<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or 14a-12
</TABLE>
APL LIMITED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $.01 par value
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
24,636,744 shares of Common Stock
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): (1)
$33.50
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: (1)
$825,330,924
------------------------------------------------------------------------
(5) Total fee paid:
$165,066.00
------------------------------------------------------------------------
- ---------------
1 The filing fee assumes the purchase of 24,636,744 shares of Common Stock
of the Registrant at $33.50 in cash per share. The amount of the filing
fee, calculated in accordance with Rule 0-11(c)(1) of the Securities
Exchange Act of 1934, as amended, equals one-fiftieth (1/50) of one
percent of the proposed cash payments to the holders of Common Stock, for
a total of $165,066.00.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[APL LIMITED LOGO]
APL LIMITED
1111 BROADWAY
OAKLAND, CALIFORNIA 94607
July 21, 1997
TO THE SHAREHOLDERS OF
APL LIMITED:
You are cordially invited to attend the Annual Meeting of Shareholders of
APL Limited (the "Company") to be held at 10:00 a.m. on August 28, 1997, at the
Company's headquarters, 1111 Broadway, Oakland, California.
As described in the enclosed Proxy Statement, at the Annual Meeting, you
will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of April 13, 1997, by and among Neptune
Orient Lines Limited ("NOL"), Neptune U.S.A., Inc., an indirect wholly-owned
subsidiary of NOL ("Sub"), and the Company (the "Merger Agreement") and the
transactions contemplated by the Merger Agreement, including the merger of Sub
with and into the Company (the "Merger"). Pursuant to the Merger Agreement, the
Company will become an indirect wholly-owned subsidiary of NOL, and each
outstanding share of the Company's common stock will be converted in the Merger
into the right to receive $33.50 in cash, without interest. You are urged to
read the enclosed Proxy Statement, which provides you with a description of
certain of the terms of the proposed Merger. A copy of the Merger Agreement is
included as Appendix A to the enclosed Proxy Statement.
At the Annual Meeting, you will also be asked to elect five Class II
directors to hold office until 2000, or if the Merger is consummated, for terms
ending on the date of consummation of the Merger, to ratify the selection of
Arthur Andersen LLP as the Company's independent auditors for fiscal year 1997
and to transact such other business as may properly come before the meeting and
any adjournment thereof. The Proxy Statement provides detailed information about
the five nominees for director.
Your Board of Directors has determined that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are advisable and in
the best interests of the Company and its shareholders and has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Merger. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER, "FOR"
THE PROPOSED SLATE OF DIRECTORS AND "FOR" THE PROPOSED RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN LLP.
Consummation of the Merger is subject to certain conditions, including
approval and adoption of the Merger Agreement and the transactions contemplated
thereby by the affirmative vote of the holders of at least a majority of the
outstanding shares of the Company's common stock entitled to vote thereon and
the approval of the Merger and the transactions contemplated thereby by various
regulatory authorities.
It is very important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign, and return the proxy card in the enclosed postage paid
envelope. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE
ANNUAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. The giving of a
proxy will not affect your right to vote in the event that you attend the Annual
Meeting.
Please do not send in your stock certificate at this time. In the event
that the Merger is approved by the requisite vote of the Company's shareholders,
you will be sent a letter of transmittal for that purpose promptly after the
Merger is consummated. Your Board of Directors and management look forward to
seeing you at the meeting.
Sincerely,
<TABLE>
<S> <C>
/s/ TIMOTHY J. RHEIN /s/ JOJI HAYASHI
TIMOTHY J. RHEIN JOJI HAYASHI
President and Chief Chairman of the Board
Executive Officer
</TABLE>
<PAGE> 3
APL LIMITED
1111 BROADWAY
[APL LIMITED LOGO] OAKLAND, CALIFORNIA 94607
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 28, 1997
------------------------
TO OUR SHAREHOLDERS:
Notice is hereby given of, and you are cordially invited to attend, the
annual meeting of shareholders (the "Annual Meeting") of APL Limited (the
"Company") to be held on August 28, 1997, at 10:00 a.m. at the Company's
headquarters, 1111 Broadway, Oakland, California for the following purposes:
(1) To elect five Class II directors to hold office until 2000, or if
the Merger (as hereinafter defined) is consummated, for terms ending on the
date of consummation of the Merger;
(2) To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of April 13, 1997, by and among
Neptune Orient Lines Limited, a Singapore corporation ("NOL"), Neptune
U.S.A., Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of NOL ("Sub"), and the Company (the "Merger Agreement") (a copy
of which is attached to the accompanying Proxy Statement as Appendix A) and
the transactions contemplated by the Merger Agreement, including the
Merger. As more fully described in the Proxy Statement, the Merger
Agreement provides that: (i) Sub will be merged with and into the Company
(the "Merger"), with the Company continuing as the surviving corporation;
(ii) the Company will thereupon become an indirect wholly-owned subsidiary
of NOL and the current shareholders of the Company will cease to have an
ownership interest in the Company; and (iii) each outstanding share of
common stock, par value $.01 per share, of the Company (the "Common Stock")
(other than certain shares owned by the Company, NOL, or their respective
wholly-owned subsidiaries, which will be cancelled, and other than shares
as to which rights to appraisal have been perfected under Delaware law as
described in the accompanying Proxy Statement) will be converted, upon the
effectiveness of the Merger, into the right to receive $33.50 in cash,
without interest;
(3) To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for fiscal year 1997; and
(4) To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on July 10, 1997, as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only holders of record of Common Stock at the
close of business on that date will be entitled to notice of and to vote at the
Annual Meeting or any adjournments or postponements thereof.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger, and certain actions to be taken in connection with the Merger,
and provides detailed information about the five nominees for director. To
ensure that your vote will be counted, please complete, date and sign the
enclosed proxy card and return it promptly in the enclosed postage paid
envelope, whether or not you plan to attend the Annual Meeting. You may revoke
your proxy in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Annual Meeting. Executed proxies with no
instructions indicated thereon will be voted "FOR" approval and adoption of the
Merger Agreement and the transactions contemplated thereby, including the
Merger, "FOR" the proposed slate of directors and "FOR" the proposed
ratification of the selection of Arthur Andersen LLP.
<PAGE> 4
Holders of the Company's common stock have the right to dissent from the
Merger and obtain a judicial determination of the "fair value" of their shares
and to receive payment therefor by following the procedures prescribed in
Section 262 of the Delaware General Corporation Law, which is attached as
Appendix C to, and summarized under "DISSENTERS' RIGHTS" in, the accompanying
Proxy Statement.
In the event that there are not sufficient votes to approve and adopt the
Merger Agreement and the transactions contemplated thereby, including the
Merger, it is expected that the Annual Meeting will be postponed or adjourned to
a later time in order to permit additional time for further solicitation of
proxies or votes by the Company.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ MARYELLEN B. CATTANI
MARYELLEN B. CATTANI
Executive Vice President,
General Counsel and Secretary
Oakland, California
July 21, 1997
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER, "FOR" THE PROPOSED SLATE OF DIRECTORS AND "FOR"
THE PROPOSED RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP.
The affirmative vote of holders of at least a majority of the outstanding
shares of Common Stock entitled to vote thereon is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. We urge you to sign and return the enclosed proxy as promptly as
possible, whether or not you plan to attend the meeting in person. You may
revoke the proxy at any time prior to its exercise in the manner described in
the accompanying Proxy Statement. Any shareholder present at the Annual Meeting,
including any adjournment or postponement thereof, may revoke such holder's
proxy and vote personally on the Merger Agreement and the transactions
contemplated thereby, including the Merger, and on the other proposals, at the
Annual Meeting. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT
THE ANNUAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
2
<PAGE> 5
APL LIMITED
1111 BROADWAY
OAKLAND, CALIFORNIA 94607
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 28, 1997
------------------------
This Proxy Statement is being furnished to the holders of common stock, par
value $.01 per share (the "Common Stock"), of APL Limited, a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board") for use at the annual
meeting of shareholders (including any postponements or adjournments thereof,
the "Annual Meeting") to be held on August 28, 1997, at 10:00 a.m. at the
Company's headquarters, 1111 Broadway, Oakland, California, and at any
adjournments or postponements thereof. The Board has fixed the close of business
on July 10, 1997, as the record date (the "Record Date") for the Annual Meeting
with respect to this solicitation. Only holders of record of Common Stock at the
close of business on the Record Date are entitled to notice of and to vote at
the Annual Meeting. At the close of business on such date, there were 24,813,009
shares of Common Stock outstanding. Each share of Common Stock is entitled to
one vote.
At the Annual Meeting, the holders of Common Stock (the "Shareholders")
will consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Merger, dated as of April 13, 1997, by and among Neptune Orient Lines
Limited, a Singapore corporation ("NOL"), Neptune U.S.A., Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of NOL ("Sub"), and the
Company (the "Merger Agreement") (a copy of which is attached to this Proxy
Statement as Appendix A) and the transactions contemplated thereby, including
the Merger (as hereinafter defined). Pursuant to the Merger Agreement, and
subject to satisfaction of the conditions set forth therein, (i) Sub will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation (the "Surviving Corporation"), (ii) the Company will
thereupon become an indirect wholly-owned subsidiary of NOL and the current
Shareholders of the Company will cease to have an ownership interest in the
Company, and (iii) each outstanding share of Common Stock (other than shares
owned by the Company, NOL, or their respective wholly-owned subsidiaries, which
will be cancelled, and other than Dissenting Shares (as hereinafter defined))
will be converted, upon the effectiveness of the Merger, into the right to
receive $33.50 in cash, without interest (the "Merger Consideration"). The
aggregate cash consideration to be paid in the Merger is approximately $825
million, exclusive of payments to be made in connection with stock options,
bonus shares, premium shares, phantom shares and dividend equivalent rights.
At the Annual Meeting, the Shareholders will also consider and vote upon
proposals to elect five Class II directors to hold office until 2000, or if the
Merger is consummated, for terms ending on the date of consummation of the
Merger, to ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for fiscal year 1997 and to transact such other business as
may properly come before the meeting and any adjournment thereof.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER, "FOR" THE PROPOSED SLATE OF DIRECTORS AND "FOR" THE
PROPOSED RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP.
Shareholders are urged to read and consider carefully the information
contained in the Proxy Statement and to consult with their personal financial
and tax advisors. As of July 18, 1997, the reported closing price of the
Company's Common Stock on the NYSE Composite Tape was $30 5/8.
The date of this Proxy Statement is July 21, 1997, and this Proxy
Statement, the accompanying Notice of Annual Meeting and the accompanying proxy
card are first being mailed to Shareholders on or about July 21, 1997.
<PAGE> 6
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder, and in accordance therewith files reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC"). Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the SEC: Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1300, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. Such material may be obtained
electronically by visiting the SEC's web site on the Internet at
http://www.sec.gov. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
This Proxy Statement includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable at this time, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are set forth in the Company's Form 10-K for the year
ended December 27, 1996 (as amended by Amendment No. 1 on Form 10-K/A) and Form
10-Q for the quarterly period ended April 4, 1997, and include competitive
pressures and growth or declines in the markets served by the Company, changes
in industry capacity, changes in the maritime regulatory environment and labor
matters. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
All information contained in this Proxy Statement concerning NOL and Sub
has been supplied by NOL for inclusion herein and has not been independently
verified by the Company. Except as otherwise indicated, all other information
contained in this Proxy Statement has been supplied by the Company.
Following the consummation of the Merger, the Company will no longer be
subject to the informational requirements of the Exchange Act and the rules and
regulations thereunder and, accordingly, will no longer file reports, proxy
statements and other information with the SEC.
------------------------
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY OR NOL SINCE THE DATE HEREOF.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY............................................................................. 5
The Annual Meeting................................................................ 5
Parties to the Merger............................................................. 6
Recommendation of Board of Directors.............................................. 7
Opinion of Financial Advisor...................................................... 7
Accounting Treatment.............................................................. 7
The Merger Agreement.............................................................. 7
Dissenters' Rights................................................................ 9
Regulatory Approvals and Certain Other Legal Matters.............................. 9
Interests of Certain Persons in the Merger........................................ 9
Certain Federal Income Tax Consequences to Holders of Common Stock................ 10
Security Ownership by Certain Beneficial Owners and Management.................... 10
Market Prices of Common Stock..................................................... 10
Selected Consolidated Financial Data.............................................. 10
THE ANNUAL MEETING.................................................................. 11
Matters to be Considered at the Annual Meeting.................................... 11
Record Date and Voting............................................................ 11
Vote Required; Revocability of Proxies............................................ 12
Solicitation of Proxies........................................................... 13
PARTIES TO THE MERGER............................................................... 13
The Company....................................................................... 13
NOL............................................................................... 13
Sub............................................................................... 14
THE MERGER.......................................................................... 15
General........................................................................... 15
Background of the Merger.......................................................... 15
Reasons for the Merger............................................................ 17
Opinion of Financial Advisor...................................................... 20
Accounting Treatment.............................................................. 23
THE MERGER AGREEMENT................................................................ 24
Effective Time.................................................................... 24
The Merger........................................................................ 24
Representations and Warranties.................................................... 25
Conduct of the Business Pending the Merger........................................ 26
Employee Arrangements............................................................. 27
Company Stock Plans............................................................... 27
Indemnification and Insurance..................................................... 28
Efforts; Consents................................................................. 28
Solicitation of Acquisition Transactions.......................................... 29
Other Agreements.................................................................. 30
Conditions Precedent to the Merger................................................ 30
</TABLE>
3
<PAGE> 8
<TABLE>
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PAGE
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<S> <C>
Termination....................................................................... 31
Fees and Expenses................................................................. 32
Amendment; Waiver................................................................. 32
DISSENTERS' RIGHTS.................................................................. 32
REGULATORY APPROVALS AND CERTAIN OTHER LEGAL MATTERS................................ 34
Regulatory Approvals.............................................................. 34
Certain Other Legal Matters....................................................... 37
INTERESTS OF CERTAIN PERSONS IN THE MERGER.......................................... 37
Payments Relating to Change in Control............................................ 37
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF COMMON STOCK.................. 40
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS............................................. 40
Information With Respect to Nominees and Directors................................ 40
Certain Committees of the Board of Directors; Meetings............................ 42
Information With Respect to Executive Officers.................................... 42
Stock Ownership of Directors and Executive Officers............................... 44
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS.................................... 45
Pension Plan Table................................................................ 47
Compensation of Directors......................................................... 47
Employment Contracts, Termination of Employment and Change-in-Control Arrangements
and Certain Transactions....................................................... 48
Compensation Committee Report on Executive Compensation........................... 49
Performance Graph................................................................. 52
CERTAIN BENEFICIAL OWNERSHIP OF SECURITIES.......................................... 53
Section 16(a) Beneficial Ownership Reporting Compliance........................... 54
PROPOSAL NO. 2 -- THE MERGER........................................................ 54
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS................. 54
MARKET PRICES OF COMMON STOCK....................................................... 55
SELECTED CONSOLIDATED FINANCIAL DATA................................................ 56
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................... 57
OTHER MATTERS....................................................................... 57
PROPOSALS OF SECURITY HOLDERS....................................................... 57
APPENDIX A Agreement and Plan of Merger, dated as of April 13, 1997, among A-1
Neptune Orient Lines Limited, Neptune U.S.A., Inc. and APL Limited...
APPENDIX B Fairness Opinion, dated as of April 13, 1997, of J.P. Morgan & B-1
Company..............................................................
APPENDIX C Section 262 of the General Corporation Law of the State of C-1
Delaware.............................................................
</TABLE>
4
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. This summary is not intended to be a complete description
and is qualified in its entirety by reference to the more detailed information
contained or incorporated by reference in this Proxy Statement, or in the
documents attached as Appendices hereto. Each Shareholder is urged to give
careful consideration to all of the information contained in this Proxy
Statement and the Appendices before voting.
THE ANNUAL MEETING
Matters to be Considered at the Annual Meeting. The Annual Meeting is
scheduled to be held at 10:00 a.m., on August 28, 1997, at the Company's
headquarters, 1111 Broadway, Oakland, California. At the Annual Meeting,
Shareholders will consider and vote upon (1) the election of five Class II
directors to hold office until 2000, or if the Merger is consummated, for terms
ending on the date of consummation of the Merger, (2) a proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger, (3) a proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent auditors for fiscal year 1997 and (4) such procedural
matters, including without limitation potential adjournments of the Annual
Meeting, and such other business as may properly be brought before the Annual
Meeting. See "THE ANNUAL MEETING -- Matters to be Considered at the Annual
Meeting" and "OTHER MATTERS."
Record Date and Voting. The Board has fixed the close of business on July
10, 1997, as the Record Date for the Annual Meeting. At the close of business on
the Record Date, there were 24,813,009 shares of Common Stock outstanding and
entitled to vote at the Annual Meeting, held by approximately 2,932 Shareholders
of record. Each holder of Common Stock on the Record Date will be entitled to
one vote for each share of Common Stock held of record upon each matter properly
submitted at the Annual Meeting. The presence, either in person or by proxy, of
a majority of the outstanding shares of Common Stock entitled to be voted at the
Annual Meeting is necessary to constitute a quorum thereat. Abstentions
(including broker non-votes) are included in the calculation of the number of
votes represented at the meeting for purposes of determining whether a quorum
has been achieved. See "THE ANNUAL MEETING -- Record Date and Voting."
Vote Required; Revocability of Proxies. The affirmative vote of holders of
at least a majority of the outstanding shares of Common Stock entitled to vote
thereon is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. The affirmative vote of
a majority of the shares of Common Stock represented at the Annual Meeting and
entitled to vote thereat is required to ratify the selection of Arthur Andersen
LLP. Directors will be elected by a plurality of the Common Stock represented at
the Annual Meeting and entitled to vote.
The required vote of the Shareholders on the Merger Agreement and the
transactions contemplated thereby, including the Merger, is based upon the total
number of outstanding shares of Common Stock as of the Record Date. Therefore,
the failure to submit an executed proxy card (or to vote in person at the Annual
Meeting) or the abstention from voting by a Shareholder (including broker
non-votes) will have the same effect as a vote against approval and adoption of
the Merger Agreement and the transactions contemplated thereby, including the
Merger. With respect to other matters submitted for Shareholder approval at the
Annual Meeting (other than the election of directors), abstentions are treated
as shares represented and entitled to vote and thus have the same effect as an
"AGAINST" vote, and broker non-votes or other circumstances in which proxy
authority has been withheld will have no effect on the approval of any such
matter. Proxies may be revoked prior to the proxy being voted by following the
procedures described in this Proxy Statement. See "THE ANNUAL MEETING -- Vote
Required; Revocability of Proxies."
SHAREHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL WHICH WILL BE SENT TO SHAREHOLDERS BY THE DISBURSING AGENT (AS
HEREINAFTER DEFINED) PROMPTLY AFTER THE EFFECTIVE TIME (AS HEREINAFTER DEFINED).
5
<PAGE> 10
PARTIES TO THE MERGER
The Company. APL Limited and its subsidiaries provide transportation
services for containerized cargo in the trans-Pacific, intra-Asia, Asia-Europe,
Asia-Latin America and North American markets. Certain of the services are
provided through alliances with other transportation companies. In addition, the
Company provides cargo distribution and warehousing services in the United
States and freight consolidation services in Mexico, Asia, the Middle East,
Europe, and Africa. The Company provides freight deconsolidation services in
several locations in the United States and Europe and acts as a non-vessel
operating common carrier in the intra-Asia region and from Asia to Europe and
Australia. The Company provides intermodal transportation and freight brokerage
services to North American and international shippers within the United States,
as well as time-critical cargo transportation and just-in-time delivery
(principally to the automotive manufacturing industry). These services are
provided through an integrated system of rail and truck transportation, the
primary element of which is train services provided utilizing double-stack rail
cars.
The Company's international transportation operations are conducted through
American President Lines, Ltd., an ocean common carrier with operations in the
Pacific Basin, Europe and Latin America. Another operating unit, American
Consolidation Services, Ltd., provides cargo distribution, warehousing and
freight consolidation services. Stevedoring and terminal operations on the U.S.
West Coast are conducted through Eagle Marine Services, Ltd. American President
Business Logistics Services, Ltd. provides logistical consulting and management
services. The Company's North America transportation operations are conducted
through APL Land Transport Services, Inc., which provides intermodal
transportation. The Company's principal offices are located at 1111 Broadway,
Oakland, California 94607, and its telephone number is (510) 272-8000. See
"PARTIES TO THE MERGER -- The Company."
NOL. Neptune Orient Lines Limited, a Singapore corporation, is a
diversified transportation group with shipping as its core business. NOL has its
headquarters in Singapore and is the largest shipping company listed on the
Stock Exchange of Singapore. NOL operates a comprehensive network of container
liner services and worldwide charter services in the liquid and dry-bulk trades.
Its fleet consists of 36 containerships, 30 tankers and 7 dry-bulk carriers,
with 14 additional vessels scheduled for delivery in 1997 and 1998.
NOL's liner services are backed by representative offices around the world
that provide support for the container liner business in the form of cargo
canvassing, cargo documentation, cargo and port operations, transhipment, and
ship husbandry. NOL subsidiary and associated companies offer shippers a
complete range of transportation-related services, including warehousing and
distribution. NOL's chartering fleet includes crude oil tankers and clean
product tankers, as well as dry-bulk carriers that are deployed on spot and
time-charters in the Caribbean, Southeast Asia, China, Japan, the United States,
and Arabian Gulf. NOL's wholly-owned subsidiary, American Eagle Tankers, Inc.
Limited is the largest lightering operator in the U.S. Gulf/Caribbean region,
with its deployment of 11 Aframax tankers.
NOL's principal office is located at 456 Alexandra Road, #06-00 NOL
Building, Singapore 119962, Republic of Singapore, and the telephone number of
its Corporate Secretariat is (65) 371-5376. See "PARTIES TO THE MERGER -- NOL."
Sub. Neptune U.S.A., Inc. is a Delaware corporation and an indirect
wholly-owned subsidiary of NOL. Pursuant to the terms of the Merger Agreement,
at the Effective Time, Sub will be merged with and into the Company, with the
Company continuing as the Surviving Corporation. Sub's principal office is c/o
Neptune Orient Lines Limited, at 456 Alexandra Road, #06-00 NOL Building,
Singapore 119962, Republic of Singapore, and the telephone number of its
Corporate Secretariat is (65) 371-5376. See "PARTIES TO THE MERGER -- Sub."
The aggregate cash consideration to be paid in the Merger is approximately
$825 million, exclusive of payments to be made in connection with stock options,
bonus shares, premium shares, phantom shares and dividend equivalent rights. NOL
intends to fund such cash payments to Shareholders through cash on hand at the
time of the Merger and borrowings under its existing lines of credit. Although
the amounts, terms and conditions have not been determined by NOL, NOL expects
that certain of the debt under its existing lines of credit will be incurred by
Sub for tax and other reasons. Any such debt incurred by Sub will become debt of
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the Surviving Corporation following the Merger and, accordingly, the Surviving
Corporation's debt to equity ratio is expected to increase and its interest
coverage ratio is expected to decrease from the Company's current ratios. In
addition, since the Surviving Corporation will no longer be subject to the
informational requirements of the Exchange Act and the rules and regulations
thereunder, no information with respect to the financial condition or results of
operations of the Surviving Corporation is expected to be disclosed publicly
following the consummation of the Merger. See "ADDITIONAL INFORMATION."
RECOMMENDATION OF BOARD OF DIRECTORS
The Board has determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable and in the best
interests of the Company and its Shareholders and has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Merger. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER.
In reaching its unanimous determination that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are advisable and in
the best interests of the Company and its Shareholders, the Board considered a
number of factors, as more fully described under "THE MERGER -- Background of
the Merger" and "THE MERGER -- Reasons for the Merger." In light of the
Company's historical performance and its prospects, including the industry
conditions described under "THE MERGER -- Background of the Merger," the Company
expects that, if the Merger is not consummated, it would again consider
alternatives to increase shareholder value, which alternatives may include
continued operations as an independent company with increased focus on its
terminal, intermodal and logistics operations and possible corporate
restructurings to take advantage of more competitive tax structures, the sale of
certain lines of business or assets of the Company, a spin-off of one or more of
the business divisions of the Company and a leveraged recapitalization of the
capital stock of the Company (or a combination of the foregoing), as well as a
sale or merger of the Company.
OPINION OF FINANCIAL ADVISOR
On April 11, 1997, J.P. Morgan Securities Inc. ("J.P. Morgan"), financial
advisor to the Company in connection with the Merger, delivered its oral opinion
to the Board that, as of that date, the Merger Consideration to be paid to the
Shareholders pursuant to the proposed Merger was fair, from a financial point of
view, to such Shareholders. J.P. Morgan subsequently confirmed its oral opinion
by delivery of its written opinion dated as of April 13, 1997. The full text of
the written opinion of J.P. Morgan, dated as of April 13, 1997, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Appendix B and is
incorporated herein by reference. Shareholders are urged to read such opinion in
its entirety. See "THE MERGER -- Opinion of Financial Advisor."
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. A summary
of the material financial analyses relied upon by J.P. Morgan in rendering its
opinion, which yielded ranges of values for the Company from approximately $25
per share to approximately $37 per share, is set forth under "THE MERGER --
Opinion of Financial Advisor," as are certain other financial analyses
performed by J.P. Morgan, which yielded higher ranges of value for the Company.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for accounting purposes. See
"THE MERGER -- Accounting Treatment."
THE MERGER AGREEMENT
The Merger. Subject to the provisions of the Merger Agreement, as of the
Effective Time, each issued and outstanding Share (as hereinafter defined),
other than those held by NOL, the Company and their
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respective wholly-owned subsidiaries and other than any Dissenting Shares, will
be converted into and represent the right to receive $33.50 in cash, without
interest thereon, and Sub will be merged with and into the Company, with the
Surviving Corporation thereby becoming an indirect wholly-owned subsidiary of
NOL and the current Shareholders of the Company will cease to have an ownership
interest in the Company. The shares of Common Stock together with, to the extent
applicable, the associated Preferred Share Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement (as hereinafter defined), are referred to
herein collectively as the "Shares." See "THE MERGER AGREEMENT -- Effective
Time" and "THE MERGER AGREEMENT -- The Merger."
The Company has agreed not to solicit any inquiries or the making of any
proposal with respect to an Acquisition Transaction (as hereinafter defined) or,
subject to certain limitations, to negotiate, explore or otherwise engage in
substantive discussions with respect to any Acquisition Transaction. The Company
may, in response to an unsolicited proposal with respect to an Acquisition
Transaction from a third party that a nationally recognized investment banking
firm retained by the Company advises, and the Board determines, may reasonably
be expected to result in a transaction that is more favorable to the Company and
its Shareholders than the transactions contemplated by the Merger Agreement,
furnish information to, negotiate, explore and otherwise engage in substantive
discussions with, and enter into an agreement with, such third party if the
Board deems it necessary to do so in the exercise of its fiduciary obligations
after consultation with outside counsel. See "THE MERGER AGREEMENT --
Solicitation of Acquisition Transactions."
Conditions Precedent to the Merger. Consummation of the Merger is subject
to various conditions, including, among others: (i) the approval and adoption of
the Merger Agreement and the transactions contemplated thereby by the requisite
vote of the Shareholders; (ii) receipt of certain governmental consents and
approvals and the expiration or termination of applicable waiting periods
imposed by certain governmental authorities; and (iii) the absence of any order,
judgment, decree, injunction or ruling of a court of competent jurisdiction
restraining, enjoining or prohibiting consummation of the Merger. In addition,
NOL's and Sub's obligations to consummate the Merger are subject to the
condition, among others, that, subject to certain exceptions, no change shall
have occurred since the date of the Merger Agreement that would have a Material
Adverse Effect (as defined herein) on the Company. See "THE MERGER
AGREEMENT -- Conditions Precedent to the Merger" and "REGULATORY APPROVALS AND
CERTAIN OTHER LEGAL MATTERS."
Termination; Termination Fees. The Merger Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval by the
Shareholders, as follows:
(i) by the mutual written consent of NOL and the Company;
(ii) by NOL or the Company, if (a) the Merger has not been consummated
on or before January 31, 1998 (provided that the terminating party is not
otherwise in material breach of its obligations under the Merger Agreement)
or (b) the Annual Meeting concludes without the Company obtaining the
required Shareholder approval of the Merger Agreement and the transactions
contemplated thereby;
(iii) by NOL or the Company, if any court or other governmental entity
has issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or ruling
has become final and nonappealable;
(iv) by NOL (a) upon a material breach of the Merger Agreement on the
part of the Company which is not cured and which would cause the condition
precedent described in clause (i) under "THE MERGER AGREEMENT -- Conditions
Precedent to the Merger -- NOL and Sub" to be incapable of being satisfied
by January 31, 1998, or (b) if the Board has withdrawn or modified in a
manner adverse to NOL its recommendation of the Merger Agreement or the
Merger;
(v) by the Company, upon a material breach of the Merger Agreement on
the part of NOL or Sub which is not cured and which would cause the
condition precedent described under "THE MERGER
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<PAGE> 13
AGREEMENT -- Conditions Precedent to the Merger -- The Company" to be
incapable of being satisfied by January 31, 1998; or
(vi) by the Company, under certain circumstances, if a third party
makes a proposal in respect of an Acquisition Transaction.
See "THE MERGER AGREEMENT -- Termination."
Under certain circumstances, termination of the Merger Agreement will
require the payment by the Company to NOL of a termination fee of $25 million
and the reimbursement of NOL by the Company of NOL's fees and expenses related
to the Merger Agreement and the transactions contemplated thereby (subject to a
maximum of $2,000,000). See "THE MERGER AGREEMENT -- Fees and Expenses."
DISSENTERS' RIGHTS
Under Delaware law, any holder of record of Shares who does not vote in
favor of the Merger and delivers a demand for appraisal prior to the vote of the
Shareholders on the Merger has the right to obtain cash payment for the "fair
value" of his or her Shares (excluding any element of value arising from the
accomplishment or expectation of the Merger). In order to exercise such rights,
a Shareholder must comply with all the procedural requirements of Section 262 of
the Delaware General Corporation Law ("DGCL"), the full text of which is
attached as Appendix C to this Proxy Statement. Section 262 should be read in
its entirety. Such "fair value" would be determined in judicial proceedings, the
result of which cannot be predicted. Failure to take any of the steps required
under Section 262 in a timely manner will result in a loss of appraisal rights.
See "DISSENTERS' RIGHTS."
REGULATORY APPROVALS AND CERTAIN OTHER LEGAL MATTERS
The consummation of the Merger is contingent upon, among other things, the
receipt of the Maritime Approvals (as defined herein) and the transfer of
certain of the Company's vessels to a qualified transferee. See "REGULATORY
APPROVALS AND CERTAIN OTHER LEGAL MATTERS," "THE MERGER AGREEMENT -- Efforts;
Consents" and "THE MERGER AGREEMENT -- Conditions Precedent to the Merger."
