<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997
REGISTRATION NO. 333-22651
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CAREY INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 4119 52-1171965
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
4530 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20016
(202) 895-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
VINCENT A. WOLFINGTON
CAREY INTERNATIONAL, INC.
4530 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20016
(202) 895-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES OF COMMUNICATIONS TO:
JOHN P. DRISCOLL, JR., ESQUIRE NEIL GOLD, ESQUIRE
NUTTER, MCCLENNEN & FISH, LLP FULBRIGHT & JAWORSKI L.L.P.
ONE INTERNATIONAL PLACE 666 FIFTH AVENUE
BOSTON, MA 02110 NEW YORK, NY 10103
(617) 439-2000 (212) 318-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If the Form is a post-effective amendment filed pursuant to Rule 426(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock (par value
$.01 per share)....... 3,335,000 shares $13.00 $43,355,000 $13,138.00 (3)
</TABLE>
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(1) Includes 435,000 shares that the Underwriters have the option to purchase
to cover over-allotments.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(3)Previously paid.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS BE ACCEPTED TO BUY PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 25, 1997
2,900,000 SHARES
CAREY INTERNATIONAL, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby are being offered by Carey
International, Inc. ("Carey" or the "Company").
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price. The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "CARY."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company, estimated at
$1,600,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 435,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ , and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
-----------
Montgomery Securities Ladenburg Thalmann & Co. Inc.
, 1997
<PAGE>
[Artwork consisting of a "gate fold" containing the following:
(i) A map of the world indicating the various locations of Carey's
subsidiaries, licensees, and affiliates; and
(ii) A montage containing (among other items) (A) the Carey "logo," (B)
various photographs of Carey limousines and chauffeurs, and (C) a photograph
of a Carey reservation agent.]
The Company intends to furnish its stockholders with annual reports
containing audited financial statements reported on by independent auditors
for each fiscal year and quarterly reports containing unaudited financial
statements for the first three quarters of each fiscal year.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE,
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information
contained in this Prospectus (i) gives effect to the Recapitalization (as
defined herein) of the Company (see "Recapitalization"), (ii) does not give
effect to 1,012,320 shares of Common Stock issuable upon the exercise or
conversion of outstanding options, warrants and a convertible note or 150,000
shares of Common Stock issuable pursuant to warrants described under the
caption "Underwriting" and (iii) assumes no exercise of the Underwriters' over-
allotment option to purchase 435,000 shares of Common Stock.
THE COMPANY
Carey International, Inc. ("Carey" or the "Company") is one of the world's
largest chauffeured vehicle service companies, providing services through a
worldwide network of owned and operated companies, licensees and affiliates
serving 420 cities in 65 countries. The "Carey" brand name has represented
quality chauffeured vehicle service since the 1920s. The Company owns and
operates its service providers in New York, San Francisco, Los Angeles, London,
Washington D.C., South Florida and Philadelphia. In addition, the Company
generates revenues from licensing the "Carey" name and providing central
reservation, billing and sales and marketing services to its licensees. The
Company's worldwide network also includes affiliates in locations in which the
Company has neither owned and operated companies nor licensees. Over the past
five years, the Company has invested significant capital in developing its
reservation, central billing and worldwide service infrastructure. By
leveraging its current infrastructure and position as a market leader, the
Company intends to consolidate the highly fragmented chauffeured vehicle
service industry through the acquisition of: (i) current Carey licensees, (ii)
additional companies in markets in which the Company already owns and operates
a chauffeured vehicle service company, and (iii) companies in other strategic
markets in North America, Europe and the Pacific rim of Asia.
The Carey network utilizes chauffeured sedans, limousines, vans and minibuses
to provide services for airport pick-ups and drop-offs, inter-office transfers,
business and association meetings, conventions, roadshows, promotional tours,
special events, incentive travel and leisure travel. Businesses and business
travelers utilize the Company's services primarily as a management tool, to
achieve more efficient use of time and other resources.
Carey's worldwide network of chauffeured vehicle service companies allows it
to provide services with consistently high quality to its customers in
virtually every major city in the expanding global travel market. The network
is linked to over 300,000 reservation terminals in travel agencies, corporate
travel departments and government offices by the Carey International
Reservation System (the "CIRS"), the chauffeured vehicle service industry's
most extensive centralized global reservation system.
The Company estimates that the United States chauffeured vehicle service
industry generated revenues of approximately $3.9 billion in 1996, and has
undergone steady growth in recent years, with revenues increasing at a compound
annual growth rate of 10.9% between 1990 and 1996. The industry is highly
fragmented, with approximately 9,000 companies utilizing over 100,000 vehicles.
The Company believes that during 1996 no chauffeured vehicle service company
accounted for more than 2% of total United States industry revenues. The
Company also believes that similar fragmentation exists in the chauffeured
vehicle service industry outside the United States.
3
<PAGE>
The Company's objective is to increase its profitability and its market share
in the chauffeured vehicle service industry by implementing the following
growth strategies:
Expand through Acquisitions. Carey believes that there are significant
opportunities to acquire additional chauffeured vehicle service companies
that would benefit from the capital and management resources that the
Company can provide. Carey intends to acquire current Carey licensees, as
well as additional chauffeured vehicle service companies both in markets in
which the Company already owns and operates such a business and in other
strategic regions in North America, Europe and the Pacific rim of Asia.
Carey believes it has a competitive advantage in acquiring licensees
because of a right of first refusal contained in a substantial majority of
its domestic license agreements. The Company believes that it has less than
a 10% market share in each of the markets in which it owns and operates a
chauffeured vehicle service company, and that there is significant
potential for it to expand its business in such markets through
acquisitions. As the Company acquires additional chauffeured vehicle
service companies, it anticipates that cost savings can be achieved through
the consolidation of certain administrative functions and the elimination
of redundant facilities, equipment and personnel.
Carey has successfully begun to implement its acquisition strategy. Since
November 1991, the Company has acquired 15 chauffeured vehicle service
companies, including, since January 1995, two of its licensees (in Ft.
Lauderdale/Miami and San Francisco) and six additional chauffeured vehicle
service companies (two in each of Boca Raton and San Francisco, and one in
each of Washington, D.C. and London). Upon the closing of this offering,
the Company will acquire Manhattan International Limousine Network Ltd. and
an affiliated company ("Manhattan Limousine"), one of the largest
chauffeured vehicle service companies in the metropolitan New York area and
the operator of a network of approximately 300 affiliates worldwide.
Manhattan Limousine generated revenues of approximately $18.4 million
during its fiscal year ended September 30, 1996, representing approximately
23.4% of the Company's fiscal 1996 revenues on a pro forma basis. See
"Acquisition of Manhattan Limousine" and "Pro Forma Consolidated Financial
Statements."
Increase International Market Share. Approximately 12.8% of the Company's
revenue, net was derived from services performed outside the United States
during its fiscal year ended November 30, 1996. Of these international
revenues, approximately 60.8% was generated by the Company's owned and
operated business in London, approximately 38.1% was generated by the
Company's international licensees and the remainder was generated by the
Company's international affiliates. Carey believes that its network can
capture a significant portion of the growing international market for
chauffeured vehicle services by acquiring or licensing additional
chauffeured vehicle service companies and otherwise implementing the Carey
system outside the United States. The Company intends to increase its
international presence by intensifying its sales and marketing efforts,
strengthening its relationships with significant domestic and international
business travel arrangers, and capitalizing on the capacity of the CIRS to
operate on a global scale. By enhancing its international presence, the
Company also expects to increase its revenues from providing chauffeured
vehicle services to international travelers both visiting the United States
and travelling abroad.
Expand Licensee Network Worldwide. The Company will seek to expand its
worldwide network and generate additional revenues from license and
marketing fees by licensing additional chauffeured vehicle service
companies in smaller markets that do not justify a Company-owned presence.
Ultimately, as these less strategic markets grow in size and importance to
the Company, the licensees in such markets may become acquisition
candidates for the Company.
Convert Salaried Chauffeurs to Independent Operators. The Company
believes that it can improve its profitability by continuing to convert
salaried chauffeurs to independent operators in businesses acquired by
Carey. The objective of Carey's independent operator strategy is to instill
in each chauffeur the sense of purpose, responsibility and dedication
characteristic of an independent business owner, thereby increasing
4
<PAGE>
the profitability of the chauffeur and the Company. Carey's independent
operator program allows the Company to reduce its labor and capital costs,
convert fixed costs to variable costs and generate revenues from fees paid
by independent operators.
In 1979, the Company was organized as a Delaware corporation and commenced
operations by acquiring certain rights to the "Carey" name held by a
predecessor company. Predecessor companies operated chauffeured vehicle service
businesses under the "Carey" name since the 1920s. The Company's principal
executive offices are located at 4530 Wisconsin Avenue, N.W., Washington, D.C.
20016. Its telephone number at that location is (202) 895-1200. As used herein,
unless the context otherwise requires, "Carey" or the "Company" refers to Carey
International, Inc. and its subsidiaries.
THE OFFERING
<TABLE>
<C> <S>
Common Stock being offered......................... 2,900,000 shares
Common Stock to be outstanding after the offering.. 6,358,845 shares(1)
Use of proceeds.................................... To repay certain
indebtedness, redeem
certain shares of
preferred stock, pay the
cash and note portions of
the purchase price for
Manhattan Limousine, fund
other acquisitions and for
general corporate
purposes, including
working capital
Proposed Nasdaq National Market symbol............. CARY
</TABLE>
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(1) Excludes: (i) 1,012,320 shares of Common Stock issuable upon the exercise
or conversion of outstanding options, warrants and a convertible note, (ii)
28,662 shares of Common Stock which are authorized but have not yet been
granted under options pursuant to the Company's 1987 Stock Option Plan and
1992 Stock Option Plan, (iii) 150,000 shares of Common Stock issuable upon
the exercise of warrants described under the caption "Underwriting," (iv)
650,000 shares of Common Stock authorized pursuant to the 1997 Equity
Incentive Plan, of which options to purchase 411,500 shares of Common Stock
are outstanding, and (v) 100,000 shares of Common Stock authorized pursuant
to the Stock Plan for Non-Employee Directors, of which options to purchase
22,500 shares of Common Stock are outstanding.
5
<PAGE>
SUMMARY AND PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
FISCAL YEAR ENDED NOVEMBER 30, FEB. 29, 1996 FEB. 28, 1997
--------------------------------------------------------------- ------------- -------------------------
1992 1993 1994 1995 1996
------- -------- ------- ------- --------------------------
ACTUAL PRO FORMA(1) ACTUAL ACTUAL PRO FORMA(2)
---------- ------------ ------------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Revenue, net.... $27,669 $30,319 $35,525 $43,484 $59,505 $78,883 $11,558 $14,141 $19,613
Cost of reve-
nue............ 20,199 22,751 24,954 29,943 40,438 52,344 7,904 9,756 13,149
------- -------- ------- ------- ---------- --------- ------- --------- ---------
Gross profit.... 7,470 7,568 10,571 13,541 19,067 26,539 3,654 4,385 6,464
Selling, general
and
administrative
expense........ 5,939 8,174 9,487 12,419 15,078 21,042 3,361 3,819 5,466
------- -------- ------- ------- ---------- --------- ------- --------- ---------
Operating income
(loss)......... 1,531 (606) 1,084 1,122 3,989 5,497 293 566 998
Interest income
(expense) and
other income
(expense)...... (819) (1,308) (1,194) (1,292) (1,277) 91 (340) (245) 109
------- -------- ------- ------- ---------- --------- ------- --------- ---------
Income (loss)
before
provision
(benefit) for
income taxes... 712 (1,914) (110) (170) 2,712 5,588 (47) 321 1,107
Provision
(benefit) for
income taxes... 53 10 19 25 (104) 2,364 11 154 465
------- -------- ------- ------- ---------- --------- ------- --------- ---------
Net income
(loss)......... $ 659 $ (1,924) $ (129) $ (195) $ 2,816 $ 3,224 $ (58) $ 167 $ 642
======= ======== ======= ======= ========== ========= ======= ========= =========
Pro forma net
income per
share.......... $0.88(3) $0.52 $0.07(3) $0.10
========== ========= ========= =========
Weighted average
shares
outstanding.... 3,526,723(3) 6,216,322 3,535,229(3) 6,169,932
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
---------------------
NOVEMBER 30,
1996 ACTUAL PRO FORMA(4)
------------ ------- ------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit)................... $(1,732) $(1,029) $ 3,162
Total assets................................ 42,526 39,378 71,660
Long-term debt, less current maturities..... 11,192 11,327 1,919
Deferred revenue(5)......................... 6,181 6,629 13,500
Total stockholders' equity.................. $ 6,672 $ 6,844 $41,673
</TABLE>
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(1) Gives effect to the following events as if they had occurred on December 1,
1995: (i) the acquisition of Camelot Barthropp Ltd., completed February
1996, including the interest cost related to indebtedness incurred in
connection with such acquisition, (ii) the acquisition of Manhattan
Limousine (using statement of operations data for Manhattan Limousine's
fiscal year ended September 30, 1996) and the amortization of associated
goodwill, (iii) the conversion of certain preferred stock and subordinated
debt into Common Stock, see "Recapitalization," and the elimination of
interest expense associated with the subordinated debt; (iv) the issuance
of shares of Common Stock to (a) repay certain existing debt of the
Company, (b) pay the cash and note portions of the purchase price for
Manhattan Limousine, (c) repay certain debt assumed in connection with the
acquisition of Manhattan Limousine, (d) redeem certain preferred stock of
the Company and (e) pay the stock portion of the purchase price in
connection with the acquisition of Manhattan Limousine, (v) the elimination
of interest expense associated with debt repaid from the proceeds of this
offering and (vi) other adjustments as described under "Pro Forma
Consolidated Financial Statements" and the notes thereto.
(2) Gives effect to the events set forth in clauses (ii) through (vi) of note
(1) above as if they had occurred on December 1, 1995, except that, with
respect to clause (ii), the statement of operations data is for Manhattan
Limousine's three months ended December 31, 1996.
(3) Gives effect to the conversion of certain preferred stock and subordinated
debt into Common Stock and the elimination of associated interest expense
on the subordinated debt as a result of the Recapitalization. See Notes 2
and 18 to the Company's Consolidated Financial Statements.
(4) Reflects (i) the Recapitalization, see "Recapitalization," (ii) the
acquisition of Manhattan Limousine, see "Acquisition of Manhattan
Limousine," and (iii) the issuance and sale of the 2,900,000 shares of
Common Stock offered hereby (at an assumed offering price of $12.00 per
share less estimated underwriting discounts and commissions and offering
expenses) and the application of the net proceeds therefrom as described
under "Use of Proceeds."
(5) Represents the balance of the fees deferred in connection with independent
operator agreements less amounts previously recognized. Such fees are
recognized ratably over the terms of the agreements, which typically range
from 10 to 20 years. See the Notes to the Company's Consolidated Financial
Statements.
6
<PAGE>
RISK FACTORS
The following factors should be considered, together with the other
information in this Prospectus, in evaluating an investment in the Company.
This Prospectus contains certain forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from the results anticipated in these forward-looking statements as a result
of certain of the factors set forth in the following risk factors and
elsewhere in this Prospectus.
HISTORY OF LOSSES
The Company has generated a net loss in three of the past four fiscal years.
Although the Company was profitable during the fiscal year ended November 30,
1996, there can be no assurance that the Company will be able to sustain
profitability.
RISKS ASSOCIATED WITH ACQUISITION OF MANHATTAN LIMOUSINE
The acquisition of Manhattan Limousine will be consummated simultaneously
with this offering. Manhattan Limousine generated pro forma revenues of
approximately $18.4 million during its fiscal year ended Septem- ber 30, 1996,
representing approximately 23.4% of the Company's fiscal 1996 revenues on a
pro forma basis. As a result of the acquisition of Manhattan Limousine, nearly
half of the Company's revenues will be generated from services provided within
the New York City metropolitan area. The eventual integration of Manhattan
Limousine, which is the Company's largest acquisition to date, will place
significant demands on the Company's management and infrastructure, and there
can be no assurance that Manhattan Limousine's business will be successfully
integrated with that of the Company, that the Company will be able to realize
operating efficiencies or eliminate redundant costs, or that the combined
business will be operated profitably. Further, there can be no assurance that
customers of Manhattan Limousine will continue to do business with the
Company. The failure of the Company in any of these respects could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Use of Proceeds" and "Acquisition of Manhattan
Limousine."
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to grow primarily through the acquisition of additional
chauffeured vehicle service companies. Increased competition for acquisition
candidates may develop, in which event there may be fewer acquisition
opportunities available to the Company as well as higher acquisition costs for
the opportunities that are available. There can be no assurance that the
Company will be able to identify, acquire or profitably manage additional
businesses or successfully integrate any acquired businesses into the Company
without substantial costs, delays, or other operational or financial problems.
There also can be no assurance that the Company will be able to purchase its
licensees that operate in markets in which the Company does not own and
operate a chauffeured vehicle service company.
The success of any acquisition will depend upon the Company's ability to
introduce automation and management systems, to convert salaried chauffeurs
employed by the acquired businesses to independent operators and to integrate
the acquired business with the Company's existing operations. Customer
dissatisfaction or performance problems at a single acquired company could
have an adverse effect on the reputation of the Company and the Company's
sales and marketing initiatives. There can be no assurance that any businesses
acquired in the future will achieve anticipated revenues and earnings.
Further, acquisitions involve a number of special risks, including possible
adverse effects on the Company's operating results, diversion of management's
attention, failure to retain key personnel at an acquired company, risks
associated with unanticipated events or liabilities and amortization of
goodwill or other acquired intangible assets, some or all of which could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Acquisition Strategy."
7
<PAGE>
RISKS RELATED TO ACQUISITION FINANCING
The Company may choose to finance future acquisitions by using shares of its
Common Stock for a portion or all of the consideration to be paid. In the
event that the Common Stock does not maintain a sufficient market value, or
potential acquisition candidates are otherwise unwilling to accept Common
Stock as part of the consideration for the sale of their businesses, the
Company might not be able to utilize Common Stock as consideration for
acquisitions and would be required to utilize more of its cash resources, if
available, in order to maintain its acquisition program. If the Company does
not have sufficient cash resources, its growth could be limited unless it is
able to obtain additional capital through debt or equity financings. There can
be no assurance that such financing will be available if and when needed or on
terms acceptable to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
RISKS ASSOCIATED WITH RAPID GROWTH
As a result of the Manhattan Limousine acquisition, the continued
implementation of the Company's acquisition strategy and the expansion of the
Company's licensee network, the Company may experience rapid growth which
could place additional demands on the Company's administrative, operational
and financial resources. Managing future growth will depend on a number of
factors, including the maintenance of the quality of services the Company
provides to its customers, and the recruitment, motivation and retention of
qualified chauffeurs and other personnel. Sustaining growth will require
enhancements to the Company's operational and financial systems as well as
additional management, operational and financial resources. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth, and
any failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company believes that its future operating results may continue to be
subject to quarterly variations caused by such factors as seasonal business
travel, variable scheduling of special events and the timing of acquisitions
by the Company. The Company's least profitable quarter generally has been the
first quarter (ending February 28 or 29), and its most profitable quarter
generally has been the fourth quarter (ending November 30). The Company's
operating results may be subject to considerable fluctuations caused by
special events, such as business and trade association meetings and
conventions and sporting events with national or international participation,
which do not necessarily recur annually, may not be held at the same time of
year and may not always be located in a city in which the Company owns and
operates a chauffeured vehicle service company. In addition, adverse economic
conditions may impact the Company's operating results by reducing the overall
number of road shows and promotional tours. All of these factors can cause
significant fluctuations in quarterly results of operations. Accordingly,
results in any fiscal quarter may not be indicative of results of future
quarters. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Results of Operations."
RISKS ASSOCIATED WITH LICENSEE OPERATIONS
The Company has 38 licensees serving 106 cities in the United States and 24
licensees serving 105 cities outside the United States. Although a component
of the Company's strategy is to increase the number of licensees, there can be
no assurance that the Company will be able to attract qualified licensees in
desired locations. The failure of the Company to attract new licensees or the
failure of the Company's licensees to operate successfully could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the failure of one or more of the
Company's licensees to maintain the Company's service standards and conform to
the Carey system could have a material adverse effect on the reputation of the
Carey network and the Company's business, financial condition and results of
operations.
In addition, the Company is subject to federal regulation and certain state
laws which govern the offer and sale of franchises. Most state franchise laws
impose substantive requirements on the franchise agreement,
8
<PAGE>
including limitations on non-competition provisions and termination or non-
renewal of a franchise. Some states require that certain materials be
registered before franchises can be offered or sold in that state. Violations
of federal regulations and the state franchising laws could result in civil
penalties against the Company and civil and criminal penalties against the
executive officers of the Company. While the Company believes that it has
operated in compliance with federal and state franchise laws, no assurance can
be given that the Company will not be required to cease offering and selling
licenses in certain states because of future changes in franchise laws or the
Company's failure or inability to comply with existing franchise laws.
STATUS OF INDEPENDENT OPERATORS
The Company's ability to benefit from conversions of salaried chauffeurs to
independent operators will depend, in part, on the Company's continued ability
to classify independent operators as third party contractors rather than as
employees. The Company does not pay or withhold any federal or state
employment tax with respect to or on behalf of independent operators. The
Internal Revenue Service (the "IRS") previously challenged the Company's
independent operator policy at its owned and operated business in
Philadelphia, but in March 1997 agreed to settle the challenge without an
adjudication of a violation of IRS regulations. In September 1996, the IRS
proposed guidelines that chauffeured vehicle service providers such as the
Company can follow in order to treat independent operators as third party
contractors rather than as employees. These proposed guidelines distinguish a
third party contractor from an employee using several factors based upon
whether or not the individual, among other things, (i) invests cash in the
venture, (ii) has the potential to realize a profit or loss, (iii) can make
his or her service available to the public and (iv) is required to comply with
company policies regarding how and when to provide services. The Company
believes that its practices substantially conform to these proposed
guidelines, and that, as a result, its independent operators will be treated
as third party contractors. If, however, the Company's practices are
determined not to conform with the guidelines in the form in which they may be
adopted, or if it is adjudicated that the Company is required to treat
independent operators as employees, the Company could become responsible for
certain past and future employment taxes. There can be no assurance that, in
the event of such an adverse adjudication, there will not be a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Independent Operators."
INDEPENDENT OPERATOR FINANCING
An important component of the Company's business strategy for its owned and
operated companies involves the preferred use of independent operators instead
of salaried chauffeurs operating Company-owned vehicles. A chauffeur becomes
an independent operator by signing an agreement to pay a fee to the Company
ranging from $45,000 to $60,000. The payment of independent operator fees
historically has been financed by the Company, financing companies or banks.
Prior to September 1996, the Company usually sold to third parties the
independent operator notes initially financed by it. Since September 1996, the
Company has ceased selling such notes to third parties. Because the Company
now bears most of the risk relating to payment of these notes, significant
defaults in their payment could have a material adverse effect on the
Company's business, financial condition and results of operations. Each new
independent operator is required to own or obtain his or her vehicle. The cost
of a new vehicle ranges from $35,000 to $65,000, depending upon whether it is
a sedan or a limousine and the features included in the vehicle. The Company
generally does not finance vehicle purchases by its independent operators. As
a result, the ability of independent operators to obtain their own vehicles, a
requirement for conversions from salaried chauffeurs to independent operators,
will depend upon the availability of third party vehicle financing for
independent operators. The inability of independent operators to obtain
vehicle financing will adversely affect the Company's ability to utilize
independent operators, and would have a material adverse effect on the
Company's business, financial condition and results of operations. There can
be no assurance that such financing will be available if and when needed or on
terms acceptable to potential independent operators. See "Business--
Independent Operators."
POTENTIAL ADVERSE EFFECT OF LITIGATION
The Company, certain of its subsidiaries and certain of its officers and
directors currently are named as defendants in a complaint, purporting to be a
class action, alleging that the plaintiff and others similarly situated
9
<PAGE>
suffered monetary damages as a result of misrepresentations by the defendants
in their use of a surface transportation billing charge. While the Company
denies all claims made against it, it has reached a tentative settlement with
the plaintiff and plaintiff's counsel. The settlement is subject to court
approval and acceptance by the proposed class. There can be no assurance that
the proposed class will agree to, or that the court will approve, the
settlement. Moreover, there can be no assurance that claims under the terms of
this or any other settlement entered into by the Company will not adversely
affect the Company's business, financial condition and results of operations.
Defense of lawsuits against the Company generally can be expensive and time-
consuming, regardless of the outcome, and an adverse result in a lawsuit could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Legal Proceedings."
FACTORS AFFECTING TRAVEL
The Company is subject to risks generally affecting levels of business
travel, including economic cycles, political changes, terrorist threats or
acts and technological advances. The Company cannot predict the likelihood of
occurrence of any such events. If the occurrence of any such event
significantly reduces domestic or international travel, there could be a
material adverse effect on the Company's business, financial condition and
results of operations.
INSURANCE COVERAGE AND CLAIMS
The Company is exposed to claims for personal injury or death and property
damage as a result of automobile accidents involving chauffeured vehicles
operated by its employees and independent operators and by its licensees and
their drivers. The Company maintains, and the Company's independent operators
are required to maintain, levels of insurance which the Company believes to be
adequate. The Company's licensees are required to maintain adequate levels of
insurance and are required to name the Company as an additional insured on
their insurance policies. There can be no assurance, however, that the limits
and the scope of any such insurance coverage will be adequate. The cost of
maintaining personal injury, property damage and workers' compensation
insurance is significant. The Company and its independent operators and
licensees could experience higher insurance premiums as a result of adverse
claims experiences, general increases in premiums by insurance carriers or
both. Significant increases in such premiums could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Independent Operators" and "Business--Insurance."
DEPENDENCE ON KEY PERSONNEL
While the Company has numerous senior managers with many years of experience
in the chauffeured vehicle service industry, the Company's success is
dependent on the efforts, abilities and leadership of its executive officers,
particularly, Vincent A. Wolfington, the Company's Chairman and Chief
Executive Officer, and Don R. Dailey, the Company's President. The Company
currently does not have employment agreements with any of its executive
officers. The loss of the services of one or more of such officers could have
a material adverse effect on the Company's business, financial condition and
results of operations.
COMPETITION
The chauffeured vehicle service industry is highly competitive and
fragmented with few significant national participants operating multi-city
reservation systems. Each local market usually contains numerous local
participants as well as a few companies offering regional and national
service. Chauffeured vehicle service companies compete primarily on the basis
of price, quality, scope of service and dependability. The Company also
competes with service providers offering alternative modes of transportation,
such as buses, jitney services, taxis, radio cars and rental cars. The Company
competes both for customers and for possible acquisitions. The Company expects
its business to become more competitive as existing competitors expand and
additional companies enter the market. Certain of the Company's existing
competitors have, and any new competitors that enter the industry may have,
access to significantly greater financial resources than the Company.
Competitive market conditions could have a material adverse affect on the
Company's business, financial condition and results of operations. See
"Business--Competition."
10
<PAGE>
POSSIBLE FUTURE SALES OF SHARES
Sales of substantial amounts of Common Stock in the public market after this
offering under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise, or the perception that such sales could occur,
may adversely affect prevailing market prices of the Common Stock and could
impair the future ability of the Company to raise capital through an offering
of its equity securities or to use such securities as consideration in
acquisitions. Upon the completion of this offering, the holders of the
Company's securities who did not purchase Common Stock in this offering will
beneficially own 4,621,165 shares of Common Stock, including (i) an aggregate
of 1,162,320 shares issuable upon the exercise of outstanding options, warrants
and a convertible note and (ii) an aggregate of 200,000 shares issued in
connection with the acquisition of Manhattan Limousine (assuming an initial
public offering price of $12.00 per share), all of which will be "restricted
securities" within the meaning of the Securities Act. Subject to the
contractual lockup provisions discussed below and unless the resale of the
shares, or the sale of shares (in the case of employee benefit plan shares), is
registered under the Securities Act, these restricted shares may not be sold in
the open market unless in compliance with the applicable requirements of Rule
144. The Company and the beneficial owners of at least 4,000,000 of such shares
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock, for a period of 180 days after the date of this
Prospectus without the prior written consent of Montgomery Securities, except
for (i) in the case of the Company, Common Stock issued pursuant to any
employee benefit plans described herein or in connection with acquisitions and
(ii) in the case of the Company's directors and executive officers, the
exercise of stock options pursuant to benefit plans described herein and shares
of Common Stock disposed of as bona fide gifts, subject, in each case, to any
remaining portion of the 180-day period applying to any shares so issued or
transferred. In connection with future acquisitions, the Company may issue
shares of Common Stock which, if the Company also files a registration
statement under the Securities Act with respect to such shares, may be subject
to immediate resale, subject to any remaining portion of the 180-day period
applying to any shares so issued. See "Shares Eligible for Future Sale" and
"Underwriting."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation,
By-laws and Delaware law could, together or separately, discourage potential
acquisition proposals, delay or prevent a change in control of the Company and
limit the price that certain investors might be willing to pay in the future
for shares of the Common Stock. Those provisions, among other things, provide
for a classified Board of Directors, allow the Board of Directors to issue,
without further stockholder approval, up to 1,000,000 shares of preferred stock
with rights and privileges that could be senior to the Common Stock, prohibit
the stockholders from calling special meetings of stockholders, restrict the
ability of stockholders to nominate directors and submit proposals to be
considered at stockholders' meetings, impose a supermajority voting requirement
in connection with stockholders' amendments to the By-laws and prohibit
stockholders after this offering from acting by written consent in lieu of a
meeting. The Company also is subject to Section 203 of the Delaware General
Corporation Laws (the "DGCL") which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date on which such stockholder became an interested stockholder.
See "Description of Capital Stock."
