECKS AND NEW CERTIFICATES IN DIFFERENT NAMES. If checks or stock
certificates representing Weatherford Common Stock are to be payable to the
order of or registered in other than exactly the name that appears on the
certificates submitted herewith, the certificates submitted must be endorsed, or
accompanied by appropriate, signed stock powers, and the SIGNATURE GUARANTEED by
a member of a national securities exchange or of the National Association of
Securities Dealers, Inc. ("NASD") or by a commercial bank or trust company in
the United States. Additionally, in such case all requisite stock transfer tax
stamps must be affixed to the certificates submitted.
9. LOST CERTIFICATES. If a holder is not able to locate his certificates
representing shares of Christiana Common Stock, he should contact Christiana for
advice on the procedure to be followed to obtain replacement certificates. Such
holder should note that it may take in excess of two weeks to obtain such
replacement certificates.
10. NON-UNITED STATES RESIDENTS. Non-United States residents purchasing
shares of C2 Common Stock must verify by proper execution of the statement made
in the signature box entitled "To Be Executed Only By Non-United States
Residents".
11. IMPORTANT TAX INFORMATION. Federal income tax law requires that each
holder of Christiana Common Stock certify to the Exchange Agent such holder's
correct Taxpayer Identification Number ("TIN") and to indicate that the holder
is not subject to backup withholding. If such holder is an individual, the TIN
is his or her social security number. Payments that are made to such holder with
respect to such Cash Consideration are subject to backup withholding if such
holder fails to make such certification on the enclosed Substitute Form W-9.
If backup withholding applies, the Exchange Agent is required to withhold
31% on payments for Christiana Common Stock made to the holder pursuant to the
Merger. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service. Certain holders (including, among
others, all corporations and certain foreign individuals) are exempt from the
backup withholding and reporting requirements. In order for a holder who is a
foreign individual to qualify as an exempt recipient, such holder must submit a
statement on the appropriate form, signed under penalties of perjury, attesting
to that individual's exempt status. Such statements can be obtained from the
Exchange Agent.
If the holder has not been issued a TIN or intends to apply for a TIN in
the near future, the holder should write "Applied For" in the space for the TIN.
If the Exchange Agent is not provided with a TIN before the effective time of
the Merger, the Exchange Agent will withhold 31% on all payments for any
Christiana Common Stock made to the holder pursuant to the Merger.
12. MISCELLANEOUS. A single check or a single stock certificate will be
issued for all shares subject to each Form Letter of Transmittal unless written
instructions to the contrary are attached hereto.
<PAGE> 8
All questions with respect to this Form Letter of Transmittal, these
Instructions and the Election (including, without limitation, questions relating
to the timeliness or effectiveness of revocation of any Election and
computations as to proration) will be determined by Firstar Bank Milwaukee, N.A.
in accordance with the terms of the Merger Agreement and C2 Prospectus.
Additional copies of this Form Letter of Transmittal may be obtained from
Firstar Bank Milwaukee, N.A.