The Company and its directors have been named as defendants in a purported
class action on behalf of all public Shareholders of the Company pending in the
Superior Court of the State of California for the County of Alameda, which
alleges, among other matters, that the Company's directors breached their
fiduciary duties in connection with the proposed Merger with NOL. See
"REGULATORY APPROVALS AND CERTAIN OTHER LEGAL MATTERS -- Certain Other Legal
Matters."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Company's management and of the Board may receive
economic benefits as a result of the Merger, including benefits pursuant to
certain employment agreements entered into as of January 28, 1997, between the
Company and certain executives which, by their terms, are to remain in effect
following the Merger. In addition to their interests as Shareholders, certain
directors and executive officers hold options to purchase Common Stock (See
"PROPOSAL NO. 1 -- ELECTION OF DIRECTORS -- Stock Ownership of Directors and
Executive Officers") and premium shares, phantom shares, bonus shares and
dividend equivalent rights under the Company's 1995 Stock Bonus Plan. The value
of the interests of such directors and executive officers under such options and
the 1995 Stock Bonus Plan upon consummation of the Merger (other than amounts
that were already vested as of April 13, 1997) ranges from $42,178 to $76,516
for nonexecutive directors and from $261,438 to $1,913,170 for executive
officers. Certain of the executive officers have "change in control" provisions
in their employment agreements, and if the obligation to make payments under
these employment agreements is triggered, the amounts payable, based on the
individuals' annual compensation as of April 1, 1997, range from $1,014,044 to
$3,154,192. Under such employment agreements these officers, except for L. Dale
Crandall, would also be entitled to certain additional payments in lieu of
payments under the Company's qualified defined benefit retirement plan and the
Company's 1995 Supple-
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<PAGE> 14
mental Executive Retirement Plan (which, if triggered immediately following
consummation of the Merger, would range from $208,969 to $1,640,099 as of
October 1, 1997) and L. Dale Crandall would be entitled to retirement benefits
with a present value of $1,431,001 as of October 1, 1997. Further, dependent
upon their previous election, the executive officers may become entitled to
receive, upon consummation of the Merger or upon termination after the Merger,
lump-sum distributions of amounts previously deferred pursuant to the Company's
deferred compensation plans (which, as of April 1, 1997, range from $23,743 to
$1,675,025).
NOL has announced that it intends to invite Timothy J. Rhein, the Company's
President and Chief Executive Officer, to join NOL's Board of Directors.
For additional information concerning such benefits, options and other
interests of certain persons in the Merger, see "INTERESTS OF CERTAIN PERSONS IN
THE MERGER."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF COMMON STOCK
The Merger will be a taxable transaction to Shareholders. For federal
income tax purposes, Shareholders will generally recognize gain or loss in the
Merger in an amount determined by the difference between the cash received and
their tax basis in the Shares exchanged therefor. For further information
regarding certain federal income tax consequences to Shareholders, see "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF COMMON STOCK."
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 1, 1997, (i) the directors and executive officers of the Company
beneficially owned, in the aggregate, 2,100,907 shares of Common Stock
(excluding certain shares which could be acquired upon the exercise of options),
representing approximately 8.5% of the outstanding shares of Common Stock, and
(ii) NOL beneficially owned 171,400 shares of Common Stock, representing
approximately 0.7% of the outstanding shares of Common Stock. To the knowledge
of the Company, such directors and executive officers of the Company intend to
vote their outstanding shares of Common Stock for the approval and adoption of
the Merger Agreement. Pursuant to the Merger Agreement, NOL has agreed to vote
all shares of Common Stock beneficially owned by it for the approval and
adoption of the Merger Agreement. See "PROPOSAL NO. 1 -- ELECTION OF
DIRECTORS -- Stock Ownership of Directors and Executive Officers."
MARKET PRICES OF COMMON STOCK
The Common Stock is listed and traded on the New York Stock Exchange, Inc.
("NYSE") and the Pacific Stock Exchange ("PSE") under the symbol "APL." On April
11, 1997, the last trading day before the public announcement of the execution
of the Merger Agreement, the reported closing price of the Common Stock as
reported on the NYSE Composite Tape was $21.50. On July 18, 1997, the most
recent trading day prior to the printing of this Proxy Statement, the reported
closing price of the Common Stock on the NYSE Composite Tape was $30 5/8. For
additional information concerning historical market prices of the Common Stock,
see "MARKET PRICES OF COMMON STOCK."
SELECTED CONSOLIDATED FINANCIAL DATA
Certain selected historical financial data of the Company are set forth
under "SELECTED CONSOLIDATED FINANCIAL DATA." That information should be read in
conjunction with the financial statements and related notes incorporated by
reference in this Proxy Statement. See "SELECTED CONSOLIDATED FINANCIAL DATA"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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THE ANNUAL MEETING
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Each copy of this Proxy Statement mailed to Shareholders is accompanied by
a proxy card furnished in connection with the solicitation of proxies by the
Board for use at the Annual Meeting. The Annual Meeting is scheduled to be held
at 10:00 a.m., on August 28, 1997, at the Company's headquarters, 1111 Broadway,
Oakland, California. At the Annual Meeting, Shareholders will consider and vote
upon (1) the election of five Class II directors to hold office until 2000, or
if the Merger is consummated, for terms ending on the date of consummation of
the Merger (Proposal No. 1), (2) a proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger
(Proposal No. 2), (3) a proposal to ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for fiscal year 1997 (Proposal No. 3) and
(4) such procedural matters, including without limitation potential adjournments
of the Annual Meeting, and such other matters as may properly come before the
Annual Meeting. See "OTHER MATTERS."
The Board has determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable and in the best
interests of the Company and its Shareholders and has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Merger. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER, "FOR" THE PROPOSED SLATE OF
DIRECTORS AND "FOR" THE PROPOSED RATIFICATION OF THE SELECTION OF ARTHUR
ANDERSEN LLP. See "THE MERGER -- Background of the Merger," "THE MERGER --
Reasons for the Merger" and "THE MERGER AGREEMENT."
SHAREHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE ANNUAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT.
RECORD DATE AND VOTING
The Board has fixed the close of business on July 10, 1997, as the Record
Date for the determination of the holders of Common Stock entitled to notice of
and to vote at the Annual Meeting. Only Shareholders of record at the close of
business on that date will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, there were 24,813,009
shares of Common Stock outstanding and entitled to vote at the Annual Meeting,
held by approximately 2,932 Shareholders of record.
Each holder of Common Stock on the Record Date will be entitled to one vote
for each share of Common Stock held of record upon each matter properly
submitted at the Annual Meeting. The presence, either in person or by proxy, of
a majority of the outstanding shares of Common Stock entitled to be voted at the
Annual Meeting is necessary to constitute a quorum thereat. Abstentions
(including broker non-votes) are included in the calculation of the number of
votes represented at the meeting for purposes of determining whether a quorum
has been achieved.
If the enclosed proxy card is properly executed and received by the Company
in time to be voted at the Annual Meeting, the shares of Common Stock
represented thereby will be voted in accordance with the instructions marked
thereon. Executed proxies with no instructions indicated thereon will be voted
"FOR" approval and adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger, "FOR" the proposed slate of
directors and "FOR" the proposed ratification of the selection of Arthur
Andersen LLP.
The Board is not aware of any matters other than those set forth in the
Notice of Annual Meeting of Shareholders that may be brought before the Annual
Meeting. If any other matters properly come before the
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Annual Meeting, the persons named as proxies in the accompanying form of proxy
will vote the shares represented by all properly executed proxies on such
matters in such manner as shall be determined by a majority of the Board, except
that shares represented by proxies which have been voted "AGAINST" the Merger
Agreement will not be used to vote "FOR" adjournment of the meeting for the
purpose of allowing additional time for soliciting additional votes "FOR" the
Merger. See "-- Vote Required; Revocability of Proxies" and "OTHER MATTERS."
SHAREHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL, WHICH WILL BE SENT TO SHAREHOLDERS BY THE DISBURSING AGENT PROMPTLY
AFTER THE EFFECTIVE TIME.
VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of holders of at least a majority of the outstanding
shares of Common Stock entitled to vote thereon is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. The affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote thereat is required to
ratify the selection of Arthur Andersen LLP. Directors are elected by a
plurality vote of the Common Stock represented at the Annual Meeting and
entitled to vote.
The required vote of the Shareholders on the Merger Agreement and the
transactions contemplated thereby, including the Merger, is based upon the total
number of outstanding shares of Common Stock as of the Record Date. Therefore,
the failure to submit a proxy card (or to vote in person at the Annual Meeting)
or the abstention from voting by a Shareholder (including broker non-votes) will
have the same effect as an "AGAINST" vote with respect to approval and adoption
of the Merger Agreement and the transactions contemplated thereby, including the
Merger. With respect to other matters submitted for Shareholder approval at the
Annual Meeting (other than the election of directors), abstentions are treated
as shares represented and entitled to vote and thus have the same effect as an
"AGAINST" vote, and broker nonvotes or other circumstances in which proxy
authority has been withheld will have no effect on the approval of any such
matter.
A proxy may be revoked prior to its being voted by: (i) delivering to the
Secretary of the Company, at or before the Annual Meeting, a written instrument
bearing a later date than the proxy, which instrument, by its terms, revokes the
proxy, (ii) duly executing a subsequent proxy relating to the same Shares and
delivering it to the Secretary of the Company at or before the Annual Meeting or
(iii) attending the Annual Meeting and giving notice of revocation to the
Secretary of the Company or in open meeting prior to the proxy being voted
(although attendance at the Annual Meeting will not in and of itself constitute
a revocation of a proxy). Any written instrument revoking a proxy should be sent
to: APL Limited, 1111 Broadway, Oakland, California 94607, Attention: Corporate
Secretary.
If a quorum is not obtained, or if fewer shares of Common Stock than the
number required therefor are voted in favor of approval and adoption of the
Merger Agreement and the transactions contemplated thereby, including the
Merger, it is expected that the Annual Meeting will be postponed or adjourned in
order to permit additional time for soliciting and obtaining additional proxies
or votes, and, at any subsequent reconvening of the Annual Meeting, all proxies
will be voted in the same manner as such proxies would have been voted at the
original convening of the Annual Meeting, except for any proxies which have
theretofore effectively been revoked or withdrawn.
The obligations of the Company and NOL to consummate the Merger Agreement
are subject to, among other things, the condition that the Shareholders, by the
requisite vote thereof, approve and adopt the Merger Agreement and the
transactions contemplated thereby. See "THE MERGER AGREEMENT -- Conditions
Precedent to the Merger -- All Parties." APL has been advised by NOL that no
vote of the stockholders of NOL is required in connection with the Merger
Agreement.
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SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies in the accompanying
form from Shareholders. In addition to soliciting proxies by mail, directors,
officers and employees of the Company, without receiving additional compensation
therefor, may solicit proxies by telephone, by telegram, or in person.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of shares of Common Stock held of record by such persons, and the Company
will reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith. The
Company has retained Morrow & Co., Inc. to aid in the solicitation of proxies.
Morrow & Co., Inc.'s fee for solicitation of the proxies is estimated to be
$6,000 plus reimbursement for out-of-pocket costs and expenses.
PARTIES TO THE MERGER
THE COMPANY
The Company and its subsidiaries provide transportation services for
containerized cargo in the trans-Pacific, intra-Asia, Asia-Europe, Asia-Latin
America and North American markets. Certain of the services are provided through
alliances with other transportation companies. In addition, the Company provides
cargo distribution and warehousing services in the United States and freight
consolidation services in Mexico, Asia, the Middle East, Europe, and Africa. The
Company provides freight deconsolidation services in several locations in the
United States and Europe and acts as a non-vessel operating common carrier in
the intra-Asia region and from Asia to Europe and Australia. The Company
provides intermodal transportation and freight brokerage services to North
American and international shippers within the United States, as well as
time-critical cargo transportation and just-in-time delivery (principally to the
automotive manufacturing industry). These services are provided through an
integrated system of rail and truck transportation, the primary element of which
is train services provided utilizing double-stack rail cars.
The Company's international transportation operations are conducted through
American President Lines, Ltd., an ocean common carrier with operations in the
Pacific Basin, Europe and Latin America. Another operating unit, American
Consolidation Services, Ltd., provides cargo distribution, warehousing and
freight consolidation services. Stevedoring and terminal operations on the U.S.
West Coast are conducted through Eagle Marine Services, Ltd. American President
Business Logistics Services, Ltd. provides logistical consulting and management
services. The Company's North America transportation operations are conducted
through APL Land Transport Services, Inc., which provides intermodal
transportation.
The Company's principal offices are located at 1111 Broadway, Oakland,
California 94607, and its telephone number is (510) 272-8000.
NOL
NOL is a diversified transportation group with shipping as its core
business. NOL has its headquarters in Singapore and is the largest shipping
company listed on the Stock Exchange of Singapore. NOL operates a comprehensive
network of container liner services and worldwide charter services in the liquid
and dry-bulk trades. Its fleet consists of 36 containerships, 30 tankers and 7
dry-bulk carriers, with 14 additional vessels scheduled for delivery in 1997 and
1998.
NOL's liner services are backed by representative offices around the world
that provide support for the container liner business in the form of cargo
canvassing, cargo documentation, cargo and port operations, transhipment, and
ship husbandry. NOL subsidiary and associated companies offer shippers a
complete range of transportation-related services, including warehousing and
distribution. NOL's chartering fleet includes crude oil tankers and clean
product tankers, as well as dry-bulk carriers that are deployed on spot and
time-charters in the Caribbean, Southeast Asia, China, Japan, the United States,
and Arabian Gulf. NOL's wholly-owned subsidiary, American Eagle Tankers, Inc.
Limited is the largest lightering operator in the U.S. Gulf/Caribbean region,
with its deployment of 11 Aframax tankers.
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NOL's principal office is located at 456 Alexandra Road, #06-00 NOL
Building, Singapore 119962, Republic of Singapore, and the telephone number of
its Corporate Secretariat is (65) 371-5376.
SUB
Sub is a Delaware corporation that conducts no business and is an indirect
wholly-owned subsidiary of NOL. Pursuant to the terms of the Merger Agreement,
at the Effective Time, Sub will be merged with and into the Company, with the
Company continuing as the Surviving Corporation and the separate corporate
existence of Sub ceasing.
The aggregate cash consideration to be paid in the Merger is approximately
$825 million, exclusive of payments to be made in connection with stock options,
bonus shares, premium shares, phantom shares and dividend equivalent rights. NOL
intends to fund such cash payments to Shareholders through cash on hand at the
time of the Merger and borrowings under its existing lines of credit. Although
the amounts, terms and conditions have not been determined by NOL, NOL expects
that certain of the debt under its existing lines of credit will be incurred by
Sub for tax and other reasons. Any such debt incurred by Sub will become debt of
the Surviving Corporation following the Merger and, accordingly, the Surviving
Corporation's debt to equity ratio is expected to increase and its interest
coverage ratio is expected to decrease from the Company's current ratios. In
addition, since the Surviving Corporation will no longer be subject to the
informational requirements of the Exchange Act and the rules and regulations
thereunder, no information with respect to the financial condition or results of
operations of the Surviving Corporation is expected to be disclosed publicly
following the consummation of the Merger. See "ADDITIONAL INFORMATION."
Sub's principal office is c/o Neptune Orient Lines Limited at 456 Alexandra
Road, #06-00 NOL Building, Singapore 119962, Republic of Singapore, and the
telephone number of its Corporate Secretariat is (65) 371-5376.
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THE MERGER
GENERAL
The following information, insofar as it relates to matters contained in
the Merger Agreement, is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and attached hereto as
Appendix A. Shareholders are urged to read the Merger Agreement in its entirety.
All information contained in this Proxy Statement with respect to NOL and its
subsidiaries, including Sub, has been supplied by NOL for inclusion herein and
has not been independently verified by the Company.
BACKGROUND OF THE MERGER
Throughout 1994 and 1995, the Company underwent a reengineering program
that involved the integration and reorganization of the Company's business
units, a renewed focus on the Company's core strengths, the sale of businesses
peripheral to the Company's long-term plans and a significant cost-cutting
effort. During the fourth quarter of 1995, the Company recorded a restructuring
charge of $48.4 million related to the accelerated completion of the
reengineering program and other organizational changes. During 1996, the Company
completed this restructuring, eliminated approximately 950 positions and sold
certain non-core operations. As a result, the Company reduced its operating
costs by approximately $151 million during 1996. Although the restructuring
lowered the Company's operating costs, improved its management of capital
resources and enhanced the quality of its customer service, the problems of
industry overcapacity, depressed shipping rates and intense competition
persisted. In the fall of 1996, after considering, among other factors, the
Company's past performance, the Company's prospects and business plan, depressed
shipping rates due to overcapacity in container vessels, the prospects that such
overcapacity would persist for the foreseeable future, and the limitations on
the Company's ability to continue to cut costs further and improve efficiencies
in its container shipping operations, the Company's Board and management began
to explore strategic alternatives to enhance Shareholder value, including
increased focus on its non-shipping operations, tax planning and potential
corporate restructurings, while continuing to address the difficult conditions
prevailing in the container shipping business.
In October 1996, the Company was approached by another industry participant
regarding a potential strategic business combination, to be structured as a
merger of equals between the two companies in which the Company's Shareholders
would retain an equity interest in the combined business. In November 1996, the
Company commenced preliminary discussions with that company to evaluate the
potential for such a business combination. In connection with such discussions,
a jointly-engaged management consultant undertook a study of the potential
operating synergies of a combination between the two companies. Each of the
Company and the potential merger partner entered into written confidentiality
agreements, dated as of November 1, 1996, with the management consultant and
provided certain confidential information to the management consultant (which
information was not disclosed to the other party). In December 1996, the Company
and Hellman & Friedman Capital Partners, an investment firm that, together with
affiliates, owned approximately 8.25% of the Common Stock, jointly entered into
a written confidentiality agreement with the potential merger partner and the
two companies exchanged certain confidential information. (Two of the Company's
directors were, at that time, partners of Hellman & Friedman Capital Partners.)
The study of potential operating synergies (which, among other things,
identified potential synergies through eliminating duplicative administrative
and operational functions, increasing asset utilizations and leveraging
purchasing volumes) was completed by the jointly-engaged management consultant
in December 1996. Although discussions continued with the potential merger
partner in December 1996 and January 1997, no agreement was reached.
In January 1997, the Company retained J.P. Morgan to act as the Company's
financial advisor to assist the Company in exploring the potential merger, as
well as alternative means of increasing Shareholder value. The Company also
continued to investigate other strategic alternatives, including increasing its
focus on its terminal, intermodal and logistics operations and possible
corporate restructurings to take advantage of more competitive tax structures.
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In late January and early February 1997, the Company received unsolicited
inquiries from two other industry participants regarding possible business
combinations with the Company, including an inquiry from NOL with an indicated
value of $30 in cash for each outstanding share of Common Stock of the Company.
The Company entered into written confidentiality agreements with each of the
interested parties (including new confidentiality agreements with the original
potential merger partner and with a party that was considering financing that
transaction), and J.P. Morgan sent to each of them a letter establishing
procedures for them to evaluate potential business combination opportunities
with the Company. The Company's senior management made informational
presentations to each of these interested parties, and the Company provided
certain non-public information to each party for the purpose of its due
diligence review and the submission of formal indications of interest. In early
March 1997, the Company received written, non-binding indications of interest
from two of the interested parties, including an indication of interest from NOL
that valued the Company at $31 in cash for each outstanding share of Common
Stock of the Company. The other interested party indicated that it might
propose, under certain conditions, a transaction in which the Company's
Shareholders would receive $30 to $35 in cash for each outstanding share of
Common Stock of the Company. The original potential merger partner indicated
that it would not participate further in the process established by the Company
and J.P. Morgan, but that it would be interested in pursuing the merger of
equals transaction on terms previously discussed with the Company. Based on the
Board's understanding of the financial terms of the proposed transaction that
such potential merger partner would have been interested in pursuing, as well as
its understanding of the business and financial condition of such potential
merger partner and the results of the study of potential operating synergies
discussed above, and after consultation with J.P. Morgan, the Board concluded
that the terms of such merger of equals (in which shareholders would retain an
equity interest in the combined business) were less favorable than both the $31
transaction then proposed by NOL and the $30 to $35 per share transaction that
such other interested party indicated it might propose.
On the basis of these indications of interest, NOL and the other interested
party were granted access to a due diligence data room for more detailed review
of the Company's material agreements and information, and selected meetings with
senior management and senior operating personnel were held. At a meeting on
March 21, 1997, J.P. Morgan and the Company's legal advisors reviewed with the
Board certain strategic alternatives available to the Company, including
continued operations as an independent company pursuant to the Company's
business plan (which business plan included the assumption that the Company
would be able to take advantage of more competitive tax structures), the sale of
certain lines of business or assets of the Company, a spin-off of one or more of
the business divisions of the Company and a leveraged recapitalization of the
capital stock of the Company (or a combination of the foregoing) and presented
an evaluation and analysis of the proposals from each interested party and the
current status of discussions. Following review and discussion of the various
strategic alternatives, the Board directed management, working with the
Company's advisors, to continue its discussions with NOL and the other
interested party with respect to their indications of interest. On March 24,
1997, a member of the Board and the Chief Executive Officer of the Company met
with members of senior management of NOL to discuss NOL's indication of
interest. At this meeting, NOL increased its proposed cash purchase price per
share to $33.50 and indicated its desire to continue its evaluation and review
of the Company. On March 29, 1997, the Company provided to each of the two
interested parties a proposed merger agreement providing for a cash merger with
the Company, and, on March 31, 1997, J.P. Morgan requested that each interested
party submit final, firm offers for an acquisition of the Company by April 4,
1997.
On April 4, 1997, NOL submitted a proposal for a merger with the Company at
a purchase price of $33.50 in cash for each outstanding share of Common Stock.
The other interested party did not submit any proposal, but indicated that it
might have an interest in submitting a proposal after passage of an unspecified
period of time. After receipt of NOL's proposal, certain members of senior
management of the Company, along with J.P. Morgan and the Company's outside
legal advisors, commenced negotiations with certain members of senior management
of NOL, and NOL's outside financial and legal advisors, relating to the terms of
the proposed merger agreement providing for a cash merger among NOL, Sub and the
Company. These negotiations continued through April 10, 1997.
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<PAGE> 21
The proposed Merger was unanimously approved by the Board at a meeting held
on April 11, 1997. At such meeting, the Board considered, among other matters, a
presentation by J.P. Morgan and the oral opinion of J.P. Morgan (which was
subsequently confirmed in writing on April 13, 1997) that, as of such date, the
consideration to be received by the Shareholders pursuant to the proposed Merger
Agreement with NOL was fair to the Shareholders, as well as other considerations
set forth below under "-- Reasons for the Merger." At such meeting, J.P. Morgan
discussed with the Board the process of discussions and negotiations that had
occurred with interested parties. The Board also discussed with management and
the Company's advisors the material terms of the Merger Agreement. On April 13,
1997, NOL's Board of Directors unanimously approved the proposed Merger
Agreement and the transactions contemplated thereby, including the Merger. On
April 13, 1997, the Merger Agreement was executed and delivered by the parties,
and the Company and NOL issued a press release announcing the proposed Merger.
REASONS FOR THE MERGER
The Board has determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, are advisable and in the best
interests of the Company and its Shareholders and has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Merger. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. See "-- Background of
the Merger" and "-- Opinion of Financial Advisor."
In reaching its unanimous determination that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are advisable and in
the best interests of the Company and its Shareholders, the Board considered a
number of factors, which factors taken together supported such determination,
including without limitation the following:
(i) the Board's knowledge of the business, operations, properties,
assets, financial condition and operating results of the Company;
(ii) information relating to the financial condition, results of
operations, asset quality and prospects of the Company (see "SELECTED
CONSOLIDATED FINANCIAL DATA"), management's assessment of the prospects of
the Company (including management's projections which assumed that the
Company's consolidated net income would grow from $55 million in 1997 to
$187.1 million in 2001) and the Board's consideration of the highly
unpredictable nature of the Company's business, as demonstrated by the
Company's actual historical performance versus its previous predictive
plans; in this regard, the Board considered that based on the Company's
actual results through 1996, the Company's actual cumulative operating
income was 45%, 68%, 77% and 60% of the cumulative forecasted operating
income predicted pursuant to the Company's 5-year plans prepared in each of
1992, 1993, 1994 and 1995 (see "-- Opinion of Financial Advisor --
Discounted Cash Flow Analysis");
(iii) the current and prospective environment in which the Company
operates, including national and international economic conditions, the
competitive environment for containerized shipping generally, the current
and prospective industry climate of depressed freight rates due to
overcapacity in the containerized shipping industry, and the related trend
toward consolidation in the containerized shipping industry;
(iv) the presentation by J.P. Morgan and its opinion that the cash
consideration of $33.50 per share to be paid to the Shareholders pursuant
to the Merger was fair, from a financial point of view, to such
Shareholders (which was one of the factors upon which the Board relied,
without independent verification, in connection with its conclusion that
the proposed transaction is advisable and in the best interest of the
Company) (see "-- Opinion of Financial Advisor");
(v) the relationship of the Merger Consideration to the historical and
current market prices for the Common Stock preceding the announcement of
the Merger (see "MARKET PRICES OF COMMON STOCK");
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<PAGE> 22
(vi) the conclusion of the Board that NOL's proposal was the most
favorable transaction available to the Company, in terms of the value to be
realized by Shareholders and the likelihood of consummation, based on the
advice of senior management and J.P. Morgan after the discussions with
other potentially interested parties discussed above and on the fact that,
while another potentially interested party had indicated that it might
propose a transaction in which the Company's shareholders would receive $30
to $35 per share for the Common Stock of the Company, it had not submitted
a firm offer for acquisition of the Company and had indicated that it might
be interested in submitting such an offer only after passage of an
unspecified period of time; as well as the Board's judgment, after review
with the Company's management and its outside legal and financial advisors
of alternatives to the Merger, particularly the alternatives of continued
operations as an independent company and the other alternatives described
below (or a combination thereof), that the Shareholders would realize
greater value from the transaction with NOL than from the other
alternatives available to the Company and that the transaction with NOL
would have greater certainty of completion than such other alternatives
(see "-- Background of the Merger" and "-- Opinion of Financial Advisor");
in that regard, the alternatives referred to above were the following:
- the alternative of a sale of certain lines of business or assets of
the Company, in connection with which the Board considered and
discussed with representatives of J.P. Morgan, that the value of such
a transaction would depend upon a number of factors, including market
conditions and the degree of separability of, and the economics of
any contractual relationship established between, any particular line
of business and the remaining businesses of the Company, and the
illustrative analysis of J.P. Morgan which indicated that, in the
event that the sale of one or more lines of business could be
accomplished at favorable prices and that such a sale would not
adversely affect the remaining businesses through loss of customers
or otherwise, and based upon an analysis of multiples of earnings
before interest, taxes, depreciation and amortization ("EBITDA") of
certain comparable companies, ranges of value from $23.04 to $38.56
per share could be implied by such sales depending on the line of
business sold; as well as the view of management and J.P. Morgan
that, among other things, while such a sale could potentially unlock
value in non-core businesses and allow a cash distribution to
Shareholders, if feasible, it would possibly be a taxable
transaction, would be subject to completion risks, could result in
separability problems, in particular, but without limitation, risk of
leakage of competitive information, loss of strategic integration and
contractual issues, could impair future transaction flexibility and
would not allow Shareholders to participate in the upside of the sold
business,
- the alternative of a spin-off of one or more businesses of the
Company, in connection with which the Board considered and discussed
with representatives of J.P. Morgan, that the value of such a
transaction would vary depending on the value of the business
spun-off (including allocated debt), the degree of separability of,
and the economics of any contractual relationship established
between, the business spun-off and the remaining businesses and the
value of the remaining businesses following the spin-off, which could
vary depending upon the synergies otherwise attributable to the
Company's unified intermodal system lost in the spin-off, and the
illustrative analysis of J.P. Morgan which indicated that, in an
assumed spin-off of the terminals business, in the event that (i) the
terminals business was valued at an amount equal to 75% of its
discounted cash flow value (based on projections supplied by
management) minus the amount of debt allocated to that business, (ii)
the earnings of the remaining businesses were unaffected by the
spin-off, (iii) the remaining businesses of the Company traded in the
market at a price reflecting a multiple of 4.0 times EBITDA after the
spin-off and (iv) the remaining businesses of the Company carried
$650 million of debt and had $284 million in cash, the value realized
by Shareholders would be $28.08 per share; as well as the view of
management and J.P. Morgan that, among other things, while such a
spin-off could potentially unlock value in non-core businesses, would
potentially be tax-free and would allow Shareholders the option to
retain the upside in both businesses, if feasible, it would be
subject to completion risks, could result in separability problems,
would not result in a distribution or other payment of cash to
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<PAGE> 23
Shareholders, could impair the Company's or such spun-off entity's
future transaction flexibility and would add risk related to the
uncertainty of the trading profile of the spun-off business, and
- the alternative of a leveraged recapitalization of the capital stock
of the Company, in connection with which the Board considered and
discussed with representatives of J.P. Morgan, that the value of such
a transaction would be highly contingent upon the results of
operations of the Company due to the increased leverage that would
result from such a transaction, and on the amount of any cash
dividend paid to the Company's Shareholders, and the illustrative
analysis of J.P. Morgan which indicated that, assuming a leveraged
recapitalization in which the Company paid a $16 special dividend at
the end of 1997, and further assuming (i) that the value of the
Company in year 2001 would be based on 4.5 times projected EBITDA for
the year 2001 and (ii) a discount rate of 10%, the value realized by
Shareholders in such a leveraged recapitalization would, due to
significant leverage effects, have a wide range of value, as high as
$51.29 per share (utilizing 2001 EBITDA based on management's
five-year plan), as low as $11.08 per share (assuming a reduction of
1% in all rates and volume assumptions from those set forth in
management's plan) and showing an illustrative per share value of
$22.66 per share (assuming a reduction of 1% in freight rates, but no
reduction in volumes, from the assumptions set forth in management's
five-year plan); as well as the view of management and J.P. Morgan
that, among other things, while such a leveraged recapitalization
would result in a significant cash distribution to Shareholders, if
feasible, it would significantly increase leverage in an uncertain
shipping rate environment, could be difficult to finance and subject
the Company to restrictive covenants decreasing operating
flexibility, would significantly increase the risk-profile of the
Company, would increase fixed costs, would be a taxable transaction
and would add risk related to the uncertainty of the trading profile
of the highly leveraged remaining equity of the Company;
the Board also considered and discussed with representatives of J.P. Morgan
that a sale of the Company could potentially result in realization of a
substantial premium to the current stock price on a more expedited basis
than other alternatives, and further, that the transaction proposed by NOL
was less complex than the potential merger of equals discussed above,
although, among other things, regulatory approval and completion risks
would exist with respect to any sale of the Company and in the event of any
such transaction the Shareholders would not participate in any industry
upside;
(vii) the terms of the Merger Agreement as reviewed by the Board with
its legal advisors, and in particular the facts that consummation of the
Merger is conditioned upon receipt of the approval of the Company's
Shareholders and that the Company may, if the Board deems it necessary to
do so in the exercise of its fiduciary obligations after consultation with
outside counsel (and upon payment of certain fees and expenses), enter into
an alternative transaction that may reasonably be expected to be more
favorable to the Company and the Shareholders (see "THE MERGER AGREEMENT");
(viii) the facts that the Merger Consideration is all cash and that
the Merger is not subject to financing contingencies (see "THE MERGER
AGREEMENT -- The Merger" and "THE MERGER AGREEMENT -- Conditions Precedent
to the Merger");
(ix) the Board's awareness and assessment of the potential that, in
connection with the Merger, in addition to their interests as Shareholders,
certain payments would be made to and other interests could be received by
certain of the Company's directors and executives pursuant to the Company's
stock plans and under certain circumstances following the Merger (see
"INTERESTS OF CERTAIN PERSONS IN THE MERGER"); and
(x) the fact that the Merger is conditioned upon receipt of regulatory
approvals (see "THE MERGER AGREEMENT -- Conditions Precedent to the
Merger"), especially considering that NOL is not an United States citizen.
The foregoing discussion of the information and factors considered by the
Board is not meant to be exhaustive but is believed to include the material
factors considered by the Board. The Board's analysis of the fairness of the
transaction to Shareholders included its analysis of each of the factors
discussed above. The
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Board did not quantify or attach any particular weight to the various factors
that it considered in reaching its determination that the Merger Agreement and
the transactions contemplated thereby, including the Merger, are advisable and
in the best interests of the Shareholders. In reaching its determination, the
Board took the various factors into account collectively and did not perform a
factor-by-factor analysis, nor did the Board consider whether any factor was, on
balance, positive or negative, but rather its determination was made in
consideration of all of the factors as a whole.