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common Stock,
and there can be no assurance that an active public market for the Common Stock
will develop or continue after this offering. The initial public offering price
was determined by negotiations between the Company and the Representatives of
the Underwriters, and may not be indicative of the market price for the Common
Stock after this offering. See "Underwriting" for factors considered in
determining the initial public offering price. From time to time after this
offering, there may be significant volatility in the market price for the
Common Stock. Quarterly operating results of the Company, changes in general
conditions in the economy or the chauffeured vehicle service industry, or other
developments affecting the Company, its licensees and affiliates or the
Company's competitors
11
<PAGE>
could cause the market price of the Common Stock to fluctuate substantially.
The equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies'
securities and have been unrelated to the operating performance of those
companies. Any such fluctuations that occur following completion of this
offering may adversely affect the prevailing market price of the Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
shares of Common Stock in the amount of $11.55 per share. See "Dilution."
12
<PAGE>
ACQUISITION OF MANHATTAN LIMOUSINE
Simultaneously with the completion of this offering, the Company will
acquire Manhattan International Limousine Network Ltd. and an affiliated
company ("Manhattan Limousine") for aggregate consideration of $14.2 million,
composed of (i) $7.1 million in cash, (ii) $4.7 million in promissory notes
bearing interest at the rate of 8.0% per annum and payable one year from the
date of the acquisition, and (iii) 200,000 shares of Common Stock (assuming an
initial public offering price of $12.00 per share). In addition, the Company
will assume approximately $3.7 million of outstanding indebtedness of
Manhattan Limousine. If the acquisition of Manhattan Limousine is not
completed by May 20, 1997, the Company has agreed to pay additional purchase
price in the amount of $7,500 for each day after such date until the closing
of the acquisition, up to an aggregate of $675,000. Pursuant to the terms of
the acquisition, Manhattan Limousine will distribute to its stockholders prior
to the closing approximately $3.8 million in assets and $2.3 million in
liabilities. See Note 3 to "Pro Forma Consolidated Financial Statements."
Manhattan Limousine is one of the largest chauffeured vehicle service
companies in the New York metropolitan area, with revenues in its fiscal year
ended September 30, 1996 totalling approximately $18.4 million. Manhattan
Limousine also operates the Manhattan International Limousine Network of more
than 300 worldwide affiliates, a significant majority of which are located in
cities in which the Company already has affiliates. In some cities the Company
and Manhattan Limousine share common affiliates. Approximately 89.2% of
Manhattan Limousine's fiscal 1996 revenues was generated by Manhattan
Limousine's New York metropolitan operations, and approximately 10.8% was
generated by its affiliates outside the New York metropolitan area. See the
Manhattan Limousine Consolidated Financial Statements and related notes
thereto.
Manhattan Limousine's independent operators are responsible for a fleet
consisting of approximately 125 sedans and limousines. Manhattan Limousine
derives revenues from contracts with major airlines, including Virgin Atlantic
Airways and Aer Lingus, and with many of the premier hotels in New York City,
including the Plaza Hotel and the Mark Hotel, as well as from other corporate
and individual customers. Typically these contracts are terminable by the
airline or hotel upon 30 days' notice. In its fiscal year ended September 30,
1996, approximately 18.0% of Manhattan Limousine's revenues were derived from
services performed for Virgin Atlantic Airways, Manhattan Limousine's largest
customer.
RECAPITALIZATION
At or prior to the closing of this offering, the Company shall effect the
following transactions (collectively, the "Recapitalization"): (i) a one-for-
2.3255 reverse split of outstanding Common Stock; (ii) the conversion of all
of the 42,070 outstanding shares of the Company's Series A Preferred Stock
into the right to receive an aggregate of $2,103,500 and 86,003 shares of
Common Stock; (iii) the redemption of all 10,000 shares of the Company's
Series F Preferred Stock and 3,000 shares of the Company's Series G Preferred
Stock for an aggregate price of $1,000,000; (iv) the conversion of 9,580
shares of the Company's Series B Preferred Stock, 46,890 shares of the
Company's Series G Preferred Stock and the Company's Subordinated Convertible
Promissory Note dated September 1, 1991 in the principal amount of $2,000,000
into an aggregate of 1,857,524 shares of Common Stock; (v) the exercise of a
warrant to purchase 616,544 shares of Common Stock by the application of
$2,867,546 due the warrant holder under a subordinated promissory note, and
the repayment by the Company of the remaining outstanding principal balance of
$912,454 under such note; and (vi) the amendment of the Company's Certificate
of Incorporation to, among other things, (a) eliminate all previously-
designated series of Preferred Stock and the designation of Class A Common
Stock, and (b) increase the authorized number of shares of Common Stock from
9,512,950 to 20,000,000.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,900,000 shares of
Common Stock offered by it (assuming an initial public offering price of
$12.00 per share and after deducting estimated underwriting discounts and
commissions and offering expenses that have not yet been paid) are estimated
to be approximately $31.1 million (approximately $36.0 million if the
Underwriters' over-allotment option is exercised in full).
The Company will use approximately $8.5 million of the net proceeds to repay
principal with respect to certain indebtedness which was incurred to finance
certain of the Company's acquisitions and for working capital purposes. Such
indebtedness bears interest at rates ranging from 7.7% to 12.0%, has a
weighted average interest rate of 9.6% and matures at various dates through
March 1, 2001. Such indebtedness includes approximately $1.1 million in
principal to be repaid to Yerac Associates, L.P. ("Yerac") and approximately
$912,000 to be paid to PNC Capital Corp. ("PNC"). Vincent A. Wolfington, the
Company's Chairman of the Board and Chief Executive Officer, and Don R.
Dailey, President and a director of the Company, have personally guaranteed
$3.7 million of the Company's indebtedness which will be repaid from the net
proceeds of this offering. These personal guarantees will be terminated upon
the repayment of the underlying indebtedness. See "Certain Transactions."
The Company currently intends to use approximately $11.8 million of the net
proceeds of this offering to pay the cash and note portion of the purchase
price for the acquisition of Manhattan Limousine. The Company also will
utilize approximately $3.7 million of the net proceeds to repay certain
indebtedness assumed upon the acquisition of Manhattan Limousine.
Approximately $3.1 million of the net proceeds will be used by the Company
to redeem all outstanding shares of its Series A and Series F Preferred Stock
and certain shares of its Series G Preferred Stock in connection with the
Recapitalization. Of this amount, $1.1 million will be paid to entities
affiliated with Hambrecht & Quist Group in connection with the redemption of
22,000 shares of Series A Preferred Stock held by those entities, $1.0 million
will be paid to IBJS Capital Corporation in connection with the redemption of
its 10,000 shares of Series F and 3,000 shares of Series G Preferred Stock,
and $20,250 and $13,650, respectively, will be paid to each of Messrs.
Wolfington and Dailey in connection with the redemption of 405 shares and 273
shares of Series A Preferred Stock, respectively, beneficially owned by each
of them. See "Recapitalization" and "Certain Transactions."
The balance of the net proceeds from this offering, approximately $3.9
million, will be used for acquisitions and other general corporate purposes,
including working capital. Except for the acquisition of Manhattan Limousine,
the Company currently has no existing commitment or agreement with respect to
any acquisition. The Company regularly reviews potential acquisition
candidates and has held preliminary discussions with a number of such
candidates.
Pending such uses, the Company intends to invest the net proceeds in short-
term, investment grade securities.
14
<PAGE>
DILUTION
The deficit in the pro forma net tangible book value of the Company as of
February 28, 1997, after giving effect to the issuance of shares of Common
Stock as part of the Recapitalization, was approximately $7.4 million, or
$(2.32) per share. The deficit in net tangible book value is determined by
subtracting franchise rights, goodwill and all other intangible assets from
total stockholders' equity. After giving effect to (i) the sale by the Company
of 2,900,000 shares of Common Stock in this offering at an assumed initial
public offering price of $12.00 per share after deducting estimated
underwriting discounts and commissions and offering expenses, and (ii) the
acquisition of Manhattan Limousine, the pro forma net tangible book value at
February 28, 1997 would have been approximately $2.8 million, or $.45 per
share. This offering represents an immediate increase in net tangible book
value of $2.77 per share to the existing stockholders, and an immediate
dilution in net tangible book value per share of $11.55 to new investors in
this offering.
The following table illustrates the dilution on a per share basis, assuming
no exercise by the Underwriters of their over-allotment option:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $12.00
Deficit in pro forma net tangible book value before
offering................................................. $(2.32)
Increase in pro forma net tangible book value attributable
to sale of shares to new investors....................... 2.77
------
Pro forma net tangible book value after offering............ .45
------
Dilution to new investors................................... $11.55
======
</TABLE>
The following table sets forth, on a pro forma basis as of February 28,
1997, the number of shares of Common Stock acquired from the Company, the
total consideration paid and the average price per share paid by (i) the
Company's debt holders and preferred stockholders who are acquiring shares of
Common Stock in the Recapitalization and (ii) new investors for (a) the
2,900,000 shares of Common Stock offered hereby and (b) the 200,000 shares of
Common Stock that constitute a portion of the consideration for the
acquisition of Manhattan Limousine (see "Acquisition of Manhattan Limousine"):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Debt holders and preferred
stockholders............. 2,560,071 45.2% $ 4,867,548 11.6% $ 1.90
New investors............. 3,100,000 54.8 37,200,000 88.4 $12.00
--------- ----- ----------- -----
Total................... 5,660,071 100.0% $42,067,548 100.0%
========= ===== =========== =====
</TABLE>
15
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company (i) as of February 28, 1997 and (ii) on a pro forma basis to give
effect to (a) the Recapitalization, see "Recapitalization," (b) the issuance
and sale of the 2,900,000 shares of Common Stock offered hereby (at an assumed
offering price of $12.00 per share, after deducting estimated underwriting
discounts and commissions and offering expenses) and the application of the
net proceeds therefrom as described under "Use of Proceeds," and (c) the
acquisition of Manhattan Limousine, see "Acquisition of Manhattan Limousine."
This table should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
------------------
ACTUAL PRO FORMA
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current maturities of long-term
obligations............................................. $ 4,837 $ 1,159
======= =======
Long-term obligations, net of current maturities......... $11,327 $ 1,919
Stockholders' equity:
Preferred Stock (1)..................................... 1,115 --
Common Stock (2), $.01 par value; 9,512,950 shares
authorized, 655,773 shares issued and outstanding;
20,000,000 shares authorized, 6,315,844 shares issued
and outstanding on a pro forma basis................... 7 63
Paid-in-capital......................................... 7,357 43,344
Accumulated deficit..................................... (1,635) (1,734)
------- -------
Total stockholders' equity.............................. 6,844 41,673
------- -------
Total capitalization................................. $18,171 $43,592
======= =======
</TABLE>
- -------
(1) See Notes 10 and 18 to the Company's Consolidated Financial Statements.
(2) Excludes Class A Common Stock, $.01 par value, none of which is issued and
outstanding. The Class A Common Stock will be eliminated as a result of
the Recapitalization.
DIVIDEND POLICY
Following this offering, the Company intends to retain all earnings to
finance the growth and development of its business and does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. Any
future determination as to the payment of dividends on the Common Stock will
depend upon the Company's future earnings, results of operations, capital
requirements and financial condition and any other factor the Board of
Directors of the Company may consider. The Company's agreements with its
principal lenders prohibit dividend payments.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected actual consolidated financial data as of November 30, 1992,
1993, 1994, 1995 and 1996 and for each of the five years in the period ended
November 30, 1996 have been derived from the consolidated financial statements
of the Company audited by Coopers & Lybrand L.L.P., independent accountants.
The selected actual consolidated financial data as of and for the three months
ended February 29, 1996 and February 28, 1997 have been derived from the
unaudited consolidated financial statements of the Company. In the opinion of
management, the unaudited consolidated financial statements reflect all
adjustments, consisting only of normal, recurring adjustments, necessary to
present fairly the consolidated financial position and the consolidated
results of operations of the Company. The consolidated results of operations
for the three-month period ended February 28, 1997 are not necessarily
indicative of the consolidated results of operations to be expected for the
year ended November 30, 1997.
The selected actual and pro forma consolidated financial data of the Company
should be read in conjunction with the Company's Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30, THREE MONTHS ENDED
------------------------------------------------------------- ---------------------------------------
1992 1993 1994 1995 1996 FEB. 29, 1996 FEB. 28, 1997
------- ------- ------- ------- ------------------------- ------------- -------------------------
ACTUAL PRO FORMA(1) ACTUAL ACTUAL PRO FORMA(2)
--------- ------------ ------------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Revenue, net...... $27,669 $30,319 $35,525 $43,484 $59,505 $78,883 $11,558 $14,141 $19,613
Cost of revenue... 20,199 22,751 24,954 29,943 40,438 52,344 7,904 9,756 13,149
------- ------- ------- ------- --------- --------- ------- --------- ---------
Gross profit...... 7,470 7,568 10,571 13,541 19,067 26,539 3,654 4,385 6,464
Selling, general
and
administrative
expense.......... 5,939 8,174 9,487 12,419 15,078 21,042 3,361 3,819 5,466
------- ------- ------- ------- --------- --------- ------- --------- ---------
Operating income
(loss)........... 1,531 (606) 1,084 1,122 3,989 5,497 293 566 998
Interest income
(expense) and
other income
(expense)........ (819) (1,308) (1,194) (1,292) (1,277) 91 (340) (245) 109
------- ------- ------- ------- --------- --------- ------- --------- ---------
Income (loss)
before provision
(benefit) for
income taxes..... 712 (1,914) (110) (170) 2,712 5,588 (47) 321 1,107
Provision
(benefit) for
income taxes..... 53 10 19 25 (104) 2,364 11 154 465
------- ------- ------- ------- --------- --------- ------- --------- ---------
Net income
(loss)........... $ 659 $(1,924) $ (129) $ (195) $ 2,816 $ 3,224 $ (58) $ 167 $ 642
======= ======= ======= ======= ========= ========= ======= ========= =========
Pro forma net in-
come per share... $0.88(3) $0.52 $0.07(3) $0.10
========= ========= ========= =========
Weighted average
shares
outstanding...... 3,526,723(3) 6,216,322 3,535,229(3) 6,169,932
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28, 1997
----------------------------------------- ---------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(4)
------- ------- ------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital (defi-
cit).................. $ 1,740 $ 1,484 $ 1,298 $ (1,407) $(1,732) $(1,029) $ 3,162
Total assets........... 28,855 27,941 27,109 35,897 42,526 39,378 71,660
Long-term debt, less
current maturities.... 10,293 12,083 11,090 13,217 11,192 11,327 1,919
Deferred revenue(5).... 3,270 4,300 4,485 4,726 6,181 6,629 13,500
Total stockholders' eq-
uity.................. $ 5,843 $ 4,388 $ 4,165 $ 3,912 $ 6,672 $ 6,844 $41,673
</TABLE>
- -------
(1) Gives effect to the following events as if they had occurred on December
1, 1995: (i) the acquisition of Camelot Barthropp Ltd., completed February
1996, including the interest cost relating to indebtedness incurred in
connection with such acquisition, (ii) the acquisition of Manhattan
Limousine (using statement of operations data for Manhattan Limousine's
fiscal year ended September 30, 1996) and the amortization of associated
goodwill, (iii) the conversion of certain preferred stock and subordinated
debt into Common Stock, see "Recapitalization", (iv) the issuance of
shares of Common Stock to (a) repay certain existing debt of the Company,
(b) pay the cash and note portions of the purchase price for Manhattan
Limousine, (c) repay certain debt assumed in connection with the
acquisition of Manhattan Limousine, (d) redeem certain preferred stock of
the Company and (e) pay the stock portion of the purchase price in
connection with the acquisition of Manhattan Limousine, (v) the
elimination of interest expense associated with debt repaid from the
proceeds of this offering and (vi) other adjustments as described under
"Pro Forma Consolidated Financial Statements" and the notes thereto.
(2) Gives effect to the events set forth in clauses (ii) through (vi) of note
(1) above as if they had occurred on December 1, 1995, except that, with
respect to clause (ii), the statement of operations data is for Manhattan
Limousine's three months ended December 31, 1996.
(3) Gives effect to the conversion of certain preferred stock and subordinated
debt into Common Stock and the elimination of associated interest expense
on the subordinated debt as a result of the Recapitalization. See Notes 2
and 18 to the Company's Consolidated Financial Statements.
(4) Reflects (i) the Recapitalization, see "Recapitalization," (ii) the
acquisition of Manhattan Limousine, see "Acquisition of Manhattan
Limousine," and (iii) the issuance and sale of the 2,900,000 shares of
Common Stock offered hereby (at an assumed offering price of $12.00 per
share less estimated underwriting discounts and commissions and offering
expenses) and the application of the net proceeds therefrom as described
under "Use of Proceeds."
(5) Represents the balance of the fees deferred in connection with independent
operator agreements less amounts previously recognized. Such fees are
recognized ratably over the terms of the agreements, which typically range
from 10 to 20 years. See the Notes to the Company's Consolidated Financial
Statements.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto and "Selected Consolidated
Financial Data" appearing elsewhere in this Prospectus. Unless otherwise
indicated or the context otherwise requires, each reference to a year is to
the Company's fiscal year which ends on November 30 of such year.
OVERVIEW
The Company generates revenues primarily from chauffeured vehicle services
provided by (i) Carey's owned and operated businesses and (ii) Carey's
licensees and affiliates when services provided by such licensees and
affiliates are billed through the Company's central reservation and billing
system. In 1995 and 1996, approximately 74.7% and 73.6%, respectively, of the
Company's revenue, net was generated by chauffeured vehicle services provided
by the Company's owned and operated businesses, approximately 16.3% and 15.6%,
respectively, was generated by chauffeured vehicle services provided by the
Company's licensees and billed by the Company, and approximately 2.5% and
2.0%, respectively, was generated by chauffeured vehicle services provided by
the Company's affiliates and billed by the Company. Carey also generates
revenues from its licensees through fees (both initial and monthly) related to
(i) licensing the use of its name and service mark, (ii) its central
reservation and billing services and (iii) its marketing activities. In 1995
and 1996, approximately 2.7% and 3.2%, respectively, of the Company's revenue,
net was generated from its licensees through such fees. To a lesser extent,
the Company derives revenues from the payment of fees by independent
operators. The Company recognizes revenues from these fees ratably over the
terms of the independent operators' agreements with the Company, which
typically range from 10 to 20 years. As of February 28, 1997, the Company had
$6.6 million of deferred revenue on its balance sheet ($13.5 million on a pro
forma basis reflecting the acquisition of Manhattan Limousine).
Cost of revenue primarily consists of amounts due to the Company's
independent operators. The amount due to independent operators is a percentage
(ranging from 60% to 65%) of the charges for services provided, net of
discounts and commissions. Cost of revenue also includes amounts due to the
Company's licensees and affiliates for chauffeured vehicle services provided
by them and billed by the Company. Such amounts generally include the charges
for services provided less a referral fee ranging from 15% to 25% of net
vehicle service revenue. Cost of revenue also includes salaries and benefits
paid to chauffeurs employed by the Company. To a lesser extent, cost of
revenue includes costs associated with owning and maintaining the vehicles
owned by the Company, telecommunications expenses, salaries and benefits for
reservationists, marketing expenses for the benefit of licensees, and
commissions due to travel agents and credit card companies.
Selling, general and administrative expenses consist primarily of
compensation and related benefits for the Company's officers and
administrative personnel, marketing and promotional expenses for the Company's
owned and operated chauffeured vehicle service companies, and professional
fees, as well as amortization costs related to the intangibles recorded as a
result of the Company's acquisitions.
In addition to internal growth from the Company's sales and marketing
efforts, an important component in the Company's growth to date has been the
acquisition of its licensees and other chauffeured vehicle service companies.
Since December 1994, Carey has acquired eight chauffeured vehicle service
companies. Each of these acquisitions was made for cash and the issuance or
assumption of notes and was accounted for using the purchase method of
accounting. A substantial majority of the purchase price paid by the Company
in each such acquisition represented goodwill, franchise rights (if a licensee
was acquired) and/or other intangibles. Such franchise rights and goodwill are
amortized over 30 years on a straight-line basis and amounted to $12.5 million
(net of accumulated amortization) as of February 28, 1997. As a result of the
acquisition of Manhattan Limousine, the Company will recognize an additional
$19.7 million of goodwill.
18
<PAGE>
The results of operations for the acquired companies have been included in
the Company's consolidated financial statements from their respective dates of
acquisition. Carey expects to benefit from its acquisitions by consolidating
general and administrative functions, increasing operating efficiencies, and,
as a result of converting salaried chauffeurs to independent operators,
eliminating the overhead and capital costs associated with employing salaried
chauffeurs, leasing garages, maintaining parts and fuel inventories, and
owning and operating vehicles. The Company generally realizes these benefits
within six to twelve months after an acquisition, depending upon whether the
acquisition is of a chauffeured vehicle service company in a location in which
the Company already operates, or of a licensee in a market where Carey has yet
to establish operations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data for the Company expressed as a percentage of revenue, net. With respect
to the pro forma data, see "Pro Forma Consolidated Financial Statements" and
the notes thereto.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30, THREE MONTHS ENDED
------------------------------------- -----------------------------
1994 1995 1996 FEB. 29, 1996 FEB. 28, 1997
------- ------- ----------------- ------------- ---------------
PRO PRO
ACTUAL FORMA ACTUAL ACTUAL FORMA
-------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 70.2 68.9 68.0 66.3 68.4 69.0 67.0
------- ------- ------- ------- ----- ------ ------
Gross profit............ 29.8 31.1 32.0 33.7 31.6 31.0 33.0
Selling, general and
administrative
expense................ 26.7 28.6 25.3 26.7 29.1 27.0 27.9
------- ------- ------- ------- ----- ------ ------
Operating income........ 3.1 2.5 6.7 7.0 2.5 4.0 5.1
Interest expense and
other income
(expense).............. (3.4) (3.0) (2.1) 0.1 2.9 (1.7) 0.5
------- ------- ------- ------- ----- ------ ------
Income (loss) before
provision (benefit) for
income taxes........... (0.3) (0.5) 4.6 7.1 (0.4) 2.3 5.6
Provision (benefit) for
income taxes........... 0.1 -- (0.2) 3.0 0.1 1.1 2.3
------- ------- ------- ------- ----- ------ ------
Net income (loss)....... (0.4)% (0.5)% 4.8% 4.1% (0.5)% 1.2% 3.3%
======= ======= ======= ======= ===== ====== ======
</TABLE>
THREE MONTHS ENDED FEBRUARY 28, 1997 (THE "1997 PERIOD") COMPARED TO THREE
MONTHS ENDED FEBRUARY 29, 1996 (THE "1996 PERIOD")
Revenue, Net. Revenue, net increased approximately $2.5 million or 22.4%
from $11.6 million in the 1996 Period to $14.1 million in the 1997 Period. Of
the increase, approximately $1.6 million was contributed by existing
operations as a result of expanded use of the Carey network, including an
increase in business from corporate travel customers and business travel
arrangers, and approximately $930,000 was due to revenues of the Company's
operations in London which were not included in the 1996 Period.
Cost of Revenue. Cost of revenue increased approximately $1.9 million or
23.4% from $7.9 million in the 1996 Period to $9.8 million in the 1997 Period.
The increase was primarily attributable to higher costs due to increased
business levels. Cost of revenue increased as a percentage of revenue, net
from 68.4% in the 1996 Period to 69.0% in the 1997 Period primarily as a
result of seasonally higher operating costs as a percentage of revenues in the
Company's London operations for the 1997 Period.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased approximately $459,000 or 13.6% from $3.4
million in the 1996 Period to $3.8 million in the 1997 Period. The increase
was largely due to the costs of additional personnel, increased marketing
expenses and increased
19
<PAGE>
administrative expenses as a result of the Company's acquisition in London in
February 1996. Selling, general and administrative expense decreased as a
percentage of revenue, net from 29.1% in the 1996 Period to 27.0% in the 1997
Period as a result of an increase in revenue, net without a corresponding
increase in administrative costs.
Interest Expense. Interest expense was approximately $422,000 in the 1996
Period and approximately $392,000 in the 1997 Period. Interest expense
decreased as a percentage of revenue, net from 3.7% in the 1996 Period to 2.8%
in the 1997 Period.
Provision For Income Taxes. The provision for income taxes increased
approximately $142,000 from approximately $12,000 in the 1996 Period to
approximately $153,000 in the 1997 Period. The increase primarily related to
the increase in pre-tax income of the Company from a pre-tax loss of
approximately $46,000 in the 1996 Period to pre-tax income of approximately
$321,000 in the 1997 Period.
Net Income (Loss). As a result of the foregoing, the Company had net income
of approximately $167,000 in the 1997 Period compared to a net loss of
approximately $58,000 in the 1996 Period.
YEAR ENDED NOVEMBER 30, 1996 COMPARED TO YEAR ENDED NOVEMBER 30, 1995
Revenue, Net. Revenue, net increased approximately $16.0 million or 36.8%
from $43.5 million in 1995 to $59.5 million in 1996. Of the increase,
approximately $9.6 million was contributed by existing operations as a result
of expanded use of the Carey network, including an increase in business from
corporate travel customers and business travel arrangers, and approximately
$6.4 million was due to revenues of companies which were acquired from
December 1994 through February 1996.
Cost of Revenue. Cost of revenue increased approximately $10.5 million or
35.1% from $29.9 million in 1995 to $40.4 million in 1996. The increase was
primarily attributable to higher costs due to increased business levels. Cost
of revenue decreased as a percentage of revenue, net from 68.9% in 1995 to
68.0% in 1996 as a result of spreading the fixed costs of the Company's
reservations infrastructure over a larger revenue base.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased approximately $2.7 million or 21.4% from
$12.4 million in 1995 to $15.1 million in 1996. The increase was largely due
to higher administrative costs associated with additional personnel, increased
marketing and promotional expenses, and higher amortization of intangibles as
a result of acquisitions. Selling, general and administrative expenses
decreased as a percentage of revenue, net from 28.6% in 1995 to 25.3% in 1996
as a result of an increase in revenue without a corresponding increase in
administrative costs.
Interest Expense. Interest expense was $1.7 million in each of 1995 and
1996. Interest expense decreased as a percentage of revenue, net from 3.0% in
1995 to 2.1% in 1996.
Provision (Benefit) for Income Taxes. The provision for income taxes was
nominal in 1995. In 1996, the Company had a tax benefit of $104,000. Prior to
1996, the Company recorded a valuation allowance against its net deferred tax
assets. This allowance was reversed in 1996 in accordance with generally
accepted accounting principles. The reversal reduced the provision for income
taxes in 1996 by approximately $1.5 million. The increase in the provision
recordable in 1996, which was offset by the effect of reducing the valuation
allowance against deferred tax assets, was attributable to the Company's
increased pretax profit level in 1996 which exceeded the beneficial tax effect
of net operating loss carryforwards of prior years. The Company has utilized
the full amount of its net operating loss carryforwards.
Net Income (Loss). As a result of the foregoing, the Company had net income
of $2.8 million in 1996 compared to a net loss of approximately $195,000 in
1995.
20
<PAGE>
YEAR ENDED NOVEMBER 30, 1995 COMPARED TO YEAR ENDED NOVEMBER 30, 1994
Revenue, Net. Revenue, net increased approximately $8.0 million or 22.4%
from $35.5 million in 1994 to $43.5 million in 1995. Of the increase,
approximately $4.7 million was due to revenues of companies acquired from
December 1994 through August 1995, as well as the full year effect in 1995 of
companies acquired in 1994. Approximately $3.3 million of the increase was
contributed by existing operations as a result of an increase in business from
corporate travel customers, business travel arrangers, special event business,
and the implementation in mid-1995 of charges to licensees for central
reservation and billing services.
Cost of Revenue. Cost of revenue increased approximately $4.9 million or
20.0% from $25.0 million in 1994 to $29.9 million in 1995. The increase was
primarily attributable to higher operating costs due to increased business
levels and to operating costs related to acquired companies. Cost of revenue
decreased as a percentage of revenue, net from 70.2% in 1994 to 68.9% in 1995
as a result of increased utilization of the Company's operating resources and
the implementation, in mid-1995, of charges to licensees for central
reservation and billing services which did not result in a corresponding
increase in cost.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased approximately $2.9 million or 30.9% from
$9.5 million in 1994 to $12.4 million in 1995. This increase was largely due
to higher costs associated with additional personnel, increased marketing and
promotional expense, and the increase in the amortization of intangibles
recorded as a result of acquisitions. Selling, general and administrative
expenses increased as a percentage of revenue, net from 26.7% in 1994 to 28.6%
in 1995 as a result of relatively higher levels of administrative costs in
existing operations and additional expenses related to companies acquired late
in 1995 whose operations were not consolidated with the Company's operations
until 1996.
Interest Expense. Interest expense increased approximately $334,000 or 24.8%
from approximately $1.4 million in 1994 to $1.7 million in 1995. This increase
was due to net increases in debt in 1995 to fund acquisitions. Interest
expense as a percentage of revenue, net increased slightly from 3.8% in 1994
to 3.9% in 1995.
Provision for Income Taxes. The provision for income taxes was nominal in
1994 and in 1995.
Net Loss. As a result of the foregoing, the Company had a net loss of
approximately $195,000 in 1995 compared to a net loss of approximately
$129,000 in 1994.
21
<PAGE>
QUARTERLY RESULTS
The following table presents unaudited quarterly financial information for
1995, 1996 and the first quarter of 1997. This information has been prepared
by the Company on a basis consistent with the Company's audited financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) which management considers necessary for a fair presentation of
the results for such quarters.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------
1995 1996 1997
----------------------------------- ---------------------------------- -------
FEB. MAY AUG. NOV. FEB. MAY AUG. NOV. FEB.