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated January 22, 1997, the Company
retained J.P. Morgan as its financial advisor to assist the Company in exploring
the potential merger that was under consideration, as well as alternative means
of increasing Shareholder value, including a potential sale, by way of merger,
spin-off or other means, of all or a portion of the assets or stock of the
Company.
At the meeting of the Board on April 11, 1997, J.P. Morgan rendered its
oral opinion to the Board that, as of such date, the Merger Consideration to be
paid in the proposed Merger was fair, from a financial point of view, to the
Company's Shareholders. J.P. Morgan has confirmed its April 11, 1997 oral
opinion by delivering its written opinion to the Board, dated April 13, 1997,
that, as of such date, the Merger Consideration to be paid in the proposed
Merger was fair, from a financial point of view, to the Company's Shareholders.
No limitations were imposed by the Company's Board upon J.P. Morgan with respect
to the investigations made or procedures followed by it in rendering its
opinions.
The full text of the written opinion of J.P. Morgan, dated April 13, 1997,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached as Appendix B to this Proxy Statement and is
incorporated herein by reference. The Company's Shareholders are urged to read
the opinion in its entirety. J.P. Morgan's written opinion is addressed to the
Board, is directed only to the Merger Consideration to be paid in the Merger and
does not constitute a recommendation to any Shareholder of the Company as to how
such Shareholder should vote at the Annual Meeting. J.P. Morgan has consented to
the disclosure of and reference to its opinion in this Proxy Statement. The
summary of the opinion of J.P. Morgan set forth in this Proxy Statement
describes the material aspects of the opinion, but does not purport to be
complete and is qualified in its entirety by reference to the full text of such
opinion.
In arriving at its opinions, J.P. Morgan reviewed, among other things, in
the case of its April 11, 1997 opinion, a draft of the Merger Agreement and, in
the case of its written opinion dated April 13, 1997, the Merger Agreement; in
the case of its April 11, 1997 and April 13, 1997 opinions, the audited
financial statements of the Company for the fiscal year ended December 27, 1996,
and the unaudited financial statements of the Company for the period ended
February 28, 1997; current and historical market prices of the Common Stock;
certain publicly available information concerning the business of the Company
and of certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed by J.P. Morgan to be comparable; the terms of other business combinations
deemed relevant by J.P. Morgan; and certain internal financial analyses and
forecasts prepared by the Company and its management. J.P. Morgan also held
discussions with certain members of the management of the Company with respect
to certain aspects of the Merger, the past and current business operations of
the Company, the financial condition and future prospects and operations of the
Company, and certain other matters believed by J.P. Morgan to be necessary or
appropriate to J.P. Morgan's inquiry. In addition, J.P. Morgan reviewed such
other financial studies and analyses and considered such other information as it
deemed appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by the Company or otherwise reviewed by J.P. Morgan, and
J.P. Morgan has not assumed any responsibility or liability therefor. J.P.
Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P. Morgan.
In relying on financial analyses and forecasts provided to J.P. Morgan, J.P.
Morgan has assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial
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<PAGE> 25
condition of the Company. J.P. Morgan has also assumed that the other
transactions contemplated by the Merger Agreement will be consummated as
described in the Merger Agreement.
The projections furnished to J.P. Morgan by the Company were prepared by
the management of the Company. The Company does not publicly disclose internal
management projections of the type provided to J.P. Morgan in connection with
J.P. Morgan's analysis of the Merger, and such projections were not prepared
with a view toward public disclosure. These projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of management, including, without limitation, factors related to general
economic and competitive conditions, prevailing rates in the containerized
shipping industry and prevailing interest rates. Accordingly, actual results
could vary significantly from those set forth in such projections.
J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect such opinions, and
J.P. Morgan does not have any obligation to update, revise, or reaffirm such
opinions.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.
Historical Trading Analysis. J.P. Morgan reviewed the historical price
trading performance of the Common Stock, on a daily basis, over the Company's
trading history. As of the date of the opinions, the 52-week trading range of
the Company's Common Stock was $18 to $28 7/8 per share. The Company's Common
Stock price has exceeded $33 1/2 per share only once in its trading history,
closing at $34 per share on March 8, 1994. J.P. Morgan also reviewed the
compound annual share price appreciation and compound annual total return of the
Common Stock compared to the S&P 500 and a composite index (the "S&P Transport
Index") composed of the following companies: Burlington Northern Santa Fe Corp.,
Delta Air Lines, Federal Express Corp., Norfolk Southern Corporation, AMR Corp.,
Caliber System Inc., Conrail Inc., CSX Corporation, Southwest Airlines Co.,
Ryder System Inc., US Airways Group Inc. and Union Pacific Corporation. This
analysis showed that the Common Stock underperformed both indices in terms of
compound annual share price appreciation and compound annual total return for
the one, three, five and ten year periods prior to the delivery of the opinions.
J.P. Morgan also reviewed the historical rolling forward one-year price to
earnings multiple at which the Common Stock had traded and at which the S&P 500
had traded. This analysis showed that the Common Stock had, with the exception
of an approximately two-year period from 1990 to 1992, underperformed the S&P
500.
Market Acquisition Premium Analysis. J.P. Morgan reviewed the median
control premium paid from 1988 to 1992 and in 1993, 1994, 1995 and 1996 for the
acquisition of U.S. public companies where majority control was purchased and
the transaction value exceeded $50 million, based on data provided by the
Securities Data Company. These premiums (which were calculated based on the
final offer price versus the target stock price five business days prior to the
initial offer) were 48.0%, 35.1%, 32.9%, 28.0% and 28.2%, respectively. The
Merger Consideration of $33.50 per share of Common Stock represents a premium of
71.8% over the closing market price of the Common Stock on April 9, 1997, which
was $19.50 per share. The 1996 median control premium of 28.2%, applied to the
April 9, 1997 market price of the Common Stock of $19.50 per share, implied a
transaction price per share of $25.00.
Selected Trading Multiples Analyses. J.P. Morgan compared selected
financial data of the Company with similar data, using publicly available
information, for selected publicly traded shipping companies. The companies
selected by J.P. Morgan were Alexander & Baldwin Inc., Teekay Shipping Corp.,
Kirby Corp., International Shipholding Inc., Stolt-Nielsen S.A., Hvide Marine
Inc. and Seacor Holdings Inc. (the "Selected Companies"). These companies were
selected, among other reasons, because J.P. Morgan determined that, although
there are no publicly-traded companies with precisely the same mix of business
and financial condition as the Company, the Selected Companies are
publicly-traded companies with operations that, for purposes of analysis, may be
considered to be similar to the operations of the Company. For each company, the
most recent publicly available financial performance was measured and J.P.
Morgan reviewed the following multiples: firm value (which includes the market
value of equity and preferred stock plus debt
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net of cash and marketable securities) to latest twelve months ("LTM") earnings
before interest and taxes ("EBIT") and to projected 1997 EBIT; firm value to LTM
EBITDA and to projected 1997 EBITDA; and equity value to projected 1997 and 1998
earnings. J.P. Morgan selected a firm value to projected 1997 EBITDA multiple
range of 5.0x to 6.0x. This multiple range was then applied to the Company's
estimate of its 1997 EBITDA, yielding implied trading values for the Common
Stock of approximately $28 to $37 per share.
J.P. Morgan also reviewed the market value weighted price to estimated 1997
earnings ratio of sixty-nine major transportation companies relative to the S&P
price to estimated 1997 earnings ratio to derive an implied transportation
company price-to-earnings multiple range of 11.7x to 12.6x. This multiple range
was then applied to the Company's estimate of its 1997 earnings, yielding
implied trading values for the Company's Common Stock of approximately $26 to
$28 per share.
J.P. Morgan also reviewed the mean and median value for the equity value to
projected 1997 earnings multiples of comparable shipping companies and selected
a multiple range of 12.0x to 14.0x. This multiple range was then applied to the
average of the most recent 1997 earnings per share estimates by analysts at
Furman Selz, Gruntal & Co., Lazard Freres, Value Line, Standard & Poor's and
NatWest Securities. This yielded implied trading values for the Common Stock of
approximately $25 to $29 per share.
Discounted Cash Flow Analysis. J.P. Morgan conducted a discounted cash
flow analysis for the purpose of determining the fully diluted equity value per
share for the Common Stock. J.P. Morgan calculated the unlevered free cash flows
that the Company is expected to generate during fiscal years 1997 through 2001
based upon financial projections prepared by the management of the Company
through the years ended 2001 (which projections assumed that the Company's
consolidated net income would grow from $55 million in 1997 to $187.1 million in
2001), upon such management projections as adjusted by J.P. Morgan with the
consent of the Company's management (to reflect the achievement of 60-70% of the
projections, which adjustment is consistent with the Company's historical actual
performance versus prior five-year financial plans) and upon such management
projections assuming all freight rates and volumes were 1% below those
forecasted by the projections. J.P. Morgan also calculated a range of terminal
asset values of the Company at the end of the five-year period ending 2001 by
applying perpetual growth rates to the unlevered free cash flow of the Company
during the final year of the five-year period. The unlevered free cash flows and
the range of terminal asset values were then discounted to present values using
a range of discount rates from 9.5% to 10.5%, which were chosen by J.P. Morgan
based upon an analysis of the weighted average cost of capital of the Company.
The present value of the unlevered free cash flows and the range of terminal
asset values were then adjusted for the Company's excess cash, option exercise
proceeds and total debt as of February 28, 1997. Based on the management
projections (as adjusted by J.P. Morgan to reflect the Company's historical
actual performance versus prior five-year financial plans) and a discount rate
of 10.0%, the discounted cash flow analysis indicated a range of equity values
of between $25 and $33 per share of Common Stock, which range J.P. Morgan
selected as most appropriate for purposes of its opinion. Based on the
unadjusted management projections and on management's projections, adjusted to
assume that all freight rates and volumes are 1% lower than forecasted, and, in
each case, using a range of discount rates from 9.5% to 10.5%, the discounted
cash flow analysis indicated ranges of equity values of $51 to $59 and $29 to
$36, respectively, per share of Common Stock.
Segment Multiples Breakup Analysis. J.P. Morgan also analyzed and
presented to the Board a firm value for the Company based on 1997 EBITDA
multiples for each segment of the Company's business. J.P. Morgan selected a
1997 EBITDA multiple range of 5.0x to 6.0x for the shipping segment (using
Alexander & Baldwin Inc., Teekay Shipping Corp., Kirby Corp., International
Shipholding Inc., Stolt-Nielsen S.A., Hvide Marine Inc. and Seacor Holdings Inc.
as comparable companies), 7.5x to 9.0x for the terminals segment (using Kelang
Container Terminal, International Container Terminal Services, Inc. and Asian
Terminals Inc. as comparable companies), 5.5x to 6.5x for the stacktrain and
domestic automobile segment (using J.B. Hunt Transport Services, Inc., Werner
Enterprises, Inc., Swift Transportation Co., Inc., US Freightways Corporation,
Heartland Express, Inc., M.S. Carriers, Inc., Landstar System, Inc., Knight
Transportation, Inc. and Covenant Transport, Inc. as comparable companies) and
9.5x to 10.5x for the consolidation services and intermodal
marketing/distribution services segment (using Hub Group, Inc. and Mark VII,
Inc. as comparable companies). This analysis indicated a range of after-tax
equity values for the Company on a
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segment breakup basis of $34 to $40 per share of Common Stock. Although a
segment multiples breakup analysis is a generally accepted valuation
methodology, J.P. Morgan did not utilize this analysis in connection with its
opinion based on J.P. Morgan's view, shared by the Company's management and
Board, that realization of such breakup values would be highly uncertain because
of separability issues (including contractual issues, erosion of highly
integrated system efficiencies and the risk of leakage of competitive
information), timing and completion risks and the incremental costs of
infrastructure that would be required for each of the Company's segments to
operate as a stand-alone business.
As described above, J.P. Morgan's opinion to the Board was one of many
factors taken into consideration by the Board in making its determination to
approve the Merger Agreement. The summary set forth above does not purport to be
a complete description of the analyses or data presented by J.P. Morgan.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. J.P. Morgan
believes that the summary set forth above and their analyses must be considered
as a whole and that selecting portions thereof, without considering all of its
analyses, could create an incomplete view of the processes underlying its
analyses and opinion. J.P. Morgan based its analyses on assumptions that it
deemed reasonable, including assumptions concerning general business and
economic conditions and industry-specific factors. The other principal
assumptions upon which J.P. Morgan based its analyses are set forth above under
the description of each such analysis. J.P. Morgan's analyses are not
necessarily indicative of actual values or actual future results that might be
achieved, which values may be higher or lower than those indicated. Moreover,
J.P. Morgan's analyses are not and do not purport to be appraisals or otherwise
reflective of the prices at which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to advise the Company
with respect to the Merger on the basis of such experience and its familiarity
with the Company.
For services rendered in connection with the Merger, the Company has agreed
to pay J.P. Morgan a fee of 0.38% of the aggregate amount of consideration
received by the Company's Shareholders (including the aggregate spread
attributable to vested options) in the Merger, plus the amount of any debt
securities assumed, redeemed or remaining outstanding. Based on the most
recently available data, the maximum fee payable would be approximately $6
million assuming consummation of the Merger. In addition, the Company has agreed
to reimburse J.P. Morgan for certain expenses incurred in connection with its
services, including the fees and disbursements of counsel, and will indemnify
J.P. Morgan against certain liabilities, including liabilities arising under the
Federal securities laws.
J.P. Morgan acted as co-manager on the Company's $150 million senior notes
issuance in 1993 and advised the Company on the sale of its Domestic
Distribution Services unit in 1996 and on the Company's share repurchases
between 1992 and 1996, including Dutch Auctions, targeted and open market
repurchases. J.P. Morgan's affiliate, Morgan Guaranty Trust Company of New York,
is the agent bank for the Company's revolving credit facility and has entered
into interest rate hedge contracts with the Company. The credit facility may
remain outstanding after consummation of the Merger. In the ordinary course of
their businesses, affiliates of J.P. Morgan may actively trade the debt and
equity securities of the Company for their own account or for the accounts of
customers and, accordingly, they may at any time hold long or short positions in
such securities.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," as amended. Under this method of accounting, the purchase price
will be allocated to assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time.
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THE MERGER AGREEMENT
The following is a summary of all material provisions of the Merger
Agreement, a copy of which is attached hereto as Appendix A. This summary does
not purport to be complete, and all references to and summaries of the Merger
Agreement in this Proxy Statement are qualified in their entirety by reference
to the Merger Agreement which is incorporated herein by reference.
EFFECTIVE TIME
Subject to the provisions of the Merger Agreement, the closing of the
Merger will take place as promptly as practicable (and in any event within two
business days) after satisfaction or waiver of the conditions relating to
Shareholder approval, the expiration of certain regulatory waiting periods and
the receipt of certain regulatory and other consents or approvals set forth in
the Merger Agreement (and subject to the other conditions in the Merger
Agreement being satisfied or waived), unless another time is agreed to in
writing by the parties to the Merger Agreement (the "Closing Date"). Subject to
the provisions of the Merger Agreement, the Merger will become effective upon
the filing of a certificate of merger with the Secretary of State of the State
of Delaware in accordance with the provisions of the DGCL, which filing will be
made as soon as practicable on the Closing Date. The term "Effective Time" means
the time at which such certificate is duly filed with the Secretary of State of
the State of Delaware or at such later time as is specified in the certificate
of merger.
THE MERGER
The Merger Agreement provides that, upon the terms and subject to the
conditions of the Merger Agreement, at the Effective Time, Sub will be merged
with and into the Company, and the separate existence of Sub will thereupon
cease, and the Company will continue as the Surviving Corporation under the laws
of the State of Delaware under the name "APL Limited." The Merger Agreement
provides that the Merger will, from and after the Effective Time, have all the
effects provided by applicable Delaware law.
The Surviving Corporation. After the Effective Time, the directors of Sub
immediately prior to the Effective Time will be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time will be the officers of the Surviving Corporation, in each case, until the
earlier of their respective resignations or the time that their respective
successors are duly elected or appointed and qualified. The Certificate of
Incorporation and By-laws of the Company as in effect immediately prior to the
Effective Time will be the Certificate of Incorporation and By-laws of the
Surviving Corporation after the Effective Time, until thereafter changed or
amended as provided therein or by applicable law, subject to certain limitations
with respect to provisions relating to indemnification, and except that the
Certificate of Incorporation of the Company will be amended as set forth in
Annex A to the Merger Agreement. See "-- Indemnification and Insurance" and
Appendix A to this Proxy Statement.
Conversion of Shares. As of the Effective Time, by virtue of the Merger
and without any action on the part of any shareholder of the Company or Sub (i)
all Shares that are held by NOL, the Company or any wholly-owned subsidiary of
NOL (including Sub) or the Company will be cancelled and retired and will cease
to exist, and no consideration will be delivered in exchange therefor; (ii) each
issued and outstanding Share, other than those described in clause (i) above and
other than any Dissenting Shares, will be converted into and represent the right
to receive $33.50 in cash; and (iii) each issued and outstanding share of common
stock of Sub will be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
Dissenting Shares. Each Dissenting Share will not be converted into the
right to receive the Merger Consideration unless and until the holder of such
Dissenting Share fails to perfect or withdraws or otherwise loses his rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares will thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the Merger Consideration, if any,
to which such holder is entitled, without interest or dividends thereon.
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<PAGE> 29
Payment. Pursuant to an agreement in form and substance reasonably
acceptable to the Company to be entered into prior to the Effective Time between
NOL and a disbursing agent selected by NOL and reasonably acceptable to the
Company (the "Disbursing Agent"), at the Effective Time, NOL or Sub will make
available to the Disbursing Agent the aggregate amount of cash to which
Shareholders will be entitled pursuant to the Merger Agreement.
As soon as practicable after the Effective Time, NOL will cause the
Disbursing Agent to send a notice and a letter of transmittal to each holder of
certificates formerly evidencing Shares (other than certificates formerly
representing Shares held by NOL, the Company or any wholly-owned subsidiary of
NOL (including Sub) or the Company, which Shares will be cancelled, and
certificates representing Dissenting Shares) advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Disbursing
Agent such certificates for exchange into the Merger Consideration for each
Share so represented, and that delivery will be effected, and risk of loss and
title to the Shares will pass, only upon proper delivery to the Disbursing Agent
of the certificates for the Shares and a duly executed letter of transmittal and
any other required documents of transfer. Each holder of certificates
theretofore evidencing Shares, upon surrender thereof to the Disbursing Agent
together with such duly executed letter of transmittal and any other required
documents of transfer, will be entitled to receive in exchange therefor the
Merger Consideration with respect to each such Share. Upon such surrender, the
Disbursing Agent will promptly deliver the Merger Consideration, less any amount
required to be withheld under applicable law, in accordance with the
instructions set forth in the related letter of transmittal, and the
certificates so surrendered will promptly be cancelled. Until surrendered,
certificates formerly evidencing Shares (other than Dissenting Shares) will be
deemed for all purposes to evidence only the right to receive the Merger
Consideration per Share or, in the case of Dissenting Shares, the fair value of
such Dissenting Shares. See "-- Dissenting Shares." No interest will accrue or
be paid on any cash payable upon the surrender of certificates which immediately
prior to the Effective Time represented outstanding Shares (other than
Dissenting Shares in accordance with applicable provisions of the DGCL).
If the Merger Consideration is to be delivered to a person other than the
person in whose name the certificates surrendered in exchange therefor are
registered, it will be a condition to the payment of such Merger Consideration
that the certificates so surrendered be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay to
the Disbursing Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Disbursing Agent that such
taxes have been paid or are not required to be paid.
Unless otherwise required by applicable law, any portion of the aggregate
Merger Consideration which remains undistributed to holders of Shares one year
after the Effective Time will be delivered to NOL and any holders of Shares who
have not theretofore complied with the provisions of the Merger Agreement
relating to payment will thereafter look only to the Surviving Corporation for
payment of any Merger Consideration to which they are entitled pursuant to the
Merger Agreement. Neither NOL nor the Disbursing Agent will be liable to any
holder of Shares for any cash held by NOL or the Disbursing Agent for payment
pursuant to the Merger Agreement delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
No Further Rights. From and after the Effective Time, all of the Shares
will no longer be outstanding and will be cancelled and retired and cease to
exist, and holders of certificates theretofore evidencing Shares will cease to
have any rights as Shareholders, except as provided in the Merger Agreement or
by law. No transfer of Shares will, after the Effective Time, be made on the
stock transfer books of the Company.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations, warranties and
agreements of the Company, NOL, and Sub including, without limitation,
representations and warranties regarding their respective due organization, good
standing, and authority to enter into the Merger Agreement and to consummate the
transactions contemplated thereby. The Company has made certain additional
representations and warranties
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<PAGE> 30
to NOL relating to provision of its Certificate of Incorporation and By-laws;
capitalization; Significant Subsidiaries (as defined herein); the absence of
conflict between transactions contemplated by the Merger Agreement and other
agreements and documents; filings, consents and approvals; reports filed with
the SEC and financial statements; accuracy of information included in this Proxy
Statement; litigation; absence of certain changes or events; employee benefit
plans; compliance with the Employee Retirement Income Security Act of 1974, as
amended, and certain related matters; taxes; the holding of permits and
licenses; compliance with laws; requirements relating to the Shareholder vote on
the Merger; non-applicability of Delaware anti-takeover laws and certain
provisions of the Company's Certificate of Incorporation; non-applicability of
the Rights Agreement, dated as of October 27, 1991, by and between the Company
and the First National Bank of Boston (the "Rights Agreement"); brokers;
environmental matters; insurance policies maintained by the Company; certain of
the Company's vessels; and certain regulatory matters. NOL has made certain
additional representations and warranties to the Company as to NOL's ownership
of Sub; the absence of conflict between transactions contemplated by the Merger
Agreement and other agreements and documents; filings, consents and approvals;
accuracy of information included in this Proxy Statement; brokers; the fact that
it has all funds necessary to consummate the Merger and the transactions
contemplated by the Merger Agreement; nonapplicability of Delaware anti-takeover
laws and certain provisions of the Company's Certificate of Incorporation; and
nonapplicability of the Rights Agreement. The term "Significant Subsidiaries"
means each of the Company's significant subsidiaries (within the meaning of
Regulation S-X under the Exchange Act), including any subsidiary that owns a
C-10 or C-11 class container vessel.
CONDUCT OF THE BUSINESS PENDING THE MERGER
The Company has agreed to consult and cooperate with NOL prior to the
Effective Time in order to facilitate planning and execution of the integration
of operations of the Company and NOL from and after the Effective Time. During
the period from the date of the Merger Agreement to the Effective Time, except
with the prior written consent of NOL or as contemplated by the Merger Agreement
or as disclosed to NOL, the Company has agreed that it will, and will cause its
subsidiaries to, conduct its operations only in the ordinary and usual course of
business consistent with past practice and will use its reasonable efforts, and
will cause each of its subsidiaries to use its reasonable efforts, to preserve
intact the business organization of the Company and each of its subsidiaries, to
keep available the services of its and their present officers and key employees,
and to preserve the good will of its customers, employees, unions and others
having business relationships with it. Except as otherwise contemplated by the
Merger Agreement or as disclosed to NOL, the Company will not, and will not
permit any of its Significant Subsidiaries to, prior to the Effective Time,
without the prior written consent of NOL: (i) adopt any amendment to its charter
or By-laws or comparable organizational documents or the Rights Agreement; (ii)
except for issuances of capital stock of the Company's subsidiaries to the
Company or a wholly-owned subsidiary of the Company, issue, reissue or sell, or
authorize the issuance, reissuance or sale of, (a) additional shares of capital
stock of any class, or securities convertible into capital stock of any class,
or any rights, warrants or options to acquire any convertible securities or
capital stock, other than the issuance of Common Stock in accordance with the
terms of the instruments governing such issuance on the date hereof, pursuant to
the exercise of Options (as defined herein) outstanding on the date hereof, or
the issuance of Common Stock pursuant to the Company's 1995 Stock Bonus Plan, or
(b) any other securities in respect of, in lieu of, or in substitution for,
Common Stock outstanding on the date of the Merger Agreement; (iii) declare, set
aside or pay any dividend or other distribution in respect of any of its capital
stock other than between any of the Company and any of its wholly-owned
subsidiaries, except for the regular quarterly dividend on the Common Stock not
in excess of $0.10 per Share and redemption of the Rights; (iv) split, combine,
subdivide, reclassify or redeem, purchase or otherwise acquire, any shares of
its capital stock, or any of its other securities; (v) subject to certain
exceptions, increase the compensation or fringe benefits payable or to become
payable to its directors, officers or key employees, or pay any benefit not
required by any existing plan or arrangement or grant any severance or
termination pay to (except pursuant to existing agreements or policies), or
enter into any employment or severance agreement with, any director, officer or
other key employee of the Company or establish, adopt, enter into, or amend any
Employee Benefit Arrangement (as defined herein); (vi) acquire, sell, lease or
dispose of any vessel; (vii) subject to certain exceptions, acquire, sell, lease
or dispose of any assets (other
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than vessels) or securities which are material to the Company and its
subsidiaries taken as a whole, or enter into any commitment to do any of the
foregoing or enter into any other material commitment or transaction, outside
the ordinary course of business consistent with past practice; (viii) subject to
certain exceptions, (a) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, (b) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, or (c) make any loans, advances or capital
contributions to, or investments in, any other person; (ix) subject to certain
exceptions, (a) settle or compromise any material claims or litigation, or (b)
except in the ordinary course of business, modify, amend or terminate any of its
material contracts or permits or waive, release or assign any other material
rights or claims; (x) permit any insurance policy naming it as a beneficiary or
a loss payable payee to be cancelled or terminated without notice to NOL, except
in the ordinary course of business; (xi) grant any lien on any C-10 or C-11
class container vessels in respect of borrowed money; and (xii) agree in writing
or otherwise to take any of the foregoing actions. The term "Employee Benefit
Arrangement" means any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees of
the Company or any of its subsidiaries.
EMPLOYEE ARRANGEMENTS
NOL has agreed that, from and after the Effective Time, it will cause the
Surviving Corporation to honor each Employee Benefit Arrangement disclosed to
NOL and, to the extent that any benefit has accrued thereunder as of the
Effective Time, each other Employee Benefit Arrangement to which the Company or
any of its subsidiaries was a party as of the date of the Merger Agreement. NOL
also has agreed to cause the Surviving Corporation to take such actions as are
necessary so that, for a period of at least two years from the Effective Time,
employees of the Company and its subsidiaries (excluding employees covered by
collective bargaining agreements) will, subject to certain limitations relating
to plans and programs requiring the issuance of capital stock, be provided cash
compensation, employee benefits and incentive compensation and similar plans and
programs as will provide compensation and benefits which, in the aggregate, are
no less favorable than those provided to such employees as of the date of the
Merger Agreement.
COMPANY STOCK PLANS
The Company has agreed that, prior to the Effective Time, it will take all
actions necessary to provide that, immediately prior to the Effective Time, (i)
each outstanding option to purchase Common Stock (an "Option") granted under the
Company's 1989 Stock Incentive Plan or the Company's 1992 Directors Stock Option
Plan, whether or not then exercisable or vested, will become fully exercisable
and vested, (ii) each Option which is then outstanding will be cancelled and
(iii) in consideration of such cancellation, and except to the extent that NOL
or Sub and the holder of any such Option otherwise agree, the Company will pay
to such holders of Options an amount in respect thereof equal to the product of
(A) the excess, if any, of the Merger Consideration over the per share exercise
price thereof and (B) the number of Shares subject thereto (such payment to be
net of applicable withholding taxes). In addition, the Company has agreed that,
prior to the Effective Time, it will take all actions necessary to provide that,
immediately prior to the Effective Time, (i) all Common Stock granted under the
Company's 1989 Stock Incentive Plan, the Company's 1992 Directors' Stock Option
Plan or the Company's 1995 Stock Bonus Plan, whether or not then vested or
subject to restrictions, will become fully vested and free of restrictions and
(ii) all "phantom shares" under the 1995 Stock Bonus Plan will be cancelled and,
in consideration of such cancellation, the Company will pay to the holders of
such phantom shares the product of the Merger Consideration and the number of
phantom shares held by such holder. The total amount to be paid to holders of
Options and to holders of shares of Common Stock and phantom shares under the
1995 Stock Bonus Plan, at the Effective Time, based on the Merger Consideration
of $33.50 per Share, is approximately $52.4 million.
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INDEMNIFICATION AND INSURANCE
NOL has agreed that all rights to indemnification existing in favor of any
director, officer, employee or agent of the Company and its subsidiaries (the
"Indemnified Parties") as provided in their respective Certificates of
Incorporation, By-laws or in indemnification agreements with the Company or any
of its subsidiaries, or otherwise in effect as of the date of the Merger
Agreement, will survive the Merger and will continue in full force and effect
for a period of not less than six years from the Effective Time. In the event
any claim or claims are asserted or made within such six-year period, all rights
to indemnification in respect of any such claim or claims will continue until
final disposition of any and all such claims. NOL also has agreed, subject to
certain limitations, to indemnify all Indemnified Parties to the fullest extent
permitted by applicable law with respect to all acts and omissions arising out
of such individuals' services as officers, directors, employees or agents of the
Company or any of its subsidiaries or as trustees or fiduciaries of any plan for
the benefit of employees of, or otherwise on behalf of, the Company or any of
its subsidiaries, occurring prior to the Effective Time including, without
limitation, the transactions contemplated by the Merger Agreement, and NOL has
agreed to pay as incurred certain legal and other expenses (including the cost
of any investigation and preparation) incurred by Indemnified Parties, including
expenses and attorneys' fees, that may be incurred by any Indemnified Party in
enforcing such indemnity and other obligations.
NOL also has agreed that, from and after the Effective Time, the Surviving
Corporation will cause to be maintained in effect for not less than two years
from the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company; provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous and provided that
such substitution will not result in any gaps or lapses in coverage with respect
to matters occurring prior to the Effective Time; and provided, further, that
the Surviving Corporation will not be required to pay an annual premium in
excess of 200% of the last annual premium paid by the Company prior to the date
of the Merger Agreement. If the Surviving Corporation is unable to obtain the
insurance so required, it will be required to obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
EFFORTS; CONSENTS
Subject to the terms and conditions provided in the Merger Agreement and to
applicable legal requirements, each of the parties to the Merger Agreement has
agreed to use its reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, and to assist and cooperate with the
other parties to the Merger Agreement in doing, as promptly as practicable, all
things necessary, proper or advisable under applicable laws and regulations to
ensure that the conditions precedent to the Merger are satisfied and to
consummate and make effective the transactions contemplated by the Merger
Agreement. In addition, each of the parties to the Merger Agreement has agreed
to promptly inform the other party of any event or circumstance which should be
set forth in an amendment to this Proxy Statement.
Each of the parties to the Merger Agreement also has agreed to use its
reasonable best efforts to obtain as promptly as practicable all consents,
waivers, approvals, authorizations or permits of, or registrations or filings
with or notifications to (any of the foregoing being a "Consent") any government
or subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (a "Governmental Entity")
or any other person required in connection with, and waivers of any Violations
(as defined herein) that may be caused by, the consummation of the transactions
contemplated by the Merger Agreement. The term "Violation" means (i) any
conflict with or violation of any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company or its Significant Subsidiaries, or
by which any of them or any of their respective properties or assets are bound
or affected, or (ii) any event that would result in a violation or breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in any loss of any
material benefit, or the creation of any lien on any of the property or assets
of the Company or any of its Significant Subsidiaries pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other material instrument or obligation to which the Company or any
of its
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subsidiaries is a party or by which the Company or any of its subsidiaries or
any of their respective properties are bound or affected.
NOL has agreed to use its reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by the Merger Agreement under any antitrust, competition or trade
regulatory laws, rules or regulations of any domestic or foreign government or
governmental authority or any multinational authority (the "Antitrust Laws").