28 31 31 30 29 31 31 30 28
------ ------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ $8,333 $10,320 $10,235 $14,596 $11,558 $15,043 $14,575 $18,330 $14,141
Gross profit............ 2,647 3,113 2,980 4,800 3,654 4,835 4,737 5,841 4,385
Operating income
(loss)................. (101) 235 (216) 1,204 293 1,037 987 1,673 566
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------
1995 1996 1997
----------------------------------- ---------------------------------- -------
FEB. MAY AUG. NOV. FEB. MAY AUG. NOV. FEB.
28 31 31 30 29 31 31 30 28
------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............ 31.8 30.2 29.1 32.9 31.6 32.1 32.5 31.9 31.0
Operating income
(loss)................. (1.3)% 2.2% (2.1)% 8.2% 2.5% 6.8% 6.7% 9.1% 4.0%
</TABLE>
The Company believes that its future operating results may continue to be
subject to quarterly variations caused by such factors as seasonal business
travel, variable scheduling of special events and the timing of acquisitions
by the Company. The Company's least profitable quarter generally has been the
first quarter (ending February 28 or 29), and its most profitable quarter
generally has been the fourth quarter (ending November 30).
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funding have been cash flow from
operations, proceeds from the bulk sale of independent operator notes,
commercial bank credit facilities, notes issued by the Company to sellers of
acquired chauffeured vehicle service companies and, to a lesser extent, the
sale of vehicles obtained from acquired companies. For the period from
December 1, 1993 through February 28, 1997, the Company generated $7.6 million
in cash from operating activities, had aggregate borrowings to fund
acquisitions of $6.5 million and had proceeds from bulk sales of notes from
independent operators of approximately $2.6 million. The Company anticipates
that in addition to the net proceeds from this offering, cash flow from
operations and borrowings under credit facilities will be its principal
sources of funding. The Company has discontinued its practice of selling notes
received from independent operators.
The Company's principal uses of cash have been, and will continue to be, the
funding of acquisitions, repayment of debt, and investment in both its
centralized reservation facility and its automated operation and information
systems.
Net cash used in operating activities increased from approximately $304,000
in the 1996 Period to approximately $364,000 in the 1997 Period. Net cash
provided by operating activities increased by $1.9 million, from $2.7 million
in 1995 to $4.6 million in 1996, primarily as a result of an increase in
operating income, as adjusted for depreciation and amortization of fixed
assets, franchise rights and goodwill from acquired operations. Net cash
provided by operating activities increased by approximately $2.0 million, from
approximately $701,000 in 1994 to $2.7 million in 1995, primarily as a result
of the timing of payments to independent operators and as a result of its
acquisition activities and internal growth. As of February 28, 1997, the
Company's working capital deficit and current ratio were approximately $1.0
million and 0.92, respectively, as a result of the high level of short-term
debt generated from the Company's practice of borrowing against its cash flow
rather than its assets, many of which are intangible in nature. The Company
may continue to experience working capital deficits as a result of short-term
borrowings to finance its acquisition strategy.
22
<PAGE>
Cash used in investing activities was approximately $988,000 in the 1996
Period compared to cash provided by investing activities of approximately
$94,000 in the 1997 Period. Cash was used in the 1996 Period to acquire
operations in London, whereas relatively little acquisition activity occurred
in the 1997 Period. Cash used in investing activities decreased by $2.1
million, from $4.1 million in 1995 to $2.0 million in 1996. Cash was used in
investing activities in 1995 and 1996 primarily for the acquisition of
chauffeured vehicle service companies. In 1994, relatively little acquisition
activity occurred and cash for investment purposes of approximately $388,000
was used primarily for capital expenditures. In all periods, funds used for
acquisitions and capital expenditures were offset in part by proceeds from the
sale of fixed assets, primarily vehicles acquired in connection with the
purchase of chauffeured vehicle service businesses.
Cash provided by financing activities was approximately $87,000 in the 1996
Period compared to cash used in financing activities of $1.0 million in the
1997 Period, primarily as a result of the net payment of notes payable during
the 1997 Period. Cash provided by financing activities was $1.4 million in
1995, compared to cash used in financing activities of $1.2 million in 1996,
primarily as a result of net repayment of notes payable in 1996. Cash used in
financing activities was $1.3 million in 1994, primarily as a result of
repaying notes payable.
At February 28, 1997, the Company had borrowings, exclusive of notes payable
to sellers of chauffeured vehicle service companies, in the amount of
approximately $14.0 million. This debt was composed of (i) a $3.7 million term
loan collateralized by the stock of the Company's United States subsidiaries,
(ii) a $1.1 million term loan collateralized by an assignment of the Carey
name and service mark and license agreements related thereto, (iii) $5.8
million in subordinated debt and (iv) $3.4 million in debt to commercial
banks, which debt is typically collateralized by a subsidiary's accounts
receivable and other assets. Of the Company's total debt at February 28, 1997,
approximately $8.5 million will be repaid from the net proceeds of this
offering. See "Use of Proceeds." As part of the Recapitalization, a further
$4.9 million of the debt will be converted to Common Stock of the Company,
approximately $1.3 million of the Company's Series G and Series F Preferred
Stock will be redeemed for cash in the amount of $1.0 million, and all
outstanding shares of the Company's Series A Preferred Stock will be redeemed
for $2.1 million in cash and 86,003 shares of Common Stock. All payments as a
result of the Recapitalization will be made from the proceeds of this
offering. See "Recapitalization."
The Company has received a commitment letter from a bank for a credit
facility consisting of a secured revolving line of credit and subsequent term
loan of $20.0 million. The bank has agreed to use its best efforts to
syndicate an additional $5.0 million for the facility. The facility, which may
be used for acquisitions and working capital, will be collateralized by the
assets of the Company and its existing and future subsidiaries. Loans made
under the revolving line of credit shall bear interest at the Company's option
of either the bank's prime lending rate or 2.0% above the LIBOR rate.
Commitment fees equal to 0.5% per annum will be payable on the unused portion
of the revolving line of credit. On the second anniversary of the closing of
this offering, the revolving line of credit will convert into a five-year term
loan, which loan will bear interest either at a fixed rate (subject to
availability) or at a variable LIBOR rate with adjustments determined based on
the Company's earnings. The credit facility (i) will prohibit the payment of
dividends by the Company, (ii) will not permit the Company to incur or assume
other indebtedness that is not subordinated to the bank and (iii) will require
the Company to comply with certain financial covenants. The ability of the
Company to obtain the credit facility is subject to the completion of
negotiations with the bank as well as the satisfaction of certain conditions,
including the closing of this offering and the execution of appropriate loan
documentation. In the event that the Company is unable to obtain the credit
facility, the Company believes that sufficient alternative sources of
financing will be available on reasonable terms.
While there can be no assurance, management believes that cash flow from
operations, funds from the credit facility and the net proceeds to the Company
from this offering will be adequate to meet the Company's capital
requirements for the next 12 months, depending on the methods of financing and
size of potential acquisitions. While the Company historically has financed
acquisitions primarily with cash, it may seek to finance future acquisitions
by using Common Stock for a portion or all of the consideration to be paid.
23
<PAGE>
IMPACT OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation and foreign currency fluctuation
has had, or will have, a material impact on the financial position and results
of operation.
24
<PAGE>
BUSINESS
Carey International, Inc. is one of the world's largest chauffeured vehicle
service companies, providing services through a worldwide network of owned and
operated companies, licensees and affiliates serving 420 cities in 65
countries. The "Carey" brand name has represented quality chauffeured vehicle
services since the 1920s. The Company owns and operates its service providers
in New York, San Francisco, Los Angeles, London, Washington D.C., South
Florida and Philadelphia. In addition, the Company generates revenues from
licensing the "Carey" name and providing central reservation, billing and
sales and marketing services to its licensees. The Company's worldwide network
also includes affiliates in locations in which the Company has neither owned
and operated companies nor licensees. Over the past five years, the Company
has invested significant capital in developing its reservation, central
billing and worldwide service infrastructure. By leveraging its current
infrastructure and position as a market leader, the Company intends to
consolidate the highly fragmented chauffeured vehicle service industry through
the acquisition of: (i) current Carey licensees, (ii) additional companies in
markets in which the Company already owns and operates a chauffeured vehicle
service company, and (iii) companies in other strategic markets in North
America, Europe and the Pacific rim of Asia.
The Carey network utilizes chauffeured sedans, limousines, vans and
minibuses to provide services for airport pick-ups and drop-offs, inter-office
transfers, business and association meetings, conventions, roadshows,
promotional tours, special events, incentive travel and leisure travel.
Businesses and business travelers utilize the Company's services primarily as
a management tool, to achieve more efficient use of time and other resources.
Carey's worldwide network of chauffeured vehicle service companies allows it
to provide services with consistently high quality to its customers in
virtually every major city in the expanding global travel market. The network
is linked to over 300,000 reservation terminals in travel agencies, corporate
travel departments and government agencies by the Carey International
Reservation System (the "CIRS"), the chauffeured vehicle service industry's
most extensive centralized global reservation system.
MARKET OVERVIEW
The Company estimates that the United States chauffeured vehicle service
industry generated revenues of approximately $3.9 billion in 1996, and has
undergone steady growth in recent years, with revenues increasing at a
compound annual growth rate of 10.9% between 1990 and 1996. The industry is
highly fragmented, with approximately 9,000 companies utilizing over 100,000
vehicles. The Company believes that during 1996 no chauffeured vehicle service
company accounted for more than 2% of total United States industry revenues.
The Company also believes that similar fragmentation exists in the chauffeured
vehicle service industry outside the United States.
The chauffeured vehicle service industry serves businesses in virtually all
industrial and financial sectors of the economy. The Company believes that
business customers are becoming increasingly sophisticated in their use of
ground vehicle services and are demanding a broader array of "meet-and-greet"
and other services, as well as business amenities such as cellular phones.
Although there are other forms of transportation that compete with chauffeured
vehicles, such as buses, jitney services, taxis, radio cars and rental cars,
the Company believes that none of those forms of transportation provides the
quality, dependability and value-added services of chauffeur-driven vehicles.
The Company also believes that businesses place a premium on service providers
that are able to coordinate the travel itinerary of each member of a large
group over many locations with a single reservation and billing system.
25
<PAGE>
BUSINESS STRATEGY
The Company's objective is to increase its profitability and its market
share in the chauffeured vehicle service industry by implementing the
following growth strategies:
Expand through Acquisitions. Carey believes that there are significant
opportunities to acquire additional chauffeured vehicle service companies
that would benefit from the capital and management resources that the
Company can provide. Carey intends to acquire current Carey licensees, as
well as additional chauffeured vehicle service companies both in markets in
which the Company already owns and operates such a company and in other
strategic regions in North America, Europe and the Pacific rim of Asia.
Carey believes it has a competitive advantage in acquiring licensees
because of a right of first refusal contained in a substantial majority of
its domestic license agreements. The Company has successfully begun to
implement its acquisition strategy, having acquired 15 chauffeured vehicle
service companies since November 1991. Upon the closing of this offering,
the Company will acquire Manhattan Limousine, one of the largest
chauffeured vehicle service companies in the New York metropolitan area and
the operator of the Manhattan International Limousine Network.
Increase International Market Share. Approximately 12.8% of the Company's
revenue, net was derived from services performed outside the United States
during its fiscal year ended November 30, 1996. Of these international
revenues, approximately 60.8% was generated by the Company's owned and
operated business in London, approximately 38.1% was generated by the
Company's international licensees and the remainder was generated by the
Company's international affiliates. Carey believes that its network can
capture a significant portion of the growing international market for
chauffeured vehicle services by acquiring or licensing additional
chauffeured vehicle service companies and otherwise implementing the Carey
system outside the United States. The Company intends to increase its
international presence by intensifying its sales and marketing efforts,
strengthening its relationships with significant domestic and international
business travel arrangers, and capitalizing on the capacity of the CIRS to
operate on a global scale. By enhancing its international presence, the
Company also expects to increase its revenues from providing chauffeured
vehicle services to international travelers both visiting the United States
and travelling abroad.
Expand Licensee Network Worldwide. The Company will seek to expand its
worldwide network and generate additional revenues from license and
marketing fees by licensing additional chauffeured vehicle service
companies in smaller markets that do not justify a Company-owned presence.
Ultimately, as these less strategic markets grow in size and importance to
the Company, the licensees in such markets may become acquisition
candidates for the Company.
Convert Salaried Chauffeurs to Independent Operators. The Company
believes that it can improve its profitability by continuing to convert
salaried chauffeurs to independent operators in businesses acquired by
Carey. The objective of Carey's independent operator strategy is to instill
in each chauffeur the sense of purpose, responsibility and dedication
characteristic of an independent business owner, thereby increasing the
profitability of the chauffeur and the Company. Carey's independent
operator program allows the Company to reduce its labor and capital costs,
convert fixed costs to variable costs and generate revenues from fees paid
by independent operators.
ACQUISITION STRATEGY
Carey believes that there are significant opportunities to acquire
additional chauffeured vehicle service companies as a result of: (i) the
highly fragmented and increasingly global nature of the industry, (ii)
industry participants' capital requirements and desire for liquidity, and
(iii) the pressures of increasing competition. The Company intends to continue
to pursue its acquisition program in order to strengthen its position in its
existing markets and to acquire operations in new markets.
Carey intends to pursue acquisitions that will allow the Company to own and
operate chauffeured vehicle service companies in new geographic markets. The
Company currently owns and operates chauffeured vehicle
26
<PAGE>
service companies in six of the largest United States travel markets and in
London, the largest European travel market, and will seek to acquire Carey
licensees in other significant travel markets in North America, Europe, and
the Pacific rim of Asia. The Company believes that its ability to acquire its
licensees will be enhanced by a right of first refusal that is contained in a
substantial majority of its domestic license agreements and the limited terms
of most of its international license agreements. The Company's preference is
to retain key management, operating and sales personnel of an acquired company
in a new market in order to maintain continuity of operations and customer
service.
The Company believes that it has a market share of less than 10% in each of
the markets in which it owns and operates a chauffeured vehicle service
company, and that there is significant potential for it to expand its business
in such markets through acquisitions. When justified by the size of an
existing market acquisition, the Company expects to retain key management and
sales personnel of the acquired company and to seek to improve that company's
profitability through implementation of the Company's operating strategies. In
most instances, acquired operations can be integrated into the Company's
existing operations in a market, resulting in elimination of duplicative
overhead and operating costs.
The Company believes that there are significant advantages to consolidating
the chauffeured vehicle service industry. Carey believes it can increase
revenues of acquired companies by marketing the worldwide services of its
network to customers of such companies, and by increasing the productivity of
chauffeurs at the acquired companies through the implementation of training
and quality assurance programs. Moreover, Carey believes that cost savings can
be achieved following acquisitions through (i) the consolidation of certain
administrative functions and increased use of automation, (ii) the elimination
of redundant facilities, equipment and personnel and (iii) the conversion of
salaried chauffeurs driving company-owned vehicles into independent operators
driving their own vehicles.
Carey has successfully begun its acquisition strategy, having acquired 15
chauffeured vehicle service companies since November 1991. The following table
lists the date of acquisition, location of each such chauffeured vehicle
service company and whether the acquired company was a licensee or affiliate
of the Company or other chauffeured vehicle service company:
ACQUISITION HISTORY
NOVEMBER 1991--PRESENT
<TABLE>
<CAPTION>
DATE LOCATION ACQUIRED COMPANY
---- -------- ----------------
<S> <C> <C>
November 1991................... Washington, DC Other
September 1992.................. Los Angeles, CA Other
August 1993..................... Wilmington, DE Licensee
September 1993.................. West Palm Beach, FL Licensee
November 1993................... New York, NY Other
June 1994....................... Washington, DC Other
June 1994....................... Los Angeles, CA Other
December 1994................... Boca Raton, FL Other
January 1995.................... San Francisco, CA Licensee
April 1995...................... Washington, DC Other
April 1995...................... Ft. Lauderdale/Miami, FL Licensee
May 1995........................ San Francisco, CA Other
August 1995..................... San Francisco, CA Other
August 1995..................... Boca Raton, FL Other
February 1996................... London, England Affiliate(/1/)
May 1997(/2/)................... New York, NY Other
</TABLE>
- --------
(1) Prior to the acquisition, the Company had no licensee in London.
(2) The acquisition will be completed upon the closing of this offering. See
"Acquisition of Manhattan Limousine."
27
<PAGE>
The Company has analyzed significant data on the chauffeured vehicle service
industry and individual businesses within that industry and believes that it
is well positioned to further implement its acquisition program following this
offering. The Company believes that management's lengthy tenure with the
Company, extensive experience in the chauffeured vehicle service industry and
relationships with acquisition candidates provide the Company with significant
knowledge that will assist the Company in its attempts to acquire licensees of
the Company and other chauffeured vehicle service companies. The Company
regularly reviews various strategic acquisition opportunities and periodically
engages in discussions regarding such possible acquisitions. Currently, other
than with respect to the acquisition of Manhattan Limousine, the Company is
not a party to any agreements regarding any material acquisitions; however, as
the result of the Company's process of regularly reviewing acquisition
prospects, negotiations and such acquisition agreements may occur from time to
time if appropriate opportunities arise.
The acquisition of Manhattan Limousine is intended to solidify the Company's
presence in the New York metropolitan area and diversify its customer base. In
particular, the Company intends to capitalize on Manhattan Limousine's
contracts with many New York-based participants in the airline and hotel
industries, including airlines such as Virgin Atlantic Airways and Aer Lingus,
and hotels such as the Plaza Hotel and the Mark Hotel. Typically these
arrangements are terminable by the airline or hotel upon 30 days' notice.
During its fiscal year ended September 30, 1996, approximately 18.0% of
Manhattan Limousine's revenues were derived from services performed for Virgin
Atlantic Airways. While the Company intends to consolidate certain
administrative operations of Manhattan Limousine with its own and to eliminate
redundant facilities, equipment and personnel, Manhattan Limousine otherwise
will retain its separate identity for at least 12 months following the
consummation of the acquisition.
Manhattan Limousine provides services solely through independent operators
rather than salaried chauffeurs. As a result, Carey will not be able to
realize the benefits of converting salaried chauffeurs into independent
operators following the acquisition. See "--Independent Operators." Manhattan
Limousine's network is composed of approximately 300 affiliates from which
Manhattan Limousine receives fees for referred business. A significant
majority of Manhattan Limousine's affiliates are located in cities in which
the Company already has affiliates, and in some cities the companies share
common affiliates.
As consideration for future acquisitions, the Company intends to use various
combinations of shares of Common Stock, cash and notes. Some or all of any
shares of Common Stock issued in connection with acquisitions may be
registered under the Securities Act.
SERVICE PROVIDER NETWORK
Carey's international network of owned and operated chauffeured vehicle
service companies, licensees and affiliates, serving 420 cities in 65
countries, enables it to provide its customers chauffeured vehicles in
virtually every significant travel market throughout the world. Carey believes
that its network is the most extensive in the industry, and intends to expand
the network by adding qualified licensees and affiliates in locations
justifying new or expanded service. The Company believes that the trend toward
globalization is opening more cities for business and personal travel around
the world. The Company monitors and evaluates cities in which a demand for
chauffeured vehicle services may warrant a "Carey" presence.
The Company's network provides chauffeured vehicle services for airport
pickups and drop-offs, inter-office transfers, business and association
meetings, conventions, road shows, promotional tours, special events,
incentive travel and leisure travel. Of these activities, the Company derived
approximately 9.3% of its 1996 pro forma revenues from hotel contracts,
approximately 8.3% from financial services customers and approximately 5.1%
from contracts with airlines. The Company also offers its clients travel and
tour planning services, "meet-and-greet" services, destination management
services, group movement coordination services, direct and central billing in
U.S. dollars, and access to the Company's 24-hour worldwide computerized
reservation system, the CIRS.
28
<PAGE>
The Company's fleet in its owned and operated locations contains four types
of vehicles consisting of chauffeured sedans, limousines, vans and minibuses,
some of which can carry up to 30 persons. In addition, the Company
subcontracts from time to time for buses that can carry a greater number of
passengers. The fleets of the Company's licensees and affiliates in larger
markets are similar to the Company's fleet, and in smaller markets generally
consist of only chauffeured sedans and limousines. All vehicles are driven by
uniformed professional chauffeurs, most of whom own the vehicles that they
drive. Each such chauffeur drives a clean, late model vehicle with amenities
important to the business traveler, such as cellular telephones and daily
newspapers.
Owned and Operated Companies. The Company owns and operates chauffeured
vehicle service companies in New York, San Francisco, Los Angeles, London,
Washington, D.C., South Florida and Philadelphia. Revenue provided by these
companies represented approximately 74.7% of the Company's revenue, net in
fiscal 1995 and 73.6% in fiscal 1996.
Licensees. The Company has 38 licensees serving 106 cities in the United
States and 24 licensees serving 105 cities outside the United States, all of
which operate under the Carey name. Revenue, net provided by the Company's
licensees represented approximately 19.0% and 18.8% of the Company's revenue,
net in fiscal 1995 and 1996, respectively.
The domestic license fee ranges from $15,000 to $75,000, depending upon the
size of the market. The sum of the continuing fees paid by the domestic
licensee varies, but annually is generally less than 10% of its revenues or,
in some cases, less than 10% of an excess above a specified base.
Substantially all candidates appointed as domestic licensees have been in
business for at least 10 years prior to the grant of a license. The term of a
domestic license agreement entered into prior to January 1, 1996 is perpetual
and subsequent to January 1, 1996 is 10 years.
International licensees historically have not paid annual license fees;
rather, they have paid a commission on business referred to them. The term of
an international license agreement usually is from year to year, although in a
few cases it is perpetual.
Under the domestic license agreement, the Company provides the licensee with
(i) the right to use the "Carey" name, (ii) participation in the CIRS, (iii)
various consulting services, (iv) identification in various travel
directories, (v) access to bulk purchasing arrangements for automobiles, parts
and maintenance materials and (vi) national sales and marketing services. In
the event of a proposed transfer of a license or a licensee, the Company has
the right to approve the transferee. In addition, for most license agreements
executed prior to January 1, 1996 and all license agreements executed on or
after January 1, 1996, Carey retains a right of first refusal by which it may
acquire any license or licensee upon the same terms as the license or licensee
is proposed to be sold.
Typically, a licensee candidate acts as an affiliate before being selected
as a licensee. Licensees operate according to strict service guidelines
specified by the Company and market the Carey name in conjunction with the
Company's overall marketing program. The Company conducts ongoing quality
assurance programs and annual audits of licensees to insure that the licensees
have met the high service standards set forth by the Company. The Company has
the right to terminate any license if the licensee fails to comply with such
standards.
Affiliates. The Company utilizes affiliates to provide services to its
clients in cities where the Company does not have Company-owned operations or
licensees. Affiliates are not licensed to use the Carey name and do not pay
license fees to the Company, but must meet the Company's quality standards in
order to receive referred business. Pursuant to oral agreements between the
Company and its affiliates, the Company is entitled to receive a commission of
15% of net vehicle revenues for all referred business. The Company's
affiliates are located in 121 cities in the United States and 67 cities
outside the United States. Revenue, net provided by the Company's affiliates
represented approximately 2.5% and 2.0% of the Company's revenue, net in
fiscal 1995 and 1996, respectively.
29
<PAGE>
CAREY INTERNATIONAL RESERVATION SYSTEM (CIRS)
The hub of the Company's network of service providers is the CIRS, the Carey
International Reservation System. The CIRS is operated on a 24-hour basis by
Carey's central reservation department, which processes reservations through
the Company's proprietary computer system. The central reservation department
receives reservations through the Company's toll free "800" telephone number
(800-336-4646), by fax or telex, or through one of the six major airline
reservation systems, SABRE, APOLLO, WORLDSPAN, GALILEO, BABS and SITA. These
airline systems allow travel agencies, corporate travel departments and
government offices to access the CIRS through over 300,000 reservation
terminals worldwide. The Company bills a licensee or affiliate for each
reservation referred to the licensee or affiliate through the CIRS.
The CIRS can be accessed for up-to-date tariffs both in dollars and in
foreign currency for 420 cities throughout the world. Through the CIRS, the
Company's reservation and customer service personnel have instant access to
all rates, services offered, types of vehicles available and special airport
greeting capabilities in each individual city. Individual customer profiles
are maintained, including vehicle and chauffeur preferences, frequent pick-up
points, addresses and directions, billing requirements and account status.
The CIRS is used to make arrangements for a broad range of business and
consumer applications such as transportation to and from airports, association
and industry meetings and functions, road shows, transportation related to
incentive travel, board of directors meetings and sight seeing tours. Special
customer service facilities are available with direct phone lines, including a
special service desk, executive VIP desk, international tour desk, special
event desk and road show desk.
The CIRS utilizes client/server architecture and proprietary software
developed over a five-year period which allows constant input into a complex
international network linking more than 65 countries. A primary strength of
the CIRS is the reliability of its reporting and control systems which verify
all reservations for complete information, customer service requirements and
accounting authorizations. The CIRS also contains customer invoicing programs
to allow central billing directly through the system for all services used
worldwide. In addition, the system's ability to track reservations allows more
accurate and detailed analyses for marketing purposes.
In 1992, the Company began leasing its reservation and operating systems to
its licensees. These systems create a basis for certain licensees to have
direct access to the CIRS and provide them with the ability to book local
reservations, dispatch vehicles and account for chauffeured vehicle services.
MARKETING, SALES AND CUSTOMER SERVICE
The Company believes that "Carey," a registered service mark, is a highly
recognized name in the chauffeured vehicle service and travel industries
worldwide. The Company intends to continue to expand recognition of the
"Carey" name through its marketing and promotional efforts. Carey has
developed an extensive marketing program directed at both the travel arranger
and the end user of chauffeured vehicle services. The program consists of
directory listings, advertising, direct mail, public relations, cooperative
promotional and joint marketing programs, attendance at and sponsorship of
travel-related conventions and workshops, and direct selling. The direct sales
force serving the Company and its licensees currently consists of 20
professionals.
Carey is listed in 95 travel directories which are used by travel arrangers
to obtain information on travel related services. Advertising targeted at
travel arrangers is placed in over 35 trade journals including Business Travel
Executive, Travel Weekly, Travel Trade and Business Travel News. In addition,
the Company advertises extensively in magazines and newspapers, consumer
association books, hotel room information books and the Yellow Pages, and on
radio and television in selected markets.
The Company's continuing direct mail program is targeted at both the travel
arranger and the end user. The program distributes approximately two million
promotional pieces annually. Most major travel arrangers receive at least six
direct mail pieces per year which include announcements of new services, news
on service providers
30
<PAGE>
and reservation programs, the Carey Newsletter and listings of rates. End
users and arrangers receive promotional pieces on Carey when they are billed
for the Company's services.
The Company's marketing program seeks to build upon brand name acceptance,
customer loyalty, service know-how, technology and strategic market
relationships with other market leaders in the travel and tourism industry,
such as airlines, travel agencies, credit card companies and central
reservation systems. The Company's sales force calls on thousands of accounts
annually and participates in trade shows, seminars and association meetings.
The Company also is involved in promotional and cooperative agreements with
American Express Platinum Card and Gold Card, Diner's Club "Club Chauffeur"
program, British Airways, Air France and various cruise lines.
The Company believes that the retention and expansion of existing business
is as important as new sales. Carey has established a base of loyal customers
in part by monitoring the standard of service through its quality assurance
and customer service programs. To assure that the Company continues to provide
consistently high quality and reliable service, Carey operates a five-part
quality assurance program. The Company's quality assurance program utilizes
survey cards that are sent to customers and travel arrangers. Approximately
90% of the quality assurance cards returned to Carey during the twelve-month
period ended November 30, 1996 rated the Company's reservation services,
chauffeurs and vehicles as "excellent." Carey's quality assurance program
includes evaluations performed by an independent consultant to measure the
quality of chauffeur services, the appearance of chauffeurs and vehicles, and
the availability of other amenities, such as cellular phones and daily
newspapers.
INDEPENDENT OPERATORS
An important component of Carey's strategy involves the preferred use of
independent operators instead of salaried chauffeurs operating Company-owned
vehicles. An independent operator takes responsibility for owning, operating
and maintaining his or her own vehicle. The Company believes that acting as an
independent operator creates incentives for the chauffeur to become more
productive, efficient and service-oriented, thereby increasing the
profitability of the chauffeur and the Company. The objective of the Company's
independent operator strategy is to instill in each chauffeur the sense of
purpose, responsibility and dedication characteristic of an independent
business owner.
The use of independent operators allows the Company to reduce its labor and
capital costs, convert fixed costs to variable costs and generate revenues
from fees paid by independent operators. Because of the greater responsibility
borne by independent operators, the Company is able to allocate fewer
resources to oversee its vehicle operations. As a result, the Company can
focus to a greater extent on support services, business development,
administration, billing, quality assurance, and sales and marketing.
Each independent operator enters into an agreement with the Company to
provide prompt and courteous service to the Company's customers with a
properly maintained, late model vehicle consistent with the Company's
standards. The cost of a new vehicle ranges from $35,000 to $65,000, depending
upon whether it is a sedan or a limousine and the features included in the
vehicle. Each new independent operator agrees to pay an initial fee to the
Company, acquires his or her vehicle and pays all of the maintenance and
operating expenses of such vehicle, including gasoline.
Prior to December 1996, the Company's typical agreement with an independent
operator had a term of 10 years and provided for a fee ranging from $30,000 to
$45,000 (depending on the local market) that was financed by the Company at an
annual interest rate of 8% to 12%. The notes evidencing such financing
generally were sold by the Company to third parties. Since December 1996, the
independent operator agreements entered into by the Company generally have
provided for, and the Company intends that future agreements will provide for,
a term of 15 years, fees of $45,000 to $60,000 and an interest rate of 14% per
year. In certain markets, such as New York, the Company may provide longer
terms and higher fees in its independent operator agreements. Currently, the
Company does not intend to continue its former practice of selling to third
parties notes evidencing independent operator financing.