The obligation to use such reasonable best efforts will not require NOL to agree
to hold separate or to divest any of the businesses, product lines or assets of
NOL or any of its affiliates or of any of the Company, its subsidiaries or
affiliates or take any other action that would have a Material Adverse Effect on
the Company or a Material Adverse Effect on NOL and the Company taken as a
whole. In addition, each of the Company, Sub and NOL has agreed to use its
reasonable best efforts to obtain the Maritime Approvals and to otherwise
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by the Merger Agreement under any shipping or maritime
laws, rules or regulations of any domestic or foreign government or governmental
authority or any multinational authority ("Maritime Laws"). NOL has agreed to
take such action or make such commitments or agreements to take action in the
future (and will consent to the Company taking such action or making such
commitments or agreements) as may be required by the applicable government or
governmental or multinational authority in order to obtain the Maritime
Approvals or to resolve such objections as such government or authority may
have; provided, however, that no such action, commitment or agreement shall be
required to be taken or made if it would have a Material Adverse Effect on the
Company or a Material Adverse Effect on NOL and the Company, taken as a whole.
The term "Material Adverse Effect" means, with respect to any person, any change
in or effect on the business, operations or financial condition of such person
or any of such person's subsidiaries that is materially adverse to such person
and its subsidiaries taken as a whole or would materially adversely affect the
ability of such person to consummate the transactions contemplated by the Merger
Agreement.
Subject to receipt of the Maritime Approvals, the Company has agreed that
it will, on or prior to the Effective Time, consummate and effectuate the
transfers of certain of its agreements and vessels, and enter into certain
agreements, trusts and charters related thereto, and transfer or terminate
certain other maritime or defense related agreements to which the Company or its
subsidiaries are subject, in order to comply with, or obtain Consents under,
such agreements and the Maritime Laws, on terms and conditions and involving
agreements and obligations of the Company and/or its subsidiaries as determined
by the Company after consultation with NOL. In the event that any filings are
required pursuant to Sections 4 or 5 of the Shipping Act of 1984 in connection
with the consummation of certain of the transactions required to obtain the
Maritime Approvals, the Company has agreed to, after consultation with NOL, make
such filings as soon as practicable (and in no event later than ten business
days after finalization of all documentation related to such transactions). In
addition, neither NOL nor (except as set forth above) the Company (or any of
their affiliates) will enter into any other agreement related to the Merger
Agreement or the transactions contemplated thereby that would require filing
under Section 4 or 5 of the Shipping Act of 1984 without the prior written
consent of the other. In the event that any such agreement is entered into (with
such consent) it shall be filed as soon as practicable (and in no event later
than 10 business days) thereafter pursuant to Sections 4 and 5 of the Shipping
Act of 1984. The Company has also agreed that it will, on or prior to the
Effective Time, at its election and on terms and conditions and involving
agreements and obligations of the Company and/or its subsidiaries as determined
by the Company, either (i) sell or otherwise transfer to an entity that is a
75%-owned citizen under Section 2 of the Shipping Act, 1916 the barges that are
chartered pursuant to a Bareboat Charter Party dated as of January 14, 1985, or
(ii) terminate such Bareboat Charter Party with respect to such barges. See
"REGULATORY APPROVALS AND CERTAIN OTHER LEGAL MATTERS."
SOLICITATION OF ACQUISITION TRANSACTIONS
The Company has agreed that, prior to the Effective Time, it will not, and
will not authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or encourage any inquiries or the
making of any proposal with respect to any merger, consolidation or other
business combination involving the Company or its subsidiaries or
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acquisition of all or substantially all of the assets or capital stock of the
Company and its subsidiaries taken as a whole (an "Acquisition Transaction") or
negotiate, explore or otherwise engage in substantive discussions with any
person with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by the Merger
Agreement; provided that the Company may, in response to an unsolicited proposal
with respect to an Acquisition Transaction from a third party that a nationally
recognized investment banking firm retained by the Company advises, and the
Board determines, may reasonably be expected to result in a transaction that is
more favorable to the Company and its Shareholders than the transactions
contemplated by the Merger Agreement, furnish information to, and negotiate,
explore or otherwise engage in substantive discussions with such third party,
and enter into any such agreement, arrangement or understanding, in each case
only if the Board deems it necessary to do so in the exercise of its fiduciary
obligations after consultation with outside counsel. The Company has agreed to
notify NOL promptly if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company.
OTHER AGREEMENTS
The Company has agreed, subject to certain limitations, that, from the date
of the Merger Agreement until the Effective Time, it will, and will cause its
subsidiaries, and each of their respective officers, directors, employees,
counsel, advisors and representatives (collectively, the "Company
Representatives") to, give NOL and Sub and their respective officers, employees,
counsel, advisors and representatives (collectively, the "NOL Representatives")
reasonable access during normal business hours and upon reasonable notice, to
the offices and other facilities and to the books and records of the Company and
its subsidiaries, as will permit NOL and Sub to make inspections of such as
either of them may reasonably require and will cause the Company Representatives
and the Company's subsidiaries to furnish NOL, Sub and the NOL Representatives
to the extent available with such financial and operating data and such other
information with respect to the business and operations of the Company and its
subsidiaries as NOL and Sub may from time to time reasonably request.
NOL has agreed that, for a period of at least three years after the
Effective Time, it will cause the Surviving Corporation to retain a substantial
corporate presence in the Oakland, California area.
CONDITIONS PRECEDENT TO THE MERGER
All Parties. The obligations of the Company, NOL and Sub to consummate the
Merger are subject to the satisfaction (or waiver by NOL and the Company) of the
following conditions: (i) the Merger Agreement and the transactions contemplated
thereby shall have been approved and adopted by the requisite vote of the
holders of the outstanding shares of Common Stock; (ii) any (a) waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), relating to the Merger and under the Shipping Act of 1984 relating
to certain agreements entered into in connection with the Maritime Approvals
shall have expired and (b) waiting periods or, if applicable, review periods of
Governmental Authorities, under the Defense Production Act of 1950, as amended
by the Omnibus Trade and Competitiveness Act of 1988 (the "Exon-Florio Laws")
and any foreign or supranational Antitrust Laws shall have expired; (iii) the
Maritime Approvals shall have been obtained; and (iv) the consummation of the
Merger shall not be restrained, enjoined or prohibited by any order, judgment,
decree, injunction or ruling of a court of competent jurisdiction, provided,
however, that the parties are required to comply with the provisions described
in "-- Efforts; Consents" and are also required to use their reasonable best
efforts to cause any such order, judgment, decree, injunction or ruling to be
vacated or lifted, unless such action would have a Material Adverse Effect on
the Company or a Material Adverse Effect on NOL and the Company, taken as a
whole.
The Company. The obligations of the Company to consummate the Merger are
subject to the satisfaction (or waiver by the Company) of the condition that the
representations and warranties of NOL and Sub set forth in the Merger Agreement
are true when made and (except for representations and warranties made as of a
specific date, which need only be true as of such date) at and as of the
Effective Time as if made at and as of such time, except for any failures to be
true that, in the aggregate, do not have a Material Adverse
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Effect on NOL; NOL and Sub shall have performed their covenants and agreements
under the Merger Agreement in all material respects; and the Company shall have
received certificates of the Chief Executive Officer or a Vice President of NOL
and Sub to the foregoing effect.
NOL and Sub. The obligations of NOL and Sub to consummate the Merger are
subject to the satisfaction (or waiver by NOL) of the following conditions: (i)
the representations and warranties of the Company set forth in the Merger
Agreement are true when made and (except for representations and warranties made
as of a specific date, which need only be true as of such date) at and as of the
Effective Time as if made at and as of such time, except for any failures to be
true that, in the aggregate, do not have a Material Adverse Effect on the
Company; the Company shall have performed its covenants and agreements under the
Merger Agreement in all material respects; and NOL and Sub shall have received a
certificate of the Chief Executive Officer or a Vice President of the Company to
the foregoing effect; (ii) except as contemplated by the Merger Agreement, or as
disclosed to NOL, no change shall have occurred, since the date of the Merger
Agreement, that would have a Material Adverse Effect on the Company, other than
(x) changes relating to or arising from general economic, market or financial
conditions or generally affecting the industries, markets or trade lanes in
which the Company operates or (y) changes relating to or arising from the
consummation or disclosure of the Merger Agreement or any transaction
contemplated by the Merger Agreement; and (iii) there shall not have occurred
and be continuing (a) any general suspension of, or limitation on prices for,
trading in securities on the Singapore Stock Exchange or the NYSE, (b) a
declaration of a banking moratorium or any suspension of payments in respect of
banks or other lending institutions in the United States or Singapore, (c) a
commencement or escalation of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States or
Singapore, or (d) in the case of any of the foregoing existing at the date of
the Merger Agreement, a material acceleration or worsening thereof.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, notwithstanding approval thereof by the
Shareholders:
(a) by mutual written consent of NOL and the Company;
(b) by either NOL or the Company if any court or other Governmental
Entity has issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction or ruling or other action has become final and
nonappealable;
(c) by either NOL or the Company if the Merger has not been
consummated by January 31, 1998 (provided that the terminating party has
not breached its obligations under the Merger Agreement in any material
respect);
(d) by either NOL or the Company if the Annual Meeting (including as
it may be adjourned from time to time) concludes without the Company
obtaining the required Shareholder approval of the Merger Agreement and the
transactions contemplated thereby;
(e) by NOL (i) upon a material breach of the Merger Agreement on the
part of the Company which has not been cured and which would cause the
condition described in clause (i) under "-- Conditions Precedent to the
Merger -- NOL and Sub" to be incapable of being satisfied by January 31,
1998, or (ii) if the Board shall have withdrawn or modified in a manner
adverse to NOL or Sub its recommendation of the Merger Agreement or the
Merger, or shall have resolved to do any of the foregoing; or
(f) by the Company (i) upon a material breach of the Merger Agreement
on the part of NOL or Sub which has not been cured and which would cause
the condition described under "-- Conditions Precedent to the Merger -- The
Company" to be incapable of being satisfied by January 31, 1998, or (ii) if
a third party, including any group, shall have made a proposal in respect
of an Acquisition Transaction that a nationally recognized investment
banking firm retained by the Company advises, and
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the Board determines, may reasonably be expected to result in a transaction
that is more favorable to the Company and its Shareholders than the
transactions contemplated by the Merger Agreement.
FEES AND EXPENSES
The Merger Agreement provides that whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses.
In addition, the Merger Agreement provides that in the event (i) NOL
terminates the Merger Agreement pursuant to the provisions described in clause
(e)(ii) under "-- Termination" and (x) ten business days shall have elapsed from
the withdrawal or modification in a manner adverse to NOL or Sub of the Board's
recommendation of the Merger Agreement and the Merger (except if the Board shall
have taken any of the actions set forth in clause (y) below), without such
recommendation being reinstated in full prior to such termination or (y) the
Board shall have advised Shareholders to reject the Merger Agreement and the
Merger or to tender shares to, or accept or vote for an agreement relating to an
Acquisition Transaction with, any person other than NOL (or affiliates thereof)
or (ii) the Company terminates the Merger Agreement pursuant to the provisions
described in clause (f)(ii) under "-- Termination," then the Company will
promptly, but in no event later than two days after the date of request (in
accordance with the terms of the Merger Agreement) therefor, reimburse NOL for
its fees and expenses related to the Merger Agreement, the transactions
contemplated thereby and any related financing (subject to a maximum of
$2,000,000), which amount shall be payable in same day funds, and pay NOL a
termination fee of $25,000,000, which amount shall be payable in same day funds.
If the Company fails to pay promptly the expense reimbursement or the
termination fee due pursuant to the provisions described in this section, and,
in order to obtain such payment, NOL or Sub commences a suit which results in a
judgment against the Company for such fee, the Company has agreed to pay to NOL
or Sub its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest thereon.
AMENDMENT; WAIVER
The Merger Agreement provides that it may be amended by the parties thereto
at any time before or after approval thereof by the Shareholders, but, after
such approval, no amendment will be made which decreases the Merger
Consideration or which adversely affects the rights of the Shareholders without
the approval of such Shareholders. The Merger Agreement also provides that, at
any time prior to the Effective Time, the parties to the Merger Agreement may
(i) extend the time for the performance of any of the obligations or other acts
of any other party to the Merger Agreement, (ii) waive any inaccuracies in the
representations and warranties by any other party contained in the Merger
Agreement or in any document, certificate or writing delivered by any other
party pursuant to the Merger Agreement or (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
DISSENTERS' RIGHTS
If the Merger is consummated, dissenting holders of Shares will be entitled
to have the "fair value" (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) of their Shares ("Dissenting
Shares") at the Effective Time judicially determined and paid to them by
complying with the provisions of Section 262 of the DGCL.
The following is a brief summary of the material provisions of Section 262
which sets forth the procedures for dissenting from the Merger and demanding
statutory appraisal rights. This summary does not purport to be a complete
statement of the provisions of Delaware law relating to the rights of
Shareholders of the Company to an appraisal of the value of their Shares and is
qualified in its entirety by reference to Section 262, the full text of which is
attached hereto as Appendix C. FAILURE TO FOLLOW SUCH PROCEDURES EXACTLY COULD
RESULT IN THE LOSS OF APPRAISAL RIGHTS.
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Shareholders who desire to exercise their appraisal rights must satisfy all
of the conditions of Section 262 of the DGCL. A written demand for appraisal of
Shares must be filed with the Company before the taking of the vote on the
Merger. This written demand for appraisal for Shares must be in addition to and
separate from any proxy vote abstaining from or voting against the Merger.
Voting against, abstaining from voting or failing to vote on the Merger will not
constitute a demand for appraisal within the meaning of Section 262.
Shareholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the Merger Agreement. If a Shareholder returns a
signed proxy but does not specify a vote against adoption of the Merger
Agreement or a direction to abstain, the proxy will be voted for adoption of the
Merger Agreement, which will have the effect of waiving that Shareholder's
appraisal rights.
A demand for appraisal must be executed by or for the Shareholder of
record, fully and correctly, as such Shareholder's name appears on the Share
certificate. If the Shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, such demand must be executed by or for the
fiduciary. If the Shares are owned of record by or for more than one person, as
in a joint tenancy or tenancy in common, such demand must be executed by or for
all joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a Shareholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, he is acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others
may exercise his right of appraisal with respect to the Shares for all or less
than all beneficial owners of Shares as to which he or she is the record owner.
In such case, the written demand must set forth the number of Shares covered by
such demand. Where the number of Shares is not expressly mentioned, the demand
will be presumed to cover all Shares outstanding in the name of such record
owner.
A Shareholder who elects to exercise appraisal rights should mail or
deliver his or her written demand to APL Limited, 1111 Broadway, Oakland,
California 94607, Attention: Maryellen B. Cattani, Secretary. The written demand
for appraisal should specify the Shareholder's name and mailing address, and
that the Shareholder is thereby demanding appraisal of his or her Shares. Within
ten days after the Effective Time, the Company must provide notice of the
Effective Time to all Shareholders who have complied with Section 262 and have
not voted for adoption of the Merger Agreement.
Within 120 days after the Effective Time, any Shareholder who has satisfied
the requirements of Section 262 may deliver to the Company a written demand for
a statement listing the aggregate number of Shares not voted in favor of the
Merger and with respect to which demands for appraisal have been received and
the aggregate number of holders of such Shares.
Within 120 days after the Effective Time, either the Company or any
Shareholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court demanding a determination of the fair
value of the Dissenting Shares. The Company has no present intention to file
such a petition if demand for appraisal is made.
Upon the filing of any such petition by a Shareholder, service of a copy
thereof shall be made upon the Company which shall, within 20 days after such
service, file in the office of the Register of Chancery in which the petition
was filed, a duly verified list containing the names and addresses of all
Shareholders who have demanded payment for their Shares and with whom agreements
as to the value of their Shares have not been reached by the Company. If the
petition shall be filed by the Company, the petition shall be accompanied by
such verified list. The Register of Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the Company and to the Shareholders shown upon
the list at the address therein stated, and notice shall also be given by
publishing a notice at least one week before the day of the hearing in a
newspaper of general circulation published in the City of Wilmington, Delaware
or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court.
If a petition for an appraisal is filed in a timely fashion, after a
hearing on such petition, the Court will determine which Shareholders are
entitled to appraisal rights, and will appraise the Shares owned by such
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Shareholders, determining the fair value of such Shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining fair value, the court is to take
into account all relevant factors. In Weinberger v. UOP, Inc., et al., decided
February 1, 1983, the Delaware Supreme Court stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered, and that
"fair price obviously requires consideration of all relevant factors involving
the value of the Company...." The Delaware Supreme Court stated that in making
this determination of fair value the Court must consider market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any other
facts which could be ascertained as of the date of the merger which throw any
light on future prospects of the merged corporation. Section 262 provides that
fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger." In Weinberger, the Delaware
Supreme Court held that the "elements of future value, including the nature of
the enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered."
Shareholders considering seeking appraisal of their Shares should note that
the fair value of their Shares determined under Section 262 could be more, the
same or less than the consideration they would receive pursuant to the Merger
Agreement if they did not seek appraisal of their Shares. The costs of the
appraisal proceeding may be determined by the Court and taxed against the
parties as the Court deems equitable in the circumstances. Upon application of a
dissenting Shareholder, the Court may order that all or a portion of the
expenses incurred by any dissenting Shareholder in connection with the appraisal
proceeding including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
shares entitled to appraisal. In the absence of such a determination or
assessment each party bears his or her own expenses.
Any Shareholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote for any purpose the
Shares subject to such demand or to receive payment of dividends or other
distributions on such Shares, except for dividends or distributions payable to
Shareholders of record at a date prior to the Effective Date.
At any time within 60 days after the Effective Time, any Shareholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered in the Merger Agreement. After this period the Shareholder may
withdraw his or her demand for appraisal and receive payment for his or her
Shares as provided in the Merger Agreement only with the consent of the Company.
If no petition for appraisal is filed with the court within 120 days after the
Effective Time, Shareholders' rights to appraisal will cease and Shareholders
will be entitled to receive the Merger Consideration as provided for in the
Merger Agreement. Inasmuch as the Surviving Corporation has no obligation to
file such a petition, and has no present intention to do so, any Shareholder who
desires such a petition to be filed is advised to file it on a timely basis. No
petition timely filed in the Court demanding appraisal shall be dismissed as to
any Shareholder without the approval of the Court, and such approval may be
conditional upon such terms as the Court deems just.
REGULATORY APPROVALS AND CERTAIN OTHER LEGAL MATTERS
REGULATORY APPROVALS
Pursuant to certain Maritime Laws, the consummation of the transactions
contemplated by the Merger Agreement, including the Merger, will require certain
approvals, actions, agreements and concurrences ("Approvals") from certain U.S.
Governmental Entities, including the Maritime Administrator, Maritime Subsidy
Board or Maritime Administration (individually and collectively, "MarAd") and
the U.S. Coast Guard. The Company has agreed that it will, on or prior to the
Effective Time, effect transfers of Maritime Security Program Operating
Agreements between its subsidiary and the United States, and enter into certain
agreements, trusts and charters related thereto. These transfers and related
transactions are described in a letter, dated January 21, 1997, from the
Maritime Administration Secretary, approving in principle such transfers,
subject to the conditions set forth therein. The consummation of the
transactions described in such
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letter requires the following Approvals: (i) Approvals by MarAd pursuant to the
Merchant Marine Act of 1936, as amended by the Maritime Security Act of 1996,
the regulations pertaining thereto, the Maritime Security Program Operating
Agreements between American President Lines, Ltd., a wholly-owned subsidiary of
the Company ("Lines") and the United States, and the letter, dated January 21,
1997, from the Maritime Administration Secretary; (ii) Approvals by the U.S.
Coast Guard pursuant to the vessel documentation statutes, the 1996 Coast Guard
Authorization Act and the regulations pertaining thereto; (iii) Approvals by
MarAd and the U.S. Department of Defense under the statutes relating to the
Emergency Preparedness Program and the Voluntary Intermodal Sealift Agreement
between Lines and the United States, the regulations pertaining thereto; and
(iv) if required, Approvals under Section 9 of the Shipping Act, 1916 in respect
of U.S. flag vessels to be owned by the Surviving Corporation. The Company also
has agreed that it will, on or prior to the Effective Time, (i) either terminate
the Operating-Differential Subsidy Agreement between Lines and the United States
(the "ODS Agreement") or transfer such ODS Agreement in a manner similar to that
described in the letter, dated January 21, 1997, from the Maritime
Administration Secretary, and (ii) if such ODS Agreement is terminated, commence
operations under the Maritime Security Program Operating Agreements reasonably
contemporaneous with such termination. In connection with such termination or
transfer, Approvals by MarAd are required pursuant to the Merchant Marine Act of
1936, the regulations pertaining thereto and the ODS Agreement.
The Company also has agreed that it will, on or prior to the Effective
Time, transfer to one or more qualified transferees or terminate the Ready
Reserve Fleet, Ship Manager Contracts and related agency agreements between
Lines and the United States. In connection therewith, Approvals by MarAd are
required pursuant to (i) 50 U.S.C. app. sec.1744 (National Defense Reserve
Fleet) and the regulations pertaining thereto, (ii) the Anti-Assignment Act and
Assignment of Claims Act, and (iii) such Ready Reserve Fleet, Ship Manager
Contracts. In addition, each of the Company's Pacesetter vessels is subject to a
Construction-Differential Subsidy Contract between American President Lines,
Ltd. and the United States (each, a "CDS Agreement"). The Company has agreed
that, to the extent that as of the Effective Time any such CDS Agreement has not
expired according to its terms, the Company will terminate its obligations under
the applicable CDS Agreement by, at the Company's election, (i) transferring the
applicable vessel and related CDS Agreement to a qualified transferee, (ii)
scrapping such vessel or (iii) repaying to the United States any unamortized
construction-differential subsidy relating to such vessel, with interest
thereon, if applicable. In connection with such transactions relating to the CDS
Agreements, Approvals by MarAd are required pursuant to the Merchant Marine Act
of 1936 and the regulations pertaining thereto, Section 9 of the Shipping Act,
1916 (in the event that the Company elects to transfer such vessels to foreign
flag in order to scrap such vessels) and the applicable CDS Agreement. The term
"Maritime Approvals" refers collectively to the Approvals described above under
this section.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules and regulations promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have expired or been terminated. On April 23, 1997,
NOL and the Company each filed the Notification and Report Form required by the
HSR Act. On May 6, 1997, the Company and NOL received notice from the Federal
Trade Commission (the "FTC") that the applicable waiting period under the HSR
Act was terminated early. At any time before or after the transaction, the
Antitrust Division of the Department of Justice or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the transaction or seeking divestiture of
substantial assets of the parties. Private parties and state attorneys general
may also bring an action under the antitrust laws under certain circumstances.
While NOL and the Company believe that the Merger is legal under the antitrust
laws, there can be no assurance that a challenge to the transaction on antitrust
grounds will not be made or, if such a challenge is made, that it would not be
successful.
Pursuant to the requirements of German competition law, the parties filed a
notification with the German Federal Cartel Office on May 28, 1997. On June 4,
1997, the Company and NOL received a letter of clearance from the German Federal
Cartel Office which permits the Merger to proceed under German law. Pursuant to
the Mexican Federal Law of Economic Competition Act, the parties filed a
notification with the
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Mexican Federal Competition Commission (the "FCC") on June 6, 1997. On July 16,
1997, the FCC decided not to object nor condition the transaction.
On April 25, 1997, NOL, Sub and the Company jointly submitted a voluntary
notice to the Staff Chairman of the Committee on Foreign Investment in the
United States ("CFIUS") pursuant to section 721 of the Exon-Florio Laws
("Section 721") and the regulations thereunder. On May 23, 1997, CFIUS permitted
NOL, Sub and the Company to withdraw voluntarily their notice to CFIUS, so as to
permit the parties to resubmit the notice at an appropriate later date so that
the Section 721 review could proceed on a parallel timing track with MarAd's
review. On June 25, 1997, Lines submitted notices to MarAd pursuant to Section
652(j) of the Merchant Marine Act, 1936 ("Section 652(j)") for the transfer of
nine Maritime Security Operating Agreements ("MSP Operating Agreements") held by
Lines, and applied to MarAd for approval pursuant to Section 608 of the Merchant
Marine Act, 1936 ("Section 608") for the transfer of the ODS Agreement which
expires December 31, 1997, also held by Lines, to American Ship Management LLC
("AMS"), in each case immediately prior to consummation of the Merger. ASM, a
newly-formed company, owned and controlled by United States citizens that will
not be affiliated with the Company or NOL, submitted a supporting application to
MarAd on July 1, 1997. Lines provided MarAd with supplemental materials on July
3 and July 18, 1997. MarAd regulations implementing Section 652(j) provide that
a MSP Operating Agreement may be transferred to an eligible person unless
disapproved by MarAd within 90 days after notification by the filing of a
completed application. MarAd advised Lines that it considers that the 90-day
period began on July 18, 1997, and will expire on October 16, 1997. No
equivalent statutory time period for approval of a request to transfer an ODS
agreement is specified in Section 608. MarAd action under Section 608 is subject
to review by the U.S. Secretary of Transportation ("Secretary") and does not
become final until the expiration of 20 days (25 days in an appeal is filed). If
the Secretary determines to take an action by MarAd under review, the Secretary
can further postpone the effective date of the action. There is no defined
statutory period within which MarAd is required to act with respect to the other
Maritime Approvals which are to be sought in connection with the transaction.
Section 721 provides for a thirty-day period for review of the Merger. If,
during such review period, CFIUS determines that an investigation should be
undertaken, the Staff Chairperson of CFIUS must send written advice to the
parties of the commencement of an investigation. CFIUS then has up to the
forty-fifth day (or the next business day if the forty-fifth day falls on a
weekend or holiday) after the commencement of its investigation to complete or
terminate its investigation and to report its recommendation to the President of
the United States. The President must decide whether or not to take action
pursuant to Section 721 and must announce such decision no later than the
fifteenth day (or the next business day if the fifteenth day falls on a weekend
or holiday) after the investigation is completed. The President is authorized by
Section 721 and the regulations thereunder to take such action as the President
considers appropriate to suspend or prohibit an acquisition, including, where
necessary, divestment authority.
The Merger Agreement provides that the obligation of each of the Company,
NOL and Sub to consummate the Merger is conditioned upon, among other things,
the receipt of the Maritime Approvals and the expiration of waiting periods or
other review periods under the Antitrust Laws and the Exon-Florio Laws. NOL and
the Company are not aware of any other material governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance that any Governmental Entity will approve or take any other
required action with respect to the Merger, and, if approvals are received or
action is taken, there can be no assurance as to the date of such approvals or
action, that such approvals or action will not be conditioned upon matters that
would cause the parties to abandon the Merger or that no action will be brought
challenging such approvals or action, or, if such a challenge is made, the
result thereof. Each of the parties to the Merger Agreement has agreed, among
other things, to use its reasonable best efforts to obtain as promptly as
practicable all Consents of any Governmental Entity or any other person required
in connection with, and waivers of Violations that may be caused by, the
consummation of the transactions contemplated by the Merger Agreement. The
Company, NOL and Sub also have agreed to use their reasonable best efforts,
subject to certain limitations, to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated by the Merger
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Agreement under any Antitrust Laws or any Maritime Laws. See "THE MERGER
AGREEMENT -- Conditions Precedent to the Merger" and "THE MERGER
AGREEMENT -- Efforts; Consents."
CERTAIN OTHER LEGAL MATTERS
The Company and its directors have been named as defendants in a purported
class action on behalf of all public shareholders of the Company pending in the
Superior Court of the State of California for the County of Alameda, captioned
Soshtain et al. v. Arledge et al., Case No. 781838-3. The complaint was filed in
mid-April 1997 and alleges that the Company's directors breached their fiduciary
duties in connection with the proposed Merger with NOL by failing to take all
necessary steps to ensure that the Company's stockholders would receive the
maximum value realizable for their shares, and seeks damages in an unspecified
amount and equitable relief, including an injunction against consummation of the
proposed Merger. The time for the defendants to move or answer with respect to
the complaint has not yet elapsed.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Company's management and of the Board may receive
economic benefits as a result of the Merger and may have other interests in the
Merger in addition to their interests as Shareholders. See "PROPOSAL NO.
1 -- ELECTION OF DIRECTORS -- Stock Ownership of Directors and Executive
Officers."
PAYMENTS RELATING TO CHANGE IN CONTROL
As of January 28, 1997, the Company entered into certain employment
agreements with each of Timothy J. Rhein, President and Chief Executive Officer,
Joji Hayashi, Chairman of the Board, John G. Burgess, Executive Vice President,
Maryellen B. Cattani, Executive Vice President, General Counsel and Secretary,
L. Dale Crandall, Executive Vice President, Chief Financial Officer and
Treasurer, James S. Marston, Executive Vice President and Chief Information
Officer, and Michael Goh, Executive Vice President. Under these agreements, each
of these officers has agreed to remain employed by the Company for a specified
period after a "change in control" of the Company (each, an "Employment Period")
at an annual base salary at least equal to twelve times the highest monthly base
salary paid to such officer during the twelve-month period immediately preceding
the month in which the change in control occurs. In addition, each such officer
will be awarded an annual cash bonus for each fiscal year ending during the
Employment Period equal to such officer's target bonus under the Company's
annual bonus program, or any comparable bonus under any predecessor or successor
plan for the year prior to the year in which the change in control occurs. If
such officer resigns for good reason during his or her Employment Period, or
such officer's employment is terminated other than for cause or disability
during that period, then the Company will be obligated to pay to such officer a
certain lump-sum amount. Such officer will also be entitled to continued
employee benefits for a specified period. See "COMPENSATION OF EXECUTIVE
OFFICERS AND DIRECTORS -- Employment Contracts, Termination of Employment and
Change-in-Control Arrangements and Certain Transactions."
Consummation of the Merger will constitute a "change in control" under such
employment agreements. If payments under the employment agreements are
triggered, the lump-sum amounts payable under those agreements, based on each
individual's annual compensation as of April 1, 1997, would be approximately
$3,154,192, $1,926,184, $1,483,087, $1,415,682, $1,906,719, $1,014,044 and
$1,442,673 for Mr. Rhein, Mr. Hayashi, Mr. Burgess, Ms. Cattani, Mr. Crandall,
Mr. Marston and Mr. Goh, respectively. Under the employment agreements, each
officer other than Mr. Crandall would also be entitled to certain additional
lump-sum payments in lieu of payments under the Company's qualified defined
benefit retirement plan and the Company's 1995 Supplemental Executive Retirement
Plan based on the value of certain retirement benefits and other payments
foregone due to termination or resignation; if termination or resignation
occurred immediately following consummation of the Merger, as of October 1,
1997, these additional payments would be approximately $1,640,099, $710,578,
$409,229, $287,379, $211,617 and $208,969 for Mr. Rhein, Mr. Hayashi, Mr.
Burgess, Ms. Cattani, Mr. Marston and Mr. Goh, respectively and Mr. Crandall
would be
37
<PAGE> 42
entitled to retirement benefits with a present value of $1,431,001. See
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Pension Plan Table" and
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Employment Contracts,
Termination of Employment and Change-in-Control Arrangements and Certain
Transactions."
If it is determined that any payment made to an officer pursuant to his or
her agreement would subject him or her to an excise tax pursuant to the Internal
Revenue Code, the Company will also be obligated to pay the officer an
additional amount sufficient to put him or her in the same after-tax position
that he or she would have been in, had no excise tax been imposed. See
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Employment Contracts,
Termination of Employment and Change-in-Control Arrangements and Certain
Transactions."