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<PAGE>
The independent operator agreement provides that the Company will bill and
collect all revenues (as defined in the agreement) and remit to the
independent operator 60% to 65% of such revenues. In this arrangement, the
Company assumes the risk of collecting from each customer and generally pays
the independent operator his or her share regardless of whether the Company is
paid by the customer. An independent operator's failure to meet the high
standards of service associated with the Carey name constitutes a breach of
the agreement and gives rise to a right of the Company to terminate the
agreement.
Independent operators also generally require financing to purchase their
vehicles. Typically, independent operators have utilized banks, vehicle
financing companies or CLI Fleet, Inc. ("CLI Fleet"), a finance company that
specializes in providing financing to the chauffeured vehicle service
industry. See "Certain Transactions." On occasion, the Company has provided
secured vehicle financing to independent operators with repayment terms of
three to five years.
CUSTOMERS
The Company's customer list exceeds 75,000 individuals and organizations
that are dispersed across many different industries and geographic locations.
No client accounted for more than 5% of the Company's revenue, net in 1996.
The Company's major clients include companies in the finance, travel and
related services, manufacturing, pharmaceutical, airline, insurance,
publishing, oil and gas exploration, entertainment, tobacco, and food and
beverage industries.
COMPETITION
The chauffeured vehicle service industry is highly competitive and
fragmented, with few significant national participants operating a multi-city
reservation system. Each local market usually contains numerous local
participants as well as a few companies offering regional and national
service. Chauffeured vehicle service providers compete primarily on the basis
of price, quality, scope of service and dependability. The Company also
competes with service providers offering alternative modes of transportation,
such as buses, jitney services, taxis, radio cars and rental cars. The Company
believes that its high quality of service and dependability have allowed the
Company to compete effectively in its markets. Carey competes both for
customers and for possible acquisitions. The Company expects its business to
become more competitive as existing competitors expand and additional
companies enter the industry. Certain of the Company's existing competitors
have, and any new competitors that enter the industry may have, access to
significantly greater financial resources than the Company.
GOVERNMENT REGULATION
The Company's chauffeured vehicle service operations are subject to various
state and local regulations and, in many instances, require permits and
licenses from state and local authorities. In addition, the Company is
regulated by the Federal Highway Administration with respect to, among other
things, minimum vehicular insurance requirements. The Company believes that it
has all required permits and licenses to conduct its operations and that it is
in substantial compliance with applicable regulatory requirements relating to
its operations.
The Company is subject to federal and state laws, rules and regulations
governing the offer and sale of franchises. A number of states have enacted
laws that require detailed disclosure in the offer and sale of franchises
and/or the registration of the franchisor with state administrative agencies.
The Company is also subject to Federal Trade Commission regulations relating
to disclosure requirements in the sale of franchises. Certain states have
enacted, and others may enact, legislation governing certain aspects of the
franchise relationship and limiting the ability of the franchisor to terminate
or refuse to renew a franchise. The law applicable to franchise sales and
relationships is rapidly developing, and the Company is unable to predict the
effect on its franchise system of additional requirements or restrictions that
may be enacted or promulgated or of court decisions that may be adverse to
franchisors. Due to the scope of the Company's business, and the complexity of
franchise regulation, compliance problems may be encountered from time to
time.
32
<PAGE>
INSURANCE
The Company is subject to accident claims as a result of the normal
operation of its fleet of vehicles, which claims and the defense thereof
generally are covered by insurance. The Company purchases automobile
liability, automobile collision and comprehensive damage, general liability,
comprehensive property damage, workers' compensation and other insurance
coverages that management considers adequate for the protection of the
Company's assets and operations, although there can be no assurance that the
coverages and limits of such policies will be adequate. The Company's standard
license agreement requires that its licensees purchase similar types of
insurance and name the Company as a named insured in such insurance policies.
A successful claim against the Company beyond the scope of its or its
licensees' insurance coverage or in excess of its or its licensees' limits
could have a material adverse effect on the Company's business, financial
condition and results of operations.
FACILITIES
The Company owns a facility in Alexandria, Virginia used by its owned and
operated chauffeured vehicle service company providing services in Washington,
D.C. The Company leases its corporate headquarters in Washington, D.C. and
also leases nine administrative and/or operating facilities in California, New
York, Pennsylvania, Florida and London. Management believes that the Company's
facilities are adequate for its present needs and that suitable additional or
replacement space will be available as required.
EMPLOYEES AND INDEPENDENT OPERATORS
As of March 31, 1997, the Company had approximately 255 full-time employees
(approximately 41 of whom were chauffeurs) and approximately 99 part-time
employees (approximately 71 of whom were chauffeurs). As of March 31, 1997,
the Company also had agreements with approximately 334 independent operators.
The Company is not a party to any collective bargaining agreement.
INTELLECTUAL PROPERTY
The Company is the registered owner of two United States service marks
covering the "Carey" name. The Company believes that customer and travel
arranger recognition of these marks has contributed to its success. The
Company is not affiliated with Carey Transportation, Inc., a company that
provides bus transportation services in the metropolitan New York City area.
Except in this area, the Company believes it has the exclusive right to use
the "Carey" name in connection with transportation services in all locations
in which it either owns and operates a chauffeured vehicle service company or
maintains a licensee.
LEGAL PROCEEDINGS
The Company and certain of its officers and directors were named in a civil
action filed on May 15, 1996 in the United States District Court for the
Eastern District of Pennsylvania (Case No. 96-CV-3702) entitled "Felix v.
Carey International, Inc., et al." The plaintiff's complaint, which purports
to be a class action, alleges that the plaintiff and others similarly situated
suffered monetary damages as a result of misrepresentations by the various
defendants in their use of a surface transportation billing charge (the
"STC"). The STC is billed by Carey to its customers and represents a surcharge
on account of various fees and service costs incurred by it in its provision
of services to such customers. The plaintiff seeks damages in excess of $1.0
million on behalf of the class for each of the counts in the complaint
including fraud, negligent misrepresentation and violations of the Racketeer
Influenced and Corrupt Organizations law of 1970, which permits the recovery
of treble damages and attorneys' fees. A class has not yet been certified in
this case. The Company filed a motion to dismiss that was denied, and
subsequently has filed an answer denying any liability in connection with this
complaint.
The Company has reached a tentative settlement with the plaintiff and
plaintiff's counsel, which is subject to court approval and acceptance by the
proposed class. The settlement calls for the Company to deposit up to $950,000
into a settlement fund for a class consisting of all persons who paid the STC
during the period from
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<PAGE>
May 15, 1992 through March 15, 1997. Following court approval of the
settlement, the Company will change its disclosure concerning the STC, and
each class member showing proper authentication of a claim shall be entitled
to receive either (i) cash totalling 10% of the STC paid during the period
described above or (ii) a nontransferable credit to be applied toward future
use of the Company's services in an amount equal to 30% of such STC. This
settlement has been agreed to by the plaintiff and plaintiff's counsel, but
there can be no assurance that the court will approve, or the proposed class
will accept, the settlement. The Company is indemnifying and defending its
officers and directors who were named defendants in the case, subject to
conditions imposed by applicable law.
Although the Company does not believe the litigation described above will
have a material adverse effect on its business, financial condition and
results of operations, the defense of the litigation could be expensive and
time-consuming, regardless of the outcome, and, if the proposed settlement is
not approved and accepted, an adverse result in such litigation could have a
material adverse effect on the Company's business, financial condition,
results of operations and cash flows.
The Company is a party to other litigation in the ordinary course of
business. The Company does not anticipate an unfavorable result in any such
litigation or believe that an unfavorable result, if it occurred, would have a
material adverse effect on its business, financial condition and results of
operations.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information pertaining to the
directors and executive officers and the director nominee of the Company. The
director nominee has agreed to become a director of the Company upon the
closing of this offering.
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Vincent A. Wolfington.......... 57 Chairman of the Board and Chief Executive
Officer
Don R. Dailey.................. 59 President and Director
Guy C. Thomas.................. 58 Executive Vice President--Operations
David H. Haedicke.............. 50 Executive Vice President and Chief
Financial Officer
Richard A. Anderson, Jr........ 51 Senior Vice President
Sally A. Snead................. 37 Senior Vice President--Information Systems
John C. Wintle................. 50 Senior Vice President--Europe
Paul A. Sandt.................. 36 Vice President and Chief Accounting Officer
Devin J. Murphy................ 31 Senior Vice President and Chief Development
Officer
Robert W. Cox.................. 59 Director
William R. Hambrecht........... 61 Director
David McL. Hillman............. 43 Director
Nicholas J. St. George......... 58 Director nominee
</TABLE>
Set forth below is a description of the backgrounds of each of the directors
and executive officers and the director nominee of the Company.
Vincent A. Wolfington, a co-founder of the Company, has served as its
Chairman of the Board of Directors and Chief Executive Officer since 1979. For
over 25 years, Mr. Wolfington has been involved in the limousine industry and
directly associated with the Carey system of licensees and affiliates. Mr.
Wolfington has served as a consultant to the National Academy of Sciences
Transportation Research Board, President of the National Para-transit
Association and a member of the International Limousine Association. Mr.
Wolfington currently is a member of the Executive Committee of the World
Travel and Tourism Council.
Don R. Dailey has been President and a director of the Company, which he co-
founded, since 1979. Mr. Dailey has been directly involved in the limousine
business for over 30 years. Mr. Dailey serves on a number of boards and
committees related to the travel industry, including the National Business
Travel Association, the International Business Travel Associates, the
Association of Corporate Travel Executives, the National Limousine Association
and the International Limousine Association (as its past president and member
of its executive committee).
Guy C. Thomas has served as Executive Vice President--Operations of the
Company since 1987. Mr. Thomas has served on a number of boards and committees
related to the travel industry, including the National Business Travel
Association, the Greater Washington Area Passenger Traffic Association, the
American Society of Association Executives, Meeting Planners International,
the Association of Corporate Travel Executives, the National Limousine
Association and the International Taxicab and Livery Association.
David H. Haedicke has been an Executive Vice President and Chief Financial
Officer of the Company since October 1996. From August 1996 to October 1996,
he was Senior Vice President and Chief Financial Officer of Infotechnology,
Inc., Hadron, Inc. and Comtex Scientific Corporation, an affiliated group of
companies engaged in systems management and software development. From
September 1993 to May 1996, he was Chief Financial Officer of Walcoff &
Associates, Inc., a communications and information management firm. From June
1991 to September 1993, he was Chief Financial Officer and Vice President of
Xsirus, Inc., a high technology research and development company. Mr. Haedicke
also was a partner at Ernst & Young L.L.P. from 1985 to June 1991, and was an
employee at that firm from 1973 to 1985. Mr. Haedicke is a Certified Public
Accountant.
35
<PAGE>
Richard A. Anderson, Jr. has served as a Senior Vice President of the
Company since December 1988. Mr. Anderson also has been Chief Operating
Officer of the Company's New York subsidiary, Carey Limousine NY, Inc., since
December 1988. Mr. Anderson is Chairman of the New York Taxi and Limousine
Commission's Limousine Advisory Board, a former Board Member of the
Association of Corporate Travel Executives, and a member of the National
Business Travel Association and Meeting Planners International.
Sally A. Snead has served as the Company's Senior Vice President--
Information Systems since June 1993. From January 1987 to June 1993, she was
Executive Vice President and General Manager of Carey Limousine L.A., Inc. She
is a member of Executive Women International, the National Business Travel
Association, the Association of Corporate Travel Executives and the National
Limousine Association.
John C. Wintle has served as the Company's Senior Vice President--Europe
since May 1996 and as Executive Vice President and Managing Director of Carey
U.K. Ltd., a subsidiary of the Company, since March 1996. From 1982 to
February 1996, Mr. Wintle served Savoy Hotel PLC ("Savoy") and its affiliates,
including Camelot Barthropp Ltd. ("Camelot"), in various capacities. From
March 1993 to February 1996, Mr. Wintle was Executive Vice Chairman of
Camelot, which was acquired by Carey U.K. Ltd. in February 1996. Previously,
from 1989 to 1993, Mr. Wintle was General Manager, Restaurant Division, of
several entities affiliated with Savoy. From 1982 to 1989, Mr. Wintle had been
Group Financial Controller at Savoy.
Paul A. Sandt has served as a Vice President and Chief Accounting Officer of
the Company since October 1994. From May 1992 through September 1994, Mr.
Sandt was a staff member with the Securities and Exchange Commission, and from
December 1990 through May 1992, he was Director of Finance of The Kline
Automotive Group. From 1984 through 1990, he was employed by Coopers & Lybrand
L.L.P. Mr. Sandt is a Certified Public Accountant.
Devin J. Murphy has served as a Vice President of the Company since May
1996, and became Senior Vice President and Chief Development Officer in April
1997. Mr. Murphy received a Master's Degree in Business Administration from
Duke University in May 1996. For the six years prior to the commencement of
his MBA program in September 1994, Mr. Murphy held various sales and marketing
positions at companies within the information technology industry. These
companies include Bay Networks, Inc., where Mr. Murphy was Marketing Manager
from January 1993 to August 1994, Motorola Inc., where he was Manager, Major
Accounts from February 1991 to January 1993, and Hewlett-Packard Co. Inc.,
where he was Territory Manager from 1988 to 1991.
Robert W. Cox has served as a director of the Company since 1995. From 1969
until his retirement in 1994, Mr. Cox was a partner in the New York and
Chicago offices of the law firm Baker & McKenzie. From 1984 to 1992, Mr. Cox
was Chairman of the Executive Committee and Managing Partner of the firm, and
from 1993 to 1994, Mr. Cox was Chairman of the Policy Committee. Mr. Cox
currently is a director of Hon Industries, Inc.
William R. Hambrecht has served as a director of the Company since 1995. Mr.
Hambrecht is Chairman of Hambrecht & Quist LLC, an investment banking firm
which he co-founded in 1968. Mr. Hambrecht also serves as a director of Adobe
Systems, Inc.
David McL. Hillman has served as a director of the Company since 1994. Mr.
Hillman is Executive Vice President of PNC Capital Corp. and Executive Vice
President and Director of PNC Equity Management Corp., which he co-founded in
1982. Mr. Hillman is a director of several privately-held companies in
connection with PNC Capital Corp.'s investments in such companies.
Nicholas J. St. George will become a director of the Company upon
consummation of this offering. Mr. St. George has been President and Chief
Executive Officer of Oakwood Homes Corporation ("Oakwood"), a manufacturer and
retailer of manufactured homes, since February 1979. Mr. St. George serves as
a director of Oakwood, and also is a director of American Bankers Insurance
Group, Inc. and Legg Mason, Inc.
36
<PAGE>
BOARD OF DIRECTORS
The Company's Board of Directors is divided into three classes with
staggered three-year terms. After the completion of this offering, the initial
term of Messrs. Hambrecht and Hillman expire at the Company's 1998 annual
meeting, the initial terms of Messrs. Cox and St. George expire at the
Company's 1999 annual meeting, and the initial terms of Messrs. Wolfington and
Dailey expire at the Company's 2000 annual meeting. Successors to the
directors whose terms expire at each annual meeting are elected for three-year
terms. A director holds office until the annual meeting for the year in which
his term expires and until his successor is elected and qualified.
Executive Committee. After the completion of this offering, the members of
the Executive Committee of the Company's Board of Directors will be Messrs.
Wolfington, Cox and Dailey. The Executive Committee will exercise all the
powers of the Board of Directors between meetings of the Board of Directors,
except such powers that are reserved to the Board of Directors by applicable
law.
Audit Committee. After the completion of this offering, the members of the
Audit Committee of the Company's Board of Directors will be Messrs. Hillman
and St. George. The Audit Committee will make recommendations concerning the
engagement of independent public accountants, review with the independent
public accountants the plans for and results of the audit, approve
professional services provided by the independent public accountants, review
the independence of the independent public accountants, consider the range of
audit and non-audit fees and review the adequacy of the Company's internal
accounting controls.
Compensation Committee. After the completion of this offering, the members
of the Compensation Committee of the Company's Board of Directors will be
Messrs. Cox and St. George. The Compensation Committee will establish a
general compensation policy for the Company and approve increases in
directors' fees and salaries paid to officers and senior employees of the
Company. The Compensation Committee will administer the Company's equity
incentive plans and will determine, subject to the provisions of the Company's
plans, the directors, officers and employees of the Company eligible to
participate in any of the plans, the extent of such participation and terms
and conditions under which benefits may be vested, received or exercised.
DIRECTOR COMPENSATION
Members of the Board of Directors who also serve as officers of the Company
do not receive compensation for serving on the Board. Each other member of the
Board receives an annual retainer of $15,000 for serving on the Board, plus a
fee of $1,000 for each Board of Directors' meeting attended. In addition, such
directors receive an additional fee of $500 for each committee meeting
attended, except that only one fee is paid in the event that more than one
such meeting is held on a single day. All directors receive reimbursement of
reasonable expenses incurred in attending Board and committee meetings and
otherwise carrying out their duties.
The Company's Board of Directors has adopted the Stock Plan for Non-Employee
Directors (the "Directors' Plan"). A maximum of 100,000 shares of Common Stock
may be delivered upon the exercise of options granted under the Directors'
Plan and elections to receive shares in lieu of cash compensation. Only
directors of the Company who are not employees of the Company or any of its
subsidiaries (the "Non-Employee Directors") are eligible to participate in the
Directors' Plan. While grants of stock options under the Directors' Plan are
automatic and non-discretionary, all questions of interpretation of the
Directors' Plan are determined by the Board of Directors.
The Directors' Plan provides that on the date of this Prospectus, an option
to purchase 7,500 shares of Common Stock will be granted to each Non-Employee
Director. On the date of each subsequent annual meeting of stockholders, each
Non-Employee Director continuing in office will be granted an option covering
2,500 shares. Any newly elected Non-Employee Director will be granted an
option covering 5,000 shares on the date of his or her election (whether such
election occurs at an annual meeting or otherwise). The option exercise price
for each option granted under the Directors' Plan will be the closing price of
a share of the Common Stock as reported on the Nasdaq National Market on the
date the option is granted, except that options awarded on the date of this
Prospectus will have an exercise price equal to the initial public offering
price in this
37
<PAGE>
offering. All options granted under the Directors' Plan become fully
exercisable six months after the date of grant. Unless sooner terminated
following the death, disability or termination of service of a director,
options granted under the Directors' Plan will remain exercisable until the
fifth anniversary of the date of grant. In addition, upon certain transactions
involving a change of control or the dissolution or liquidation of the
Company, all options held by Non-Employee Directors will terminate; provided,
however, that for a period of 20 days prior to the effective date of any such
transaction, dissolution or liquidation, all options outstanding under the
Directors' Plan that are not otherwise exercisable shall immediately vest and
become exercisable.
Under the Directors' Plan, a Non-Employee Director may elect to be paid all
or a portion of his or her annual retainer in shares of Common Stock. Any such
election must be made in writing at least 30 days prior to the date the annual
retainer would be paid by the Company. The number of shares to be delivered to
a Non-Employee Director upon such election is determined by dividing the
amount of the annual retainer to be received in shares of Common Stock by the
closing price of a share of Common Stock as reported on the Nasdaq National
Market on the date the annual retainer is to be paid.
The Board of Directors may at any time or times amend the Directors' Plan
for any purpose which at the time may be permitted by law.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table contains a summary of the compensation paid to the Chief
Executive Officer of the Company and the other executive officers whose salary
and bonus for the Company's fiscal year ended November 30, 1996 exceeded
$100,000.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
-----------------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)(1)
- ------------------ --------- -------- --------------- ------------------
<S> <C> <C> <C> <C>
Vincent A. Wolfington.... $211,620 -- -- $57,000
Chairman and Chief
Executive Officer
Don R. Dailey............ 185,001 -- -- 57,000
President and Director
Guy C. Thomas............ 115,000 -- $13,020(2) 6,300
Executive Vice
President--Operations
and Chief
Operating Officer
</TABLE>
- --------
(1) Includes with respect to each of Messrs. Wolfington and Dailey $45,000
paid for providing certain personal guarantees on behalf of the Company
and $12,000 in life insurance premiums, and with respect to Mr. Thomas,
$6,300 in life insurance premiums.
(2) Includes a car allowance of $11,820.
38
<PAGE>
OPTIONS TO PURCHASE SHARES OF COMMON STOCK
Messrs. Wolfington, Dailey and Thomas hold options to purchase the following
shares of Common Stock, all of which options are exercisable at a price of
approximately $4.65 per share. The aggregate values of the options are as set
forth below, assuming a fair market value of $12.00 per share of Common Stock.
The named officers neither were granted nor exercised options during the
fiscal year ended November 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
NAME UNDERLYING OPTIONS VALUE
---- ------------------ --------
<S> <C> <C>
Vincent A. Wolfington......................... 105,706 $776,833
Don R. Dailey................................. 105,706 $776,833
Guy C. Thomas................................. 32,018 $235,300
</TABLE>
EQUITY INCENTIVE PLANS
The Company currently maintains the 1987 Stock Option Plan (the "1987 Plan")
and the 1992 Stock Option Plan (the "1992 Plan"), both of which provide for
the award of incentive and non-statutory stock options by the Company. The
Company has adopted the 1997 Equity Incentive Plan (the "1997 Plan"), which
provides for the award of up to 650,000 shares of Common Stock in the form of
incentive stock options, non-statutory stock options, stock appreciation
rights, restricted stock, performance stock units and other stock units which
are valued by reference to the value of the Common Stock. The 1987 Plan, 1992
Plan and 1997 Plan are hereinafter referred to collectively as the "Equity
Plans."
Options are outstanding to purchase an aggregate of 454,155 shares of Common
Stock under the 1987 Plan and the 1992 Plan, and an aggregate of 28,655 shares
of Common Stock are authorized but have not yet been granted under options
pursuant to such plans. The Company has granted to employees options to
purchase an aggregate of 411,500 shares of Common Stock pursuant to the 1997
Plan having an exercise price equal to the initial public offering price. Of
these options, Messrs. Wolfington and Dailey each received an option to
purchase 100,000 shares of Common Stock, and Mr. Thomas received an option to
purchase 15,000 shares of Common Stock. The options issued to Messrs.
Wolfington and Dailey will vest in full 90 days from the date of this
Prospectus. The balance of the options issued under the 1997 Plan will vest
with respect to one-quarter of the underlying shares on each of the first four
anniversaries of the date of grant.
Officers, key employees, non-employee directors of and consultants to the
Company have participated in the 1987 Plan and the 1992 Plan. The 1987 Plan
and the 1992 Plan are administered by the Compensation Committee of the Board
of Directors. Among other things, the Compensation Committee determines,
subject to the provisions of said plans, who shall receive awards, the types
of awards to be made, and the terms and conditions of each award. No incentive
stock option may be granted under the 1987 Plan and the 1992 Plan at an
exercise price less than the fair market value of the shares of Common Stock
at the time the option is granted (and, in the case of stock options granted
to holders of more than 10% of the Common Stock, no option may be granted at
an exercise price less than 110% of the fair market value of the shares of
Common Stock at the time the option is granted).
All employees and directors of, and consultants and advisers to, the Company
and any of its subsidiaries are eligible to participate in the 1997 Plan. The
1997 Plan will be administered by the Compensation Committee, which will
determine who shall receive awards from those eligible to participate in the
1997 Plan, the type of award to be made, the number of shares of Common Stock
which may be acquired pursuant to the award and the specific terms and
conditions of each award, including the purchase price, term, vesting
schedule, restrictions on transfer and any other conditions and limitations
applicable to the awards or their exercise. Options that are intended to
qualify as incentive stock options may be exercisable for not more than 10
years after the date the option is awarded and may not be granted at an
exercise price less than the fair market value of the shares of Common Stock
at the time the option is granted. The Compensation Committee may at any time,
including in connection with a change in control of the Company, accelerate
the exercisability of all or any portion of any option issued under the 1997
Plan.
39
<PAGE>
The Compensation Committee may amend, modify or terminate any outstanding
award under the Company's Equity Plans with the participant's consent, except
consent shall not be required if the Compensation Committee determines that
such action will not materially and adversely affect the participant. The
Board may amend, suspend or terminate any of the Equity Plans, or any part of
such plans, at any time, except that no amendment may be made without
stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement.
INDEMNIFICATION AND LIMITATION OF LIABILITIES OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation provides for the elimination, subject to certain
conditions, of the personal liability of directors of the Company for monetary
damages for breach of their fiduciary duties. The directors, however, remain
subject to equitable remedies even if their liability for monetary damages is
eliminated. The Company's Certificate of Incorporation also provides that the
Company shall indemnify its directors and officers. In addition, the Company
maintains an indemnification insurance policy covering all directors and
officers of the Company. In general, the Company's Certificate of
Incorporation and the indemnification insurance policy attempt to provide the
maximum protection permitted by Delaware law with respect to indemnification
of directors and officers.
Under the indemnification provisions of the Company's Certificate of
Incorporation and the indemnification insurance policy, the Company will pay
certain amounts incurred by a director or officer in connection with any civil
or criminal action or proceeding, and specifically including actions by or in
the name of the Company (derivative suits), where the individual's involvement
is by reason of the fact that he is or was a director or officer of the
Company. Such amounts include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts, and
other expenses customarily incurred in connection with legal proceedings. A
director or officer will not receive indemnification if he is found not to
have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company.
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock before and after the completion of this
offering for each beneficial owner of more than 5% of the Company's Common
Stock, each director and the director nominee of the Company, each named
executive officer of the Company and all directors, executive officers and the
director nominee as a group. Except as indicated in the footnotes below, the
persons named in this table have sole investment and voting power with respect
to the shares beneficially owned by them. The information contained in the
table and the footnotes thereto gives effect to the Recapitalization.
<TABLE>
<CAPTION>
PERCENT OWNED
-----------------
SHARES BEFORE AFTER
BENEFICIALLY THE THE
NAME OWNED OFFERING OFFERING
- ---- ------------ -------- --------
<S> <C> <C> <C>
Vincent A. Wolfington.......................... 316,228(1) 9.5% 4.9%
Don R. Dailey.................................. 315,176(2) 9.5% 4.9%
Guy C. Thomas.................................. 94,800(3) 2.9% 1.5%
Robert W. Cox.................................. 12,900(4) * *
William R. Hambrecht........................... 945,060(5) 29.4% 14.9%
David McL. Hillman............................. 616,544(6) 19.2% 9.7%
Nicholas J. St. George......................... -- -- --
H&Q London Ventures............................ 444,093 13.8% 7.0%
One Bush St.
San Francisco, CA 94104
H&Q Ventures International C.V.(7)............. 175,197 5.4% 2.8%
H&Q Ventures IV(7)............................. 175,197 5.4% 2.8%
PNC Capital Corp. ............................. 616,544(6) 19.2% 9.7%
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
Yerac Associates, L.P. ........................ 516,018(8) 16.0% 8.1%
45 Belden Place
San Francisco, CA 94104
All directors, executive officers and the
director nominee as a group
(13 persons).................................. 2,333,061(9) 49.0% 35.1%
</TABLE>
- --------
* Less than 1%.
(1) Includes options to purchase 105,706 shares of Common Stock that currently
are exercisable. Also includes 1,182 shares of Common Stock currently held
by a company controlled by Mr. Wolfington. Excludes shares held by Yerac
Associates, L.P., a limited partnership of which Mr. Wolfington is a
limited partner, with respect to which shares Mr. Wolfington has no voting
or investment power. Mr. Wolfington's address is c/o Carey International,
Inc., 4530 Wisconsin Avenue, N.W., Washington, D.C. 20016.
(2) Includes options to purchase 105,706 shares of Common Stock that currently
are exercisable. Excludes shares held by Yerac Associates, L.P., a limited
partnership of which Mr. Dailey is a limited partner,with respect to which
shares Mr. Dailey has no voting or investment power. Mr. Dailey's address
is c/o Carey International, Inc., 4530 Wisconsin Avenue, N.W., Washington,
D.C. 20016.
(3) Includes options to purchase 32,018 shares of Common Stock that currently
are exercisable.
(4) Represents options to purchase shares of Common Stock that currently are
exercisable.
(5) Includes the following number of shares of Common Stock held by the
following venture capital funds, as to which Mr. Hambrecht disclaims
beneficial ownership: H&Q Ventures International C.V. (175,197 shares);
H&Q London Ventures (444,093 shares); H&Q Ventures IV (175,197 shares);
Hamquist (10,727 shares); Hambrecht & Quist, Inc. (21,454 shares); and
Hambrecht & Quist Group (9,773 shares). Also includes (i) 85,816 shares of
Common Stock with respect to which Mr. Hambrecht shares record and
41
<PAGE>
beneficial ownership with Hamco Capital Corp. and (ii) 22,803 shares of
Common Stock with respect to which Mr. Hambrecht shares record and
beneficial ownership with the Hambrecht 1980 Revocable Trust. See "Certain
Transactions." Mr. Hambrecht's address is c/o Hambrecht & Quist, Inc., One
Bush Street, San Francisco, CA 94104.
(6) David McL. Hillman is Executive Vice President of PNC Capital Corp. Mr.
Hillman disclaims beneficial ownership of the shares held by PNC Capital
Corp.
(7) This entity shares the same address as H&Q London Ventures.
(8) Includes shares of Common Stock issuable upon exercise of a warrant to
purchase 86,003 shares of Common Stock at a price of approximately $4.65
per share. The warrant is exercisable at any time until September 1, 2001.
(9) See Notes 1, 2, 3, 4, 5 and 6. Also includes 45,253 shares of Common Stock
issuable upon exercise of the vested portions of options held by other
executive officers of the Company.
42
<PAGE>
CERTAIN TRANSACTIONS
During 1993, for an aggregate purchase price of $850,000, the Company
acquired 85 shares of non-voting redeemable preferred stock of CLI Fleet, Inc.