Benefit Plans. NOL has agreed to cause the Surviving Corporation to honor
each Employee Benefit Arrangement disclosed to NOL and each other Employee
Benefit Arrangement to which the Company or its subsidiaries was a party as of
the date of the Merger Agreement. NOL also has agreed to cause the Surviving
Corporation to take such actions as are necessary so that, for at least two
years after the Effective Time, employees of the Company and its subsidiaries
(excluding employees covered by collective bargaining agreements) will, subject
to certain limitations relating to plans and programs requiring the issuance of
capital stock, be provided cash compensation, employee benefits and incentive
compensation and similar plans and programs as will provide compensation and
benefits which in the aggregate are no less favorable than those provided to
such employees as of the date of the Merger Agreement. The executive officers
may receive benefits under the plans, programs and arrangements referred to
above. See "THE MERGER AGREEMENT -- Employee Arrangements." At the Effective
Time, pursuant to the Merger, each director of the Company will cease service as
a director of the Company, and each non-employee director will become eligible
to receive retirement benefits under the Retirement Plan for Directors of APL
Limited if such director is otherwise eligible under such plan. See
"COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS -- Compensation of Directors."
In addition, depending upon their previous elections, the executive officers may
become entitled to receive, upon consummation of the Merger or upon termination
of employment after the Merger, lump-sum distributions of amounts previously
deferred pursuant to the Company's deferred compensation plans, which, as of
April 1, 1997, would be $1,001,509, $65,957, $41,624, $23,743, $1,434,033,
$1,675,025, 1,468,699 and $454,720 for Mr. Burgess, Ms. Cattani, Mr. Crandall,
Mr. Goh, Mr. Hayashi, Mr. Marston, Mr. Rhein and Mr. Stuebgen, respectively.
Stock Plans. In connection with the Merger and pursuant to the terms of
the applicable plans or agreements, the vesting and exercisability of certain
Options held by officers and other key employees of the Company will be
accelerated and cancelled in exchange for cash, and certain shares of Common
Stock and phantom shares under the 1995 Stock Bonus Plan held by officers and
key employees of the Company will become fully vested, free of restrictions
and/or cancelled in exchange for cash. See "THE MERGER AGREEMENT -- Company
Stock Plans." Set forth below, with respect to each of the executive officers
and directors of the Company so listed, immediately following such individual's
name, is a calculation of the amounts to be received by such individual with
respect to Common Stock and/or phantom shares under the 1995 Stock Bonus Plan
and Options held by such individual (other than amounts that were already vested
as of April 13, 1997): Charles S. Arledge, $53,970; John H. Barr, $54,405; John
G. Burgess, $619,479; Maryellen B. Cattani, $589,770; L. Dale Crandall,
$913,751; Tully M. Friedman, $76,516; Michael Goh, $574,375; Joji Hayashi,
$890,000; F. Warren Hellman, $42,178; James S. Marston, $611,875; Toni Rembe,
$53,769; Timothy J. Rhein, $1,913,170; Forrest N. Shumway, $42,178; William J.
Stuebgen, $261,438; G. Craig Sullivan, $46,516; and Barry L. Williams, $51,189.
See "THE MERGER AGREEMENT -- Company Stock Plans." In addition, under the
Company's 1992 Directors' Stock Option Plan, on the first business day following
the conclusion of the annual meeting, all non-employee directors will receive
their annual grant of options to purchase 2,000 shares of Common Stock with an
exercise price equal to the fair market value of the Common Stock on the grant
date.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that, for a period of not less than six years from the
Effective Time, the directors, officers, employees and agents of the Company and
its subsidiaries will continue to enjoy all rights to indemnification existing
in their favor as of the
38
<PAGE> 43
date of the Merger Agreement as provided in the respective Certificate of
Incorporation or by-laws of, or in indemnification agreements with, the Company
or any of its subsidiaries, or otherwise in effect as of the date of the Merger
Agreement. NOL also has agreed, subject to certain limitations, to indemnify
such persons to the fullest extent permitted by applicable law with respect to
all acts and omissions arising out of such individuals' services as officers,
directors, employees or agents of the Company or any of its subsidiaries or as
trustees or fiduciaries of any plan for the benefit of employees of, or
otherwise on behalf of, the Company or any of its subsidiaries, occurring prior
to the Effective Time including, without limitation, the transactions
contemplated by the Merger Agreement. In addition, NOL has agreed to cause to be
maintained in effect for a period of not less than two years from the Effective
Time the Company's current or similar directors' and officers' liability
insurance, subject to certain cost limitations. See "THE MERGER AGREEMENT --
Indemnification and Insurance."
Other Interests. Pursuant to the Merger Agreement, at the Effective Time
the officers of the Company will become officers of the Surviving Corporation.
See "THE MERGER AGREEMENT -- The Merger -- The Surviving Corporation." Although
not required by the Merger Agreement, NOL has announced that it intends to
invite Timothy J. Rhein, the Company's President and Chief Executive Officer, to
join NOL's Board of Directors. In addition, Hellman & Friedman Capital Partners
is not receiving any compensation for its participation in the negotiations
leading up to the execution and delivery of the Merger Agreement.
39
<PAGE> 44
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
TO HOLDERS OF COMMON STOCK
The following is a summary of the material United States federal income tax
consequences of the Merger to the Shareholders.
The receipt of cash in exchange for Shares pursuant to the Merger will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local and foreign tax laws. A Shareholder
will generally recognize gain or loss for federal income tax purposes in an
amount determined by the difference between such Shareholder's adjusted tax
basis in the Shares, and the amount of cash received in exchange therefor. Such
gain or loss will be a capital gain or loss if such Shares are held as capital
assets at the Effective Time, and will be a long-term capital gain or loss if,
at the Effective Time, such Shares were held for more than one year.
The foregoing discussion may not apply to Shareholders who acquired their
Shares pursuant to the exercise of stock options or other compensation
arrangements with the Company or who are not citizens or residents of the United
States or who are otherwise subject to special tax treatment. EACH SHAREHOLDER
IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE MERGER UNDER SUCH SHAREHOLDER'S PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR
OTHER TAX LAWS.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Company has three classes of directors with staggered three-year terms.
Class I consists of three directors, Class II consists of five directors and
Class III consists of two directors. Five Class II directors are to be elected
at the Annual Meeting for terms which continue until the 2000 Annual Meeting of
Shareholders and until their respective successors are duly elected and
qualified or until retirement in accordance with the Retirement Plan for
Directors (as described below), or if the Merger is consummated, for terms
ending on the date of consummation of the Merger. Mr. Forrest Shumway will reach
the retirement age of 72 in 1999 and has advised the Board that, if the Merger
is not consummated, he intends to retire from the Board of Directors at the time
of the 1999 Annual Meeting. The Company's Certificate of Incorporation and
By-laws provide that the number of directors shall be determined by resolution
of the Board (but shall not be less than five). The Board has established by
resolution that the number of directors constituting the Board shall be ten (10)
and that the maximum number of directors shall be fixed at fifteen (15).
All five Class II nominees have been recommended by the Board for election
as directors. All of the Class II nominees are presently members of the Board.
The Board knows of no reason why any of the nominees will be unable to serve. In
the event that any nominee becomes unable or declines to serve, the proxies may
be voted for the balance of those named and for such other nominee or nominees
as the Board may select.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below are the names and ages of the nominees for Class II
director and the continuing directors of Class I and Class III, their principal
occupations at present and for the past five years and certain directorships
held by each. The terms of the continuing Class I and the Class III directors
will expire in 1999 and 1998, respectively, unless the Merger is consummated, in
which case such terms will end on the date of the consummation of the Merger.
CLASS II -- NOMINEES FOR DIRECTOR
Charles S. Arledge (Age 61). Mr. Arledge became a director of the Company
in July 1983. Mr. Arledge is a partner of Signal Ventures, a private investment
firm. He was Vice President, Strategic Planning of Aerojet-General Corporation
from 1986 to 1989.(a)(c)
40
<PAGE> 45
F. Warren Hellman (Age 62). Mr. Hellman became a director of the Company
in November 1988. He is a general partner of Hellman & Friedman, a San
Francisco-based investment firm. Mr. Hellman is also a director of
Williams-Sonoma, Inc., Levi Strauss & Co., Franklin Resources, Inc., MobileMedia
Corporation and numerous private companies.(b)(d)
Timothy J. Rhein (Age 56). Mr. Rhein was named President and Chief
Executive Officer of the Company in October 1995. He served as the Company's
President and Chief Operating Officer from July 1995 to October 1995. Prior to
that, Mr. Rhein was President and Chief Executive Officer of APL Land Transport
Services, Inc. from May 1990 to October 1995 and President and Chief Operating
Officer of American President Lines, Ltd. from January 1987 to May 1990. He has
been a director of the Company since July 1990.(d)
Forrest N. Shumway (Age 70). Mr. Shumway became a director of the Company
in August 1987. He retired as Vice Chairman of the Board of Allied-Signal Inc.
in December 1987, a position he had held since 1985. Mr. Shumway is also a
director of Transamerica Corporation, The Clorox Company and Aluminum Company of
America.(b)(c)(d)
Barry L. Williams (Age 52). Mr. Williams became a director of the Company
in July 1983. He is President of Williams Pacific Ventures Inc., a venture
capital and real estate investment and consulting firm. He was President of C.N.
Flagg Power Inc., a construction services company, from July 1988 until its sale
in July 1992, and a Managing Principal of Bechtel Investments, Inc. until May
1987. He is also a director of Tenera, Inc., CH2M Hill Companies, Ltd., The USA
Group, Inc., PG&E Corporation, Simpson Manufacturing Company, Inc., Comp USA and
Newhall Land and Farming Co., Inc.(a)(c)
CLASS I -- DIRECTORS
Tully M. Friedman (Age 55). Mr. Friedman was elected as a director of the
Company in April 1994. He is currently Chairman of Tully M. Friedman & Company,
LLC, which he formed in April 1997. Mr. Friedman was formerly a managing partner
of Hellman & Friedman, a San Francisco-based investment firm. Mr. Friedman
presently serves on the Advisory Board of Tevecap, S.A. and as a director of
Levi Strauss & Co., Mattel, Inc. and McKesson Corporation.(a)
Joji Hayashi (Age 57). Mr. Hayashi became the Chairman of the Board of
Directors in October 1995. He was President and Chief Executive Officer of
American President Lines, Ltd. from May 1990 until October 1995. He has been a
director of the Company since July 1983.
G. Craig Sullivan (Age 57). Mr. Sullivan was elected as a director of the
Company in April 1994. Mr. Sullivan has been the Chairman of the Board and Chief
Executive Officer of The Clorox Company since July 1, 1992. Prior to that, he
was The Clorox Company's Vice Chairman and Chief Executive Officer (May-June
1992) and Group Vice President (1989-1992).(b)(d)
CLASS III -- DIRECTORS
John H. Barr (Age 67). Mr. Barr became a director of the Company in July
1983. He is a real estate developer of industrial and mobile home parks.(b)(d)
Toni Rembe (Age 61). Ms. Rembe has been a director of the Company since
October 1993. She has been a partner in the law firm of Pillsbury Madison &
Sutro LLP since 1971, where she is managing partner of the firm's Tax Group and
a former member of the Executive Committee. She is also a director of Potlatch
Corporation and Transamerica Corporation, an Advisory Director of SBC
Communications, Inc. and a Trustee and the President of both the van Loben Sels
Foundation and the American Conservatory Theater.(a)(c)
- ---------------
<TABLE>
<S> <C>
(a) Member of the Audit Committee
(b) Member of the Compensation Committee
(c) Member of the Nominating Committee
(d) Member of the Executive Committee
</TABLE>
41
<PAGE> 46
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Company has standing audit, compensation, executive and nominating
committees of the Board.
The Audit Committee assists the Board in matters relating to accounting.
The Audit Committee receives from, and reviews with, the Company's independent
auditors the annual report of such auditors; reviews with the independent
auditors the scope of the succeeding annual audit; nominates the independent
auditors to be selected each year by the Board; reviews consulting services
rendered by the Company's independent auditors and evaluates the possible effect
on the auditors' independence of performing such services; ascertains the
existence of adequate internal accounting and control systems; and reviews with
management and the Company's independent auditors current and emerging
accounting and financial reporting requirements and practices affecting the
Company. The Audit Committee held four meetings during 1996.
The Compensation Committee determines or reviews and passes upon
management's recommendations with respect to executive compensation, bonuses,
incentive stock awards and stock option grants and other compensation plans. The
Compensation Committee is comprised of four non-employee directors, each of whom
is identified under "-- Information With Respect to Nominees and Directors."
There are no compensation committee interlocks. The Compensation Committee held
five meetings during 1996.
The Executive Committee, subject to the ultimate direction and control of
the Board of Directors, exercises all of the powers of the Board in the
management of the business and affairs of the Company during the intervals
between meetings of the Board. The Executive Committee held one meeting during
1996.
The Nominating Committee makes recommendations to the Board with respect to
the number of directors to serve on the Board, reviews potential candidates for
director and recommends nominees for election as director. The Nominating
Committee held one meeting during 1996. Any Shareholder may recommend director
nominees to the Nominating Committee by writing to the Secretary of the Company
not less than 30 nor more than 60 days prior to any Shareholders' meeting called
for the election of directors. Submissions should include the full name, age,
business and residence addresses of the proposed nominee and a statement of the
nominee's qualifications, including the nominee's principal occupation and
employment during the last five years, and the number of shares of Common Stock
owned by the nominee.
Six meetings of the Board were held during 1996. During 1996, each of the
directors attended 75% or more of the aggregate number of meetings of the Board
and of the committees on which such director served.
INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
Set forth below are the names and ages of the executive officers of the
Company other than those who serve on the Company's Board and are named in
"-- Information With Respect to Nominees and Directors" and their offices. The
executive officers of the Company are elected by the Board. Each officer holds
office until his or her successor has been duly elected and qualified, or until
the earliest of his or her death, resignation, retirement or removal by the
Board.
The following sets forth certain information with respect to the remaining
executive officers of the Company:
John G. Burgess (Age 52). Mr. Burgess was elected Executive Vice President
of the Company in May 1995. He has also served as Executive Vice President of
American President Lines, Ltd. since December 1992. Prior to that, he served as
Executive Vice President and Chief Operating Officer of American President
Lines, Ltd. from May 1990 to November 1992.
Maryellen B. Cattani (Age 53). Ms. Cattani was elected Executive Vice
President of the Company in March 1995. She has also served as General Counsel
and Secretary of the Company since July 1991 and as a Senior Vice President from
July 1991 to March 1995. Prior to joining the Company, she was a partner in the
law firm of Morrison & Foerster from 1989 to 1991.
42
<PAGE> 47
L. Dale Crandall (Age 55). Mr. Crandall was elected Executive Vice
President and Chief Financial Officer of the Company in March 1995 and Treasurer
of the Company in September 1995. Prior to that, Mr. Crandall was managing
partner of Price Waterhouse's Los Angeles office from 1990 to 1995.
Michael Goh (Age 47). Mr. Goh was elected Executive Vice President of the
Company in April 1996. Prior to that, he served as Senior Vice President of the
Company from March 1996 to April 1996, Senior Vice President of American
President Lines, Ltd. from January 1996 to March 1996 and in various capacities
with APL Land Transport Services, Inc., including Senior Vice President from May
1992 to July 1994 and Vice President from May 1989 to April 1992.
James S. Marston (Age 63). Mr. Marston was elected Executive Vice
President and Chief Information Officer of the Company in May 1995. He served as
Senior Vice President and Chief Information Officer of the Company from
September 1987 to May 1995.
William J. Stuebgen (Age 49). Mr. Stuebgen has served as Vice President,
Controller of the Company since October 1990.
43
<PAGE> 48
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of May 1, 1997, the number of shares of
Common Stock beneficially owned by the directors and nominees named above, the
executive officers listed in the Summary Compensation Table and the directors
and executive officers of the Company as a group. Except as otherwise indicated,
and subject to applicable community property laws, each person has sole
investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective individuals
and contained in the Company's records.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS
- --------------------------------------------------------------- --------------------- ----------
<S> <C> <C>
John G. Burgess................................................ 38,351 *
L. Dale Crandall............................................... 0 *
Joji Hayashi................................................... 44,322 *
James S. Marston............................................... 36,826 *
Timothy J. Rhein............................................... 15,251 *
Charles S. Arledge............................................. 22,487 *
John H. Barr................................................... 48,457 *
Tully M. Friedman.............................................. 11,999 *
F. Warren Hellman.............................................. 2,044,697(2) 7.89%
Toni Rembe..................................................... 14,999 *
Forrest N. Shumway............................................. 21,999 *
G. Craig Sullivan.............................................. 12,999 *
Barry L. Williams.............................................. 7,145 *
All directors and executive officers as a group
(16 persons including the 13 named above).................... 2,366,692 9.60%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes shares of Common Stock which may be acquired pursuant to the
exercise of options exercisable on May 1, 1997 or within 60 days thereafter,
as follows: Mr. Burgess, 34,580; Mr. Hayashi, 38,168; Mr. Marston, 23,300;
Mr. Rhein, 15,251; Mr. Arledge, 15,999; Mr. Barr, 15,999; Mr. Friedman,
11,999; Mr. Hellman, 15,999; Ms. Rembe, 13,999; Mr. Shumway, 15,999; Mr.
Sullivan, 11,999; Mr. Williams, 5,333; and all directors and executive
officers as a group, 265,785. Also includes shares attributable to accounts
under the Company's SMART Plan as of May 8, 1997, as follows: Mr. Hayashi,
1,720; Mr. Marston, 992; and all directors and executive officers as a
group, 6,762.
Pursuant to the Merger Agreement, the Company will take all actions
necessary to provide that, immediately prior to the Effective Time, each
outstanding option will become fully exercisable and vested. See "THE MERGER
AGREEMENT -- Company Stock Plans." In such an event, the number of shares of
Common Stock which would be acquired pursuant to the exercise of outstanding
options (all of which would be then exercisable), would be as follows: Mr.
Burgess, 89,580; Mr. Crandall, 80,000; Mr. Hayashi, 118,168; Mr. Marston,
78,300; Mr. Rhein, 185,251; Mr. Arledge, 18,000; Mr. Barr, 18,000; Mr.
Friedman, 14,000; Mr. Hellman, 18,000; Ms. Rembe, 16,000; Mr. Shumway,
18,000; Mr. Sullivan, 14,000; Mr. Williams, 7,334; and all directors and
executive officers as a group, 855,293.
(2) Includes an aggregate of 2,028,698 shares of Common Stock held by Hellman &
Friedman Capital Partners, a California Limited Partnership, Hellman &
Friedman Capital Partners International (BVI), APC Partners, L.P. and H&F
Redwood Partners, L.P. Mr. Hellman is a director and officer of each of the
corporate general partners of such partnerships. Mr. Hellman beneficially
owns all of the stock of each such corporation and has investment and voting
power with respect to the shares of Common Stock held by the above-named
partnerships. Mr. Hellman disclaims beneficial ownership of these shares.
The address of Mr. Hellman is c/o Hellman & Friedman, One Maritime Plaza,
12th Floor, San Francisco, CA 94111.
44
<PAGE> 49
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Information is set forth below as to the compensation awarded to, earned by
or paid to the Chief Executive Officer of the Company, each of the four most
highly compensated executive officers of the Company other than the Chief
Executive Officer, and the Company's directors, for services rendered to the
Company and its subsidiaries during the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
AWARDS
ANNUAL COMPENSATION -----------------------
------------------------------------ RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS(2) OPTIONS COMPENSATION(3)
- -------------------------------- ---- -------- -------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John G. Burgess................. 1996 $276,025 $138,120 $ 0 $ 2,092 0 $ 17,215
Executive Vice President 1995 $275,810 $63,740 $ 0 $ 2,793 17,500 $ 17,263
1994 $275,810 $119,915 $ 8,283 $ 0 15,000 $ 17,093
L. Dale Crandall................ 1996 $365,200 $180,834 $ 0 $ 12,460 0 $ 94,320
Executive Vice President, 1995(4) $275,305 $92,837 $ 0 $ 3,129 80,000 $ 430,080
Chief
Financial Officer and
Treasurer
Joji Hayashi.................... 1996 $365,040 $172,142 $ 0 $ 0 0 $ 23,257
Chairman of the Board 1995 $365,040 $92,797 $ 0 $ 0 0 $ 23,214
1994 $365,040 $177,382 $ 12,220 $ 0 32,000 $ 22,977
James S. Marston................ 1996 $291,200 $131,084 $ 0 $ 0 0 $ 18,722
Executive Vice President and 1995 $291,200 $67,296 $ 0 $ 0 0 $ 19,466
Chief Information Officer 1994 $291,200 $134,050 $ 12,961 $ 0 22,000 $ 19,170
Timothy J. Rhein................ 1996 $525,000 $324,097 $ 0 $ 56,159 60,000 $ 31,500
President and Chief Executive 1995 $393,265 $155,382 $ 0 $ 13,629 30,000 $ 23,283
Officer 1994 $365,040 $177,382 $ 13,809 $ 0 32,000 $ 22,847
</TABLE>
- ---------------
(1) Under the Company's 1995 Stock Bonus Plan, certain of the Company's
executives and key employees can elect to receive all or any part of their
bonuses in the form of phantom shares. Messrs. Burgess, Crandall and Rhein
designated that $11,993, $70,822 and $319,087, respectively, of their
bonuses payable with respect to 1996, and $15,918, $17,829 and $77,490,
respectively, of their bonuses payable with respect to 1995, be credited to
them in the form of phantom shares.
(2) The amounts shown with respect to 1995 and 1996 represent the value of
premium phantom shares received under the 1995 Stock Bonus Plan.
Participants who elect to receive their bonuses in the form of phantom
shares receive a premium in the form of additional phantom shares equal to
17.6% of the shares representing their converted bonuses. Premium phantom
shares vest in two years, subject to earlier vesting in the event the
participant's employment terminates due to death or disability or in the
event of a change in control with respect to the Company. The term "change
in control" has the same meaning in this plan as in the 1989 Stock Incentive
Plan (which is described below). If the participant's employment terminates
in less than two years for any reason other than death or disability, the
premium phantom shares are forfeited. Premium phantom shares carry a right
to dividend equivalents, which are converted into additional phantom shares.
The unvested premium phantom shares held by Messrs. Burgess, Crandall and
Rhein as of the end of fiscal 1996 had values of $3,109, $3,483 and $15,170,
respectively, based on the closing price of the Common Stock on the NYSE on
December 27, 1996. Pursuant to the plan, the premium phantom shares accrued
in fiscal 1996 were not credited to participants until February 14, 1997.
Accordingly, these units had no fiscal 1996 year-end value.
(3) During fiscal year 1996, the Company paid premiums on life insurance for
Messrs. Burgess, Crandall, Hayashi and Marston in the amounts of $653,
$1,076, $1,355 and $2,068, respectively; made matching contributions under
the Company's SMART Plan for Messrs. Burgess, Crandall and Rhein in the
amounts of $4,780, $9,000 and $9,000, respectively; made matching
contributions under the Company's 1995 Deferred Compensation Plan for
Messrs. Burgess, Crandall, Hayashi, Marston and Rhein of $11,782, $12,912,
$21,902, $16,654, and $22,500, respectively; and forgave $71,332 in
principal and accrued interest on a loan made to Mr. Crandall in 1995 in
connection with the sale of his home in Southern California, pursuant to his
employment agreement.
(4) Mr. Crandall joined the Company on March 31, 1995, and his compensation is
for the period from March 31 to December 29, 1995.
45
<PAGE> 50
Information is provided below with respect to all stock option grants to
and exercises by the five executive officers named in the Summary Compensation
Table during fiscal year 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(1)(2) IN FISCAL YEAR PER SHARE(1) DATE VALUE(3)
- ------------------------------------- ------------- -------------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C>
John G. Burgess...................... 0 0% N/A N/A 0
L. Dale Crandall..................... 0 0% N/A N/A 0
Joji Hayashi......................... 0 0% N/A N/A 0
James S. Marston..................... 0 0% N/A N/A 0
Timothy J. Rhein..................... 10,000 6.8% $ 22.375 7/26/03 $ 81,209
50,000 34.0% $ 22.375 7/26/03 $406,047
</TABLE>
- ---------------
(1) All options were granted with an exercise price at or above fair market
value. During fiscal year 1996, no stock appreciation rights were awarded to
any executive officer.
(2) These options become exercisable in installments based upon achievement of
specified targets for appreciation in the value of the Common Stock. See
"-- Compensation Committee Report on Executive Compensation." On July 27,
1998, the options will vest as to 60% of the covered shares if not otherwise
vested, and on July 27, 2002, the options will vest as to the remaining 40%
if not otherwise vested. In addition, the options will vest in full in the
event of the employee's death or disability or upon a "change in control" of
the Company. As defined in the 1989 Stock Incentive Plan, a "change in
control" of the Company occurs when: (a) any person, entity or group becomes
the beneficial owner of at least 20% of the Company's outstanding Common
Stock or of the combined voting power of the Company's outstanding
securities, except by reason of (i) repurchases of securities by the Company
or its employee benefit plans and (ii) certain business combinations in
which (1) the Company's prior Shareholders continue to own a majority of the
successor entity's common stock and voting power in substantially the same
proportions as before the combination, (2) no person or entity beneficially
owns 20% or more of the successor's common stock or voting power except to
the extent that such ownership existed before the combination, and (3) the
successor's board of directors consists of at least a majority of the
"Incumbent Board," as described below; (b) the "Incumbent Board" ceases to
constitute a majority of the Board; (c) a business combination is
consummated that does not meet the requirements summarized in clause (ii)
above; or (d) the Company's Shareholders approve a complete liquidation or
dissolution of the Company. As defined in the plan, the "Incumbent Board"
consists of those individuals who were directors of the Company on January
28, 1997, together with any other directors whose election or nomination was
approved by a majority of the directors then comprising the "Incumbent
Board," subject to certain exceptions. Consummation of the Merger will
constitute a "change in control" as defined in the plan.
(3) "Grant Date Present Values" were determined based upon a model that uses the
Black-Scholes option pricing methodology. These are estimated values based
upon the following arbitrary assumptions: stock price volatility calculated
using the daily stock prices for the 18-month period prior to the valuation
date; a risk-free interest rate curve based on the interbank borrowing rate;
exercise on the option expiration date; and a future dividend yield of
1.72%. The actual value, if any, that an executive ultimately realizes upon
the exercise of an option will be the difference between the market price of
the underlying shares and the option exercise price on the date of exercise.
46
<PAGE> 51
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT
SHARES YEAR-END FISCAL YEAR-END(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- --------------------------------- ----------- -------- --------------------- ------------------
<S> <C> <C> <C> <C>
John G. Burgess.................. 0 $0 34,580/ 55,000 $ 144,045/$ 55,000
L. Dale Crandall................. 0 $0 0/ 80,000 $ 0/$ 80,000
Joji Hayashi..................... 0 $0 38,168/ 80,000 $ 265,080/$ 80,000
James S. Marston................. 0 $0 23,300/ 55,000 $ 164,707/$ 55,000
Timothy J. Rhein................. 0 $0 15,251/170,000 $ 73,078/$140,000
</TABLE>
- ---------------
(1) Calculated based the market price for the Common Stock on December 27, 1996.
PENSION PLAN TABLE
The following table illustrates the approximate retirement income which may
become payable under the APL Limited Retirement Plan (the "Retirement Plan")
(including the supplemental benefits under the Company's Excess-Benefit Plan and
1995 Supplemental Executive Retirement Plan) to an employee credited with the
number of years of service shown, assuming that benefits commence at age 65 and
are payable in the normal form (generally a joint and 50% survivor benefit).
ANNUAL RETIREMENT INCOME
<TABLE>
<CAPTION>
YEARS OF SERVICE
5-YEAR AVERAGE ------------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35
- ----------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$400,000..................... $120,000 $160,000 $180,000 $200,000 $200,000
$500,000..................... $150,000 $200,000 $225,000 $250,000 $250,000
$600,000..................... $180,000 $240,000 $270,000 $300,000 $300,000
$700,000..................... $210,000 $280,000 $315,000 $350,000 $350,000
$800,000..................... $240,000 $320,000 $360,000 $400,000 $400,000
$900,000..................... $270,000 $360,000 $405,000 $450,000 $450,000
</TABLE>
The amounts shown in the table are subject to adjustment for Social
Security benefits. The credited years of service of the executive officers of
the Company named in the Summary Compensation Table are as follows: Mr. Burgess,
11 years; Mr. Crandall, 2 years; Mr. Hayashi, 27 years; Mr. Marston, 9 years;
and Mr. Rhein, 29 years. The compensation covered by the Retirement Plan,
Excess-Benefit Plan and 1995 Supplemental Executive Retirement Plan was
$339,980, $458,037, $457,837, $358,496 and $680,000 for Messrs. Burgess,
Crandall, Hayashi, Marston and Rhein, respectively, during 1996. Covered
compensation for any year is equal to the sum of the employee's annual salary
rate on June 1 and any cash bonus that the employee receives or defers during
the year. However, before June 1, 1997, the compensation on which retirement
income would be determined is different from such amount because benefits
accruing before that date are based upon a five-year average of the employee's
compensation. Retirement benefits are supplemented for Mr. Crandall under the
terms of his employment agreement. See "-- Employment Contracts, Termination of
Employment and Change-in-Control Arrangements and Certain Transactions."
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive an annual retainer
of $24,000, a fee of $1,000 per meeting when attending Board or Shareholder
meetings and an additional fee of $850 for each committee meeting attended. The
Chairpersons of the Company's Audit and Compensation Committees each receive an
annual retainer of $3,000. All directors are reimbursed for their reasonable
expenses incurred in connection with the Company's business. A director may
elect to defer receipt of compensation earned as a director under a deferred
compensation plan and may elect to receive such compensation in the form of
Common Stock or phantom shares under the 1995 Stock Bonus Plan.
47
<PAGE> 52
Under the Retirement Plan for Directors of APL Limited (the "Retirement
Plan for Directors"), directors who have never been employees of the Company are
eligible to receive an unfunded benefit if they complete five years of service
as a director or if they attain age 70 or become permanently and totally
disabled while serving as a director. The benefit is equal to the amount of the
annual retainer paid by the Company to its active directors during the period
that the retired director is receiving the benefit, and is paid for a period
equal to the lesser of 10 years or one year for each full or partial year of
service as a director. A reduced benefit for a director's surviving spouse is
provided in the event that the director dies before retirement or dies after
retirement but before expiration of his or her benefit. In addition, the
Retirement Plan for Directors provides for mandatory retirement of a director
not later than the date of the annual meeting of Shareholders of the Company
coinciding with or next following his or her 70th birthday (72nd birthday for
individuals who were directors on September 15, 1992).
Under the 1992 Directors' Stock Option Plan, directors who have never been
Company employees receive options to purchase 10,000 shares of Common Stock upon
election or appointment to the Board, and all non-employee directors receive
annual grants of options to purchase 2,000 shares of Common Stock. These options
have exercise prices equal to the fair market value of the Common Stock on the
grant date. They vest in three equal annual installments and, if held for at
least six months, vest in full upon the non-employee director's retirement,
death or disability or a change in control of the Company. The term "change in
control" has the same definition in this plan as in the 1989 Stock Incentive
Plan (as described above). As provided in the plan, Ms. Rembe and Messrs.
Arledge, Barr, Friedman, Hellman, Shumway, Sullivan and Williams each received
options to purchase 2,000 shares of Common Stock in fiscal year 1996.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS AND CERTAIN TRANSACTIONS
Messrs. Burgess, Crandall, Hayashi, Marston and Rhein are employed at
annual salaries of not less than $303,860, $376,160, $380,000, $299,940 and
$600,000, respectively, under employment agreements that expire when they attain
age 65. These agreements may be terminated by either party for any reason upon
30 days' notice. While the agreements remain in effect, these individuals are
entitled to receive their salaries and to participate in the employee benefit
and compensation plans maintained by the Company. If the Company terminates
their employment without cause, specified percentages of their base salaries
(150% for Messrs. Burgess and Marston, 155% for Messrs. Crandall and Hayashi and
160% for Mr. Rhein), and participation in all insurance and similar plans, will
continue for three years (but not beyond age 65) and the applicable period will
be counted as employment with the Company for purposes of determining the
termination date of options, vesting under the Company's executive compensation
programs, including the 1989 Stock Incentive Plan and 1995 Stock Bonus Plan, and
calculation of a supplemental retirement benefit. In the event of such
termination, Mr. Hayashi would also be credited with service for purposes of
calculating the supplemental retirement benefit for a period during which he was
employed by the Company in a seagoing position. These agreements with Messrs.
Burgess, Crandall, Hayashi, Marston and Rhein also provide that the Company will
compensate them for any amounts that they do not receive as a result of any
provision in any plan or agreement limiting payments which are nondeductible by
the Company for federal income tax purposes on account of Internal Revenue Code
provisions relating to golden parachute payments.
As of January 28, 1997, the Company entered into additional employment
agreements with the officers named in the Summary Compensation Table and certain
other executive officers. See "INTERESTS OF CERTAIN PERSONS IN THE
MERGER -- Payments Relating to Change in Control." Under these agreements, each
of these officers has agreed to remain employed by the Company for a specified
period after a change in control of the Company. The agreements also protect
these officers against certain material reductions in compensation, benefits,
titles and duties, and against material changes in their office locations,
following a change in control. So long as each such officer remains employed
with the Company during his or her Employment Period, he or she will be entitled
to receive an amount equal to his or her annual salary (annualized from his or
her highest monthly salary during the 12 months prior to the change of control)
and annual bonus, and certain other benefits. In addition, if such officer
resigns for good reason (including a resignation due to a material reduction in
compensation, benefits, title or duties or a material relocation and a
resignation within a specified time period) during his or her Employment Period,
or such officer's employment
48
<PAGE> 53
is terminated other than for cause or disability during that period, then the
Company will be obligated to pay a lump-sum amount equal to up to three times
such officer's annual base salary and bonus plus the value of certain retirement
benefits and other payments foregone due to the termination or resignation. Such
officer will also be entitled to continued employee benefits for a specified
period. If it is determined that any payment made to an officer pursuant to his
or her agreement would subject him or her to an excise tax pursuant to the
Internal Revenue Code, the Company will also be obligated to pay the officer an
additional amount sufficient to put him or her in the same after-tax position
that he or she would have been in, had no excise tax been imposed. The term
"change in control" has the same meaning in these agreements as in the 1989
Stock Incentive Plan (as described above).
The Company has also agreed to provide Mr. Crandall with an unfunded
supplemental retirement benefit equal to the difference between the amount of
the pension benefits actually paid under the Company's qualified and
non-qualified defined benefit pension plans and the amount of a hypothetical
pension benefit. If Mr. Crandall's employment terminates after he reaches age
65, the hypothetical pension benefit will be equal to 40% of his highest
five-year average annual compensation (subject to adjustment for Social Security
benefits). If his employment terminates before he reaches age 65, the
hypothetical pension benefit will be equal to the greater of (i) $12,500 per
month (subject to cost-of-living increases not to exceed three percent per year)
and (ii) 40% of his highest five-year average annual compensation, prorated
based upon his length of service with the Company (subject to adjustment for
Social Security benefits). This hypothetical benefit for termination prior to
age 65 will also be reduced by the amount of any retirement benefit that Mr.
Crandall receives from his prior employer. If Mr. Crandall is not otherwise
eligible for retiree health insurance coverage from the Company when his
employment terminates, the Company will provide coverage comparable to the
coverage then being provided to its retiring employees. Mr. Crandall will be
required to contribute to the cost of this coverage on the same basis as
retiring employees. To assist him in the sale of his home in Southern
California, the Company made a loan in the amount of $400,000 to Mr. Crandall in
fiscal 1995 which bears interest at the prime rate and is payable in annual
installments of $50,000 over eight years commencing in March 1996. Payment of
the first two installments and accrued interest was forgiven in March 1996 and
March 1997, respectively, and payment of the next three installments and accrued
interest will be forgiven as they become due, provided Mr. Crandall continues to
be employed by the Company (or is treated as being so employed under his
employment agreement), or in the event that his employment terminates due to
disability.
The law firm of Pillsbury Madison & Sutro LLP, of which Ms. Rembe is a
partner, provides legal services to the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's senior management is determined by the
Compensation Committee of the Board, which is comprised of four non-employee
directors. The Committee believes that the Company's executive compensation
program should attract and retain highly qualified personnel and provide
meaningful incentives for superior performance. The Company seeks to link
executives' interests with those of the Company's Shareholders by rewarding the
achievement of short- and long-term performance goals, as measured by
improvements in the Company's earnings and return on equity. The Company intends
that certain compensation paid to its senior management in 1996, including stock
options, be exempt from the limitations on deductibility under Section 162(m) of
the Internal Revenue Code. From time to time, the Committee retains an
independent compensation consultant to provide advice with respect to the
Company's compensation plans and programs.
Based upon the recommendation of management, the Compensation Committee
granted no merit salary increases to the Company's Chief Executive Officer or
other senior executives for 1996. Instead, the Committee adopted a program which
tied 1996 merit pay to the financial performance of the Company. Target payouts
ranging from 7% to 14% of base salary were established based upon the
achievement of return on equity targets for 1996. No payments were made under
this program, as the minimum return on equity target was not achieved.
In January 1996, management of the Company recommended, and the
Compensation Committee approved, a bonus program for 1996. The program had two
components: 80% of the bonus was based upon the
49
<PAGE> 54
achievement of return on equity targets, which were established on the basis of
anticipated results for 1996, and 20% of the bonus was based upon the
achievement of customer satisfaction targets, established from baseline
measures. Bonus pools ranging from 50% to 150% of target bonuses were
established to correspond to levels of return on equity and customer
satisfaction. Following the end of 1996, the Committee authorized a bonus pool
of 85.74% of target bonuses, based solely upon return on equity. The Committee
determined that it was appropriate to exclude customer satisfaction as a
criterion due to the special circumstances associated with implementation of the
Company's reengineering program. The Committee fixed the bonus of Mr. Rhein at
102.89% of his target bonus and reviewed and acted upon recommendations of the
management of the Company with respect to bonuses for the Company's other senior
executives. Individual bonus awards were based upon the individual's annual
salary and target bonus and an evaluation of the individual's contribution to
the Company's performance.
In 1993, the Compensation Committee approved a long-term incentive program,
intended to replace annual option grants for five years. The program was
designed to meet key strategic objectives of linking the interests of employees
with the interests of Shareholders in stock price appreciation, creating a high
level of employee focus and motivation, enhancing employee ownership of the
Company's stock and promoting employee retention. Under the program, performance
options were granted to each eligible employee in an aggregate amount of
approximately five times the employee's 1993 annual grant. In addition, the
Committee also grants options to certain newly hired or promoted employees. In
January and October of 1996, Mr. Rhein was granted options for an aggregate of
60,000 shares based upon the Committee's assessment of his performance as
President and Chief Executive Officer of the Company and to provide additional
incentives for superior performance. Each of the performance options has a term
expiring July 26, 2003, and an exercise price equal to the greater of the fair
market value of the Common Stock at the time of the grant or $22.375, which was
the stock's fair market value when the initial grant of performance options was
made in July 1993. Vesting of the options will occur between the present time
and July 27, 2002, depending upon the Company's achievement of certain stock
price targets. See table entitled "Long-Term Incentive Program" below.
The Compensation Committee believes that the total compensation provided to
the Company's executive officers is competitive with the compensation provided
by employers of comparable size and that the annual bonus and stock option
programs have helped to focus the Company's senior management on increasing
profitability and Shareholder value and reducing costs.
G. Craig Sullivan, Chairman
John H. Barr
F. Warren Hellman
Forrest N. Shumway
50
<PAGE> 55
LONG-TERM INCENTIVE PROGRAM
The performance stock options discussed above will vest based upon the
Company's achievement of the stock price targets set forth below.
<TABLE>
<CAPTION>
VESTED PERCENTAGE OF
TIME PERIOD STOCK PRICE TARGET ORIGINAL OPTION
- ---------------- --------------------------------------------------- --------------------
<S> <C> <C>
July 27, 1996 to $33.563 33 1/3%
July 26, 1997 $36.919 66 2/3%
$42.513 100%
July 27, 1997 to $35.800 33 1/3%
July 26, 1998 $38.030 66 2/3%
$42.513 100%
July 27, 1998 none 60%
July 27, 1998 to Total return on the Company's Common Stock 100%
July 26, 2002 (appreciation plus dividends) since date of
grant is at least 100% total return of median
company in S&P 500 Index for same period.
July 27, 2002 none 100%
</TABLE>
Before July 27, 1998, no portion of the options will vest unless the total
return on the Common Stock from the date of grant to the potential vesting date
has been at least 75% of the total return of the median company in the S&P 500
Index for the same period. This minimum requirement applies in addition to the
targets in the table above. These options will also vest in full upon a "change
in control" of the Company (as defined above).
51
<PAGE> 56
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock with a comparable return on the indicated indices for the last five fiscal
years. The total return on the Common Stock is determined based on the change in
the price of the Common Stock and assumes reinvestment of all dividends and an
original investment of $100. The total returns on the indicated indices also
assume reinvestment of dividends and an original investment in each index of
$100 on December 27, 1991.
TOTAL RETURN TO SHAREHOLDERS
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) APL LTD TRANSPORTATION S&P 500 INDEX
<S> <C> <C> <C>
DEC 91 100 100 100
DEC 92 95.40 108.66 107.62
DEC 93 142.63 129.34 118.46
DEC 94 127.80 108.44 120.03
DEC 95 118.28 151.10 165.13
DEC 96 123.57 172.90 203.05
</TABLE>
52
<PAGE> 57
CERTAIN BENEFICIAL OWNERSHIP OF SECURITIES
Each of the following Shareholders has advised the Company under the rules
of the SEC that it is the beneficial owner of more than 5% of the Common Stock
of the Company. The following information is furnished as of July 10, 1997, with
respect to any person known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Common Stock of the Company. Except as
otherwise indicated, the named beneficial owner has sole voting and investment
power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
---------------------------------------------------------- ------------------ ----------
<S> <C> <C>
Hellman & Friedman Capital Partners(2).................... 1,263,996
APC Partners, L.P.(2)..................................... 653,833 8.2%
Hellman & Friedman Capital Partners International
(BVI)(2)................................................ 68,227
H&F Redwood Partners, L.P.(2)............................. 42,642
Franklin Resources, Inc.(3)............................... 1,334,725 5.4%
777 Mariner's Island Blvd.
San Mateo, CA
Pioneering Management Corporation(4)...................... 1,278,100 5.2%
60 State Street
Boston, MA
Primecap Management Company(5)............................ 1,560,100 6.3%
225 South Lake Avenue
Pasadena, CA
Trimark Investment Management Inc.(6)..................... 2,340,000 9.4%
One First Canadian Place
Ontario, Canada
</TABLE>
- ---------------
(1) All percentages are given as of July 10, 1997, based on 24,813,009 shares of
Common Stock outstanding.
(2) The voting and dispositive powers with respect to the shares of Common Stock
held by Hellman & Friedman Capital Partners, a California Limited
Partnership, Hellman & Friedman Capital Partners International (BVI), APC
Partners, L.P., and H&F Redwood Partners, L.P. (the "H&F Group") are
indirectly controlled by Hellman & Friedman Capital Management, Inc., H&F
Capital Management International, Inc., APC Administrators, Inc. and H&F
Redwood Investors, Inc., respectively. A trust of which Mr. F. Warren
Hellman is a trustee and a beneficiary owns all of the stock of each such
corporation. As a result, Mr. Hellman could be deemed to beneficially own
100% of the 2,028,698 shares of the Common Stock of the Company owned by the
H&F Group. Mr. Hellman disclaims such beneficial ownership. The address of
Mr. Hellman is c/o Hellman & Friedman, One Maritime Plaza, 12th Floor, San
Francisco, CA 94111.
(3) These securities are beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are advised by direct
and indirect investment advisory subsidiaries (the "Adviser Subsidiaries")
of Franklin Resources, Inc. ("FRI"). Such advisory contracts grant to such
Adviser Subsidiaries all voting and investment power over the securities
owned by such advisory clients. Therefore, such Adviser Subsidiaries may be
deemed to be the beneficial owner of these securities. Charles B. Johnson
and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding
Common Stock of FRI and are the principal shareholders of FRI. FRI and
Charles B. Johnson and Rupert H. Johnson, Jr. may be deemed to be the
beneficial owner of securities held by persons and entities advised by FRI
subsidiaries. FRI, Charles B. Johnson and Rupert H. Johnson, Jr., and each
of the Adviser Subsidiaries disclaim any economic interest or beneficial
ownership in any of these securities. The information set forth in this
footnote is based upon Amendment No. 4 to FRI's Schedule 13G, filed July 9,
1997.
(4) Based on Amendment No. 2 to Pioneering Management Corporation's Schedule
13G, filed January 3, 1997.
(5) Based on Amendment No. 6 to Primecap Management Company's Schedule 13G,
filed March 7, 1996.
53
<PAGE> 58
(6) Certain Trimark mutual funds (the "Funds"), which are trusts organized under
the laws of Ontario, Canada, are owners of record of these securities.
Trimark Investment Management Inc. ("TIMI"), a corporation incorporated
under the laws of Canada, is a manager and trustee of the Funds. TIMI is
qualified to act as an investment adviser and manager of the Funds in the
province of Ontario pursuant to a registration under the Securities Act
(Ontario). Trimark Financial Corporation ("TFC") is a corporation
incorporated under the laws of Ontario, Canada, which owns 100% of the
voting equity securities of TIMI, and consequently, TFC may be deemed to be
the beneficial owner of these securities. The information set forth in this
footnote is based upon Amendment No. 4 to TFC's Schedule 13G, filed February
12, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, executive officers, and beneficial owners of more than 10% of the
outstanding Common Stock are required to file reports with the SEC and the NYSE
concerning their ownership of and transactions in Common Stock; such persons are
also required to furnish the Company with copies of such reports. Based solely
on a review of the copies of such reports furnished to the Company and written
representations from certain reporting persons, the Company believes that all
such filing requirements were complied with in a timely manner during the past
fiscal year.
PROPOSAL NO. 2 -- THE MERGER
At the Annual Meeting, the Shareholders will be asked to approve and adopt
the following resolution with respect to Proposal No. 2:
RESOLVED, that the Agreement and Plan of Merger, dated as of April 13,
1997, by and among the Company, NOL and Sub, and the transactions
contemplated thereby, including the Merger, as described in the Proxy
Statement for this Annual Meeting, are hereby approved and adopted.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER.
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
The Board has selected Arthur Andersen LLP to serve as the Company's
independent auditors for fiscal year 1997. Arthur Andersen LLP have served as
the Company's independent auditors since 1983. While it is not required to do
so, the Board is submitting the selection of that firm to the Shareholders for
ratification in order to ascertain the Shareholders' views. If ratification is
not provided, the Board will reconsider its selection.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and available to respond to appropriate questions. Such
representatives will have the opportunity to make a statement if they desire to
do so.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE SELECTION OF ARTHUR ANDERSEN LLP.
54
<PAGE> 59
MARKET PRICES OF COMMON STOCK
The Common Stock is listed and traded on the NYSE and the PSE under the
symbol "APL." The following table sets forth the range of quarterly high and low
sale prices for the Common Stock since January 1, 1995.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1997:
First Quarter............................................................ $24 3/8 $21
Second Quarter........................................................... $31 1/8 $18
Third Quarter (through July 18, 1997).................................... $31 3/8 $30 5/16
1996:
First Quarter............................................................ $24 $20 1/8
Second Quarter........................................................... $29 1/8 $22 3/4
Third Quarter............................................................ $26 3/8 $21 1/4
Fourth Quarter........................................................... $24 3/8 $21
1995:
First Quarter............................................................ $24 1/2 $21
Second Quarter........................................................... $24 3/4 $21 7/8
Third Quarter............................................................ $31 3/4 $23 1/4
Fourth Quarter........................................................... $29 3/4 $21 3/4
</TABLE>
On April 11, 1997, the last trading day before the public announcement of
the execution of the Merger Agreement, the reported closing price of the Common
Stock as reported on the NYSE Composite Tape was $21.50 and the high and low
sale prices as reported on the NYSE Composite Tape were $22.38 and $19.88,
respectively. On July 18, 1997, the most recent trading day prior to the
printing of this Proxy Statement, the reported closing price of the Common Stock
on the NYSE Composite Tape was $30 5/8. Shareholders are urged to obtain current
information with respect to the price of the Common Stock.
Quarterly cash dividends were declared and paid on the Common Stock
totalling $.40 per share in 1995 and 1996, and $.10 per share in each of the
first three quarters of 1997.
55
<PAGE> 60
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is certain summary historical consolidated financial
information of the Company. The summary financial information for the five years
ended December 27, 1996 is derived from the Company's audited consolidated
financial statements. The summary financial information for the 14 week periods
ended April 4, 1997 and April 5, 1996 is derived from the Company's unaudited
consolidated financial statements. More comprehensive financial information is
included in the Company's Annual Report on Form 10-K for the year ended December
27, 1996 and Quarterly Report on Form 10-Q for the quarterly period ended April
4, 1997, and the financial information that follows is qualified by reference to
such documents and all of the financial statements and related notes contained
therein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED 14 WEEKS ENDED
------------------------------------------------------------------------ -------------------
DECEMBER 27, DECEMBER 29, DECEMBER 30, DECEMBER 31, DECEMBER 25, APRIL 4, APRIL 5,
INCOME STATEMENT DATA 1996 1995 1994 1993 1992 1997 1996
------------ ------------ ------------ ------------ ------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $2,739 $2,896 $2,794 $2,606 $2,516 $ 679 $ 726
Expenses................ 2,598 2,828 2,671 2,473 2,376 688 708
------ ------ ------ ------ ------ ------ ------
Operating Income
(Loss)................ 141 68 123 133 140 (9) 18
Interest Expense, net... (37) (15) (13) (11) (26) (9) (11)
Gain on Sale of
Investment............ -- -- -- 9 8 -- --
------ ------ ------ ------ ------ ------ ------
Income (Loss) before
Taxes................. 104 53 110 131 122 (18) 7
Tax Expense (Benefit)... 34 23 36 51 44 (8) 3
------ ------ ------ ------ ------ ------ ------
Income before Cumulative
Effect of Accounting
Change................ 70 30 74 80 78 (10) 4
Cumulative Effect on
Prior Years of
Changing the
Accounting for
Revenues and
Expenses.............. -- -- -- -- (22) -- --
------ ------ ------ ------ ------ ------ ------
Net Income (Loss)....... $ 70 $ 30 $ 74 $ 80 $ 56 $ (10) $ 4
====== ====== ====== ====== ====== ====== ======
Earnings (Loss) per
share, fully
diluted............... $ 2.67 $ 0.99 $ 2.30 $ 2.50 $ 1.69 $(0.40) $ 0.15
Dividends per share..... $ 0.40 $ 0.40 $ 0.40 $ 0.30 $ 0.30 $ 0.10 $ 0.10
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA, AS DECEMBER 27, DECEMBER 29, DECEMBER 30, DECEMBER 31, DECEMBER 25, APRIL 4, APRIL 5,
OF 1996 1995 1994 1993 1992 1997 1996
------------ ------------ ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital......... $ 226 $ 65 $ 206 $ 51 $ (16) $ 191 $ 197
Total Assets............ 1,880 1,879 1,664 1,454 1,436 1,832 1,926
Long-term Debt and
Capital Lease
Obligations........... 696 687 386 267 242 691 736
Redeemable Preferred
Stock................. -- -- 75 75 75 -- --
Stockholders' Equity.... 503 469 541 475 397 492 471
</TABLE>
56
<PAGE> 61
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC (File No. 1-8544)
are incorporated into this Proxy Statement by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 27, 1996;
2. Amendment No. 1 to the Company's Annual Report on Form 10-K/A,
filed April 18, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarterly
period ended April 4, 1997;
4. The Company's Current Report on Form 8-K, filed July 18,1997;
5. The Company's Current Report on Form 8-K, filed July 18,1997;
6. The Company's Current Report on Form 8-K, filed June 25, 1997;
7. The Company's Current Report on Form 8-K, filed April 14, 1997; and
8. Amendment to the Company's Current Report on Form 8-K dated May 2,
1996, filed July 16, 1996.
All documents or reports subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the date of the Annual Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part of this Proxy Statement
from the date of filing of such document. Any statement contained herein, or in
a document all or a portion of which is incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Proxy Statement 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 such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
The Company will provide without charge to any person to whom this Proxy
Statement is delivered, on the written or oral request of such person and by
first-class mail within one business day of receipt of such request, a copy of
the Company's 1996 Annual Report to Shareholders and any or all of the foregoing
documents incorporated by reference (other than exhibits not specifically
incorporated by reference into the texts of such documents). Requests for such
documents should be directed to: Tom Meier, Assistant Treasurer, APL Limited,
1111 Broadway, Oakland, California 94607, telephone number (510) 272-8000.
OTHER MATTERS
The Board of Directors is not aware of any matters other than those set
forth in the Notice of Annual Meeting of Shareholders that may be brought before
the Annual Meeting. If any other matters properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote the shares
represented by all properly executed proxies on such matters in such manner as
shall be determined by a majority of the Board, except that shares represented
by proxies which have been voted "AGAINST" the Merger Agreement will not be used
to vote "FOR" adjournment of the meeting for the purpose of allowing additional
time for soliciting additional votes "FOR" the Merger.
PROPOSALS OF SECURITY HOLDERS
The Company will hold a 1998 Annual Meeting of Shareholders only if the
Merger is not consummated prior thereto. In the event of such a meeting, to be
considered for presentation at the 1998 Annual Meeting of Shareholders, a
Shareholder proposal must be received at the offices of the Company not later
than March 23, 1998.
57
<PAGE> 62
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 13, 1997
AMONG
NEPTUNE ORIENT LINES LIMITED,
NEPTUNE U.S.A., INC.
AND
APL LIMITED
<PAGE> 63
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
The Merger
SECTION 1.01 The Merger........................................................ A-1
SECTION 1.02 Closing........................................................... A-1
SECTION 1.03 Effective Time of the Merger...................................... A-1
SECTION 1.04 Effect of the Merger.............................................. A-1
ARTICLE II
The Surviving Corporation
SECTION 2.01 Articles of Incorporation......................................... A-2
SECTION 2.02 By-laws........................................................... A-2
SECTION 2.03 Board of Directors; Officers...................................... A-2
ARTICLE III
Conversion of Shares
SECTION 3.01 Merger Consideration.............................................. A-2
SECTION 3.02 Dissenting Shares................................................. A-2
SECTION 3.03 Payment........................................................... A-3
SECTION 3.04 No Further Rights................................................. A-3
SECTION 3.05 Closing of the Company's Transfer Books........................... A-4
ARTICLE IV
Representations and Warranties of the Company
SECTION 4.01 Organization and Qualification; Subsidiaries...................... A-4
SECTION 4.02 Charter and By-Laws............................................... A-4
SECTION 4.03 Capitalization.................................................... A-4
SECTION 4.04 Authority Relative to this Agreement.............................. A-5
SECTION 4.05 No Conflict; Required Filings and Consents........................ A-5
SECTION 4.06 SEC Reports and Financial Statements.............................. A-6
SECTION 4.07 Disclosure Documents.............................................. A-6
SECTION 4.08 Litigation........................................................ A-7
SECTION 4.09 Absence of Certain Changes or Events.............................. A-7
SECTION 4.10 Employee Benefit Plans............................................ A-7
SECTION 4.11 ERISA............................................................. A-7
SECTION 4.12 Taxes............................................................. A-8
SECTION 4.13 Compliance with Applicable Laws................................... A-8
SECTION 4.14 Voting Requirements............................................... A-9
SECTION 4.15 Certain Approvals................................................. A-9
SECTION 4.16 Rights Agreement.................................................. A-9
SECTION 4.17 Brokers........................................................... A-9
SECTION 4.18 Environmental Matters............................................. A-9
SECTION 4.19 Insurance......................................................... A-9
SECTION 4.20 Vessels........................................................... A-9
SECTION 4.21 Maritime Security Program Subsidy and Construction Differential A-9
Subsidy...........................................................
SECTION 4.22 Capital Construction Fund......................................... A-10
</TABLE>
i
<PAGE> 64
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE V
Representations and Warranties of Parent and Merger Sub
SECTION 5.01 Organization and Qualification.................................... A-10
SECTION 5.02 Authority Relative to this Agreement.............................. A-10
SECTION 5.03 No Conflict; Required Filings and Consents........................ A-10
SECTION 5.04 Disclosure Documents.............................................. A-11
SECTION 5.05 Financing......................................................... A-11
SECTION 5.06 Parent Not an Interested Stockholder or an Acquiring Person....... A-11
SECTION 5.07 Brokers........................................................... A-11
ARTICLE VI
Covenants
SECTION 6.01 Conduct of Business of the Company................................ A-11
SECTION 6.02 Shareholder Meeting; Proxy Material............................... A-13
SECTION 6.03 Access to Information............................................. A-13
SECTION 6.04 Reasonable Best Efforts........................................... A-14
SECTION 6.05 Consents.......................................................... A-14
SECTION 6.06 Public Announcements.............................................. A-15
SECTION 6.07 Employee Benefit Arrangements..................................... A-15
SECTION 6.08 Stock Options and Stock Plans..................................... A-15
SECTION 6.09 Indemnification................................................... A-16
SECTION 6.10 Corporate Presence................................................ A-16
SECTION 6.11 Maritime Transactions............................................. A-17
SECTION 6.12 No Solicitation................................................... A-17
SECTION 6.13 Notification of Certain Matters................................... A-17
SECTION 6.14 Redemption of Rights; Amendment of By-Laws........................ A-18
SECTION 6.15 Voting of Shares.................................................. A-18
SECTION 6.16 State Takeover and Environmental Laws............................. A-18
SECTION 6.17 Capital Construction Fund......................................... A-18
ARTICLE VII
Conditions to Consummation of the Merger
SECTION 7.01 Conditions to the Obligations of Each Party....................... A-18
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub............ A-19
SECTION 7.03 Conditions to the Obligations of the Company...................... A-19
ARTICLE VIII
Termination; Amendments; Waiver
SECTION 8.01 Termination....................................................... A-19
SECTION 8.02 Effect of Termination............................................. A-20
SECTION 8.03 Fees and Expenses................................................. A-20
SECTION 8.04 Amendment......................................................... A-21
SECTION 8.05 Extension; Waiver................................................. A-21
ARTICLE IX
Miscellaneous
SECTION 9.01 Non-Survival of Representations and Warranties.................... A-21
SECTION 9.02 Entire Agreement; Assignment...................................... A-21
SECTION 9.03 Validity.......................................................... A-21
</TABLE>
ii
<PAGE> 65
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 9.04 Notices........................................................... A-21
SECTION 9.05 Governing Law..................................................... A-22
SECTION 9.06 Descriptive Headings.............................................. A-22
SECTION 9.07 Counterparts...................................................... A-22
SECTION 9.08 Parties in Interest............................................... A-22
SECTION 9.09 Certain Definitions............................................... A-22
SECTION 9.10 Specific Performance; Consent to Jurisdiction..................... A-23
SECTION 9.11 Appointment of Agent for Service of Process....................... A-23
SECTION 9.12 Guarantee......................................................... A-23
</TABLE>
iii
<PAGE> 66
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 13,
1997, by and among NEPTUNE ORIENT LINES LTD, a corporation organized under the
laws of Singapore ("Parent"), NEPTUNE U.S.A., INC., a corporation organized
under the laws of the State of Delaware and an indirect wholly-owned subsidiary
of Parent ("Merger Sub"), and APL LIMITED, a corporation organized under the
laws of the State of Delaware (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the merger of Merger Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.03), Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall
thereupon cease, and the Company shall continue as the surviving corporation in
the Merger (the "Surviving Corporation") under the laws of the State of Delaware
and under the name "APL Limited."
SECTION 1.02 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.01, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger will take place as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver of the conditions set forth in Sections 7.01(a), (b) and (c), at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New
York 10019, unless another date, time or place is agreed to in writing by the
parties hereto (the "Closing Date").
SECTION 1.03 Effective Time of the Merger. The Merger shall become
effective upon the filing of a certificate of merger with the Secretary of State
of the State of Delaware in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL"), which filing shall be made as
soon as practicable on the Closing Date. When used in this Agreement, the term
"Effective Time" shall mean the time at which such certificate is duly filed
with the Secretary of State of Delaware or at such later time as is specified in
the certificate of merger.
SECTION 1.04 Effect of the Merger. The Merger shall, from and after the
Effective Time, have all the effects provided by applicable Delaware law. If at
any time after the Effective Time the Surviving Corporation shall consider or be
advised that any further deeds, conveyances, assignments or assurances in law or
any other acts are necessary, desirable or proper to vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation, the title to any property
or rights of Merger Sub or the Company (the "Constituent Corporations") to be
vested in the Surviving Corporation, by reason of, or as a result of, the
Merger, or otherwise to carry out the purposes of this Agreement, the
Constituent Corporations agree that the Surviving Corporation and its proper
officers and directors shall execute and deliver all such deeds, conveyances,
assignments and assurances in law and do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement,
and that the proper officers and directors of the Surviving Corporation are
fully authorized in the name of each of the Constituent Corporations or
otherwise to take any and all such action.
A-1
<PAGE> 67
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01 Articles of Incorporation. The Certificate of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, until thereafter changed or amended as provided therein or by applicable
law, except that Articles Fourth, Fifth, Sixth, Seventh, Eighth, Tenth,
Fourteenth and Fifteenth of the Certificate of Incorporation of the Company
shall be amended as set forth in Annex A.
SECTION 2.02 By-laws. The By-laws of the Company as in effect immediately
prior to the Effective Time (as amended in accordance with Section 6.14) shall
be the By-laws of the Surviving Corporation, until, subject to Section 6.09,
thereafter changed or amended as provided therein or by applicable law.
SECTION 2.03 Board of Directors; Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case, until the
earlier of their respective resignations or the time that their respective
successors are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.01 Merger Consideration. As of the Effective Time, by virtue of
the Merger and without any action on the part of any shareholder of the Company
or Merger Sub:
(a) All shares of common stock, $0.01 par value, of the Company
("Common Shares"), and the associated Preferred Share Purchase Rights (the
"Rights") issued pursuant to the Rights Agreement dated as of October 27,
1991 between the Company and the First National Bank of Boston, as Rights
Agent (the "Rights Agreement"), which are held by Parent, the Company or
any wholly-owned subsidiary of Parent (including Merger Sub) or the Company
shall be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor. The Common Shares
together with, to the extent applicable, the Rights are referred to herein
collectively as the "Shares".
(b) Each issued and outstanding Share, other than those to which the
first sentence of Section 3.01(a) applies and other than any Dissenting
Shares (as defined in Section 3.02) shall be converted into and represent
the right to receive $33.50 in cash, without interest thereon; (such amount
of cash being referred to herein as the "Merger Consideration").
(c) Each issued and outstanding share of common stock, $.01 par value,
of Merger Sub shall be converted into and become one fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation.
SECTION 3.02 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, each Share outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Share in
accordance with Section 262 of the DGCL, if such Section 262 provides for
appraisal rights for such Share in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Consideration unless and until
such holder fails to perfect or withdraws or otherwise loses his right to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the Merger Consideration, if any,
to which such holder is entitled, without interest or dividends thereon. The
Company shall give Parent prompt notice of any demands received by the Company
for appraisal of Shares and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior
A-2
<PAGE> 68
written consent of Parent, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment.
SECTION 3.03 Payment.
(a) Pursuant to an agreement in form and substance reasonably
acceptable to the Company to be entered into prior to the Effective Time
among Parent and a disbursing agent selected by Parent and reasonably
acceptable to the Company (the "Disbursing Agent"), at the Effective Time,
Parent or Merger Sub shall make available to the Disbursing Agent the
aggregate amount of cash to which holders of Shares shall be entitled
pursuant to Section 3.01(b).