("CLI Fleet") a privately-held finance company formed for the purpose of
financing the chauffeured vehicle service industry. As a holder of CLI Fleet
preferred stock, the Company is currently entitled to receive an annual
dividend of $500 per share. The Company waived the right to receive any
dividends accrued in respect of its preferred stock through April 30, 1996,
but during 1995 received referral fees totalling $100,000 from CLI Fleet. Also
during 1995, CLI Fleet redeemed 10 shares of preferred stock held by the
Company for an aggregate redemption price of $100,000. The remaining shares of
preferred stock are subject to mandatory redemption by redemption payments of
$100,000, $100,000 and $550,000 in May 1998, 1999 and 2000, respectively.
Under the terms of an agreement with CLI Fleet, commencing in April 1997, the
Company has an exclusive option to purchase all of the outstanding shares of
common stock of CLI Fleet at a purchase price equal to the greater of $187,500
or CLI Fleet's liquidating value as determined by an independent appraisal.
To date, CLI Fleet has provided financing to the Company's independent
operators, without recourse to the Company, for both initial fees due under
the Company's independent operator agreements and with respect to vehicles
purchased by independent operators. Each of the Company's owned and operated
chauffeured vehicle service companies has entered into a Finance & Service
Agreement with CLI Fleet, which provides that the Company will recommend and
refer independent operators to CLI Fleet for financing of vehicles. To date,
CLI Fleet also has purchased from the Company notes receivable due from
independent operators in exchange for cash or demand notes on a non-recourse
basis. The Company sold $378,733, $1,762,345 and $1,015,897 of independent
operator notes receivable to CLI Fleet for cash of $378,733, $1,290,899 and
$733,793 and demand promissory notes of $0, $471,446 and $282,104 in 1994,
1995 and 1996, respectively. These promissory notes are due on demand,
although monthly principal payments generally are received. These notes bear
interest at rates ranging from 5% to 7%. The Company generally no longer sells
notes receivables from independent operators to CLI Fleet, although CLI Fleet
continues to provide vehicle financing to the Company's independent operators.
In connection with the Recapitalization, the exercise price of a warrant
issued to PNC will be reduced from $6.14 to $4.65 per share. In addition, upon
the closing of this offering, Carey will repay approximately $912,000 of the
$3.8 million in principal outstanding on its subordinated note held by PNC and
apply the balance of the outstanding principal to pay the purchase price for
616,544 shares of Common Stock to be issued to PNC upon exercise of the
warrant held by it. David McL. Hillman, a director of the Company, is
Executive Vice President of PNC.
In connection with the Recapitalization, the exercise price of a warrant to
purchase 86,003 shares of Common Stock owned by Yerac will be reduced from
$6.14 to $4.65 per share. In addition, Yerac will convert the entire
outstanding balance of a $2.0 million subordinated note held by it into
approximately 430,000 shares of Common Stock. From the net proceeds of this
offering, the Company will repay approximately $1.1 million of additional
outstanding indebtedness to Yerac. Messrs. Wolfington and Dailey are limited
partners of Yerac. See "Use of Proceeds" and "Principal Stockholders."
In connection with the Recapitalization, the Company will redeem 22,000
shares of Series A Preferred Stock held by entities affiliated with Hambrecht
& Quist Group (collectively "H&Q") for an aggregate of $1.1 million in cash
plus 44,974 shares of Common Stock. Also in connection with the
Recapitalization, (i) the conversion price of the Series G Preferred Stock
will be reduced from $7.41 to approximately $6.14, and (ii) H&Q will receive
900,089 shares of Common Stock as a result of the conversion of 5,500 shares
of Series B Preferred Stock and 31,864 shares of Series G Preferred Stock.
William R. Hambrecht, a director of the Company, is a director and chairman of
Hambrecht & Quist Group and Hamco Capital Corporation, and a general partner
of Hambrecht & Quist Venture Partners which, in turn, is the general partner
of H&Q London Ventures, H&Q Ventures International C.V., and H&Q Ventures IV.
Mr. Hambrecht also is a trustee of The Hambrecht 1980 Revocable Trust. See
"Principal Stockholders."
43
<PAGE>
Vincent A. Wolfington, the Company's Chairman and Chief Executive Officer,
and Don R. Dailey, the Company's President, each has personally guaranteed
certain indebtedness of the Company in the original principal amount of $4.5
million. The outstanding balance of this indebtedness totalled approximately
$3.7 million as of February 28, 1997. The Company paid Messrs. Wolfington and
Dailey $45,000 each during 1996 as a fee for guaranteeing such indebtedness.
The Company will use part of the net proceeds of this offering to repay the
entire outstanding amount of such indebtedness, and following the repayment
the guarantees will be terminated. In connection with the Recapitalization,
Messrs. Wolfington and Dailey will receive $20,250 and $13,650, respectively,
and 7,569 shares and 5,123 shares of Common Stock, respectively, as a result
of the redemption of the shares of Series A Preferred Stock and the conversion
of the shares of Series G Preferred Stock beneficially owned by each of them.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $.01 par value per share, and 1,000,000 shares of Preferred
Stock, $.01 par value per share ("Preferred Stock"). The following summary
description of the Common Stock and the Preferred Stock is qualified by
reference to the Company's Amended and Restated Certificate of Incorporation
included as an exhibit to the Registration Statement of which this Prospectus
is a part.
COMMON STOCK
As of the date of this Prospectus, there are 3,215,844 outstanding shares of
Common Stock and outstanding options and warrants to purchase an aggregate of
1,002,108 shares of Common Stock. Upon the closing of this offering, the
holder of a convertible promissory note of the Company having an outstanding
principal balance of $400,000 will convert the note into 43,001 shares of
Common Stock. In addition, as of February 28, 1997, the Company was obligated
under another convertible promissory note having an aggregate outstanding
principal balance of $95,000 which, under certain circumstances, is
convertible into 10,212 shares of Common Stock upon the closing of this
offering. A total of 94,170 shares of Common Stock are reserved for issuance
under the 1987 Plan, 388,647 shares are reserved for issuance under the 1992
Plan, 650,000 shares of Common Stock are reserved for issuance under the 1997
Plan and 100,000 shares of Common Stock are reserved for issuance under the
Directors' Plan. Holders of Common Stock are entitled to one vote for each
share held of record on all matters to be submitted to a vote of the
stockholders, and do not have cumulative voting rights. Subject to preferences
that may be applicable to any outstanding shares of Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors of the Company out of
funds legally available therefor. See "Dividend Policy." All outstanding
shares of Common Stock are, and the shares to be sold in this offering when
issued and paid for will be, fully paid and nonassessable and the holders
thereof will have no preferences or conversion, exchange or pre-emptive
rights. In the event of any liquidation, dissolution or winding-up of the
affairs of the Company, holders of Common Stock will be entitled to share
ratably in the assets of the Company remaining after payment or provision for
payment of all of the Company's debts and obligations and liquidation payments
to holders of outstanding shares of Preferred Stock, if any.
PREFERRED STOCK
After the completion of this offering, no shares of Preferred Stock of the
Company will be issued and outstanding. Thereafter, Preferred Stock may be
issued in one or more series without further stockholder authorization, and
the Board of Directors is authorized to fix and determine the terms,
limitations and relative rights and preferences of the Preferred Stock, to
establish series of Preferred Stock and to fix and determine the variations as
among series. Preferred Stock, if issued, would have priority over the Common
Stock with respect to dividends and to other distributions, including the
distribution of assets upon liquidation, and may be subject to repurchase or
redemption by the Company. The Board of Directors, without approval of the
holders of the Common Stock, can issue Preferred Stock with voting and
conversion rights (including multiple voting rights) which could adversely
affect the rights of holders of Common Stock. In addition to having a
preference with respect to dividends or liquidation proceeds, Preferred Stock,
if issued, may be entitled to the allocation of capital gains from the sale of
the Company's assets. Although the Company has no present plans to issue any
shares of Preferred Stock following the closing of this offering, the issuance
of shares of Preferred Stock, or the issuance of rights to purchase such
shares, may have the effect of delaying, deferring or preventing a change in
control of the Company or an unsolicited acquisition proposal.
CLASSIFIED BOARD OF DIRECTORS
The Restated Certificate of Incorporation and By-laws of the Company provide
for the Board of Directors to be divided into three classes of directors, as
nearly equal in number as is reasonably possible, serving staggered terms so
that directors' initial terms will expire either at the 1998, 1999 or 2000
annual meeting of stockholders. Starting with the 1998 annual meeting of
stockholders, one class of directors will be elected each year for a three-
year term. See "Management."
45
<PAGE>
The Company believes that a classified Board of Directors will help to
assure the continuity and stability of the Board of Directors and the
Company's business strategies and policies as determined by the Board of
Directors, since a majority of the directors at any given time will have had
prior experience as directors of the Company. The Company believes that such
continuity and stability, in turn, will permit the Board of Directors to
represent more effectively the interests of its stockholders.
With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, generally will be required to effect a change in
the majority of the Board of Directors. As a result, a provision relating to a
classified Board of Directors may discourage proxy contests for the election
of directors or purchases of a substantial block of the Common Stock because
the provision could operate to prevent a rapid change in control of the Board
of Directors. The classification provision also could have the effect of
discouraging a third party from making a tender offer or otherwise attempting
to obtain control of the Company. Under the DGCL, unless a corporation's
certificate of incorporation otherwise provides, a director on a classified
board may be removed by the stockholders of the corporation only for cause.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS AND STOCKHOLDER
NOMINATIONS OF DIRECTORS
The By-laws establish an advance notice procedure with regard to the
nomination by the stockholders of the Company of candidates for election as
directors (the "Nomination Procedure") and with regard to other matters to be
brought by stockholders before a meeting of stockholders of the Company (the
"Business Procedure").
The Nomination Procedure requires that a stockholder give written notice to
the Secretary of the Company, delivered to or mailed and received at the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to the meeting, in proper form, of a planned nomination for the
Board of Directors. Detailed requirements as to the form and timing of that
notice are specified in the By-laws. If the Chairman determines that a person
was not nominated in accordance with the Nomination Procedure, such person
will not be eligible for election as a director.
Under the Business Procedure, a stockholder seeking to have any business
conducted at any meeting must give written notice to the Secretary of the
Company, delivered to or mailed and received at the principal executive
offices of the Company not less than 60 days nor more than 90 days prior to
the meeting, in proper form, subject to the requirements of the proxy
solicitation rules under the Securities Exchange Act of 1934. Detailed
requirements as to the form and timing of that notice are specified in the By-
laws. If the Chairman determines that the other business was not properly
brought before such meeting in accordance with the Business Procedure, such
business will not be conducted at such meeting.
Although the By-laws do not give the Board of Directors any power to approve
or disapprove of stockholder nominations for the election of directors or of
any other business desired by stockholders to be conducted at an annual or any
other meeting, the By-laws (i) may have the effect of precluding nominations
for the election of directors or precluding the conduct of business at a
particular annual meeting if the proper procedures are not followed or (ii)
may discourage or deter a third party from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of the Company, even if the conduct of such solicitation or such
attempt might be beneficial to the Company and its stockholders.
OTHER PROVISIONS
Special Meetings of the Stockholders of the Company. The Company's By-laws
provide that a special meeting of the stockholders of the Company only may be
called by the Chairman of the Board, or by order of the Board of Directors.
That provision prevents stockholders from calling a special meeting of
stockholders and potentially limits the stockholders' ability to offer
proposals to the annual meetings of stockholders, if no special meetings are
otherwise called by the Chairman or the Board.
Amendment of the By-laws. The Company's Restated Certificate of
Incorporation provides that the By-laws only may be amended by a vote of the
Board of Directors or by a vote of at least 75% of the outstanding shares of
the Company's stock entitled to vote in the election of directors.
46
<PAGE>
No Action by Written Consent. The Company's Restated Certificate of
Incorporation does not permit the Company's stockholders to act by written
consent. As a result, any action to be taken by the Company's stockholders
must be taken at a duly called meeting of the stockholders.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period
of three years following the date that such stockholder became an interested
stockholder, unless: (a) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (b) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (i) by persons who are directors and officers
and (ii) by employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer, or (c) on or after such date,
the business combination is approved by the Board of Directors and authorized
at an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. An "interested stockholder" is defined as any person
that is (y) the owner of 15% or more of the outstanding voting stock of the
corporation or (z) an affiliate or associate of the Company and was the owner
of 15% or more of the outstanding voting stock of the Company at any time
within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering and the acquisition of Manhattan
Limousine, the Company will have 6,358,845 shares of Common Stock outstanding.
Of these shares, 2,900,000 shares sold pursuant to this offering (3,335,000
shares if the Underwriters exercise their over-allotment option in full) will
be freely tradeable without restriction under the Securities Act, except for
any shares which may be acquired by an "affiliate" of the Company (as that
term is defined in Rule 144). The 3,458,845 remaining shares constitute
"restricted securities" within the meaning of Rule 144 and, except for shares
held by affiliates of the Company and the 200,000 shares issued in connection
with the acquisition of Manhattan Limousine, will be eligible for sale in the
open market subject to the applicable requirements of Rule 144(k) described
below.
Following the completion of this offering, if issued upon the conversion of
an outstanding convertible note and the exercise of outstanding warrants,
274,165 shares of Common Stock also will be restricted securities within the
meaning of Rule 144 and will be eligible for sale in the open market subject
to the applicable requirements of Rule 144 discussed below.
Also following the completion of this offering, there will be a total of
888,155 shares of Common Stock issuable upon the exercise of outstanding
options under the Company's Equity Plans and Directors' Plan and an additional
344,662 shares of Common Stock reserved for future award or grant under such
plans. The Company intends to file a registration statement on Form S-8 to
register the issuance of shares under the Equity Plans and Directors' Plan.
Common Stock issued after the effective date of such registration statement
upon exercise of outstanding vested options granted pursuant to the Equity
Plans and Directors' Plan, other than Common Stock issued to affiliates of the
Company, would be available for immediate resale in the open market.
In general, under Rule 144 as in effect as of April 29, 1997, if a period of
at least one year has elapsed between the later of the date on which
restricted securities were acquired from the Company and the date on which
they were acquired from an affiliate, then the holder of such restricted
securities (including an affiliate) is entitled to sell that number of shares
within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of the Common Stock or (ii) the average
weekly reported volume of trading of the Common Stock during the four calendar
weeks preceding such sales. Sales under Rule 144 also are subject to certain
requirements pertaining to the manner of such sales, notices of such sales and
the
47
<PAGE>
availability of current public information concerning the Company. Any shares
not constituting restricted securities sold by affiliates must be sold in
accordance with the foregoing volume limitations and other requirements but
without regard to the one year holding period. Under Rule 144(k) as in effect
as of April 29, 1997, if a period of at least two years has elapsed from the
later of the date on which restricted securities were acquired from the
Company and the date on which they were acquired from the affiliate, a holder
of such restricted securities who is not an affiliate at the time of the sale
and has not been an affiliate for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above.
The Company and the beneficial owners of at least 4,000,000 shares of Common
Stock (including all of the Company's officers and directors and those
individuals who will be issued Common Stock in the Manhattan Limousine
acquisition) have agreed that they will not offer, sell, contract to sell,
pledge, grant any option for the sale of, or otherwise dispose or cause the
disposition of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for such shares, for a period of 180 days after
the date of this Prospectus without the prior written consent of Montgomery
Securities, except for (i) in the case of the Company, Common Stock issued
pursuant to any employee or director benefit plan described herein or in
connection with acquisitions or (ii) in the case of directors and executive
officers, the exercise of stock options pursuant to benefit plans described
herein and shares of Common Stock disposed of as bona fide gifts, subject in
each case to any remaining portion of the 180-day period applying to shares so
issued or transferred. In evaluating any request for a waiver of the 180-day
lock-up period, Montgomery Securities will consider, in accordance with their
customary practice, all relevant facts and circumstances at the time of the
request, including, without limitation, the recent trading market for the
Common Stock, the size of the request and, with respect to a request by the
Company to issue additional equity securities, the purpose of such an
issuance. The holder of 200,000 shares of Common Stock to be issued in
connection with the acquisition of Manhattan Limousine will be entitled to
certain demand and piggy-back registration rights one year after completion of
this offering.
After the offering, sales of substantial amounts of Common Stock by existing
stockholders could have an adverse impact on the prevailing market price of
the Common Stock. No predictions can be made as to the effect, if any, that
market sales of shares by existing stockholders or the availability of such
shares for future sale will have on the market price of shares of Common Stock
prevailing from time to time.
48
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), represented by Montgomery
Securities and Ladenburg Thalmann & Co. Inc. (the "Representatives"), have
severally agreed, subject to the terms and conditions in the underwriting
agreement (the "Underwriting Agreement") by and between the Company and the
Underwriters, to purchase from the Company the number of shares of Common
Stock indicated below opposite their respective names, at the initial public
offering price less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of the shares of Common Stock, if
they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Montgomery Securities............................................
Ladenburg Thalmann & Co. Inc. ...................................
---------
Total........................................................ 2,900,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on
the cover page of this Prospectus. The Underwriters may allow selected dealers
a concession of not more than $ per share; and the Underwriters may allow,
and such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the initial public offering, the public offering
price and other selling terms may be changed by the Representatives. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 435,000 additional shares of Common Stock to cover over-allotments,
if any, at the same price per share as the initial shares to be purchased by
the Underwriters. To the extent that the Underwriters exercise such over-
allotment option, the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
The Company's officers and directors and certain of the shareholders of the
Company (including the holders of shares issued in connection with the
acquisition of Manhattan Limousine) who, immediately following this offering,
collectively will beneficially own an aggregate of at least 4,000,000 shares
of Common Stock (including shares issuable upon the exercise of outstanding
options and warrants), have agreed that for a period of 180 days after the
date of this Prospectus they will not, without the prior written consent of
Montgomery Securities, directly or indirectly sell, offer, contract or grant
any option to sell, pledge, transfer, establish an open put equivalent
position or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stocks. The Company has
also agreed not to issue, offer, sell, grant options to purchase or otherwise
dispose of any of the Company's equity securities for a period of 180 days
after the effective date of this offering without the prior written consent of
Montgomery Securities, except for securities issued by the Company in
connection with
49
<PAGE>
acquisitions and for grants and exercises of stock options, subject in each
case to any remaining portion of the 180-day period applying to shares so
issued or transferred. In evaluating any request for a waiver of the 180-day
lock-up period, Montgomery Securities will consider, in accordance with their
customary practice, all relevant facts and circumstances at the time of the
request, including, without limitation, the recent trading market for the
Common Stock, the size of the request and, with respect to a request by the
Company to issue additional equity securities, the purpose of such an
issuance. See "Shares Eligible for Future Sale."
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M under the Securities Exchange Act of
1934, pursuant to which such persons may bid for or purchase Common Stock for
the purpose of stabilizing its market price. The Underwriters also may create
a short position for the account of the Underwriters by selling more Common
Stock in connection with the offering than they are committed to purchase from
the Company, and in such case may purchase Common Stock in the open market
following completion of this offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 435,000 shares of Common Stock, by exercising the
Underwriters' over-allotment option referred to above. In addition, Montgomery
Securities, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in this offering), for the account of the
other Underwriters, the selling concession with respect to Common Stock that
is distributed in this offering but subsequently purchased for the account of
the Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
expect to make sales of Common Stock offered by this Prospectus to accounts
over which they exercise discretionary authority in excess of 5% of the number
of shares of Common Stock offered hereby.
In recognition of financial advisory services provided to the Company prior
to this offering, the Company has agreed to issue to each of Montgomery
Securities and Ladenburg Thalmann & Co. Inc. warrants (the "Warrants") to
purchase 67,500 shares of Common Stock, exercisable for a period of five years
commencing on the date of this offering, at a price equal to 120% of the
initial offering price, subject to adjustment in certain events. Each Warrant
contains certain registration rights relating to the shares issuable
thereunder.
The Company also has agreed to issue warrants to purchase an aggregate of
15,000 shares of Common Stock to LP Associates, William Russell and Michael
Press as a finder's fee in connection with this offering. These warrants will
contain identical terms to the Warrants.
Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiations between the Company and the
Representatives. Among the factors considered in such negotiations were the
history of, and the prospects for, the Company and the industry in which the
Company competes, an assessment of the Company's management, its financial
conditions, its past and present earnings and the trend of such earnings, the
prospects for future earnings of the Company, the present state of the
Company's development, the general condition of the economy and the securities
markets at the time of this offering and the market prices of and demand for
publicly traded common stock of comparable companies in recent periods.
50
<PAGE>
LEGAL MATTERS
The validity of the shares offered will be passed upon for the Company by
Nutter, McClennen & Fish, LLP, Boston, Massachusetts. Certain legal matters
will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., New
York, New York.
EXPERTS
The consolidated financial statements of the Company as of November 30, 1995
and 1996 and for each of the three years in the period ended November 30, 1996
included in this Prospectus have been included herein in reliance on the
report, which includes an explanatory paragraph relating to the restatement of
such financial statements, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The combined financial statements of Manhattan Limousine as of September 30,
1996 and for the year ended September 30, 1996 included in this Prospectus
have been included herein in reliance on the report, which includes an
explanatory paragraph relating to the restatement of such financial
statements, of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The financial statements of Speed 6060 Limited (formerly Camelot Barthropp
Limited) as of and for the years ended December 31, 1994 and December 31,
1995, included in this Prospectus have been included herein in reliance on the
report of Coopers & Lybrand, Chartered Accountants and Registered Auditors,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Camelot Barthropp Limited (formerly Speed 6060
Limited) as of December 31, 1995 and for the period from August 4, 1995 to
December 31, 1995, included in this Prospectus have been included herein in
reliance on the report of Coopers & Lybrand, Chartered Accountants and
Registered Auditors, given on the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Common Stock offered hereby. This Prospectus
omits certain information contained in the Registration Statement, and
reference is made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the Common
Stock offered hereby. Statements contained in this Prospectus concerning the
provisions or contents of any contract, agreement or any other document
referred to herein are not necessarily complete with respect to each such
contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matters involved, and each such statement shall be deemed qualified by
such reference. The Registration Statement, including the exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1204, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the Registration Statement or any part thereof may be obtained from
such office, upon payment of the fees prescribed by the Commission. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that submit electronic filings to the Commission.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAREY INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Balance Sheet as of February 28, 1997........................... F-3
Pro Forma Statement of Operations for three months ended February 28,
1997..................................................................... F-4
Pro Forma Statement of Operations for the year ended November 30, 1996.... F-5
Notes to Pro Forma Consolidated Financial Statements...................... F-6
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Financial Statements
Balance Sheet as of February 28, 1997..................................... F-8
Statements of Operations for three months ended February 29, 1996 and
February 28, 1997........................................................ F-9
Statements of Cash Flows for three months ended February 29, 1996 and
February 28, 1997........................................................ F-10
Note to Consolidated Financial Statements................................. F-11
Audited Consolidated Financial Statements
Report of Independent Accountants......................................... F-15
Balance Sheets as of November 30, 1995 and 1996........................... F-16
Statements of Operations for the years ended November 30, 1994, 1995 and
1996..................................................................... F-17
Statements of Changes in Stockholders' Equity for the years ended November
30, 1994, 1995
and 1996................................................................. F-18
Statements of Cash Flows for the years ended November 30, 1994, 1995 and
1996..................................................................... F-19
Notes to Consolidated Financial Statements................................ F-20
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK, LTD. AND AFFILIATE
Combined Financial Statements
Report of the Independent Accountants..................................... F-36
Balance Sheets as of September 30, 1996 and December 31, 1996
(unaudited).............................................................. F-37
Statements of Operations for the year ended September 30, 1996 and the
three months ended
December 31, 1996 (unaudited)............................................ F-38
Statements of Cash Flows for the year ended September 30, 1996 and the
three months ended
December 31, 1996 (unaudited)............................................ F-39
Notes to Combined Financial Statements.................................... F-40
CAMELOT BARTHROPP LIMITED
Audited Financial Statements
Report of the Independent Accountants..................................... F-46
Statement of Operations for the period from August 4, 1995 to December 31,
1995..................................................................... F-47
Balance Sheet at December 31, 1995........................................ F-48
Notes to the Financial Statements......................................... F-49
SPEED 6060 LIMITED
Audited Financial Statements
Report of the Independent Accountants..................................... F-58
Statements of Operations for the years ended December 31, 1994 and 1995... F-59
Balance Sheets at December 31, 1994 and 1995.............................. F-60
Notes to the Financial Statements......................................... F-61
</TABLE>
F-1
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The Pro Forma Consolidated Balance Sheet as of February 28, 1997 and the Pro
Forma Consolidated Statement of Operations for the year ended November 30,
1996 and for the three months ended February 28, 1997 are based on the
historical consolidated financial statements of Carey International, Inc. and
subsidiaries (the "Company"), Manhattan International Limousine Network Ltd.
and Affiliate ("Manhattan Limousine") and Camelot Barthropp Limited. The Pro
Forma Consolidated Balance Sheet has been prepared assuming the acquisition of
Manhattan Limousine occurred on February 28, 1997. For purposes of the Pro
Forma Balance Sheet, the Combined Balance Sheet of Manhattan Limousine as of
December 31, 1996, its most recent quarter-end, has been combined with the
Consolidated Balance Sheet of the Company as of February 28, 1997.
The Pro Forma Consolidated Statement of Operations for the year ended
November 30, 1996 and for the three months ended February 28, 1997 have been
prepared assuming the acquisitions of Camelott Barthropp Limited and Manhattan
Limousine occurred on December 1, 1995. For purposes of the Pro Forma
Consolidated Statements of Operations for the year ended November 30, 1996 and
the three months ended February 28, 1997, Manhattan Limousine's Statement of
Operations for the year ended September 30, 1996 has been combined with the
Consolidated Statement of Operations of the Company for the year ended
November 30, 1996 and Manhattan Limousine's Statement of Operations for the
three months ended December 31, 1996 has been combined with the Consolidated
Statement of Operations of the Company for the three months ended February 28,
1997. The Pro Forma Consolidated Statements of Operations also reflect the
issuance of 2,434,703 shares of Common Stock (at the estimated initial public
offering price of $12.00 per share, net of estimated underwriting discounts)
required to: (i) repay certain existing debt of the Company, (ii) pay the cash
and note portions of the purchase price for Manhattan Limousine, (iii) repay
certain debt assumed in connection with the acquisition of Manhattan
Limousine, and (iv) redeem certain preferred stock of the Company. The Pro
Forma Consolidated Statement of Operations also reflects the issuance of an
aggregate of 2,760,071 shares of Common Stock in connection with (i) the
acquisition of Manhattan Limousine (at the estimated initial public offering
price of $12.00 per share) and (ii) the issuance of shares of Common Stock as
part of the Recapitalization. These 5,194,774 shares are assumed to have been
issued, the debt repaid and the preferred stock redeemed at the beginning of
the period presented, and thus interest expense attributable to such debt has
been eliminated.
The Pro Forma Consolidated Balance Sheet reflects the assumed issuance as of
February 28, 1997 of 2,900,000 shares of Common Stock in this offering at the
estimated initial public offering price of $12.00 per share, and the
application of the proceeds (net of estimated underwriting discounts and
offering expenses payable by the Company) to: (i) repay certain existing debt
of the Company, (ii) pay the cash and note portions of the purchase price for
the acquisition of Manhattan Limousine, (iii) repay certain debt assumed in
connection with the acquisition of Manhattan Limousine and (iv) redeem certain
preferred stock of the Company, with the remaining net proceeds added to
working capital.
The Pro Forma Consolidated Financial Statements do not purport to represent
what the Company's actual results of operations or financial position would
have been had the acquisitions occurred as of such dates, or to project the
Company's results of operations or financial position for any period or date,
nor does it give effect to any matters other than those described in the notes
thereto. In addition, the allocation of purchase price to the assets and
liabilities of Manhattan Limousine is preliminary and the final allocation may
differ from the amounts reflected herein. The Pro Forma Consolidated Financial
Statements should be read in conjunction with the other financial statements
and notes thereto included elsewhere in this Prospectus.