(b) As soon as practicable after the Effective Time, Parent shall
cause the Disbursing Agent to send a notice and a letter of transmittal to
each holder of certificates formerly evidencing Shares (other than
certificates formerly representing Shares to be cancelled pursuant to
Section 3.01(a) and certificates representing Dissenting Shares) advising
such holder of the effectiveness of the Merger and the procedure for
surrendering to the Disbursing Agent such certificates for exchange into
the Merger Consideration for each Share so represented, and that delivery
shall be effected, and risk of loss and title to the Shares shall pass,
only upon proper delivery to the Disbursing Agent of the certificates for
the Shares and a duly executed letter of transmittal and any other required
documents of transfer. Each holder of certificates theretofore evidencing
Shares, upon surrender thereof to the Disbursing Agent together with such
letter of transmittal (duly executed) and any other required documents of
transfer, shall be entitled to receive in exchange therefor the Merger
Consideration with respect to each such Share. Upon such surrender, the
Disbursing Agent shall promptly deliver the Merger Consideration (less any
amount required to be withheld under applicable law) in accordance with the
instructions set forth in the related letter of transmittal, and the
certificates so surrendered shall promptly be cancelled. Until surrendered,
certificates formerly evidencing Shares (other than Dissenting Shares)
shall be deemed for all purposes to evidence only the right to receive the
Merger Consideration per Share or, in the case of Dissenting Shares, the
fair value of such Dissenting Shares. No interest shall accrue or be paid
on any cash payable upon the surrender of certificates which immediately
prior to the Effective Time represented outstanding Shares (other than
Dissenting Shares in accordance with applicable provisions of the DGCL).
(c) If the Merger Consideration is to be delivered to a person other
than the person in whose name the certificates surrendered in exchange
therefor are registered, it shall be a condition to the payment of such
Merger Consideration that the certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Disbursing Agent any transfer or
other taxes payable by reason of the foregoing or establish to the
satisfaction of the Disbursing Agent that such taxes have been paid or are
not required to be paid.
(d) Unless otherwise required by applicable law, any portion of the
aggregate Merger Consideration which remains undistributed to holders of
Shares one year after the Effective Time shall be delivered to Parent, and
any holders of Shares who have not theretofore complied with the provisions
of this Article III shall thereafter look only to the Surviving Corporation
as general creditors for payment of any Merger Consideration to which they
are entitled pursuant to this Article III. Neither Parent nor the
Disbursing Agent shall be liable to any holder of Shares for any cash held
by Parent or the Disbursing Agent for payment pursuant to this Article III
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 3.04 No Further Rights. From and after the Effective Time, all of
the Shares shall no longer be outstanding and shall be cancelled and retired and
shall cease to exist, and holders of certificates theretofore evidencing Shares
shall cease to have any rights as shareholders of the Company, except as
provided herein or by law.
SECTION 3.05 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall be made thereafter. In the event that,
A-3
<PAGE> 69
after the Effective Time, certificates for Shares are presented to Parent or the
Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration for each Share represented as provided in Section 3.03, subject to
applicable law in the case of Dissenting Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that except as
disclosed in the SEC Reports (as defined herein) filed, or in the disclosure
statement (the "Company Disclosure Statement") delivered to Parent, prior to the
execution of this Agreement:
SECTION 4.01 Organization and Qualification; Subsidiaries. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Company's significant subsidiaries
(within the meaning of Regulation S-X under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), including without limitation any subsidiary
that owns a C-10 or C-11 Vessel (as defined herein) (the "Significant
Subsidiaries"), is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
and each of the Significant Subsidiaries has the requisite corporate power and
authority to own, operate or lease its properties and to carry on its business
as it is now being conducted, and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary.
SECTION 4.02 Charter and By-Laws. The Company has heretofore made
available to Parent and Merger Sub a complete and correct copy of the charter
and the By-Laws, each as amended to the date hereof, of the Company.
SECTION 4.03 Capitalization. The authorized capital stock of the Company
consists of 60,000,000 Common Shares and 5,000,000 shares of Preferred Stock,
$.01 par value, of which 500,000 shares have been designated as shares of Series
A Junior Participating Preferred Stock ("Junior Participating Preferred Stock")
and 2,000,000 shares have been designated as 9% Series D Convertible Preferred
Stock ("Convertible Preferred Stock"). As of the close of business on April 4,
1997, 24,598,652 Common Shares were issued and outstanding, and there were no
Common Shares held in treasury and no shares of Convertible Preferred Stock or
Junior Participating Preferred Stock issued and outstanding. The Company has no
shares reserved for issuance, except that, as of December 31, 1996, there were
5,671,958 Common Shares reserved for issuance (of which as of April 4, 1997,
4,012,720 were subject to outstanding Options (as defined herein) and bonus
share, premium share and phantom stock awards and dividend equivalent rights
under the Stock Bonus Plan) pursuant to the Option Plans and the Stock Bonus
Plan (as such terms are defined in Section 6.08) and 500,000 shares of Junior
Participating Preferred Stock reserved for issuance upon exercise of the Rights.
Since April 4, 1997, the Company has not issued any shares of capital stock
except pursuant to the exercise of Options (as defined herein) outstanding as of
such date or pursuant to the Stock Bonus Plan. All the outstanding Common Shares
are, and all Common Shares which may be issued pursuant to the exercise of
outstanding Options or pursuant to the Stock Bonus Plan will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable. There are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) ("Voting Debt") of the Company or any of its Significant
Subsidiaries issued and outstanding. Except as set forth above or for the Rights
and except for the Merger, there are no existing options, warrants, calls,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Significant Subsidiaries, obligating the Company or any of its
Significant Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Significant Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests
or obligations of the Company or any of its Significant Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment. Except as contemplated by this
Agreement or the Rights Agreement and except for the Company's obligations in
respect of the Options under
A-4
<PAGE> 70
the Option Plans, there are no outstanding contractual obligations of the
Company or any of its Significant Subsidiaries to repurchase, redeem or
otherwise acquire any Common Shares or the capital stock of the Company or any
of its Significant Subsidiaries. Each of the outstanding shares of capital stock
of each of the Company's Significant Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and all of the shares of the Company's
Significant Subsidiaries are owned by the Company or by a subsidiary of the
Company, in each case free and clear of any lien, claim, option, charge,
security interest, limitation, encumbrance and restriction of any kind (any of
the foregoing being a "Lien"), except such as would not have a Material Adverse
Effect on the Company.
SECTION 4.04 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and, subject to the approval of this Agreement and the transactions contemplated
hereby by the holders of the Common Shares, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized and approved by the Board of Directors of the
Company (the "Company Board ") and no other corporate proceedings on the part of
the Company are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of the Merger and this Agreement by the
affirmative vote of the holders of a majority of the Common Shares then
outstanding). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due and valid authorization, execution and
delivery of this Agreement by Parent and Merger Sub, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will
(i) conflict with or violate the Certificate of Incorporation or By-Laws of
the Company or the comparable organizational documents of any of its
Significant Subsidiaries, (ii) conflict with or violate any statute,
ordinance, rule, regulation, order, judgment or decree applicable to the
Company or its Significant Subsidiaries, or by which any of them or any of
their respective properties or assets are bound or affected, or (iii)
result in a violation or breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the
creation of any Lien on any of the property or assets of the Company or any
of its Significant Subsidiaries (any of the foregoing referred to in clause
(ii) or this clause (iii) being a "Violation") pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other material instrument or obligation ("Contracts"),
including without limitation material collective bargaining Contracts and
other material Contracts with unions ("Union Contracts"), material alliance
Contracts with other shipping companies ("Alliance Contracts"), material
Contracts with MarAd (as defined herein) ("MarAd Contracts"), material
Contracts relating to the provision of or access to rail service ("Rail
Contracts"), and material Contracts allowing the use by the Company or its
Vessels of any port terminal ("Terminal Contracts") to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective properties are bound or affected.
As of the date hereof, the Company is not in material breach of its
obligations under any Union Contract, Alliance Contract, MarAd Contract,
Rail Contract, Terminal Contract or Contract relating to indebtedness for
money borrowed.
(b) None of the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated
hereby or compliance by the Company with any of the provisions hereof will
require any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the foregoing being
a "Consent"), any government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or regulatory authority,
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agency, commission, tribunal or body, domestic, foreign or supranational (a
"Governmental Entity"), except for (i) compliance with any applicable
requirements of the Exchange Act, (ii) the filing of a certificate of
merger pursuant to the DGCL, (iii) certain state takeover and environmental
statutes, (iv) compliance with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act ") and any requirements of any
foreign or supranational Antitrust Laws (as hereinafter defined), (v)
Consents of any Governmental Entity that become applicable as a result of
the specific regulatory status of Parent, Merger Sub or any of their
affiliates, if any, (vi) the filing of notification with the Committee on
Foreign Investment in the United States ("CFIUS ") under Section 721 of
Title VII of the Defense Production Act of 1950, as amended by the Omnibus
Trade and Competitiveness Act of 1988 (the "Exon Florio Amendment"); (vii)
approvals of United States government departments and agencies, including
but not limited to the Maritime Administration, United States Department of
Transportation ("MarAd ") and the United States Coast Guard, set forth on
Section 4.05(b) of the Company Disclosure Statement (the "Maritime
Approvals"), and (viii) compliance with Sections 4, 5 and 6 of the Shipping
Act of 1984 (the "Shipping Act ") with respect to the agreements related to
the "Charter Transactions" (as defined in Section 4.05(b) of the Company
Disclosure Statement), to the extent any such agreement is required to be
filed by Sections 4 and 5 of the Shipping Act.
SECTION 4.06 SEC Reports and Financial Statements.
(a) The Company has filed with the Securities and Exchange Commission
(the "SEC ") all forms, reports, schedules, registration statements and
definitive proxy statements (the "SEC Reports") required to be filed by the
Company with the SEC since January 1, 1995. As of their respective dates,
the SEC Reports complied in all material respects with the requirements of
the Exchange Act or the Securities Act of 1933 and the rules and
regulations of the SEC promulgated thereunder applicable, as the case may
be, to such SEC Reports, and none of the SEC Reports contained any untrue
statement of a material fact or omitted 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.
(b) The consolidated balance sheets as of December 27, 1996 and
December 29, 1995 and the related consolidated statements of income, common
shareholders' equity and cash flows for each of the three years in the
period ended December 27, 1996 (including the related notes and schedules
thereto) of the Company contained in the Form 10-K for the year ended
December 27, 1996 included in the SEC Reports present fairly, in all
material respects, the consolidated financial position and the consolidated
results of operations and cash flows of the Company and its consolidated
subsidiaries as of the dates or for the periods presented therein in
conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved except
as otherwise noted therein, including the related notes.
SECTION 4.07 Disclosure Documents.
(a) The proxy statement of the Company (the "Company Proxy Statement")
to be filed with the SEC in connection with the Merger, and any amendments
or supplements thereto will, when filed (or if amended or supplemented,
when and as so amended or supplemented), comply in all material respects
with the applicable requirements of the Exchange Act.
(b) At the time of filing the Company Proxy Statement (or if amended
or supplemented, at the time of the filing of such amendment or supplement)
with the SEC, at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to shareholders of the Company, at the
time such shareholders vote on adoption of this Agreement, and at the
Effective Time, the Company Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties contained in this
Section 4.07(b) will not apply to statements or omissions included in the
Company Proxy Statement based upon information furnished to the Company in
writing by Parent or Merger Sub specifically for use therein.
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SECTION 4.08 Litigation. As of the date hereof, there is no (i) suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries or (ii) judgment,
decree, injunction or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries, in each case that would have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 4.09 Absence of Certain Changes or Events. Except as contemplated
by this Agreement, from December 31, 1996 until the date hereof, the Company has
conducted its business only in the ordinary course, and there has not been (i)
any change that would have a Material Adverse Effect on the Company, other than
(x) changes relating to or arising from general economic, market or financial
conditions or generally affecting the industries, markets or trade lanes in
which the Company operates or (y) changes relating to or arising from the
consummation or disclosure of this Agreement or any transaction contemplated by
this Agreement or by the Company Disclosure Statement, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
securities or property) with respect to any of the Company's capital stock,
except for the regular quarterly dividend on the Common Shares not in excess of
$0.10 per Common Share with a record and payment date in accordance with recent
practice, (iii) any damage, destruction or loss, whether or not covered by
insurance, that would have a Material Adverse Effect on the Company, (iv) any
change in accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may have been
required by GAAP or (v) any increase in the compensation payable or which would
become payable by the Company and its subsidiaries to the officers or key
employees of the Company and its subsidiaries (taken as a whole), other than as
provided in agreements entered into prior to the date hereof between the Company
or its subsidiaries and such officers or employees (copies of which have been
made available to Parent prior to the date hereof), or any amendments to any
Company Benefit Plans (as defined herein).
SECTION 4.10 Employee Benefit Plans. Section 4.10 of the Company
Disclosure Statement lists all bonus, deferred compensation, pension,
retirement, profit sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, all employment
or severance contracts and all other employee benefit plans or contracts
(including without limitation any "employee benefit plans" as defined in Section
3(3) of the Employee Retirement Security Act of 1974, as amended ("ERISA") and
plans or agreements which cover employees or former employees of the Company and
its subsidiaries and contain applicable "change of control" or similar
provisions), other than those that are not material to the Company and its
subsidiaries as a whole (the "Company Benefit Plans"). True and complete copies
of all Company Benefit Plans (other than multiemployer plans and plans primarily
covering foreign employees) have been made available to Parent. As of the date
hereof, since January 1, 1996, there have been no disputes or grievances subject
to any grievance procedure, unfair labor practice proceedings, arbitration or
litigation under such Company Benefit Plans, which have not been finally
resolved, settled or otherwise disposed of, nor is there any default, or any
condition which, with notice or lapse of time or both, would constitute such a
default, under any such Company Benefit Plans, by the Company or its
subsidiaries or, to the best knowledge of the Company, any other party thereto,
other than disputes, grievances, arbitration, litigation, proceedings, defaults
or conditions which, alone or in the aggregate, would not have a Material
Adverse Effect on the Company.
SECTION 4.11 ERISA. All Company Benefit Plans which are subject to ERISA
have been administered in accordance, and are in compliance, with the applicable
provisions of ERISA. Each Company Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA, other than
multiemployer plans ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal Revenue Service
for "TRA" (as defined in Rev. Proc. 93-39) and the Company is not aware of any
circumstances likely to result in the revocation of any such favorable
determination letter. No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any of its subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of the Company or its subsidiaries, or the single-employer plan of any
entity which is considered one employer with the Company
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under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate").
There have not been any non-exempt "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving the
Company Benefit Plans which could subject the Company, its subsidiaries or
Parent to the penalty or tax imposed under Section 502(i) of ERISA or Section
4975 of the Code. Neither the Company nor any of its subsidiaries has made a
complete or partial withdrawal, within the meaning of Section 4201 of ERISA,
from any multiemployer plan which has resulted in, or is reasonably expected to
result in, any withdrawal liability to the Company or any of its subsidiaries
with respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Pension Plan or by any ERISA Affiliate for a single-employer plan
of such ERISA Affiliate within the 12-month period ending on the date hereof.
All contributions required to be made under the terms of any Pension Plan or
single-employer plan of an ERISA Affiliate have been timely made. No Pension
Plan has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA. Neither the Company
nor any of its subsidiaries has provided, or is required to provide, security to
any Pension Plan or single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code. Under each Pension Plan, as of the last day of
the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan. All
Company Benefit Plans covering foreign Employees comply in all material respects
with applicable local law. Except as set forth in Section 4.11 of the Company
Disclosure Statement, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation or golden parachute) becoming due to any director or employee of
the Company, (ii) materially increase any benefits otherwise payable under any
Company Benefit Plan or (iii) result in the acceleration of the time of payment
or vesting of any such benefits to any material extent.
SECTION 4.12 Taxes. (i) All material Tax Returns (as defined below) have
been duly filed and are complete and accurate in all material respects, (ii) all
Taxes (as defined below) shown to be due on the Tax Returns referred to in
clause (i) have been paid in full, (iii) the United States federal and
California state income Tax Returns referred to in clause (i) have been examined
by the Internal Revenue Service or the California state taxing authority through
1991 or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (iv) as of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled, and
(v) as of the date hereof, no waivers of statutes of limitation have been given
by or requested in writing with respect to any Taxes. "Tax Returns" shall mean
all reports and returns required to be filed on or before the Closing Date
(taking into account any extension of time within which to file) with respect to
the Taxes of the Company including, without limitation, consolidated, combined
or unitary tax returns of any group of companies of which the Company is a
member. "Taxes" shall mean all federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes imposed on
the income, properties or operations of the Company, together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions or penalties.
SECTION 4.13 Compliance with Applicable Laws. To the best knowledge of
the Company, the Company and its subsidiaries hold all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for them to own, lease or operate their properties and assets
and to carry on their businesses substantially as now conducted (the "Compliance
Permits"). To the best knowledge of the Company, the Company and its
subsidiaries are in substantial compliance with applicable laws and the terms of
the Compliance Permits. To the best knowledge of the Company, the business
operations of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for possible violations which, individually or in the aggregate, would not have
a Material Adverse Effect on the Company.
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SECTION 4.14 Voting Requirements. The affirmative vote of the holders of
at least a majority of the total number of votes entitled to be cast by the
holders of the Common Shares outstanding as of the record date for the Company
Shareholder Meeting (as defined herein) is the only vote of the holders of any
class or series of the Company's capital stock necessary to adopt and approve
this Agreement and the transactions contemplated by this Agreement (including
the Merger).
SECTION 4.15 Certain Approvals. The Company Board has taken appropriate
action such that, assuming the accuracy of Parent's representations in Section
5.06 of this Agreement, the provisions of Section 203 of the DGCL will not apply
to any of the transactions contemplated by this Agreement. The Company Board has
approved the transactions contemplated by this Agreement for purposes of Article
Sixth and Article Eighth of the Company's Certificate of Incorporation.
SECTION 4.16 Rights Agreement. Assuming the accuracy of Parent's
representation in Section 5.06 of this Agreement, neither the execution and the
delivery of this Agreement nor consummation of the transactions contemplated
hereby will result in a "Distribution Date" (as defined in the Rights
Agreement).
SECTION 4.17 Brokers. Except for the engagement of J.P. Morgan & Company,
a copy of the engagement letter with which has been provided to Parent, none of
the Company, any of its subsidiaries, or any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
SECTION 4.18 Environmental Matters. Except as would not reasonably be
expected to have a Material Adverse Effect on the Company, as of the date
hereof: (i) to the best knowledge of the Company no real property currently or
formerly owned or operated by the Company or any current subsidiary is
contaminated with any Hazardous Substances to an extent or in a manner or
condition now requiring remediation under any Environmental Law; (ii) no
judicial or administrative proceeding is pending or to the best knowledge of the
Company threatened relating to liability for any off-site disposal or
contamination; and (iii) the Company and its subsidiaries have not received any
claims or notices alleging liability under any Environmental Law, and the
Company has no knowledge of any circumstances that could result in such claims.
"Environmental Law" means any applicable domestic or foreign federal, state or
local law, regulation, order, decree, or judicial opinion or other agency
requirement having the force and effect of law and relating to noise, odor,
Hazardous Substance or the protection of the environment. "Hazardous Substance"
means any toxic or hazardous substance that is regulated by or under authority
of any Environmental Law. None of the items set forth on Section 4.18 of the
Company Disclosure Statement is, at the date hereof, reasonably likely to result
in a net cost to the Company and its subsidiaries in excess of $5 million.
SECTION 4.19 Insurance. Each of the Company and its subsidiaries
maintains such policies of maritime, property, casualty, worker's compensation,
general liability and other insurance, or has self insured and established
reserves, as are appropriate and as are comparable in amounts and scope to such
policies maintained by similarly situated businesses or as required by
applicable law or Contracts.
SECTION 4.20 Vessels. Schedule 4.20 accurately lists all vessels having a
size in excess of 4,000 twenty-foot equivalent units ("Vessels") owned by the
Company or any of its subsidiaries. As of the date of this Agreement, each of
the Vessels is (i) in good running order and repair, and is sufficiently
tackled, appareled, furnished, equipped, and seaworthy and in good operating
condition, ordinary wear and tear and depreciation excepted, and (ii) in such
condition as will entitle each Vessel to the highest classification and rating
for a vessel of the same age and type of the American Bureau of Shipping.
SECTION 4.21 Maritime Security Program Subsidy and Construction
Differential Subsidy. (a) Each of the five C-10 Vessels and at least four of
the C-11 Vessels at the date hereof owned and operated by the Company or its
subsidiaries will, following the consummation of the transactions contemplated
by Item A of Section 4.05(b) of the Company Disclosure Statement, meet all of
the requirements necessary in order to be eligible to receive payments from
MarAd pursuant to the Maritime Security Act of 1996 and the relevant MSP
Operating Agreement (or pursuant to the Operating-Differential Subsidy and
related agreements),
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except to the extent that (x) the MSP Operating Agreement with respect to such
Vessel has been terminated in accordance with its terms or (y) such C-11 Vessel
has not yet been registered as a U.S. flag vessel.
(b) The transactions contemplated by Section 4.05(b) of the Company
Disclosure Statement will not have a Material Adverse Effect on the Company.
(c) As of May 1, 1997, the aggregate unamortized CDS will be $2,214,588 for
the four Pacesetter Vessels.
SECTION 4.22 Capital Construction Fund. As of the date hereof, the fund
(the "Capital Construction Fund") established pursuant to the Maritime
Administration Capital Construction Fund Agreement (Contract No. MA/CCF-306),
dated as of December 8, 1976, between the Assistant Secretary of Commerce for
Maritime Affairs and American President Lines, Ltd., and Addenda Nos. 1-22
thereto, consists of an investment of not greater than $65 million in the
Company's trade accounts receivable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Singapore and
each material subsidiary of Parent is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is a direct or
indirect wholly-owned subsidiary of Parent. Parent and each of its material
subsidiaries (including Merger Sub) has the requisite corporate power and
authority to own, operate or lease its properties and to carry on its business
as it is now being conducted, and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary.
SECTION 5.02 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly and validly authorized and approved by the Boards of Directors of
Parent and Merger Sub and by each stockholder of Merger Sub and no other
corporate proceedings on the part of Parent, Merger Sub or any other affiliate
of Parent are necessary to authorize or approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and, assuming the due and valid
authorization, execution and delivery by the Company, constitutes a valid and
binding obligation of each of Parent and Merger Sub enforceable against each of
them in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally and (ii) is subject
to general principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement by Parent or
Merger Sub, the consummation by Parent or Merger Sub of the transactions
contemplated hereby or compliance by Parent or Merger Sub with any of the
provisions hereof will (i) conflict with or violate the organizational
documents of Parent or Merger Sub, (ii) conflict with or violate any
statute, ordinance, rule, regulation, order, judgment or decree applicable
to Parent or Merger Sub, or any of their subsidiaries, or by which any of
them or any of their respective properties or assets are bound or affected,
or (iii) result in a Violation pursuant to any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Parent or Merger Sub, or any of
their subsidiaries, is a party or by which any of their respective
properties or assets are bound or affected.
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(b) None of the execution and delivery of this Agreement by Parent and
Merger Sub, the consummation by Parent and Merger Sub of the transactions
contemplated hereby or compliance by Parent and Merger Sub with any of the
provisions hereof will require any Consent of any Governmental Entity,
except for (i) compliance with any applicable requirements of the Exchange
Act, (ii) the filing of a certificate of merger pursuant to the DGCL, (iii)
notifications required by certain state takeover and environmental
statutes, (iv) compliance with the HSR Act and any requirements of any
foreign or supranational Antitrust Laws and filings under the Exon-Florio
Amendment and (v) Consents required to be obtained by the Company.
SECTION 5.04 Disclosure Documents. The information with respect to Parent
and its subsidiaries that Parent furnishes to the Company in writing,
specifically for use in the Company Proxy Statement, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading at the time of filing the Company
Proxy Statement (or if amended or supplemented, at the time of the filing of
such amendment or supplement) with the SEC, at the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to shareholders
of the Company, at the time the shareholders vote on adoption of this Agreement
and at the Effective Time.
SECTION 5.05 Financing. Parent or Merger Sub has all funds necessary to
consummate the Merger and the transactions contemplated hereby and to pay
related fees and expenses.
SECTION 5.06 Parent Not an Interested Stockholder or an Acquiring
Person. As of the date of this Agreement, neither Parent nor any of its
affiliates is an "Interested Stockholder" as such term is defined in Section 203
of the DGCL, Article Sixth of the Company's Certificate of Incorporation or
Article Eighth of the Company's Certificate of Incorporation or an "Acquiring
Person" as such term is defined in the Rights Agreement.
SECTION 5.07 Brokers. Neither Parent nor Merger Sub, nor any of their
respective subsidiaries, officers, directors or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement with respect to which the Company is or might be liable if the Merger
contemplated hereby is not consummated.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. The Company agrees to
consult and cooperate with Parent prior to the Effective Time in order to
facilitate planning and execution of the integration of operations of the
Company and Parent from and after the Effective Time. Except with the prior
written consent of Parent or as contemplated by this Agreement or the Company
Disclosure Statement, during the period from the date of this Agreement to the
Effective Time, the Company will, and will cause each of its subsidiaries to,
conduct its operations only in the ordinary and usual course of business
consistent with past practice and will use its reasonable efforts, and will
cause each of its subsidiaries to use its reasonable efforts, to preserve intact
the business organization of the Company and each of its subsidiaries, to keep
available the services of its and their present officers and key employees, and
to preserve the good will of its customers, employees, unions and others having
business relationships with it. In addition, except as otherwise contemplated by
this Agreement or the Company Disclosure Statement, the Company will not, and
will not permit any of its Significant Subsidiaries to, prior to the Effective
Time, without the prior written consent of Parent:
(a) adopt any amendment to its charter or By-Laws or comparable
organizational documents or the Rights Agreement;
(b) except for issuances of capital stock of the Company's
subsidiaries to the Company or a wholly-owned subsidiary of the Company,
issue, reissue or sell, or authorize the issuance, reissuance or sale of
(i) additional shares of capital stock of any class, or securities
convertible into capital stock of any
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class, or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issuance of Common Shares (and
the related Rights) in accordance with the terms of the instruments
governing such issuance on the date hereof, pursuant to the exercise of
Options outstanding on the date hereof, or the issuance of Common Stock
(and the related Rights) pursuant to the Stock Bonus Plan, or (ii) any
other securities in respect of, in lieu of, or in substitution for, Common
Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property) in respect of any of its capital
stock other than between any of the Company and any of its wholly-owned
subsidiaries, except for (x) the regular quarterly dividend on the Common
Shares not in excess of $0.10 per Common Share with a record and payment
date in accordance with recent practice, and (y) the redemption of the
Rights;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire,
any shares of its capital stock, or any of its other securities;
(e) except for (i) increases in the ordinary course consistent with
past practice in salary, wages and benefits granted to grade 13 or below
employees of the Company or its subsidiaries, (ii) entry into termination
and severance agreements in the ordinary course consistent with past
practice in accordance with the severance policy described in Section 4.09
of the Company Disclosure Statement, or (iii) increases in salary, wages
and benefits to employees of the Company or its subsidiaries pursuant to
collective bargaining agreements entered into in the ordinary course of
business, increase the compensation or fringe benefits payable or to become
payable to its directors, officers or key employees (whether from the
Company or any of its subsidiaries), or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
of stock options, stock appreciation rights, shares of restricted stock or
performance units) or grant any severance or termination pay to (except
pursuant to existing agreements or policies), or enter into any employment
or severance agreement with, any director, officer or other key employee of
the Company or establish, adopt, enter into, or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit
plan, agreement, trust, fund, policy or arrangement for the benefit or
welfare of any directors, officers or current or former employees (any of
the foregoing being an "Employee Benefit Arrangement"), except in each case
to the extent required by applicable law or regulation; provided, however,
that nothing herein will be deemed to prohibit the payment of benefits as
they become payable;
(f) acquire, sell, lease or dispose of any vessel;
(g) acquire, sell, lease or dispose of any assets (other than vessels)
or securities which are material to the Company and its subsidiaries taken
as a whole, or enter into any commitment to do any of the foregoing or
enter into any other material commitment or transaction, outside the
ordinary course of business consistent with past practice other than
transactions between a wholly owned subsidiary of the Company and the
Company or another wholly owned subsidiary of the Company;
(h) (i) incur, assume or pre-pay any long-term debt or incur or assume
any short-term debt, except that the Company and its subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent
with past practice, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except in the ordinary course of business
consistent with past practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person except in the
ordinary course of business consistent with past practice and except for
loans, advances, capital contributions or investments between any wholly
owned subsidiary of the Company and the Company or another wholly owned
subsidiary of the Company;
(i) neither the Company nor any of its subsidiaries shall (i) settle
or compromise any material claims or litigation (other than any settlement
or compromise not involving payments by the Company, net of insurance, in
excess of $500,000), or (ii) except in the ordinary course of business,
modify, amend
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or terminate any of its material Contracts or Permits or waive, release or
assign any other material rights or claims;
(j) neither the Company nor any subsidiary shall permit any insurance
policy naming it as a beneficiary or a loss payable payee to be canceled or
terminated without notice to Parent, except in the ordinary course of
business;
(k) grant any lien on any Vessel in respect of borrowed money; and
(l) agree in writing or otherwise to take any of the foregoing
actions.
SECTION 6.02 Shareholder Meeting; Proxy Material.
(a) The Company shall take all action necessary, in accordance with
applicable law and its Certificate of Incorporation and By-laws, to convene
a meeting of its shareholders (the "Company Shareholder Meeting") as
promptly as reasonably practicable after the date on which the definitive
Company Proxy Statement has been mailed to the Company's shareholders for
the purpose of considering and taking action upon the Merger and this
Agreement. Subject to the fiduciary duties of the Company Board, the
Company Board will recommend that holders of Common Shares vote in favor of
the approval of this Agreement at the Company Shareholder Meeting.
(b) In connection with such meeting, the Company (i) will as promptly
as practicable prepare and file with the SEC, will use its best efforts to
have cleared by the SEC and will thereafter mail to its shareholders as
promptly as practicable the Company Proxy Statement and all other proxy
materials for such meeting, (ii) subject to the fiduciary duties of the
Company Board, will use its best efforts to obtain the necessary approvals
by its shareholders of this Agreement and the transactions contemplated
hereby and (iii) will otherwise comply with all legal requirements
applicable to such meeting. The Company will provide Parent with a copy of
the preliminary proxy statement and all modifications thereto prior to
filing or delivery to the SEC and will consult with Parent in connection
therewith. The Company will notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Company Proxy Statement or for
additional information and will supply Parent with copies of all written
correspondence between the Company or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the
Company Proxy Statement or the Merger. If at any time prior to the Company
Shareholder Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Company Proxy Statement, the Company will
promptly prepare and mail to its shareholders such an amendment or
supplement.
SECTION 6.03 Access to Information. From the date of this Agreement until
the Effective Time, the Company will, and will cause its subsidiaries, and each
of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give Parent
and Merger Sub and their respective officers, employees, counsel, advisors and
representatives (collectively, the "Parent Representatives") reasonable access
(subject, however, to existing confidentiality and similar non-disclosure
obligations, as to which the Company will use reasonable efforts to obtain
waivers or to make non-applicable to Parent or Merger Sub, and the preservation
of attorney client and work product privileges) during normal business hours and
upon reasonable notice, to the offices and other facilities and to the books and
records of the Company and its subsidiaries, as will permit Parent and Merger
Sub to make inspections of such as either of them may reasonably require and
will cause the Company Representatives and the Company's subsidiaries to furnish
Parent, Merger Sub and the Parent Representatives to the extent available with
such financial and operating data and such other information with respect to the
business and operations of the Company and its subsidiaries as Parent and Merger
Sub may from time to time reasonably request. Unless otherwise required by law,
Parent and Merger Sub will, and will cause the Parent Representatives to, hold
any such information in confidence until the Effective Time or such time as such
information otherwise becomes publicly available through no wrongful act of
Parent, Merger Sub or the Parent Representatives. In the event of termination of
this Agreement for any reason, Parent and Merger Sub will, and will cause the
Parent Representatives to, return to the Company all copies of written
information furnished by the Company
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or any of the Company Representatives to Parent or Merger Sub or the Parent
Representatives and destroy all memoranda, notes and other materials prepared by
Parent, Merger Sub or the Parent Representatives based upon or including the
information furnished by the Company or any of the Company Representatives to
Parent or Merger Sub or the Parent Representatives (and Parent will certify to
the Company that such destruction has occurred). In addition, Parent will comply
with the terms of the Confidentiality Agreement (as hereinafter defined), which
the parties hereby agree will terminate as of the Effective Time.