F-2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
-------------------------------------------------------------------------------------------
ACTUAL
------------------------
MANHATTAN ACQUISITION RECAPITALIZATION OFFERING
COMPANY LIMOUSINE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS(1) PRO FORMA
----------- ----------- ----------- ---------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 1,458,633 $ 24,932 $ (24,932)(3) $ -- $31,066,224 $ 5,353,580
(7,607,622)
(7,060,000)
(4,740,000)
(3,747,703)
(4,015,952)(5)
Accounts receivable,
net.................... 7,474,537 2,550,658 (2,550,658)(3) -- -- 7,474,537
Notes receivable from
contracts, current
portion................ 434,562 478,707 -- -- -- 913,269
Prepaid expenses and
other current assets... 2,663,215 51,499 -- -- (1,227,563) 1,487,151
----------- ----------- ----------- ---------- ----------- -----------
Total current
assets............. 12,030,947 3,105,796 (2,575,590) -- 2,667,384 15,228,537
Fixed assets, net....... 3,179,839 735,108 1,250,000 (4) -- -- 5,164,947
Notes receivable from
contracts, excluding
current portion........ 1,256,900 7,498,445 -- -- -- 8,755,345
Franchise rights, net... 5,289,286 -- -- -- -- 5,289,286
Trade name and contract
rights, net............ 6,637,275 -- -- -- -- 6,637,275
Goodwill, net........... 7,230,853 -- 19,677,031 (4) -- -- 26,907,884
Deferred tax assets..... 2,461,573 -- -- -- -- 2,461,573
Deposits and other
assets................. 1,291,556 1,227,814 (1,204,927)(3) -- (99,439) 1,215,004
----------- ----------- ----------- ---------- ----------- -----------
Total assets........ $39,378,229 $12,567,163 $17,146,514 $ -- $ 2,567,945 $71,659,851
=========== =========== =========== ========== =========== ===========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current portion of notes
payable................ $ 3,967,163 $ 2,769,013 $(1,685,964)(3) $ -- $(3,193,148) $ 949,026
4,740,000 (4) (4,740,000)
(908,038)
Payable to seller....... -- -- 7,060,000 (4) -- (7,060,000) --
Current portion of
capital leases......... 210,227 -- -- -- -- 210,227
Current portion of
subordinated notes
payable................ 660,000 -- -- -- (660,000)(5) --
Accounts payable and
accrued expenses....... 8,222,819 4,375,872 (182,000)(3) -- (925,339) 11,491,352
----------- ----------- ----------- ---------- ----------- -----------
Total current
liabilities........ 13,060,209 7,144,885 9,932,036 -- (17,486,525) 12,650,605
Notes payable, excluding
current portion........ 5,527,830 2,445,743 520,000 (4) -- (4,414,474) 1,239,434
(2,839,665)
Capital leases,
excluding current
portion................ 679,215 -- -- -- -- 679,215
Subordinated notes
payable, excluding
current portion........ 5,120,000 -- -- (4,867,548)(5) (252,452)(5) --
Deferred rent and other
long-term liabilities.. 74,307 866,401 (466,624)(3) -- -- 474,084
Deferred tax
liabilities............ 1,444,163 -- -- -- -- 1,444,163
Deferred revenue........ 6,628,564 6,871,236 -- -- -- 13,499,800
Stockholders' equity:
Preferred stock....... 1,115,400 -- -- (775,050)(5) (340,350)(5) --
Common stock.......... 6,558 1,100 (1,100)(4) 25,600 (5) 29,000 63,158
2,000 (4)
Additional paid in
capital.............. 7,357,064 176,940 (176,940)(4) 5,616,998 (5) 30,735,000 43,343,912
2,398,000 (4) (2,763,150)(5)
Accumulated deficit... (1,635,081) (4,939,142) 4,939,142 (3,4) -- (99,439)(2) (1,734,520)
----------- ----------- ----------- ---------- ----------- -----------
Total stockholders'
equity............. 6,843,941 (4,761,102) 7,161,102 4,867,548 27,561,061 41,672,550
----------- ----------- ----------- ---------- ----------- -----------
Total liabilities
and stockholders'
equity........... $39,378,229 $12,567,163 $17,146,514 $ -- $ 2,567,945 $71,659,851
=========== =========== =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
F-3
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
------------------------------------------------------------------------------------
ACTUAL
-----------------------
MANHATTAN ACQUISITION RECAPITALIZATION OFFERING
COMPANY LIMOUSINE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net............ $14,141,383 $5,471,384 $ -- $ -- $ -- $19,612,767
Cost of revenue......... 9,756,260 3,393,076 -- -- -- 13,149,336
----------- ---------- --------- -------- -------- -----------
Gross profit.......... 4,385,123 2,078,308 -- -- -- 6,463,431
Selling, general and
administrative
expense................ 3,819,432 1,491,857 (46,865)(6) -- 37,500 (11) 5,465,901
163,977 (7) --
----------- ---------- --------- -------- -------- -----------
Operating income
(loss)............... 565,691 586,451 (117,112) -- (37,500) 997,530
Other income (expense)
Interest expense...... (392,347) (224,810) (28,281)(8) 125,000(10) 465,999 (11) (54,439)
Interest and other
income............... 147,285 16,500 -- -- -- 163,785
----------- ---------- --------- -------- -------- -----------
Income before provision
for income taxes....... 320,629 $ 378,141 $(145,393) $125,000 $428,499 1,106,876
========== ========= ======== ========
Provision for income
taxes.................. 153,223 464,888 (12)
----------- -----------
Net income ............. $ 167,406 $ 641,988
=========== ===========
Pro forma net income per
common share........... $ .10 (13)
===========
Weighted average shares
outstanding............ 6,169,932 (13)
===========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
F-4
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED NOVEMBER 30, 1996
-------------------------------------------------------------------------------------------------
ACTUAL
-----------------------------------
CAMELOT
BARTHROPP MANHATTAN ACQUISITION RECAPITALIZATION OFFERING
COMPANY LIMITED LIMOUSINE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- --------- ----------- ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ $59,505,698 $ 938,656 $18,438,547 $ -- $ -- $ -- $78,882,901
Cost of revenue......... 40,438,449 865,336 11,040,017 -- -- -- 52,343,802
----------- --------- ----------- -------- -------- ---------- -----------
Gross profit.......... 19,067,249 73,320 7,398,530 -- -- -- 26,539,099
Selling, general and
administrative
expense................ 15,077,553 211,097 5,821,899 (874,475)(6) -- 150,000 (11) 21,041,984
655,910 (7) --
----------- --------- ----------- -------- -------- ---------- -----------
Operating income
(loss)............... 3,989,696 (137,777) 1,576,631 218,565 -- (150,000) 5,497,115
Other income (expense)
Interest expense...... (1,704,187) (21,375) (881,854) (76,608)(8) 500,000(10) 1,848,648 (11) (335,376)
Interest and other
income............... 426,349 -- 66,000 (66,000)(9) -- -- 426,349
----------- --------- ----------- -------- -------- ---------- -----------
Income before provision
(benefit) for income
taxes.................. 2,711,858 $(159,152) $ 760,777 $ 75,957 $500,000 $1,698,648 5,588,088
========= =========== ======== ======== ==========
Provision (benefit) for
income taxes........... (104,246) 2,364,000 (12)
----------- -----------
Net income ............. $ 2,816,104 $ 3,224,088
=========== ===========
Pro forma net income per
common share........... $ .52 (13)
===========
Weighted average shares
outstanding............ 6,216,322 (13)
===========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
F-5
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
To date, all of the Company's acquisitions have been accounted for under the
purchase method of accounting with the results of the acquired companies
included in the Company's statements of operations beginning on the date of
the acquisition.
(1) Gives effect to the sale by the Company of 2,900,000 shares of Common
Stock in this offering at an estimated offering price of $12.00 per
share. After estimated underwriting discounts and commissions and
offering expenses of $4.0 million, of which approximately $300,000 has
been paid, the estimated net proceeds of $31.1 million will be applied
to: (i) the repayment of certain existing debt of the Company of $7.6
million, (ii) the repayment of the cash and note portions of the purchase
price for the acquisition of Manhattan Limousine of $7.1 million and $4.7
million, respectively, (iii) the repayment of $3.7 million of debt
assumed upon the acquisition of Manhattan Limousine and (iv) the
redemption of certain preferred stock of the Company for $3.1 million and
the repayment of subordinated debt of approximately $912,000 as part of
the Recapitalization (see Note 5, below). The balance of the net
proceeds, estimated to be approximately $3.9 million, will be added to
working capital.
(2) Reflects the elimination of approximately $99,000 of capitalized
financing fees related to certain debt repaid out of the net proceeds of
the offering.
(3) Gives effect to the retention by the stockholders of Manhattan Limousine
of certain assets and liabilities consisting of: (i) cash of
approximately $25,000, (ii) $2.6 million of accounts receivable, net,
(iii) $1.2 million of deposits and other assets, (iv) debt of $1.7
million collateralized by accounts receivable and (v) certain liabilities
of approximately $649,000.
(4) Gives effect to the acquisition of Manhattan Limousine for $14.2 million,
as if such acquisition occurred on February 28, 1997. The adjustments
reflect: (i) a cash payment of $7.1 million, (ii) promissory notes issued
in the aggregate amount of $4.7 million and (iii) the issuance of $2.4
million of Common Stock. After taking into account all acquisition
adjustments, the liabilities of Manhattan Limousine exceed its assets.
Accordingly, the allocation of the purchase price to the estimated fair
value of the assets and liabilities assumed will result in the
recognition by the Company of $19.7 million in goodwill. As part of the
fair value allocation, the Company valued the facility at which Manhattan
Limousine operates at its estimated fair market value of $1.1 million and
certain radio frequencies used in the conduct of Manhattan Limousine's
business at their estimated fair market value of $200,000. In January
1997, Manhattan Limousine increased the mortgage on this facility by
approximately $520,000 to $800,000. The entire mortgage was included in
the acquired liabilities.
(5) Gives effect to the Recapitalization, which will be implemented upon the
closing of the IPO. Pursuant to the Recapitalization: (i) the $2.0
million subordinated convertible note dated September 1, 1991, and $2.9
million of the $3.8 million subordinated note dated July 30, 1992 will be
converted or exchanged for an aggregate of 1,046,559 shares of Common
Stock, (ii) the Series A Preferred Stock will be redeemed in part for
$2.1 million and converted in part into 86,003 shares of Common Stock,
(iii) all of the Series F and 3,000 shares of the Series G Preferred
Stock will be redeemed for $1.0 million and (iv) the remaining Series G
Preferred Stock and the Series B Preferred Stock will be converted into
an aggregate of 1,427,509 shares of Common Stock.
(6) Gives effect to the elimination from the Combined Statement of Operations
of Manhattan Limousine of: (i) a one-time charge related to advances to a
non-combined affiliate of Manhattan Limousine which were approximately
$7,000 and $218,000 for the three months ended February 28, 1997 and the
year ended November 30, 1996, respectively, (ii) redundant administrative
and other costs immediately identifiable at the time of the acquisition
(relating to salary and benefits of a stockholder of Manhattan Limousine
and members of his family which will not be incurred by the Company) of
approximately $40,000 and $591,000 for the three months ended February
28, 1997 and the year ended November 30, 1996, respectively, and
(iii) approximately $65,000 for the year ended November 30, 1996 of
financing fees associated with debt retained by a stockholder of
Manhattan Limousine.
(7) Gives effect to the amortization of approximately $164,000 and $656,000
for the three months ended February 28, 1997 and the year ended November
30, 1996, respectively, of goodwill recognized with
F-6
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respect to the acquisition of Manhattan Limousine. Goodwill will be
amortized over a 30-year period.
(8) Gives effect to an increase in interest associated with the promissory
notes in the aggregate amount of $4.8 million used to acquire Manhattan
Limousine and the increase of $520,000 in Manhattan Limousine's mortgage
note in January 1997, both of which will be repaid out of the proceeds of
the offering. Also gives effect to a decrease in interest expense
associated with the debt retained by a stockholder of Manhattan
Limousine.
(9) Gives effect to the elimination of interest income related to a note
receivable retained by a stockholder of Manhattan Limousine.
(10) Reflects the elimination of approximately $125,000 and $500,000 for the
three months ended February 28, 1997 and the year ended November 30,
1996, respectively, of interest on certain debt converted into Common
Stock.
(11) Reflects directors' and officers' insurance costs the Company anticipates
to incur in connection with being a public registrant and the elimination
of $466,000 and $1.8 million for the three months ended February 28, 1997
and the year ended November 30, 1996, respectively, of interest on
certain current and long-term debt repaid from the proceeds of this
offering.
(12) Reflects the estimated provision for income taxes at an assumed rate of
42.0% and 42.3% for the three months ended February 28, 1997 and the year
ended November 30, 1996, respectively, after giving consideration to
nondeductible goodwill expense.
(13) Pro forma net income per share was computed by dividing the pro forma net
income for the three months ended February 28, 1997 and the year ended
November 30, 1996 by the pro forma weighted average number of shares
outstanding for each of the periods. Pro forma weighted average shares
outstanding include common share equivalents, and give retroactive effect
as of December 1, 1995 for the following: (i) the repayment of certain
existing debt of the Company, (ii) the payment of the cash and note
portions of the purchase price for the acquisition of Manhattan Limousine
of $7.1 million and $4.7 million, respectively, (iii) the repayment of
$3.7 million of debt assumed upon the acquisition of Manhattan Limousine,
(iv) the redemption of certain preferred stock of the Company for $3.1
million and the repayment of subordinated debt of the Company in the
principal amount of approximately $912,000 as part of the
Recapitalization and (v) increasing the weighted average common shares
outstanding by the number of common shares resulting from such conversion
of $4,867,546 of subordinated debt and the partial conversion of the
Series A Preferred Stock. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin (SAB) No. 83, the common equivalent shares
issued by the Company during the 12 months preceding the anticipated
effective date of the Registration Statement relating to the Company's
initial public offering, using the treasury stock method and an assumed
public offering price of $12.00 per share, have been included in the
calculation of pro forma net income per share. All share numbers give
effect to the reverse stock split of one-for-2.3255 that is part of the
Recapitalization.
F-7
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FEBRUARY 28,
1997
------------
(UNAUDITED)
<S> <C>
ASSETS
Cash and cash equivalents......................................... $ 1,458,633
Accounts receivable, net of allowance for doubtful accounts of
$546,000......................................................... 7,474,537
Notes receivable from contracts, current portion.................. 434,562
Prepaid expenses and other current assets......................... 2,663,215
-----------
Total current assets.......................................... 12,030,947
Fixed assets, net of accumulated depreciation and amortization of
$2,593,000....................................................... 3,179,839
Notes receivable from contracts, excluding current portion........ 1,256,900
Franchise rights, net of accumulated amortization of $1,788,000... 5,289,286
Trade name, trademark and contract rights, net of accumulated
amortization of $1,020,000....................................... 6,637,275
Goodwill and other intangible assets, net of accumulated
amortization of $894,000......................................... 7,230,853
Deferred tax assets............................................... 2,461,573
Deposits and other assets......................................... 1,291,556
-----------
Total assets................................................ $39,378,229
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable.................................. $ 3,967,163
Current portion of capital leases................................. 210,227
Current portion of subordinated notes payable..................... 660,000
Accounts payable and accrued expenses............................. 7,297,480
Accrued offering costs............................................ 925,339
-----------
Total current liabilities..................................... 13,060,209
Notes payable, excluding current portion.......................... 5,527,830
Capital leases, excluding current portion......................... 679,215
Subordinated notes payable, excluding current portion............. 5,120,000
Deferred tax and other long-term liabilities...................... 1,518,470
Deferred revenue.................................................. 6,628,564
Commitments and contingencies
Stockholders' equity:
Preferred stock................................................. 1,115,400
Class A common stock, $.01 par value; 314,000 authorized shares,
none issued and outstanding.................................... --
Common stock, $.01 par value; 9,512,950 authorized shares,
655,773 issued and outstanding shares.......................... 6,558
Additional paid-in capital...................................... 7,357,064
Accumulated deficit............................................. (1,635,081)
-----------
Total stockholders' equity.................................... 6,843,941
-----------
Total liabilities and stockholders' equity.................. $39,378,229
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenue, net....................................... $11,557,885 $14,141,383
Cost of revenue.................................... 7,903,979 9,756,260
----------- -----------
Gross profit................................... 3,653,906 4,385,123
Selling, general and administrative expense........ 3,360,726 3,819,432
----------- -----------
Operating income............................... 293,180 565,691
Other income (expense):
Interest expense............................... (422,222) (392,347)
Interest income................................ 23,168 28,174
Gain on sales of fixed assets.................. 59,399 119,111
----------- -----------
Income (loss) before provision for income taxes.... (46,475) 320,629
Provision for income taxes......................... 11,722 153,223
----------- -----------
Net income (loss).................................. $ (58,197) $ 167,406
=========== ===========
Pro forma net income per common share.............. $ .07
===========
Weighted average common shares outstanding......... 3,535,229
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ (58,197) $ 167,406
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization of fixed assets.... 217,307 267,496
Amortization of intangible assets................ 248,721 239,760
Gain on sales of fixed assets.................... (59,399) (119,111)
Provision for deferred taxes..................... -- 46,500
Change in deferred revenue....................... 426,999 447,417
Changes in operating assets and liabilities
Accounts receivable............................ 1,442,819 2,667,195
Notes receivable from contracts................ (493,135) (519,510)
Prepaid expenses, deposits and other assets.... (128,394) (695,335)
Accounts payable and accrued expenses.......... (1,897,456) (2,829,078)
Deferred rent and other long-term liabilities.. (2,791) (36,974)
---------- ----------
Net cash used in operating activities........ (303,526) (364,234)
---------- ----------
Cash flows from investing activities:
Proceeds from sales of fixed assets................ 194,540 274,949
Purchases of fixed assets.......................... (62,406) (145,554)
Acquisitions of chauffeured vehicle service compa-
nies.............................................. (1,120,417) (35,812)
---------- ----------
Net cash provided by (used in) investing ac-
tivities.................................... (988,283) 93,583
---------- ----------
Cash flows from financing activities:
Principal payments under capital lease obliga-
tions............................................. (101,778) (50,016)
Payments of notes payable.......................... (798,571) (1,224,976)
Proceeds from notes payable........................ 1,085,000 400,000
Payment of offering costs.......................... -- (150,000)
Redemption of Series E preferred stock............. (97,500) --
---------- ----------
Net cash provided by (used in) financing ac-
tivities.................................... 87,151 (1,024,992)
---------- ----------
Net decrease in cash and cash equivalents............ (1,204,658) (1,295,643)
Cash and cash equivalents at beginning of period..... 1,438,659 2,754,276
---------- ----------
Cash and cash equivalents at end of period........... $ 234,001 $1,458,633
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1.BACKGROUND AND ORGANIZATION
General
Carey International, Inc. (the "Company") is one of the world's largest
chauffeured vehicle service companies, providing services through a worldwide
network of owned and operated companies, licensees and affiliates serving 420
cities in 65 countries. The Company owns and operates service providers in the
form of wholly-owned subsidiaries in the following cities: New York (Carey
Limousine N.Y., Inc.), San Francisco (Carey Limousine SF, Inc.), Los Angeles
(Carey Limousine L.A., Inc.), London (Carey UK Limited), Washington, D.C.
(Carey Limousine D.C., Inc.), South Florida (Carey Limousine Florida, Inc.)
and Philadelphia (Carey Limousine Corporation, Inc.). In addition, the Company
generates revenues from licensing the "Carey" name, and from providing central
reservations, billing, sales and marketing services to its licensees. The
Company's worldwide network also includes affiliates in locations in which the
Company has neither owned and operated locations nor licensees.
Acquisitions and licensees
The Company is engaged in a program of acquiring chauffeured vehicle service
businesses, including licensees operating under the Carey name and trademark.
These acquisitions are accounted for as purchases. The carrying value of the
assets acquired is determined by the negotiated purchase price. In addition to
acquiring licensees operating under the Carey name, the Company has acquired
chauffeured vehicle service businesses in cities in which the Company
operates. In 1995, these acquisitions included chauffeured vehicle service
companies operating in Washington, D.C., Miami, West Palm Beach and San
Francisco. In 1996, the Company acquired a chauffeured vehicle service company
in London, England.
Reverse stock split
On February 25, 1997, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock in an
initial public offering (the "IPO"). The Board of Directors, at the same
meeting and subject to stockholder approval, authorized a reverse stock split
of approximately one-for-2.3255 of the outstanding shares of the Company's
common stock. A majority of the Company's stockholders have approved the
reverse stock split. All references to common stock, options, warrants and per
share data have been restated to give effect to the reverse stock split. The
Board of Directors also authorized a Recapitalization Plan (see Note 7) on
February 25, 1997.
2.BASIS OF PRESENTATION
The consolidated financial statements include the financial statements of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The consolidated financial statements and notes do not include all of the
disclosures made in the Company's consolidated financial statements for the
years ended November 30, 1994, 1995 and 1996, which should be read in
conjunction with these statements. The financial information included herein
has not been audited. However,
F-11
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
in the opinion of management, the statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of the periods reflected. The results for these
periods are not necessarily indicative of the results for the full fiscal
year.
Pro forma net income per common share
Consistent with Staff Accounting Bulletin 1B-2, the Company has recalculated
historical weighted average common shares outstanding and net income per
common share to give effect to the following matters pursuant to the
Recapitalization (see Note 7). The recalculated net income per common share is
determined by (i) adjusting net income to reflect the elimination in interest
expense, net of taxes, resulting from the conversion of $4,867,546 of
subordinated debt into common stock and (ii) increasing the weighted average
common shares outstanding by the number of common shares resulting from the
conversion of such debt, as well as the partial conversion of the Series A
Preferred Stock.
3.ACQUISITIONS
On February 29, 1996, the Company acquired the common stock of a chauffeured
vehicle service company in London, England for approximately $1,500,000. The
acquisition was financed through the incurrence of $950,000 in debt and a
payment of $550,000. Additional contingent consideration of up to $1,000,000
may be payable with respect to each of the two years in the period ending
February 28, 1998 based on the level of revenues referred to the acquired
company by the seller. As of February 28, 1997, the Company has paid $278,304
in contingent consideration in the acquisition of the London company. On March
28, 1997, the Company made an additional payment of approximately $270,000 for
contingent consideration in the acquisition of the London company. In
addition, the Company is required to pay a standard commission to the seller
of the acquired chauffeured vehicle service company for business referral,
which is expensed as incurred.
The Company has historically accounted for all of its acquisitions as
purchases. The net assets acquired and results of operations have been
included in the financial statements as of and from, respectively, the
effective dates of the acquisitions. Total consideration is allocated to the
assets acquired based upon their estimated fair values with any remaining
consideration, including contingent consideration when paid, allocated to
either franchise rights or goodwill. In the periods ended February 29, 1996
and February 28, 1997, the following acquisition activity was recorded by the
Company:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Fair Value of Net Assets and Liabilities Ac-
quired:
Receivables and other assets..................... $ 632,554 $ --
Fixed assets..................................... 928,377 --
Franchise rights................................. 16,072 --
Goodwill......................................... 65,865 35,812
Trade liabilities................................ (522,451) --
---------- -------
Fair value of assets and liabilities acquired.... $1,120,417 $35,812
========== =======
Cash payments (exclusive of $223,695 cash ac-
quired in 1996)................................. $1,120,417 $35,812
========== =======
</TABLE>
4.COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to various legal
actions which are not material to the financial position, the results of
operations or cash flows of the Company.
F-12
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
The Company, certain of the Company's subsidiaries and certain officers and
directors of the Company were named in a civil action filed on May 15, 1996 in
the United States District Court for the Eastern District of Pennsylvania
entitled "Felix v. Carey International, Inc., et al." The plaintiff's
complaint, which purports to be a class action, alleges that the plaintiff and
others similarly situated suffered monetary damages as a result of
misrepresentations by the various defendants in their use of a surface
transportation billing charge. The plaintiff seeks damages in excess of $1
million on behalf of the class for each of the counts in the complaint
including fraud, negligent misrepresentation and violations of the Racketeer
Influenced and Corrupt Organizations law of 1970, which permits the recovery
of treble damages and attorneys' fees. A class has not yet been certified in
this case. The Company filed a motion to dismiss that was denied, and
subsequently has filed an answer denying any liability in connection with this
complaint. The Company has agreed to indemnify and defend its offices and
directors who were named as defendants in the case, subject to conditions
imposed by applicable law. The Company has reached a tentative settlement with
the plaintiff and plaintiff's counsel, which is subject to court approval and
acceptance by the proposed class. The Company does not believe that this
litigation will have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
5.NOTES PAYABLE
Pursuant to an agreement with the lender dated March 24, 1997, the Company
extended the maturity dates of the $750,000 and $200,000 bank lines of credit
to March 31, 1998. The borrowings under these lines of credit have accordingly
been included in non-current notes payable in the accompanying consolidated
balance sheet.
6.NET INCOME PER COMMON SHARE
Net income per common share, on a historical basis, are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Net income (loss) available to common sharehold-
ers............................................ $ (58,197) $ 167,406
Weighted average common shares outstanding...... 2,435,888 2,447,582
Net income (loss) per common share.............. $ (.02) $ .07
</TABLE>
Common equivalent shares are included in the per share calculations where
the effect of their inclusion would be dilutive. Common equivalent shares
consist of shares issuable upon (a) the conversion of Series B, F and G
preferred stock and (b) the assumed exercise of vested outstanding stock
options and warrants. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 83, the common equivalent shares issued by the
Company during the twelve months preceding the anticipated effective date of
the Registration Statement relating to the Company's initial public offering,
using the treasury stock method and an assumed public offering price of $12.00
per share, have been included in the calculation of net income per common
share.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS
128 simplifies the existing earnings per share (EPS) computations under
Accounting Principles Board Opinion No. 15, "Earnings Per Share," revises
disclosure requirements, and increases the comparability of EPS data on an
international basis. In simplifying the EPS computations, the presentation of
primary EPS is replaced with basic EPS, with the principal difference being
that common stock equivalents are not considered in computing basic EPS. In
addition, FAS 128 requires dual presentation of basic and diluted EPS. FAS 128
is effective for financial statements issued for periods ending after December
15, 1997. The Company's pro forma basic EPS under FAS 128 would have been
$0.26 and dilutive EPS under FAS 128 would not differ significantly from the
reported pro forma net income per share.
F-13
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS--(CONTINUED)
7.RECAPITALIZATION AND EQUITY PLANS
On February 25, 1997, pursuant to an agreement reached in May 1996, the
Board of Directors authorized a recapitalization (the "Recapitalization"),
which will be implemented at the time of the IPO. Under the Recapitalization,
the $2,000,000 subordinated convertible note dated September 1, 1991 and the
$3,780,000 subordinated note dated July 30, 1992 will be converted or
exchanged for 1,046,559 shares of common stock and payment of $912,454. The
Series A preferred stock will be converted in part into 86,003 shares of
common stock and redeemed in part for $2,103,500. All of the Series F
preferred stock and 3,000 shares of the Series G preferred stock will be
redeemed for an aggregate of $1,000,000. The remaining preferred stock will be
converted into 1,427,509 shares of common stock. As a result of the
Recapitalization, preferred stock with a liquidation preference of $11,154,900
and subordinated debt with a principal amount of $5,780,000 will be converted
in part into 2,560,071 shares of common stock and repaid or redeemed in part
for $4,015,952 in cash. All of the cash amounts will be paid out of the
proceeds of the IPO.
On February 25, 1997, the Board of Directors adopted the 1997 Equity
Incentive Plan (the "1997 Plan"). A total of 650,000 shares of common stock
are reserved for issuance under the 1997 Plan. The Board of Directors also
granted options to purchase at the IPO price a total of 411,500 shares of
common stock under the 1997 Plan, such grants to be effective upon the
execution of an underwriting agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors adopted the Stock Plan for
Non-Employee Directors (the "Directors' Plan"). A total of 100,000 shares of
common stock of the Company are reserved for issuance under the Directors'
Plan. Options to purchase at the IPO price a total of 22,500 shares of common
stock will be granted under the Directors' Plan, such grants to be effective
upon the execution of an underwriting agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors approved amendments to the
Company's Certificate of Incorporation increasing the number of authorized
shares of the Company's Common Stock from 9,512,950 to 20,000,000, and
increasing the number of authorized shares of the Company's preferred stock
from 173,050 to 1,000,000.
8.SUBSEQUENT EVENT
On March 1, 1997, the Company entered into an agreement to purchase the
stock of Manhattan International Limousine Network Ltd. and an affiliated
company (collectively, "Manhattan Limousine"). Manhattan Limousine is one of
the largest providers of chauffeured vehicle services in the New York
metropolitan area. The Company expects to consummate the acquisition at the
time of the IPO. If the acquisition of Manhattan Limousine is not completed by
May 20, 1997, the Company has agreed to pay additional purchase price in the
amount of $7,500 for each day after such date until the closing of the
acquisition, up to an aggregate of $675,000.
F-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Carey International, Inc.
We have audited the accompanying consolidated balance sheets of Carey
International, Inc. and Subsidiaries as of November 30, 1995 and 1996, and the
related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended
November 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Carey
International, Inc. and Subsidiaries as of November 30, 1995, and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended November 30, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 16 to the consolidated financial statements, the
accompanying consolidated balance sheet as of November 30, 1995, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended November 30, 1995
have been restated for a change in the revenue recognition method.
Washington, D.C.
January 31, 1997, except for
Notes 1, 2 and 18 as to which
the date is March 1, 1997
F-15
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................ $ 1,438,659 $ 2,754,276
Accounts receivable, net of allowance for doubtful
accounts of $294,000 in 1995 and $535,000 in 1996... 9,023,016 10,141,732
Notes receivable from contracts, current portion..... 659,609 402,751
Prepaid expenses and other current assets............ 364,741 1,936,961
----------- -----------
Total current assets............................. 11,486,025 15,235,720
Fixed assets, net of accumulated depreciation of
$2,779,000 in 1995 and $2,619,000 in 1996........... 2,185,071 3,379,246
Notes receivable from contracts, excluding current
portion............................................. 193,298 769,201
Franchise rights, net of accumulated amortization of
$1,494,000 in 1995 and $1,729,000 in 1996........... 5,533,956 5,348,264
Trade name, trademark and contract rights, net of
accumulated amortization of $781,000 in 1995 and
$973,000 in 1996.................................... 6,876,578 6,685,135
Goodwill and other intangible assets, net of
accumulated amortization of $574,000 in 1995 and
$827,000 in 1996.................................... 7,113,684 7,262,203
Deferred tax assets.................................. 892,993 2,461,573
Deposits and other assets............................ 1,615,316 1,384,787
----------- -----------
Total assets................................... $35,896,921 $42,526,129
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable..................... $ 4,585,703 $ 5,131,227
Current portion of capital leases.................... 206,031 199,224
Current portion of subordinated notes payable........ 100,000 440,000
Accounts payable and accrued expenses................ 8,000,972 11,196,949
----------- -----------
Total current liabilities........................ 12,892,706 16,967,400
Notes payable, excluding current portion............. 7,361,749 5,188,742
Capital leases, excluding current portion............ 74,879 663,030
Subordinated notes payable, excluding current
portion............................................. 5,780,000 5,340,000
Deferred rent and other long-term liabilities........ 148,195 111,281
Deferred tax liabilities............................. 1,001,480 1,402,611
Deferred revenue..................................... 4,726,134 6,181,147
Commitments and contingencies
Stockholders' equity:
Preferred stock.................................... 1,212,900 1,115,400
Class A common stock, $.01 par value; authorized
314,000 shares, none issued and outstanding.......
Common stock, $.01 par value; authorized 9,512,950
shares, issued and outstanding, 655,773 shares.... 6,558 6,558
Additional paid-in capital......................... 7,357,064 7,357,064
Accumulated deficit................................ (4,664,744) (1,807,104)
----------- -----------
Total stockholders' equity....................... 3,911,778 6,671,918
----------- -----------
Total liabilities and stockholders' equity..... $35,896,921 $42,526,129
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-16
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue, net........................... $35,525,309 $43,483,947 $59,505,698
Cost of revenue........................ 24,953,904 29,942,961 40,438,449
----------- ----------- -----------
Gross profit......................... 10,571,405 13,540,986 19,067,249
Selling, general and administrative
expense............................... 9,486,797 12,419,062 15,077,553
----------- ----------- -----------
Operating income..................... 1,084,608 1,121,924 3,989,696
Other income (expense):
Interest expense..................... (1,348,883) (1,682,884) (1,704,187)
Interest income...................... 172,641 259,852 156,695
Gain (loss) on sale of fixed assets.. (18,359) 130,913 269,654
----------- ----------- -----------
Income (loss) before provision for
income taxes.......................... (109,993) (170,195) 2,711,858
Provision (benefit) for income taxes .. 19,000 25,000 (104,246)
----------- ----------- -----------
Net income (loss)...................... $ (128,993) $ (195,195) $ 2,816,104
=========== =========== ===========
Pro forma net income per common share.. $ .88
===========
Weighted average common shares
outstanding........................... 3,526,723
===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-17
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------
SERIES A SERIES B SERIES E SERIES F SERIES G ADDITIONAL TOTAL
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK STOCK STOCK SHARES $ CAPITAL DEFICIT EQUITY
--------- --------- --------- --------- --------- ------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
November 30,
1993........... $420,700 $95,800 $266,250 $100,000 $498,900 623,091 $6,231 $7,335,796 $(4,336,178) $4,387,499
Accretion of
redeemable
preferred
stock.......... -- -- 8,750 -- -- -- -- (8,750) -- --
Redemption of
Series E
preferred
stock.......... -- -- (62,500) -- -- -- -- -- -- (62,500)
Payment of
accrued
dividends...... -- -- (26,250) -- -- -- -- -- -- (26,250)
Payment of
Series E
dividends...... -- -- -- -- -- -- -- -- (4,378) (4,378)
Net loss........ -- -- -- -- -- -- -- -- (128,993) (128,993)
-------- ------- -------- -------- -------- ------- ------ ---------- ----------- ----------
Balance at
November 30,
1994........... 420,700 95,800 186,250 100,000 498,900 623,091 6,231 7,327,046 (4,469,549) 4,165,378
Accretion of
redeemable
preferred
stock.......... -- -- 4,375 -- -- -- -- (4,375) -- --
Redemption of
Series E
preferred
stock.......... -- -- (62,500) -- -- -- -- -- -- (62,500)
Payment of
accrued
dividends...... -- -- (30,625) -- -- -- -- -- -- (30,625)
Issuance of
stock.......... -- -- -- -- -- 32,682 327 34,393 -- 34,720
Net loss........ -- -- -- -- -- -- -- -- (195,195) (195,195)
-------- ------- -------- -------- -------- ------- ------ ---------- ----------- ----------
Balance at
November 30,
1995........... 420,700 95,800 97,500 100,000 498,900 655,773 6,558 7,357,064 (4,664,744) 3,911,778
Redemption of
Series E
preferred
stock.......... -- -- (97,500) -- -- -- -- -- -- (97,500)
Cumulative
effect of
currency
translation.... -- -- -- -- -- -- -- -- 41,536 41,536
Net income...... -- -- -- -- -- -- -- -- 2,816,104 2,816,104
-------- ------- -------- -------- -------- ------- ------ ---------- ----------- ----------
Balance at
November 30,
1996........... $420,700 $95,800 $ -- $100,000 $498,900 655,773 $6,558 $7,357,064 $(1,807,104) $6,671,918
======== ======= ======== ======== ======== ======= ====== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-18
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $ (128,993) $ (195,195) $ 2,816,104
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation and amortization of fixed
assets............................... 1,233,267 1,265,934 1,100,320
Amortization of intangible assets..... 641,309 712,348 1,062,406
(Gain) loss on sales of fixed assets.. 18,359 (130,913) (269,654)
Deferred income tax benefit........... -- -- (1,370,557)
Change in deferred revenue............ 184,220 237,306 1,455,013
Changes in operating assets and
liabilities:
Accounts receivable.................. (962,523) (2,516,952) (486,162)
Notes receivable from contracts...... (519,155) 11,000 (1,052,838)
Prepaid expenses, deposits and other
assets.............................. (433,963) (192,666) (660,870)
Accounts payable and accrued
expenses............................ 679,233 3,389,540 2,003,427
Deferred rent and other long-term
liabilities......................... (10,407) 87,490 (36,914)
----------- ----------- -----------
Net cash provided by operating
activities......................... 701,347 2,667,892 4,560,275
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of fixed assets..... 172,747 565,510 862,980
Purchases of fixed assets.............. (445,967) (615,117) (1,134,910)
Software development costs............. -- (203,529) --
Redemption of investment in affiliate.. -- 100,000 --
Acquisitions of chauffeured vehicle
service companies, net of cash
acquired.............................. (114,521) (3,949,393) (1,730,232)
----------- ----------- -----------
Net cash used in investing
activities......................... (387,741) (4,102,529) (2,002,162)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds upon sale of notes receivable
from independent operators............ 378,733 1,493,399 733,793
Principal payments under capital lease
obligations........................... (384,181) (436,169) (243,485)
Preferred stock dividends.............. (30,628) (30,625) --
Payment of notes payable............... (2,277,466) (2,658,521) (3,867,747)
Proceeds from notes payable............ 1,119,515 3,106,808 2,232,443
Issuance of common stock............... -- 34,720 --
Redemption of Series E preferred
stock................................. (62,500) (62,500) (97,500)
----------- ----------- -----------
Net cash provided by (used in)
financing activities............... (1,256,527) 1,447,112 (1,242,496)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ (942,921) 12,475 1,315,617
Cash and cash equivalents at beginning
of year................................ 2,369,105 1,426,184 1,438,659
----------- ----------- -----------
Cash and cash equivalents at end of
year................................... $ 1,426,184 $ 1,438,659 $ 2,754,276
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION
General
Carey International, Inc. (the "Company") is one of the world's largest
chauffeured vehicle service companies, providing services through a worldwide
network of owned and operated companies, licensees and affiliates serving 420
cities in 65 countries. The Company owns and operates service providers in the
form of wholly-owned subsidiaries in the following cities: New York (Carey
Limousine N.Y., Inc.), San Francisco (Carey Limousine SF, Inc.), Los Angeles
(Carey Limousine L.A., Inc.), London (Carey UK Limited), Washington, D.C.
(Carey Limousine D.C., Inc.), South Florida (Carey Limousine Florida, Inc.)
and Philadelphia (Carey Limousine Corporation, Inc.). In addition, the Company
generates revenues from licensing the "Carey" name, and from providing central
reservations, billing, sales and marketing services to its licensees. The
Company's worldwide network also includes affiliates in locations in which the
Company has neither owned and operated locations nor licensees.
Acquisitions and franchises
The Company is engaged in a program of acquiring chauffeured vehicle service
businesses, including licensees operating under the Carey name and trademark.
These acquisitions are accounted for as purchases. The carrying value of the
assets acquired is determined by the negotiated purchase price. In addition to
acquiring licensees operating under the Carey name, the Company has acquired
chauffeured vehicle service businesses in cities in which the Company
operates. In 1995, these acquisitions included chauffeured vehicle service
companies operating in Washington, D.C., Miami, West Palm Beach and San
Francisco. In 1996, the Company acquired a chauffeured vehicle service company
in London, England.
Reverse Stock Split
On February 25, 1997, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock in an
initial public offering (the "IPO"). The Board of Directors, at the same
meeting and subject to stockholder approval, authorized a reverse stock split
of approximately one-for-2.3255 of the outstanding shares of the Company's
common stock. A majority of the Company's stockholders have approved the
reverse stock split. All references to common stock, options, warrants and per
share data have been restated to give effect to the reverse stock split. The
Board of Directors also authorized a Recapitalization (see Note 18) on
February 25, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the financial statements of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
F-20
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Notes receivable from contracts
An important component of the Company's operating strategy involves the
preferred use of non-employee independent operators chauffeuring their own
vehicles rather than employee chauffeurs operating Company-owned vehicles.
Each independent operator enters into an agreement with the Company to
provide prompt and courteous service to the Company's customers with a
properly maintained, late model vehicle which he or she owns and for which he
or she pays all of the maintenance and operating expenses, including gasoline.
The Company, under the independent operator agreement, agrees to bill and
collect all revenues and remit to the independent operator 60% to 65% of
revenues, as defined in the agreement. Each new operator agrees to pay a one-
time fee generally ranging from $30,000 to $45,000 to the Company under the
terms of the independent operator agreement. Through 1996, the term of the
independent operator agreement generally ranged from 10 years to perpetuity.
(See "Revenue recognition").
The Company typically receives a promissory note from the independent
operator as payment for the one-time fee due under the terms of the Standard
Independent Operator Agreement (see Note 4) and records the note in notes
receivable from contracts. The notes evidencing such financing generally were
sold on a non-recourse basis by the Company to third party finance companies
(see Note 11) in exchange for cash and promissory notes. Since September 1996,
the Company has ceased selling notes to third parties. Such promissory notes
due from finance companies have also been recorded in notes receivable from
contracts in the consolidated balance sheets.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, accounts receivable and notes receivable from contracts. The
Company maintains its cash and cash equivalents with various financial
institutions. In order to limit exposure to any one institution, the Company's
cash equivalents are composed mainly of overnight repurchase agreements
collateralized by U.S. Government securities. Accounts receivable are
generally diversified due to the large number of entities comprising the
Company's customer base and their dispersion across many different industries
and geographies. The Company performs ongoing credit evaluations of its
customers, and may require credit card documentation or prepayment of selected
transactions. Notes receivable from contracts are also geographically
dispersed and are supported by the underlying base of revenue serviced by each
respective independent operator (see Notes 4 and 11). The Company performs
ongoing evaluations of each independent operator's productivity and payment
capacity and has utilized third-party financing to reduce credit exposure.
Fixed assets
Furniture, equipment, vehicles, leasehold improvements and land and building
are stated at cost. Equipment under capital leases is stated at the lower of
the present value of minimum lease payments or the fair market value at the
inception of the lease. Depreciation on furniture, equipment, vehicles and
leasehold improvements is calculated on the straight-line method over the
estimated useful lives of the assets, generally three to five years. The
building owned by the Company is depreciated over 40 years on a straight-line
basis. Sales and retirements of fixed assets are recorded by removing the cost
and accumulated depreciation from the accounts. Gains or losses on sales and
retirements of property are reflected in results of operations.
Intangible assets
Effective September 1, 1991, the Company acquired the Carey name and
trademark and the contract rights to all royalty fee payments by various Carey
licensees for a purchase price of $7 million. These assets are held by Carey
Licensing, Inc. and are being amortized over 40 years.
F-21
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has acquired chauffeured vehicle service companies, all of which
have been accounted for as purchases. For each business acquired which is a
licensee of the Company, the excess of cost over the fair market value of the
net assets acquired is allocated to franchise rights in the consolidated
balance sheet. With respect to acquired businesses which are not licensees of
the Company, the excess of cost over the net assets acquired is allocated to
goodwill. Additional purchase price attributable to the operating performance
of the acquired entities is recorded as goodwill or franchise rights when
determined (see Note 13). Goodwill and franchise rights are amortized over 30
years using the straight-line method. Such amortization is included in
selling, general and administrative expense in the consolidated statement of
operations. The Company evaluates the recoverability of its intangible assets
based on estimated undiscounted cash flows over the lesser of the remaining
amortization periods or calculated lives, giving consideration to revenue
expected to be realized. This determination is based on an evaluation of such
factors as the occurrence of a significant change in the environment in which
the business operates or the expected future net cash flows (undiscounted and
without interest). There have been no adjustments to the carrying value of
intangible assets resulting from this evaluation.
Revenue recognition
Chauffeured vehicle services--The Company's principal source of revenue is
from chauffeured vehicle services provided by its operating subsidiaries. Such
revenue, net of discounts, is recorded when such services are provided. The
Company, through the Carey International Reservation System ("CIRS"), has a
central reservation system capable of booking reservations on behalf of its
licensees and affiliates. Under most circumstances, central reservations are
billed by the Company to the customer when the Company receives a service
invoice from the licensee or affiliate that provided the service. At such
time, the Company also records the gross revenue for the transaction.
Fees from licensees--The Company charges an initial license fee under its
domestic license agreement and records the fee as revenue on signing of the
agreement. The Company also charges its domestic licensees monthly franchise
and marketing fees equal to stated percentages of monthly revenues, as defined
in the licensing agreement. Monthly fees to domestic licensees are generally
less than 10% of the licensee's monthly revenues. The Company records such
fees as revenues as they are charged to the licensees.
International licensees and the Company's domestic and international
affiliates historically have not paid fees to the Company, but have instead
given a discount on business referred to them through CIRS. Such discounts
reduce the amount of service invoices to the Company from such licensees and
affiliates for services provided to customers whose reservations have been
booked and invoiced centrally by the Company.
Independent operator fees--The Company enters into contracts with
independent operators ("Standard Independent Operator Agreements") to provide
chauffeured vehicle services exclusively to the Company's customers. When
independent operator agreements are executed, the Company defers revenue equal
to the amount of the one-time fees and recognizes the fees as revenue over the
terms of the contracts or over 20 years for perpetual contracts. Upon
termination of an independent operator agreement, the remaining deferred
revenue associated with the specific contract, less any amounts due from the
independent operator deemed uncollectible, is recognized as revenue.
Income taxes
The provision for income taxes includes income taxes currently payable and
the change during the year in the net deferred tax liabilities or assets.
Deferred income tax liabilities and assets are determined based on the
differences between the financial statement and tax bases of liabilities and
assets using enacted tax rates in effect for the year in which the differences
are expected to reverse. A valuation allowance is provided to reduce the net
deferred tax asset, if any, to a level which, more likely than not, will be
realized.
F-22
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pro forma net income per common share
Consistent with Staff Accounting Bulletin 1B-2, the Company has recalculated
historical weighted average common shares outstanding and net income per
common share to give effect to the following matters pursuant to the
Recapitalization (see Note 18). The recalculated net income per common share
is determined by (i) adjusting net income available to common shareholders to
reflect the elimination in interest expense, net of taxes, resulting from the
conversion of $4,867,546 of subordinated debt into common stock and (ii)
increasing the weighted average common shares outstanding by the number of
common shares resulting from the conversion of such debt, as well as the
partial conversion of the Series A Preferred Stock.
Stock-based compensation
In October 1995, the Financial Accounting Standards Boards issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123") Accounting for Stock-
Based Compensation, which is effective for the Company's financial statements
for fiscal years beginning after December 15, 1995. SFAS 123 allows companies
to either account for stock-based compensation under the new provisions of
SFAS 123 or under the provisions of Accounting Principles Board Opinion No. 25
("APB 25"), Accounting for Stock Issued to Employees. The Company will
continue to apply the provisions of APB 25 and provide pro forma disclosure in
the notes to the financial statements.
Foreign operations
The Consolidated Balance Sheets include foreign assets and liabilities of
$3.7 million and $2.7 million as of November 30, 1996. The net effects of
foreign currency transactions reflected in income were immaterial. Assets and
liabilities of the Company's foreign operations are translated into United
States dollars using exchange rates in effect at the balance sheet date and
results of operations items are translated using the average exchange rate
prevailing throughout the period.
Reclassifications
Certain accounts in 1994 and 1995 have been reclassified to conform with the
1996 presentation.
3. FEES FROM LICENSEES
The total of all domestic license fees, franchise fees and marketing fees
earned in each of 1994, 1995 and 1996 was $1,466,588, $1,228,472 and
$2,180,540, respectively. Amounts due from licensees of $46,520 and $143,041
at November 30, 1995 and 1996, respectively, are included in accounts
receivable in the consolidated balance sheets of the Company.
4. TRANSACTIONS WITH INDEPENDENT OPERATORS
The Company recorded approximately $1,153,000, $1,130,000 and $2,371,000 in
1994, 1995 and 1996, respectively, as deferred revenue relating to fees from
new agreements with independent operators. Amounts of deferred revenue
recognized as revenues in 1994, 1995 and 1996 amounted to approximately
$969,000, $889,000 and $936,000, respectively.
Notes receivable from contracts include approximately $305,000 and $917,000
at November 30, 1995 and 1996, respectively, for amounts due from independent
operators and approximately $548,000 and $255,000 at November 30, 1995 and
1996, respectively, for amounts due from a related party financing company
(see Note 11).
F-23
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the normal course of business, the Company's independent operators are
responsible for financing their own vehicles through third parties. From time
to time, the Company has arranged lease and purchase financing for certain
vehicles and has in turn leased back such vehicles to independent operators on
terms and conditions similar to those under which the Company is obligated (see
Note 5).
5. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Vehicles.............................................. $2,692,079 $2,337,947
Equipment............................................. 1,699,803 2,200,094
Furniture............................................. 319,597 525,202
Leasehold improvements................................ 252,366 404,888
Land and building..................................... -- 529,634
---------- ----------
4,963,845 5,997,765
Less accumulated depreciation and amortization........ 2,778,774 2,618,519
---------- ----------
Net fixed assets...................................... $2,185,071 $3,379,246
========== ==========
</TABLE>
The Company is obligated under various vehicle and equipment capital leases.
Vehicles and equipment under capital leases included in fixed assets are as
follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1995 1996
-------- ----------
<S> <C> <C>
Equipment............................................... $444,983 $1,048,633
Vehicles................................................ 352,796 621,420
-------- ----------
797,779 1,670,053
Less accumulated amortization........................... 536,713 561,871
-------- ----------
$261,066 $1,108,182
======== ==========
</TABLE>
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Bank revolving credit/term loan dated April 13, 1995,
modified December 1, 1996. Collateralized by accounts
receivable of the Company and the pledge of common
stock of the Company's U.S. subsidiaries. Interest only
payable until June 30, 1996; beginning July 1, 1996,
quarterly principal payments are required in an amount
sufficient to amortize the outstanding balance over a
four-year period. Interest is payable monthly at a
floating rate based on the Wall Street Journal prime
plus 1.25% (9.5% at November 30, 1996). This loan is
guaranteed by the Chairman of the Board and the
President of the Company............................... $4,500,000 $3,937,500
Note payable dated September 1, 1991, at an annual rate
of interest of 7.74%, collateralized by the assets of
Carey Licensing, Inc. Pursuant to an agreement with the
lender effective November 30, 1996, principal payments
of $220,000 are due quarterly from December 31, 1996
through December 31, 1997 and a final principal payment
of $240,000 is due March 1, 1998....................... 2,220,000 1,340,000
</TABLE>
F-24
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------
1995 1996
--------- ---------
<S> <C> <C>
Bank line of credit of $1,000,000, dated October 17, 1994,
and collateralized by accounts receivable of Carey NY and
an assignment of license agreement between the Parent and
Carey NY; due April 30, 1997. Interest is payable monthly
at a variable interest rate of .75% above the bank's
prime rate (9.0% at November 30, 1996)................... 990,000 990,000
Various installment notes payable, with interest rates
ranging from 9% to 14.5%, collateralized by certain
vehicles and equipment of the Company's subsidiaries;
principal and interest are payable monthly over 36-month
terms.................................................... 693,002 254,279
Installment notes payable to sellers under acquisition
agreements dated various dates from June 30, 1994 to
September 8, 1995. Interest rates range from 7.5% to
8.5%. Interest is generally payable monthly. Principal is
payable in varying installments.......................... 2,339,418 1,305,574
Convertible note payable to seller under acquisition
agreement dated September 30, 1993 at an annual rate of
7.5%, interest payable quarterly; principal due in two
equal annual installments of $116,667 on January 2, 1996
and 1997. The note was repaid in January 1997............ 233,333 116,666
Bank line of credit of $200,000, dated October 31, 1995 at
a variable interest rate (10% at November 30, 1995),
collateralized by accounts receivable of Carey DC. This
facility was refinanced by a term loan with the same bank
on March 1, 1996......................................... 200,000 --
Amount payable to a seller under acquisition agreement
dated January 1, 1995. Due 30 days after receipt of an
audit of the predecessor company. Amount of the payment
is subject to reduction based on the results of the
audit. The audit has been completed and the amount was
subsequently reduced in 1996 to $210,821 and has been
repaid................................................... 250,000 --
Note payable to bank, dated September 30, 1995, payable in
monthly installments of $4,167 plus interest. Interest
rate is variable at bank's prime plus 1% (10.0% at
November 30, 1996)....................................... 241,667 191,717
Note payable to bank, dated August 30, 1993,
collateralized by accounts receivable, fixed assets and
intangible assets of Carey DC; monthly payments of $9,401
for principal and interest through August 31, 1996.
Interest rate is fixed at 8%. This note was refinanced on
March 1, 1996 by a term loan with the same bank.......... 90,631 --
Note payable to bank dated October 17, 1994,
collateralized by accounts receivable and fixed assets of
Carey NY. Principal and interest payments of $2,848 are
payable monthly. Remaining balance is due October 17,
1999. Interest rate is fixed at 9.25%.................... 189,401 149,001
Bank line of credit of $750,000, dated February 26, 1996
collateralized by accounts receivable of Carey Licensing,
Inc.; due March 31, 1997. Interest is payable monthly at
1% above the Wall Street Journal's "Prime Rate" (9.25% at
November 30, 1996)....................................... -- 750,000
Bank line of credit of $200,000, dated February 26, 1996,
collateralized by accounts receivable of Carey FLA.; due
March 31, 1997. Interest is payable monthly at 1% above
Wall Street Journal's "Prime Rate" (9.25% at November 30,
1996).................................................... -- 200,000
Note payable to bank, dated March 1, 1996, collateralized
by accounts receivable of Carey DC. Monthly payments of
$12,735 of principal and interest through March 1, 2001.
Interest is payable monthly at .5% above the bank's Prime
Rate (9.5% at November 30, 1996)......................... -- 662,053
</TABLE>
F-25
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------
1995 1996
----------- ----------
<S> <C> <C>
Note payable to bank, dated May 10, 1996, collateralized
by the land and building held by Carey DC; monthly
payments of $3,863 of principal and interest are due
through April 10, 2001 and a balloon payment of
$375,468 on May 10, 2001. Interest fixed at 8.75%...... -- 423,179
----------- ----------
Total notes payable..................................... 11,947,452 10,319,969
Less current installments............................... 4,585,703 5,131,227
----------- ----------
Long-term portion....................................... $ 7,361,749 $5,188,742
=========== ==========
Subordinated notes payable consist of the following:
Subordinated convertible note dated September 1, 1991,
with the principal of $2,000,000 due on August 30,
2000; interest payable quarterly at a fixed rate of
7.74%. After September 1, 1992, this debt is
convertible into shares of common stock of the Company
at the discretion of the holder at a conversion price
of $6.14. A warrant for the purchase of 86,003 shares
of common stock of the Company was issued in connection
with the note. The warrant is exercisable immediately,
expires at the earlier of the third anniversary of an
initial public offering or November 30, 2001, and has
an exercise price of $6.14 per share. The note contains
certain antidilutive provisions which lower its
conversion price in the event dilutive securities are
subsequently issued by the Company at prices below the
note's conversion price. The warrant has not been
exercised. The terms of the agreement have been
modified as part of the Recapitalization (see Note
18).................................................... $ 2,000,000 $2,000,000
Subordinated note dated July 30, 1992; interest only
payable quarterly until September 30, 1995. The
interest rate is fixed at 12%. Principal of $220,000
was paid on September 30, 1995. Pursuant to an
agreement with the lender dated November 30, 1996, no
further payments of principal are due until June 30,
1997, when $220,000 is due. Thereafter, quarterly
principal payments of $220,000 are due until March 31,
1998. On June 30, 1998, the loan balance of $2,240,000
is due. A warrant for the purchase of 616,544 shares of
Class A common stock or common stock was issued, in
connection with the note. The warrant is exercisable
immediately, has an exercise price of $6.14 per share
and expires at the earlier of the fifth anniversary of
the repayment of the note in full or July 30, 2000. The
warrant contains certain antidilutive provisions which
lower the exercise price in the event dilutive
securities are subsequently issued by the Company at
prices below the warrant exercise price. The warrant
has not been exercised. The terms of the agreement have
been modified as part of the Recapitalization (see Note
18).................................................... 3,780,000 3,780,000
Convertible note payable to seller under acquisition
agreement, dated September 30, 1992; interest payable
quarterly at a fixed rate of 7.74%. The note was repaid
in September, 1996. ................................... 100,000 --
----------- ----------
Total subordinated notes payable........................ 5,880,000 5,780,000
Less current installments............................... 100,000 440,000
----------- ----------
Subordinated notes payable, excluding current install-
ments.................................................. $ 5,780,000 $5,340,000
=========== ==========
</TABLE>
F-26
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future annual principal payments on all notes payable at November 30, 1996 are
as follows:
<TABLE>
<CAPTION>
EAR ENDING NOVEMBER 30:Y
- ------------------------
<S> <C>
1997............................................................ $ 5,571,227
1998............................................................ 5,622,403
1999............................................................ 1,486,254
2000............................................................ 881,183
2001 and thereafter............................................. 2,538,902
-----------
$16,099,969
===========
</TABLE>
Certain loan agreements, principally the Company's line of credit agreement,
contain restrictive covenants which include financial ratios related to
working capital, debt service coverage, debt to net worth and maintenance of a
minimum tangible net worth, and submission of audited financial statements,
prepared in accordance with generally accepted accounting principles, within
120 days after the end of the fiscal year. Additionally, these covenants
restrict the Company's capital expenditures and prohibit the payment of
dividends on the Company's common and preferred stock, except for the Series E
preferred stock. The Company did not meet certain covenants related to the
timely submission of financial statements, working capital, debt to net worth
and maintenance of a minimum tangible net worth at November 30, 1996. The
Company obtained waivers for compliance with these covenants through and
including November 30, 1996.
The carrying value of notes payable approximates the current value of the
notes payable at November 30, 1996. (See Note 17 for discussions of the fair
value for the subordinated debt). Interest paid during the years ended
November 30, 1994, 1995, and 1996 was approximately $1,358,000, $1,662,000 and
$1,682,000, respectively.
7. LEASES
The Company has several noncancelable operating leases, primarily for office
space and equipment, that expire over the next five years. Certain of the
Company's facilities are under operating leases which provide for rent
adjustments based on increases of defined indexes, such as the Consumer Price
Index. These agreements also typically include renewal options.
F-27
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments as of November 30, 1996
are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING NOVEMBER 30 LEASES LEASES
----------------------- -------- ----------
<S> <C> <C>
1997................................................... $233,778 $1,395,093
1998................................................... 171,653 1,277,009
1999................................................... 155,984 662,698
2000................................................... 155,984 245,746
2001................................................... 138,659 219,128
Thereafter............................................. 138,169 --
-------- ----------
Total minimum lease payments........................... 994,227 $3,799,674
==========
Less estimated executory costs......................... 5,189
--------
989,038
Less amount representing interest (at rates ranging
from 9% to 12%)....................................... 126,784
--------
Present value of net minimum capital lease payments.... 862,254
Less current portion of obligations under capital
lease................................................. 199,224
--------
Obligations under capital leases, excluding current
portion............................................... $663,030
========
</TABLE>
During the years ended November 30, 1994, 1995 and 1996 the Company
recognized $1,004,818, $508,724 and $252,355, respectively, of sublease rental
revenue under vehicle sublease arrangements with independent operators and
others.
During the years ended November 30, 1994, 1995 and 1996, the Company entered
into capital lease obligations of $79,414, $346,666 and $810,993,
respectively, related to the acquisition of vehicles and equipment.
Total rental expense for operating leases in 1994, 1995 and 1996 was
$1,023,372, $1,314,301 and $2,203,490, respectively.
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses is composed of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------
1995 1996
---------- -----------
<S> <C> <C>
Trade accounts payable............................... $5,222,306 $ 5,341,834
Accrued expenses and other liabilities............... 2,332,681 4,570,975
Gratuities payable................................... 445,985 458,801
Accrued offering costs............................... -- 825,339
---------- -----------
$8,000,972 $11,196,949
========== ===========
</TABLE>
F-28
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES
The provision (benefit) for income taxes is composed of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------
1994 1995 1996
------- ------- -----------
<S> <C> <C> <C>
Federal:
Current...................................... $14,000 $15,000 $ 1,043,689
Deferred..................................... -- -- (1,220,799)
------- ------- -----------
14,000 15,000 (177,110)
------- ------- -----------
State and local:
Current...................................... 5,000 10,000 78,251
Deferred..................................... -- -- (149,758)
------- ------- -----------
5,000 10,000 (71,507)
------- ------- -----------
Foreign:
Current...................................... -- -- 144,371
------- ------- -----------
Total income tax provision (benefit)........... $19,000 $25,000 $ (104,246)
======= ======= ===========
</TABLE>
The Company's tax provision (benefit) for the years ended November 30, 1994,
1995 and 1996, respectively, differs from the statutory rate for federal
income taxes as a result of the tax effect of the following factors:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory rate.......... 34.0% 34.0% 34.0%
State income tax, net of
federal benefit........ (2.8) (2.4) (3.5)
Goodwill amortization... (13.0) (13.0) .8
Non-deductible life
insurance.............. (9.9) (23.8) .4
Meals and entertainment
expenses............... (12.2) (36.5) 1.5
Valuation allowance..... (13.4) 28.1 (38.5)
Other................... -- (1.1) 1.5
-------- -------- --------
(17.3)% (14.7)% (3.8)%
======== ======== ========
</TABLE>
The source and tax effects of temporary differences are composed of the
following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Allowance for bad debts............................ $ 108,000 $ 176,000
Net operating loss carryforward.................... 266,000 --
Deferred revenue................................... 1,701,000 2,040,000
Deferred state taxes and other..................... 425,000 558,000
----------- -----------
Gross deferred tax asset........................... 2,500,000 2,774,000
Valuation allowance................................ (1,499,000) --
----------- -----------
1,001,000 2,774,000
----------- -----------
Amortization of intangible assets.................. (951,000) (1,350,000)
Other.............................................. (50,000) (53,000)
----------- -----------
Gross deferred tax liability....................... (1,001,000) (1,403,000)
----------- -----------
Net deferred tax asset............................. $ -- $ 1,371,000
=========== ===========
</TABLE>
F-29
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A valuation allowance was provided in 1994 and 1995 to reduce the net
deferred tax asset to $0. In the fourth quarter of 1996, the Company concluded
that it was more likely than not that the net deferred tax asset would be
realized and therefore recorded a deferred tax benefit from the reversal of
the valuation allowance of $1,499,000.