SECTION 6.04 Reasonable Best Efforts. Subject to the terms and conditions
herein provided and to applicable legal requirements, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, and to assist and cooperate with the
other parties hereto in doing, as promptly as practicable, all things necessary,
proper or advisable under applicable laws and regulations to ensure that the
conditions set forth in Article VII are satisfied and to consummate and make
effective the transactions contemplated by this Agreement.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Parent or Merger Sub or any of
their respective subsidiaries, should be discovered by the Company or Parent, as
the case may be, and which should be set forth in an amendment to the Company
Proxy Statement, the discovering party will promptly inform the other party of
such event or circumstance.
SECTION 6.05 Consents.
(a) Each of the parties will use its reasonable best efforts to obtain
as promptly as practicable all Consents of any Governmental Entity or any
other person required in connection with, and waivers of any Violations
that may be caused by, the consummation of the transactions contemplated by
this Agreement.
(b) (i) In furtherance and not in limitation of the foregoing, Parent
shall use its reasonable best efforts to resolve such objections, if any,
as may be asserted with respect to the transactions contemplated by this
Agreement under any antitrust, competition or trade regulatory laws, rules
or regulations of any domestic or foreign government or governmental
authority or any multinational authority ("Antitrust Laws"). The obligation
to use such reasonable best efforts shall not require Parent to agree to
hold separate or to divest any of the businesses, product lines or assets
of Parent or any of its affiliates or of any of the Company, its
subsidiaries or affiliates, or take any other action that would have a
Material Adverse Effect on the Company or a Material Adverse Effect on
Parent and the Company taken as a whole.
(ii) In furtherance and not in limitation of the foregoing, each of
the Company, Merger Sub and Parent shall use its reasonable best efforts to
obtain the Maritime Approvals and to otherwise resolve such objections, if
any, as may be asserted with respect to the transactions contemplated by
this Agreement under any shipping or maritime laws, rules or regulations of
any domestic or foreign government or governmental authority or any
multinational authority ("Maritime Laws"). If the Maritime Approvals have
not been obtained, Parent shall take such action or make such commitments
or agreements to take action in the future (and shall consent to the
Company taking such action or making such commitments or agreements) as may
be required by the applicable government or governmental or multinational
authority (including, without limitation, MarAd or the Federal Maritime
Commission) in order to obtain the Maritime Approvals or to resolve such
objections as such government or authority may have; provided, however,
that no such action, commitment or agreement shall be required to be taken
or made if it would have a Material Adverse Effect on the Company or a
Material Adverse Effect on Parent and the Company, taken as a whole.
(c) Any party hereto shall promptly inform the others of any material
communication from MarAd, the Federal Maritime Commission, the United
States Federal Trade Commission, the Department of Justice, the European
Economic Area, CFIUS or any other domestic or foreign government or
governmental or multinational authority regarding any of the transactions
contemplated by this Agreement. If any party or any affiliate thereof
receives a request for additional information or documentary material from
any such government or authority with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith
to make, or cause to be made, as soon as
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reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request. Parent and the
Company will consult and cooperate with one another with respect to (and
prior to) any understandings, undertakings or agreements (oral or written)
which are proposed to be made or entered into with MarAd, the Federal
Maritime Commission, the Federal Trade Commission, the Department of
Justice, the European Economic Area, CFIUS or any other domestic or foreign
government or governmental or multinational authority in connection with
the transactions contemplated by this Agreement and no such understandings,
undertaking or agreements shall be made or entered into without prior
consultation with Parent.
(d) (i) (A) In the event that any filings are required pursuant to
Sections 4 or 5 of the Shipping Act in connection with the Charter
Transactions, the Company shall, after consultation with Parent, make such
filings as soon as practicable (and in no event later than ten business
days after finalization of all documentation related to such transactions).
(B) Neither Parent nor (except as set forth above) the Company (or any of
their affiliates) shall enter into any other agreement related to this
Agreement or the transactions contemplated hereby that would require filing
under Section 4 or 5 of the Shipping Act ("Additional Shipping Act
Agreements") without the prior written consent of the other. In the event
that any such agreement is entered into (with such consent) it shall be
filed as soon as practicable (and in no event later than 10 business days)
thereafter pursuant to Sections 4 and 5 of the Shipping Act.
(ii) Parent and the Company shall each promptly, and in any event
within 10 days after execution and delivery of this Agreement, make all
filings or submissions as are required under the HSR Act or any other
Antitrust Laws or the Exon-Florio Amendment.
SECTION 6.06 Public Announcements. So long as this Agreement is in
effect, Parent, Merger Sub and the Company agree to use reasonable efforts to
consult with each other before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this
Agreement.
SECTION 6.07 Employee Benefit Arrangements.
(a) Parent agrees that the Company will honor and, from and after the
Effective Time, Parent will cause the Surviving Corporation to honor, (i)
each Employee Benefit Arrangement that is set forth in the Company
Disclosure Statement and (ii) each other Employee Benefit Arrangement to
which the Company or any of its subsidiaries is presently a party, in the
case of clause (ii), to the extent that any benefit has accrued thereunder
as of the Effective Time.
(b) Parent will cause the Surviving Corporation to take such actions
as are necessary so that, for a period of at least two years from the
Effective Time, employees of the Company and its subsidiaries (excluding
employees covered by collective bargaining agreements) will be provided
cash compensation, employee benefit (including without limitation
indemnification arrangements and directors' and officers' insurance) and
incentive compensation and similar plans and programs as will provide
compensation and benefits which in the aggregate are no less favorable than
those provided to such employees as of the date hereof; provided, however,
that it is understood that after the Effective Time no party hereto will
have any obligation to issue shares of capital stock of any entity pursuant
to any such plan or program and that any substitute plan or program may be
based on criteria other than stock performance.
(c) Nothing in this Section 6.07 shall require any party hereto to
retain any employee (other than pursuant to agreements existing at the
Effective Time).
SECTION 6.08 Stock Options and Stock Plans.
(a) The Company shall take all actions necessary to provide that,
immediately prior to the Effective Time, (i) each outstanding option to
purchase Common Shares (an "Option") granted under the Company's 1989 Stock
Incentive Plan or the Company's 1992 Directors Stock Option Plan
(collectively, the "Option Plans"), whether or not then exercisable or
vested, shall become fully exercisable and vested, (ii) each Option which
is then outstanding shall be cancelled and (iii) in consideration of such
cancellation, and except to the extent that Parent or the Merger Sub and
the holder of any such Option otherwise agree, the Company shall pay to
such holders of Options an amount in respect thereof equal to
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the product of (A) the excess, if any, of the Merger Consideration over the
per share exercise price thereof and (B) the number of Common Shares
subject thereto (such payment to be net of applicable withholding taxes).
(b) The Company shall take all actions necessary to provide that,
immediately prior to the Effective Time, (i) all Common Shares granted
under any Option Plan or under the Company's 1995 Stock Bonus Plan (the
"Stock Bonus Plan") (including without limitation "Premium Shares" under
the Stock Bonus Plan), whether or not then vested or subject to
restrictions, shall become fully vested and free of restrictions and (ii)
all "Phantom Shares" under the Stock Bonus Plan shall be cancelled and, in
consideration of such cancellation, the Company shall pay to the holders of
such Phantom Shares the product of the Merger Consideration and the number
of Phantom Shares held by such holder.
SECTION 6.09 Indemnification.
(a) Parent agrees that all rights to indemnification now existing in
favor of any employee, agent, director or officer of the Company and its
subsidiaries (the "Indemnified Parties") as provided in their respective
charters or By-Laws, in an agreement between an Indemnified Party and the
Company or one of its subsidiaries, or otherwise in effect on the date
hereof shall survive the Merger and shall continue in full force and effect
for a period of not less than six years from the Effective Time; provided
that in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim
or claims shall continue until final disposition of any and all such
claims. Parent also agrees to indemnify all Indemnified Parties to the
fullest extent permitted by applicable law with respect to all acts and
omissions arising out of such individuals' services as officers, directors,
employees or agents of the Company or any of its subsidiaries or as
trustees or fiduciaries of any plan for the benefit of employees, or
otherwise on behalf of, the Company or any of its subsidiaries, occurring
prior to the Effective Time including, without limitation, the transactions
contemplated by this Agreement. Without limitation of the foregoing, in the
event any such Indemnified Party is or becomes involved in any capacity in
any action, proceeding or investigation in connection with any matter,
including, without limitation, the transactions contemplated by this
Agreement, occurring prior to, and including, the Effective Time, Parent
will pay as incurred such Indemnified Party's legal and other expenses
(including the cost of any investigation and preparation) incurred in
connection therewith. Notwithstanding the foregoing two sentences, Parent
shall have no obligation to indemnify or pay expenses of such Indemnified
Party to the extent that the Company or the relevant insurer shall have
actually paid or satisfied (and eliminated any liability of such
Indemnified Party with respect to) such applicable indemnification
obligation or expense reimbursement within 5 business days (or such shorter
period as may be required so that such Indemnified Party suffers no legal
disadvantage) of the date that such obligation of such Indemnified Party
became due. Parent shall pay all expenses, including attorneys' fees, that
may be incurred by any Indemnified Party in enforcing or otherwise in
respect of the indemnity and other obligations provided for in this Section
6.09.
(b) Parent agrees that the Company, and from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for
not less than two years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company;
provided that the Surviving Corporation may substitute therefor policies of
at least the same coverage containing terms and conditions which are no
less advantageous and provided that such substitution shall not result in
any gaps or lapses in coverage with respect to matters occurring prior to
the Effective Time; and provided, further, that the Surviving Corporation
shall not be required to pay an annual premium in excess of 200% of the
last annual premium paid by the Company prior to the date hereof and if the
Surviving Corporation is unable to obtain the insurance required by this
Section 6.09(b) it shall obtain as much comparable insurance as possible
for an annual premium equal to such maximum amount.
SECTION 6.10 Corporate Presence. For a period of at least three years
after the Effective Time, Parent shall cause the Surviving Corporation to retain
a substantial corporate presence in the Oakland, California area.
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SECTION 6.11 Maritime Transactions.
(a) Subject to receipt of the Approvals described in Section 4.05(b)
of the Company Disclosure Statement, the Company shall, on or prior to the
Effective Time, (i) consummate and effectuate the transfers, agreements,
trusts and charters set forth in item A of Section 4.05(b) of the Company
Disclosure Statement, (ii) transfer or terminate the Company's contracts
and agency agreements relating to the Ready Reserve Force as set forth in
item B of Section 4.05(b) of the Company Disclosure Statement, (iii)
terminate (and/or transfer under a structure similar to that described in
item A of Section 4.05 of the Company Disclosure Statement) the Company's
ODS Agreement (and, if terminated, reasonably contemporaneous with such
termination, commence operations under a minimum of five of the Company's
MSP Operating Agreements) as set forth in item C of Section 4.05(b) of the
Company Disclosure Statement and (iv) with respect to certain of the
Company's Pacesetter Vessels that are subject to Construction Differential
Subsidy Agreements, consummate and effectuate, at the Company's election,
one of the transactions set forth in items D.1, D.2 or D.3 of Section
4.05(b) of the Company Disclosure Statement, in each case set forth in
clauses (i) through (iv) above, on terms and conditions and involving
agreements and obligations of the Company and/or its subsidiaries as
determined by the Company after consultation with Parent.
(b) The Company shall, on or prior to the Effective Time, at its
election and on terms and conditions and involving agreements and
obligations of the Company and/or its subsidiaries as determined by the
Company, either (i) sell or otherwise transfer to an entity that is a
75%-owned citizen under Section 2 of the 1916 Shipping Act the barges that
are chartered to Trailer Marine Transport Corporation pursuant to a
Bareboat Charter Party dated as of January 14, 1985 or (ii) terminate such
Bareboat Charter Party with respect to such barges.
SECTION 6.12 No Solicitation. The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate or
encourage any inquiries or the making of any proposal with respect to any
merger, consolidation or other business combination involving the Company or its
subsidiaries or acquisition of all or substantially all of the assets or capital
stock of the Company and its subsidiaries taken as a whole (an "Acquisition
Transaction") or negotiate, explore or otherwise engage in substantive
discussions with any person (other than Parent, Merger Sub or their respective
directors, officers, employees, agents and representatives) with respect to any
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement and the Company
will immediately cease or cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing; provided that the Company may, in response to an unsolicited proposal
with respect to an Acquisition Transaction from a third party that a nationally
recognized investment banking firm retained by the Company advises, and the
Company Board determines, may reasonably be expected to result in a transaction
that is more favorable to the Company and its stockholders than the transactions
contemplated hereby, furnish information to, and negotiate, explore or otherwise
engage in substantive discussions with such third party, and enter into any such
agreement, arrangement or understanding, in each case only if the Company Board
deems it necessary to do so in the exercise of its fiduciary obligations after
consultation with outside counsel. The Company will notify Parent promptly if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with the Company. The Company also will promptly request
each person which has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company to return all
confidential information heretofore furnished to such person by or on behalf of
the Company.
SECTION 6.13 Notification of Certain Matters. Parent and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (ii)
to cause any material covenant, condition or agreement under this Agreement not
to be complied with or satisfied in all material respects and (b) any failure of
the Company or Parent, as the case may be, to comply with or satisfy any
covenant,
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condition or agreement to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification shall affect the
representations or warranties of any party or the conditions to the obligations
of any party hereunder.
SECTION 6.14 Redemption of Rights; Amendment of By-Laws. The Company will
(a) redeem all outstanding Rights at a redemption price of $0.01 per Right (or
otherwise make such Rights inapplicable to the Merger) and (b) delete or amend
Section 3 of Article VII of the Company's By-Laws to permit the unrestricted
acquisition of Common Shares by Merger Sub pursuant to the Merger and in
accordance with this Agreement, in each case effective no later than immediately
prior to the Effective Time. Prior to such redemption (or other action) and
deletion or amendment, Parent will provide the Company with reasonable
assurances that the Merger will be consummated.
SECTION 6.15 Voting of Shares. Parent agrees to vote all Common Shares
beneficially owned by it, if any, in favor of adoption of this Agreement at the
Company Shareholder Meeting.
SECTION 6.16 State Takeover and Environmental Laws. The Company shall,
upon the request of and in cooperation with Merger Sub, take all reasonable
steps to (a) obtain, grant or have granted such approvals pursuant to and
otherwise act to eliminate or minimize the effects on, or assist in any
challenge by Merger Sub to the validity or applicability to, the transactions
contemplated by this Agreement, including the Merger, of any state takeover law
and (b) obtain, grant or have granted any approvals applicable to the
transactions contemplated by this Agreement, including the Merger, under any
applicable state environmental law.
SECTION 6.17 Capital Construction Fund. The Company agrees to use its
reasonable efforts, following consultation with Parent and subject to Parent's
reasonable objections, to spend or invest the Capital Construction Fund prior to
the Effective Time in order to minimize any adverse tax consequences to such
fund or the Company as a result of the Merger and maximize the value of such
fund to the Company.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction (or waiver by Parent and the Company) of the following
conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the holders of the
outstanding Common Shares of the Company in accordance with the DGCL;
(b) any (i) waiting period under (x) the HSR Act relating to the
Merger and (y) Sections 4, 5 and 6 of the Shipping Act relating to the
Charter Transactions or to any Additional Shipping Act Agreements shall
have expired and (ii) waiting periods or, if applicable, review periods of
Governmental Authorities, under the Exon Florio Amendment and any foreign
or supranational Antitrust Laws shall have expired;
(c) the Maritime Approvals shall have been obtained; and
(d) the consummation of the Merger shall not be restrained, enjoined
or prohibited by any order, judgment, decree, injunction or ruling of a
court of competent jurisdiction, provided, however, that the parties shall
comply with Sections 6.04 and 6.05 and shall further use their reasonable
best efforts to cause any such order, judgment, decree, injunction or
ruling to be vacated or lifted, unless such action would have a Material
Adverse Effect on the Company or a Material Adverse Effect on Parent and
the Company, taken as a whole.
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SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are further
subject to the satisfaction (or waiver by Parent) of the following conditions:
(a) the representations and warranties of the Company set forth in
this Agreement shall be true when made and (except for representations and
warranties made as of a specific date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time,
except for any failures to be true that, in the aggregate, do not have a
Material Adverse Effect on the Company; the Company shall have performed
its covenants and agreements under this Agreement in all material respects;
and Parent and Merger Sub shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to the foregoing
effect;
(b) except as contemplated by this Agreement, including the Company
Disclosure Statement, no change shall have occurred, since the date of this
Agreement, that would have a Material Adverse Effect on the Company, other
than (x) changes relating to or arising from general economic, market or
financial conditions or generally affecting the industries, markets or
trade lanes in which the Company operates or (y) changes relating to or
arising from the consummation or disclosure of this Agreement or any
transaction contemplated by this Agreement; and
(c) there shall not have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
Singapore Stock Exchange or the New York Stock Exchange, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks
or other lending institutions in the United States or Singapore, (iii) a
commencement or escalation of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States or Singapore, or (iv) or in the case of any of the foregoing
existing at the date hereof, a material acceleration or worsening thereof.
SECTION 7.03 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are further subject to the
satisfaction (or waiver by the Company) of the condition that the
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true when made and (except for representations and warranties
made as of a specific date, which need only be true as of such date) at and as
of the Effective Time as if made at and as of such time, except for any failures
to be true that, in the aggregate, do not have a Material Adverse Effect on
Parent; Parent and Merger Sub shall have performed their covenants and
agreements under this Agreement in all material respects; and the Company shall
have received certificates of the Chief Executive Officer or a Vice President of
Parent and Merger Sub to the foregoing effect.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Company Shareholder Meeting
(including as it may be adjourned from time to time) shall have concluded
without the Company having obtained the required shareholder approval of
this Agreement and the transactions contemplated hereby;
(c) by Parent or the Company if any court or other Governmental Entity
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction, ruling or other action shall have become
final and nonappealable;
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(d) by either the Company or Parent, if the Merger has not been
consummated by January 31, 1998, provided, however, that the party seeking
to terminate the Agreement shall not have breached its obligations under
this Agreement in any material respect;
(e) by Parent, at any time prior to the Effective Time, by action of
the Board of Directors of Parent, (i) upon a material breach of this
Agreement on the part of the Company which has not been cured and which
would cause the condition set forth in Section 7.02(a) of this Agreement to
be incapable of being satisfied by January 31, 1998, or (ii) if the Company
Board shall have withdrawn or modified in a manner adverse to Parent or
Merger Sub its recommendation of this Agreement or the Merger (which for
these purposes shall be deemed to have been made as of the date hereof), or
shall have resolved to do any of the foregoing; or
(f) by the Company, at any time prior to the Effective Time, by action
of the Company Board, (i) upon a material breach of this Agreement on the
part of Parent or Merger Sub which has not been cured and which would cause
the condition set forth in Section 7.03 of this Agreement to be incapable
of being satisfied by January 31, 1998, or (ii) if a third party, including
any group, shall have made a proposal in respect of an Acquisition
Transaction that a nationally recognized investment banking firm retained
by the Company advises, and the Company Board determines, may reasonably be
expected to result in a transaction that is more favorable to the Company
and its stockholders than the transactions contemplated hereby.
SECTION 8.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provisions of this Section
8.02, Section 8.03 and the last sentence of Section 6.03, which shall survive
any such termination. Nothing contained in this Section 8.02 shall relieve any
party from liability for any breach of this Agreement or the Confidentiality
Agreement.
SECTION 8.03 Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
(b) In the event (i) Parent shall have terminated this Agreement
pursuant to Section 8.01(e)(ii) and (x) ten business days shall have
elapsed from the withdrawal or modification in a manner adverse to Parent
or Merger Sub of the Company Board's recommendation of this Agreement and
the Merger (except if the Company Board shall have taken any of the actions
set forth in clause (y) below), without such recommendation being
reinstated in full prior to such termination or (y) the Company Board shall
have advised shareholders to reject this Agreement and the Merger or to
tender shares to, or accept or vote for an agreement relating to an
Acquisition Transaction with, any person other than Parent (or affiliates
thereof) or (ii) the Company shall have terminated this Agreement pursuant
to Section 8.01(f)(ii), then the Company shall promptly, but in no event
later than two days after the date of request (in accordance with the terms
hereof) therefor, reimburse Parent for the documented fees and expenses of
Parent and Merger Sub related to this Agreement, the transactions
contemplated hereby and any related financing (subject to a maximum of
$2,000,000), which amount shall be payable in same day funds and pay Parent
a termination fee of $25,000,000, which amount shall be payable in same day
funds. The Company acknowledges that the agreements contained in this
Section 8.03(b) are an integral part of the transactions contemplated in
this Agreement, and that, without these agreements, Parent and Merger Sub
would not enter into this Agreement; accordingly, if the Company fails to
promptly pay the expense reimbursement or the termination fee due pursuant
to this Section 8.03(b), and, in order to obtain such payment, Parent or
Merger Sub commences a suit which results in a judgment against the Company
for the fee set forth in this paragraph (b), the Company shall pay to
Parent or Merger Sub its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount due
(accruing from the day after such amount was due and payable pursuant to
the terms hereof until the
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date of payment) at the three month T-bill rate as disclosed in the Wall
Street Journal on the date such payment was required to be made.
SECTION 8.04 Amendment. This Agreement may be amended by the Company,
Parent and Merger Sub at any time before or after any approval of this Agreement
by the stockholders of the Company but, after any such approval, no amendment
shall be made which decreases the Merger Consideration or which adversely
affects the rights of the Company's stockholders hereunder without the approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties.
SECTION 8.05 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein by any other party or in
any document, certificate or writing delivered pursuant hereto by any other
party or (iii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Sections 3.03, 6.07, 6.08, 6.09 and 6.10 shall survive the Effective Time
indefinitely (except to the extent a shorter period of time is explicitly
specified therein).
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) and the letter agreement dated February 12, 1997 (the
"Confidentiality Agreement"), constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written
consent of the other party provided, however, that Parent may designate, by
written notice to the Company, another wholly-owned direct or indirect
subsidiary in lieu of Merger Sub, in the event of which, all references
herein to Merger Sub shall be deemed references to such other subsidiary
except that all representations and warranties made herein with respect to
Merger Sub as of the date of this Agreement shall be deemed representations
and warranties made with respect to such other subsidiary as of the date of
such designation. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Parent or Merger Sub:
Neptune Orient Lines Limited
456 Alexandra Road, #06-00 NOL Building
Singapore 119962, Republic of Singapore
Attention: President
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<PAGE> 87
with a copy to:
Sullivan & Cromwell
28th Floor
Nine Queen's Road, Central
Hong Kong
Attention: Robert G. DeLaMater, Esq.
If to the Company:
APL Limited
1111 Broadway
Oakland, California 94607
Attention: President
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.08 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except with respect
to Sections 6.07, 6.08, 6.09 and 6.10, as to which the third parties who benefit
from such sections are intended third party beneficiaries, nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.09 Certain Definitions. As used in this Agreement:
(a) the term "affiliate," as applied to any person, shall mean any
other person directly or indirectly controlling, controlled by, or under
common control with, that person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that person, whether
through the ownership of voting securities, by contract or otherwise;
(b) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is used in Section 13(d)(3) of the Exchange Act);
(c) the term "subsidiary" or "subsidiaries" means, with respect to
Parent, the Company or any other person, any corporation, partnership,
joint venture or other legal entity of which Parent, the Company or such
other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally
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<PAGE> 88
entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal
entity;
(d) the term "Material Adverse Effect on the Company," as used in this
Agreement, means any change in or effect on the business, operations or
financial condition of the Company or any of its subsidiaries that is
materially adverse to the Company and its subsidiaries taken as a whole or
would materially adversely affect the ability of the Company to consummate
the transactions contemplated hereby;
(e) the term "Material Adverse Effect on Parent," as used in this
Agreement, means any change in or effect on the business, operations or
financial condition of Parent or any of its subsidiaries that would be
materially adverse to Parent and its subsidiaries taken as a whole or would
materially adversely affect the ability of Parent or Merger Sub to
consummate the transactions contemplated hereby; and
(f) the phrase "Material Adverse Effect on Parent and the Company,
taken as a whole" as used in this Agreement, means any change in or effect
on the business, operations or financial condition of Parent or the
Company, or any of their respective subsidiaries, that is materially
adverse to Parent, the Company and their subsidiaries, taken as one
combined enterprise, or would materially adversely affect the ability of
Parent or the Company to consummate the transactions contemplated hereby.
SECTION 9.10 Specific Performance; Consent to Jurisdiction. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States located in the Northern District of California,
any California state court located in the Northern District of California or any
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of the Federal District
Court for the Northern District of California, any California state court
located in the Northern District of California and any Delaware state court, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal District Court
for the Northern District of California, a California state court located in the
Northern District of California or a Delaware state court.
SECTION 9.11 Appointment of Agent for Service of Process. Parent hereby
consents to service of process upon it by mailing or delivering such service to
its agent, NOL (USA), Inc. (the "Agent"), located at 80 Grand Avenue, No. 700,
Oakland, California 94612, USA, and authorizes and directs its Agent to accept
such service.
SECTION 9.12 Guarantee. Parent hereby guarantees the due performance by
Merger Sub of all of the Merger Sub's obligations incurred in connection with
the Merger, this Agreement and the transactions contemplated hereby.
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<PAGE> 89
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
NEPTUNE ORIENT LINES LIMITED
By: /s/ H.R. HOCHSTADT
------------------------------------
Name: H.R. Hochstadt
Title: Chairman
NEPTUNE U.S.A., INC.
By: /s/ LUA CHENG ENG
------------------------------------
Name: Lua Cheng Eng
Title: Director
APL LIMITED
By: /s/ TIMOTHY J. RHEIN
------------------------------------
Name: Timothy J. Rhein
Title: President & Chief
Executive Officer
A-24
<PAGE> 90
APPENDIX B
[JP MORGAN LOGO]
J.P. Morgan Securities Inc.
April 13, 1997
60 Wall Street
New York NY
10260-0060 The Board of Directors
APL Limited
1111 Broadway
Oakland, CA 94607-5500
Attention: Tim Rhein
Chief Executive Officer & President
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to the stockholders of APL Limited
(the "Company") of the consideration proposed to be paid to
them in connection with the proposed merger (the "Merger") of
the Company with an indirect wholly-owned subsidiary of Neptune
Orient Lines Ltd (the "Buyer"). Pursuant to the Agreement and
Plan of Merger, dated as of April 13, 1997 (the "Agreement"),
among the Company, the Buyer and Neptune U.S.A., Inc. (the
"Merger Subsidiary"), the Company will become a wholly-owned
subsidiary of the Buyer, and stockholders of the Company will
receive $33.50 for each share of Common Stock, par value $0.01
per share, of the Company held by them.
In arriving at our opinion, we have reviewed (i) the Agreement;
(ii) certain publicly available information concerning the
business of the Company and of certain other companies engaged
in businesses comparable to those of the Company, and the
reported market prices for certain other companies' securities
deemed comparable; (iii) current and historical market prices
of the common stock of the Company; (iv) the audited financial
statements of the Company for the fiscal year ended December
31, 1996, and the unaudited financial statements of the Company
for the period ended February 28, 1997; (v) certain internal
financial analyses and forecasts prepared by the Company and
its management; and (vi) the terms of other business
combinations that we deemed relevant. In addition, we have held
discussions with certain members of the Management of the
Company with respect to certain aspects of the Merger, and the
past and current business operations of the Company, the
financial condition and future prospects and operations of the
Company, and certain other matters we believed necessary or
appropriate to our inquiry. We have reviewed such other
financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this
opinion.
In giving our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all
information that was publicly available or was furnished to us
by the Company or otherwise reviewed by us, and we have not
assumed any responsibility or liability therefor. We have not
conducted any valuation or
<PAGE> 91
appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to us. In relying on
financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on
assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results
of operations and financial condition of the Company. We have
also assumed that the other transactions contemplated by the
Agreement will be consummated as described in the Agreement. We
have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
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 should be understood that
subsequent developments may affect this opinion and that we do
not have any obligation to update, revise, or reaffirm this
opinion.
We have acted as financial advisor to the Company with respect
to the proposed Merger and will receive a fee from the Company
for our services. We will also receive an additional fee if the
proposed Merger is consummated. We have also acted as
co-manager on the Company's $150 million senior notes issuance
in 1993 and advised on the Company's sale of its Domestic
Distribution Services unit and on the Company's share
repurchases, including Dutch Auction, targeted and open market
repurchases. Our affiliate Morgan Guaranty Trust Company of New
York is the agent bank for the Company's revolving credit
facility and has entered into interest rate hedge contracts
with the Company.
The credit facility may remain outstanding after consummation
of the Merger. In the ordinary course of their businesses, our
affiliates may actively trade the debt and equity securities of
the Company or the Buyer for their own account or for the
accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the consideration to be paid to the
Company's stockholders in the proposed Merger is fair, from a
financial point of view, to such stockholders.
This letter is provided to the Board of Directors of the
Company in connection with and for the purposes of its
evaluation of the Merger. This opinion does not constitute a
recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger. This
opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever
except with our prior written consent in each instance. This
opinion may be reproduced in full in any proxy or information
statement mailed to stockholders of the Company but may not
otherwise be disclosed publicly in any manner without our prior
written approval and must be treated as confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ ROBERT SROKA
-------------------------
Name: Robert Sroka
Title: Managing Director
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<PAGE> 92
APPENDIX C
SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
sec.262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
<PAGE> 93
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
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<PAGE> 94
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
C-3
<PAGE> 95
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-4
<PAGE> 96
[FORM OF PROXY CARD]
APL LIMITED
P 1111 BROADWAY
OAKLAND, CALIFORNIA 94607
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Timothy J. Rhein, Maryellen B. Cattani
O and Timothy J. Windle, and each of them, as proxies, each with the power to
appoint his substitute, and hereby authorizes each of them to represent and
X vote all the shares of the common stock of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Y Meeting to be held on August 28, 1997, or at any adjournment or
postponement thereof, (1) as specified below on the matters listed and more
fully described in the Notice of Annual Meeting and Proxy Statement of said
meeting, receipt of which is acknowledged, and (2) in their discretion on
such procedural matters, including without limitation potential
adjournments of the Annual Meeting, and such other matters as may properly
come before the meeting or any adjournment or postponement thereof.
The shares represented by this Proxy will be voted as directed by the
shareholder. If no direction is given, shares will be voted FOR the
election of the director nominees and FOR Proposals 2 and 3. Specific
choices may be made on the reverse side of this Proxy.
SEE REVERSE SIDE
(Continued and to be signed on reverse side)
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS
[ ] FOR [ ] WITHHELD
<TABLE>
<S> <C> <C> <C>
NOMINEES: Charles S. Arledge Timothy J. Rhein Barry L. Williams
F. Warren Hellman Forrest N. Shumway
[ ] --------------------------------------
for all nominees except as noted above
</TABLE>
2. APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSALS 2 AND 3 UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATE NAME, PLEASE
SIGN IN FULL CORPORATE NAME BY AN AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
<TABLE>
<S> <C> <C>
--------------------------------- -------------- , 1997
Signature Date
--------------------------------- -------------- , 1997
Signature Date
</TABLE>
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