Income taxes paid during the years ended November 30, 1994, 1995 and 1996
amounted to $0, $10,375 and $210,437, respectively.
10. PREFERRED STOCK
The Company has the following series of preferred stock:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------
1995 1996
---------- ----------
<S> <C> <C>
Series A, par value $10.00, authorized 43,000 shares,
issued and outstanding 42,070 shares (liquidation
preference of $4,207,000 and non-cumulative
dividends of $7.00 per share per annum when declared
by the Board of Directors).......................... $ 420,700 $ 420,700
Series B, par value $10.00, authorized 10,000 shares,
issued and outstanding 9,580 shares (liquidation
preference of $958,000 and non-cumulative dividends
of $5.00 per share per annum when declared by the
Board of Directors)................................. 95,800 95,800
Series E, par value $10.00, authorized 50 shares,
issued and outstanding 12.5 shares at November 30,
1995 (liquidation preference of $97,500)............ 97,500 --
Series F, par value $10.00, authorized 10,000 shares,
issued and outstanding 10,000 shares (liquidation
preference of $1,000,000 and non-cumulative
dividends of $5.00 per share per annum when declared
by the Board of Directors).......................... 100,000 100,000
Series G, par value $10.00, authorized 110,000
shares, issued and outstanding 49,890 shares
(liquidation preference of $4,989,900 and non-
cumulative dividends of $5.00 per share per annum
when declared by the Board of Directors)............ 498,900 498,900
---------- ----------
$1,212,900 $1,115,400
========== ==========
</TABLE>
At the option of preferred stockholders or upon the closing of an
underwritten public offering yielding net proceeds to the Company of at least
$10,000,000 and having an offering price of at least $14.81 per share, each
share of Series B, F and G preferred stock is convertible into the number of
shares of common stock equal to 500, 100 and 100 divided by the conversion
price, respectively. The conversion price as of November 30, 1996 was $7.216,
$7.406 and $7.406 for Series B, F and G preferred stock, respectively. The
Company has reserved 663,759, 135,025 and 633,393 shares of common stock,
respectively, for conversion of the Series B, F, and G preferred stock.
Antidilutive provisions lower the conversion price if certain securities are
issued by the Company at a price below the respective conversion prices then
in effect. The Company must redeem, on a pro rata basis, the outstanding
shares of Series A preferred stock plus for $100 per share any declared and
unpaid dividends upon the completion of an initial public offering yielding
net proceeds to the Company of at least $10,000,000. Series A, B and G
preferred stock have voting rights and Series F preferred stock is non-voting,
except under certain circumstances. (See Note 18 for discussion of the
Recapitalization, pursuant to which all of the preferred stock will be
redeemed or converted into common stock.)
F-30
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. RELATED-PARTY TRANSACTIONS
The Company has invested $750,000 in non-voting redeemable preferred stock
of a privately-held finance company formed for the purpose of providing
financing to the chauffeured vehicle services industry. This entity provides
financing to the Company's independent operators, without recourse to the
Company, for both automobiles and amounts due under independent operator
agreements. The Company sold $378,733, $1,762,345 and $1,015,897 of
independent operator notes receivable to this related-party finance company
for cash of $378,733, $1,290,899 and $733,793 and demand promissory notes of
$0, $471,446 and $282,104 in 1994, 1995 and 1996, respectively. The unpaid
balances of the promissory notes were $547,930 and $255,664 at November 30,
1995 and 1996, respectively, and are included in notes receivable from
contracts. These promissory notes are due on demand and, generally, monthly
principal payments are received by the Company. These notes generally bear
interest rates of 7%.
It is not practicable to estimate the fair value of the preferred stock
investment in a privately-held company. As a result, the Company's investment
in the privately-held finance company noted above is carried at its original
cost (less redemptions) of $750,000. At April 30, 1996, the total assets
reported by the privately-held company were $10,502,234 and stockholders'
equity was $1,108,448, revenues were $1,088,720 and net income was $96,681.
Pursuant to a stock ownership agreement between the common stockholders of
the related-party finance company and the Company, the Company has an option
to purchase all of the outstanding common stock of the affiliate at $12,500
per common share or market value, if higher. The option is not exercisable
until April 15, 1998.
A guarantee fee of $45,000 has been paid to both the Chairman of the Board
and the President of the Company for guaranteeing certain indebtedness (see
Note 6).
12. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to various legal
actions which are not material to the financial position, results of
operations or cash flows of the Company.
The Company, certain of the Company's subsidiaries and certain officers and
directors of the Company were named in a civil action filed on May 15, 1996 in
the United States District Court for the Eastern District of Pennsylvania
entitled "Felix v. Carey International, Inc., et al." The plaintiff's
complaint, which purports to be a class action, alleges that the plaintiff and
others similarly situated suffered monetary damages as a result of
misrepresentations by the various defendants in their use of a surface
transportation billing charge. The plaintiff seeks damages in excess of $1
million on behalf of the class for each of the counts in the complaint
including fraud, negligent misrepresentation and violations of the Racketeer
Influenced and Corrupt Organizations law of 1970, which permits the recovery
of treble damages and attorneys' fees. A class has not yet been certified in
this case. The Company filed a motion to dismiss that was denied, and
subsequently has filed an answer denying any liability in connection with this
complaint. The Company has agreed to indemnify and defend its officers and
directors who were named as defendants in the case, subject to conditions
imposed by applicable law. The Company has reached a tentative settlement with
the plaintiff and plaintiff's counsel, which is subject to court approval and
acceptance by the proposed class. The Company does not believe that this
litigation will have a material adverse effect on the financial condition,
results of operations or cash flows of the Company.
13. ACQUISITIONS
In December 1994, the Company acquired certain assets and liabilities of a
chauffeured vehicle service company in Boca Raton, Florida and consolidated
the operations within its existing operations in West Palm Beach.
Subsequently, the Company acquired an additional chauffeured vehicle service
company in Boca Raton
F-31
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(in August 1995) and the Carey licensee in Fort Lauderdale--Miami (in April
1995) and consolidated the two additional businesses into the Carey South
Florida operations.
In January 1995, the Company acquired certain assets and liabilities of the
Carey licensee in San Francisco, California ("Carey SF"). Subsequently, the
Company acquired the business of two additional chauffeured service companies
(in May and August 1995) and combined the acquired operations with those of
Carey SF.
In April 1995, the Company acquired certain assets and liabilities of a
chauffeured vehicle service company in the Washington, DC area and combined
the acquired operations with those of Carey Limousine D.C., Inc.
In February 1996, the Company acquired the common stock of a chauffeured
vehicle service company in London, England for approximately $1,500,000. The
acquisition was financed through the incurrence of $950,000 in debt and a
payment of $550,000. Additional contingent consideration of up to $1,000,000
may be payable with respect to each of the two years ending February 28, 1998
based on the level of revenues referred to the acquired company by the seller.
As of November 30, 1996, the Company has paid $278,304 in contingent
consideration in the acquisition of the London company. In addition, the
Company is required to pay a standard commission to the seller of the acquired
chauffeured vehicle service company for business referral, which will be
expensed as incurred.
All acquisitions have been accounted for as purchases. The net assets
acquired and results of operations have been included in the financial
statements as of and from, respectively, the effective dates of the
acquisitions. The total consideration was allocated to the assets acquired
based upon their estimated fair values with any remaining consideration
allocated to either franchise rights or goodwill, as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------
1994 1995 1996
------- ---------- ----------
<S> <C> <C> <C>
NET ASSETS PURCHASED
Receivables and other assets.............. $ -- $ -- $ 632,554
Fixed assets.............................. -- 1,703,521 928,377
Franchise rights.......................... -- 1,527,402 89,243
Goodwill.................................. 75,000 4,697,958 447,269
Accounts payable and accrued expenses..... -- -- (367,211)
------- ---------- ----------
Fair value of assets acquired............. $75,000 $7,928,881 $1,730,232
======= ========== ==========
CONSIDERATION
Cash (exclusive of $223,695 cash acquired
in 1996)................................. $75,000 $3,633,620 $1,730,232
Capital leases assumed related to vehicle
acquisitions............................. -- 346,666 --
Notes assumed related to vehicle acquisi-
tions.................................... -- 895,571 --
Uncollateralized promissory notes issued
to sellers............................... -- 3,053,024 --
------- ---------- ----------
Total consideration..................... $75,000 $7,928,881 $1,730,232
======= ========== ==========
</TABLE>
Certain of these acquisitions require the payment of contingent
consideration based on percentages of annual net revenue of the acquired
entities over a defined future period. The Company paid $39,521, $315,773 and
F-32
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$291,755 in the years ended November 30, 1994, 1995 and 1996, respectively, in
contingent consideration and increased goodwill by the same amounts (see Note
2) which is reflected in the table above.
Of the total uncollateralized promissory notes issued to sellers in 1995,
two notes totaling $303,000 were subject to reduction based upon the results
of the acquired entities (see Note 6). The two notes were repaid in 1996 for
approximately $211,000 and the difference of approximately $92,000 reduced by
recorded goodwill.
The unaudited pro forma summary consolidated results of operations assuming
all the acquisitions had occurred for the purposes of the 1995 summary at the
beginning of fiscal 1995, and for the purposes of the 1996 summary at the
beginning of fiscal 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenue.......................................... $ 51,490,000 $ 60,444,000
Cost of revenue.................................. (35,089,000) (41,304,000)
Other expense, net............................... (16,256,000) (16,570,000)
Benefit (provision) for income taxes............. (58,000) 164,000
------------ ------------
Net income....................................... $ 87,000 $ 2,734,000
============ ============
Net income per common share...................... $ .04 $ 1.12
============ ============
Weighted average common shares outstanding....... 2,404,657 2,439,076
============ ============
</TABLE>
14. 401(K) PLAN
The Company sponsors (but has made no contributions to) a defined
contribution plan established pursuant to Section 401(k) of the Internal
Revenue Code for the benefit of employees of the Company.
15. STOCK OPTION PLANS
On December 1, 1987, the Company established a Stock Option Plan (the "1987
Plan") that included all officers and key employees of the Company, non-
employee directors of the Company, and certain persons retained by the Company
as consultants. In accordance with the 1987 Plan, the Company's Board of
Directors may, from time to time, determine the persons to whom the stock
options are to be granted, the number of shares under option, the option price
and the manner in which payment of the option price shall be made. The 1987
Plan provides for the options to be exercised 25% each year beginning after
the year following the grant. The options are exercisable for a period of ten
years after the grant date. The total number of options authorized under the
1987 Plan is 193,506.
On July 28, 1992, the Company established a Stock Option Plan (the "1992
Plan") that included all officers and key employees of the Company, non-
employee directors of the Company, and certain persons retained by the Company
as consultants. In accordance with the 1992 Plan, the Company's Board of
Directors may, from time to time, determine the persons to whom the stock
options are to be granted, the number of shares under option, the option
price, the time or times during the exercise period at which each such option
will become exercisable, and the manner in which payment of the option price
shall be made. The options are exercisable for a period of ten years after
grant date. The total number of options authorized under the 1992 Plan is
388,647.
F-33
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock activity under the 1987 Plan and the 1992 Plan is as follows:
<TABLE>
<CAPTION>
1987 PLAN 1992 PLAN
---------------------- ------------------
OPTION OPTION
PRICE PER PRICE PER
SHARES SHARE SHARES SHARE
------- ------------- ------- ---------
<S> <C> <C> <C> <C>
Balance, December 1, 1993........... 64,502 $ 1.44 385,139 $7.40
Granted............................. -- -- 17,372 7.40
Exercised........................... -- -- -- --
Forfeited........................... -- -- (13,932) --
------- ------------- ------- -----
Balance, November 30, 1994.......... 64,502 1.44 388,579 7.40
Granted............................. -- -- 12,900 7.40
Exercised........................... (32,681) -- -- --
Forfeited........................... (860) -- (60,984) --
------- ------------- ------- -----
Balance, November 30, 1995.......... 30,961 1.44 340,495 7.40
Granted............................. 38,701 4.65 47,017 4.65
Exercised........................... -- --
Forfeited........................... -- (3,010)
------- -------
Balance, November 30, 1996.......... 69,662 $1.44 - $4.65 384,502 $4.65
======= =======
Vested and exercisable at November
30, 1996........................... 30,961 $1.44 358,702 $4.65
======= ============= ======= =====
</TABLE>
In May 1996, the options granted under the 1992 Plan and a warrant to
purchase 86,003 shares of common stock (see Note 6) were repriced to $4.65.
The options and warrant were repriced at the determined fair market value as
of the date of repricing (see Note 18).
On February 25, 1997, the Board of Directors adopted the 1997 Equity
Incentive Plan and the Stock Plan for Non-Employee Directors (see Note 18).
16. REVENUE RECOGNITION METHOD
The Company enters into agreements with independent operators under which
the independent operator contracts to provide chauffeured vehicle services
exclusively to the Company's customers over a contract period pursuant to a
Standard Independent Operator Agreement. Upon signing the Standard Independent
Operator Agreement, the Company is entitled to receive a one-time fee from the
independent operator. Previously, the Company would recognize the one-time fee
as revenue upon signing of the independent operator agreement and when
collection of the fee was reasonably assured. In accordance with APB 20, the
financial statements have been retroactively restated to report such fees as
deferred revenue which are recognized as revenue over the terms of the
contracts (see Note 2). The effect of such restatements was to reduce 1994 and
1995 revenue, results of operations and stockholders' equity by $665,391 and
$1,144,511, respectively (net of income taxes of $0 and $586,680 for 1994 and
1995, respectively).
17. NET INCOME PER COMMON SHARE
Net income per common share, on a historical basis, are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) available to common
shareholders.............................. $ (137,743) $ (199,570) $2,816,104
Weighted average common shares outstand-
ing....................................... 2,409,582 2,404,657 2,439,076
Net income (loss) per common share......... $ (.06) $ (.08) $ 1.15
</TABLE>
F-34
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common equivalent shares are included in the per share calculations where
the effect of their inclusion would be dilutive. Common equivalent shares
consist of common shares issuable upon (a) conversion of Series B, F and G
preferred stock and (b) the assumed exercise of outstanding stock options and
warrants. Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin (SAB) No. 83, the common equivalent shares issued by the Company
during the twelve months preceding the anticipated effective date of the
Registration Statement relating to the Company's initial public offering,
using the treasury stock method and an assumed public offering price of $12.00
per share, have been included in the calculation of net income per common
share.
Net income (loss) available to common shareholders is the net income (loss)
for the fiscal year less accretion of dividends on the Series E preferred
stock of $8,750, $4,376 and $0 for 1994, 1995 and 1996, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS
128 simplifies the existing earnings per share (EPS) computations under
Accounting Principles Board Opinion No. 15, "Earnings Per Share," revises
disclosure requirements, and increases the comparability of EPS data on an
international basis. In simplifying the EPS computations, the presentation of
primary EPS is replaced with basic EPS, with the principal difference being
that common stock equivalents are not considered in computing basic EPS. In
addition, FAS 128 requires dual presentation of basic diluted EPS. FAS 128 is
effective for financial statements issued for periods ending after December
15, 1997. The Company's pro forma basic EPS under FAS 128 would have been
$4.29 and dilutive EPS under FAS 128 would not differ significantly from the
reported pro forma net income per share.
18. SUBSEQUENT EVENTS
On February 25, 1997, pursuant to an agreement reached in May 1996, the
Board of Directors authorized a recapitalization (the "Recapitalization"),
which will be implemented at the time of the IPO. Under the Recapitalization,
the $2,000,000 subordinated convertible note dated September 1, 1991 and the
$3,780,000 subordinated note dated July 30, 1992 will be converted or
exchanged for 1,046,559 shares of common stock and payment of $912,454. The
Series A preferred stock will be converted in part into 86,003 shares of
common stock and redeemed in part for $2,103,500. All of the Series F
preferred stock and 3,000 shares of the Series G preferred stock will be
redeemed for an aggregate of $1,000,000. The remaining preferred stock will be
converted into 1,427,509 shares of common stock. As a result of the
Recapitalization, preferred stock with a liquidation preference of $11,154,900
and subordinated debt with a principal amount of $5,780,000 will be converted
in part into 2,560,071 shares of common stock and repaid or redeemed in part
for $4,015,952 in cash. All of the cash amounts will be paid out of the
proceeds of the IPO.
On February 25, 1997, the Board of Directors adopted the 1997 Equity
Incentive Plan (the "1997 Plan"). A total of 650,000 shares of common stock
are reserved for issuance under the 1997 Plan. The Board of Directors also
granted options to purchase at the IPO price a total of 411,500 shares of
common stock under the 1997 Plan, such grants to be effective upon the
execution of an underwriting agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors, subject to stockholder
approval, adopted the Stock Plan for Non-Employee Directors (the "Directors'
Plan"). A total of 100,000 shares of common stock of the Company are reserved
for issuance under the Directors' Plan. Options to purchase at the IPO price a
total of 22,500 shares of common stock will be granted under the Directors'
Plan, such grants to be effective upon the execution of an underwriting
agreement in connection with the IPO.
Also on February 25, 1997, the Board of Directors, approved amendments to
the Company's Certificate of Incorporation increasing the number of authorized
shares of the Company's Common Stock from 9,512,950 to 20,000,000, and
increasing the number of authorized shares of the Company's preferred stock
from 173,050 to 1,000,000.
On March 1, 1997, the Company entered into an agreement to purchase the
stock of Manhattan International Limousine Network Ltd. and an affiliated
company (collectively, "Manhattan Limousine"). Manhattan Limousine is one of
the largest providers of chauffeured vehicle services in the New York
metropolitan area. The Company expects to consummate the acquisition at the
time of the IPO. If the acquisition of Manhattan Limousine is not completed by
May 20, 1997, the Company has agreed to pay additional purchase price in the
amount of $7,500 for each day after such date until the closing of the
acquisition, up to an aggregate of $675,000.
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders
Manhattan International Limousine Network Ltd. and Affliliate
We have audited the accompanying combined balance sheet of Manhattan
International Limousine Network Ltd. and Affliliate (collectively, the
"Company") as of September 30, 1996, and the related combined statements of
operations and retained earnings (accumulated deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Manhattan
International Limousine Network Ltd. and Affliliate as of September 30, 1996,
and the combined results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
As discussed in Note 10 to the combined financial statements, the
accompanying combined balance sheet as of September 30, 1996, and the related
combined statement of operations and retained earnings (accumulated deficit)
and cash flows for the year then ended have been restated.
COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 1, 1997, except
for Note 10 as to which
the date is April 22, 1997
F-36
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents......................... $ 130,494 $ 24,932
Accounts receivable, net of allowances for doubt-
ful accounts of $181,000 and $192,000, respec-
tively........................................... 2,466,134 2,550,658
Receivables from independent operators, current
portion.......................................... 271,086 478,707
Prepaid expenses and other current assets......... 51,499 51,499
----------- -----------
Total current assets........................... 2,919,213 3,105,796
Fixed assets, net................................. 805,724 735,108
Receivables from independent operators, less cur-
rent portion..................................... 7,375,219 7,498,445
Other assets...................................... 1,221,885 1,227,814
----------- -----------
Total assets...................................... $12,322,041 $12,567,163
=========== ===========
<CAPTION>
LIABILITIES
<S> <C> <C>
Current portion of notes payable.................. $ 1,232,457 $ 2,769,013
Accounts payable, trade........................... 1,520,295 1,555,510
Accounts payable, independent operators........... 1,738,072 1,867,308
Accrued expenses.................................. 529,761 683,610
Other current liabilities......................... 240,059 269,444
----------- -----------
Total current liabilities...................... 5,260,644 7,144,885
Notes payable, less current portion............... 4,523,171 2,445,743
Other liabilities................................. 862,875 866,401
Deferred revenue.................................. 6,801,965 6,871,236
Commitments and contingencies
<CAPTION>
STOCKHOLDERS' DEFICIENCY
<S> <C> <C>
MILN common stock, $1 par value, 200 shares autho-
rized, 100 shares issued and outstanding......... 100 100
ILN common stock, $1 par value, 200 shares autho-
rized, 200 shares issued and outstanding......... 1,000 1,000
ILN additional paid-in capital.................... 176,940 176,940
<CAPTION>
Retained earnings (accumulated deficit):
<S> <C> <C>
MILN............................................ (5,439,073) (5,073,561)
ILN............................................. 134,419 134,419
----------- -----------
Total stockholders' deficiency................. (5,126,614) (4,761,102)
----------- -----------
Total liabilities and stockholders' deficien-
cy............................................ $12,322,041 $12,567,163
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-37
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ --------------------------
1996 1996
------------------ --------------------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Service revenues, net.......... $17,218,728 $ 5,203,279
Interest from independent oper-
ator financing................ 1,219,819 268,105
----------- -----------
Total revenues................. 18,438,547 5,471,384
Cost of revenues................. 11,040,017 3,393,076
----------- -----------
Gross profit................... 7,398,530 2,078,308
Selling, general and administra-
tive expenses................... 5,821,899 1,491,857
----------- -----------
Operating income............... 1,576,631 586,451
Interest expense................. (881,854) (224,810)
Interest income.................. 66,000 16,500
----------- -----------
Income before provision for in-
come taxes.................... 760,777 378,141
Provision for income taxes....... 55,014 12,629
----------- -----------
Net income..................... 705,763 365,512
Accumulated deficit, beginning of
period.......................... (5,907,417) (5,304,654)
Distribution to S corporation
stockholder..................... (103,000) --
----------- -----------
Accumulated deficit, end of peri-
od.............................. ($5,304,654) ($4,939,142)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-38
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1996
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income............................... $705,763 $ 365,512
Adjustments necessary to reconcile net
income
to net cash provided by operating
activities:
Depreciation and amortization........... 258,439 71,487
Change in deferred revenue.............. (279,625) 69,271
Changes in operating assets and
liabilities:
Accounts receivable.................... (377,793) (84,524)
Receivables from independent opera-
tors.................................. 139,363 (330,847)
Other assets........................... (103,240) (5,929)
Accounts payable and accrued expenses.. (152,519) 189,064
Accounts payable, independent opera-
tors.................................. 293,731 129,236
Other liabilities...................... (193,582) 32,911
-------- ---------
Net cash provided by operating
activities........................... 290,537 436,181
-------- ---------
Cash flows from investing activities:
Purchases of fixed assets................ (256,248) (871)
-------- ---------
Net cash used in investing
activities........................... (256,248) (871)
-------- ---------
Cash flows from financing activities:
Net borrowings (payments) on line of
credit.................................. 261,802 (179,003)
Proceeds from borrowings under notes
payable................................. 310,000 --
Principal payments on notes payable...... (412,643) (361,869)
Distribution to S corporation
stockholder............................. (103,000) --
-------- ---------
Net cash provided by (used in)
financing activities................. 56,159 (540,872)
-------- ---------
Net change in cash and cash equivalents... 90,448 (105,562)
Cash and cash equivalents, beginning of
period................................... 40,046 130,494
-------- ---------
Cash and cash equivalents, end of period.. $130,494 $ 24,932
======== =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION
Manhattan International Limousine Network Ltd. and its wholly-owned
subsidiary (collectively, "MILN") are engaged primarily in the business of
providing chauffeured vehicle services in New York City and the surrounding
areas, and providing reservation and billing services to both individual and
corporate customers worldwide through an affiliation with a network of
independent chauffeured vehicle service companies. International Limousine
Network Ltd. ("ILN") is an affiliated company (the "Affiliate") engaged in
sales and marketing activities exclusively on behalf of MILN.
The accompanying financial statements combine the accounts of MILN and ILN
because such entities are under common control. All intercompany transactions
have been eliminated. The combined entities are referred to herein as the
"Company."
ILN operates on a calendar year. As a result, the accompanying financial
statements as of and for the year ended September 30, 1996 include the effects
of combining the financial statements of ILN as of and for the year ended
December 31, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all short-term investments with original maturities of
three months or less to be cash equivalents.
Receivables from Independent Operators and Accounts Payable, Independent
Operators
The Company enters into agreements with independent operators (franchisees)
under which the independent operator contracts to provide chauffeured vehicle
services exclusively to the Company's customers over the contract period. Upon
signing the agreement, the Company is entitled to receive a one-time fee from
the independent operator.
The Company generally receives a minimal down payment from the independent
operator together with a promissory note (see Note 3) and records the note as
a receivable from the independent operator, but does not recognize revenue at
that time. (See Revenue Recognition.) In addition, the Company collects all
billings for services rendered by the independent operator and has the right
to withhold and remit, from the independent operator's earnings, all payments
due to the Company and certain third parties for, among other things, note
payments, two-way radio charges and lease obligations on vehicles, on a
monthly basis. The Company is then obligated to remit the balance of the
independent operator's earnings on a monthly basis. The unpaid balance due to
independent operators at the end of a given period is reflected as accounts
payable, independent operators in the accompanying balance sheet.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk include cash and cash equivalents, accounts
receivable and receivables from independent operators. The Company maintains
its cash and cash equivalents with various financial institutions. Accounts
receivable are generally diversified due to the large number of entities
comprising the Company's customer base and their dispersion across many
different industries. The Company performs ongoing credit evaluations of its
customers, and may require credit card documentation or prepayment of certain
transactions. Receivables from independent operators are supported by the
underlying base of revenues serviced by each respective independent operator.
The Company performs ongoing evaluations of the productivity and payment
capacity of each independent operator in order to manage its credit risk.
F-40
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Fixed Assets
Fixed assets are stated at cost. Depreciation on furniture, equipment,
vehicles and leasehold improvements is calculated on the declining balance
method over the estimated useful lives of the assets or the leaseholds,
generally three to five years. Buildings and improvements are depreciated on
the straight line method over 20 years. Sales and retirements of fixed assets
are recorded by removing the cost and accumulated depreciation from the
accounts. Gains and losses on sales of property are reflected in the results
of operations.
Intangible Assets
The Company owns Federal Communications Commission licenses to three radio
frequencies which it uses in the dispatch of vehicles used in its business.
The licenses have been fully amortized in prior years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue Recognition
Service revenues include fees derived from chauffeured vehicle services
provided by the Company's independent operators. Revenue is recorded for
chauffeured vehicle services when those services are provided.
When the Company enters into an agreement with an independent operator, the
Company defers revenue equal to the amount of the contract and recognizes
those fees over the term of the contract, typically 20 years. Amortization of
deferred revenue is also included in independent operator service revenues in
the accompanying combined statements of operations. Upon termination of an
agreement, the remaining deferred revenue associated with the contract, less
any amounts due from the independent operators deemed uncollectible, is
recognized as revenue immediately.
As described above, the Company typically provides extended financing terms
to its independent operators for payment of the independent operator fee.
Interest income is recognized as earned over the term of the loan agreement
with the independent operator.
The Company provides reservation services to its customers for service in
other locations through its affiliation with a network of independent service
companies. Revenue related to services provided by a member of the network is
recognized as chauffeured vehicle service revenue when a gross service bill is
received from the member. The corresponding liability to the member, reduced
by the Company's discount, is recorded as a cost of revenue by the Company at
such time.
Income Taxes
For MILN, the provision for income taxes includes income taxes currently
payable and the change during the year in the net deferred tax assets or
liabilities. Deferred income tax assets and liabilities are determined based
on the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. A valuation allowance is provided to
reduce the net deferred tax asset, if any, to a level which, more likely than
not, will be realized.
F-41
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
ILN has elected to be treated as an "S corporation" under provisions of the
Internal Revenue Code. As such, the income tax effects of ILN's operations are
borne directly by the stockholder, and no provision for ILN income taxes is
recorded in the accompanying financial statements.
Unaudited Interim Financial Statements
The combined financial statements as of and for the three-month period ended
December 31, 1996 are unaudited. In the opinion of management, those unaudited
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present the financial statements on a
basis substantially consistent with the annual audited financial statements
contained herein. All disclosures herein related to December 31, 1996 and for
the three-month period ended December 31, 1996 are unaudited.
3. TRANSACTIONS WITH INDEPENDENT OPERATORS
At the time the Company enters into an agreement with an independent
operator, the Company is entitled to receive a one-time fee. Those fees are
typically financed by the Company over 20 years at an interest rate of 15.75%
per annum. Independent operator fees are recognized as revenue ratably over
the terms of the agreements. In the opinion of management, the carrying value
of the loans approximates their fair value. Revenue recognized from
independent operator fees was $514,632 and $120,729 for the year ended
September 30, 1996 and for the three-month period ended December 31, 1996,
respectively.
The Company's independent operators are responsible for financing their own
vehicles through third parties. Under programs the Company has established
with several automotive leasing organizations, the Company guarantees lease
payments until the independent operator has made twelve monthly lease
payments. As of September 30, 1996, the Company's independent operators had
aggregate lease obligations of $2,203,158 under these programs.
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- ------------
<S> <C> <C>
Land............................................... $ 62,569 $ 62,569
Buildings and improvements......................... 676,730 676,730
Furniture, fixtures and equipment.................. 3,086,224 3,087,095
Vehicles........................................... 344,170 344,170
---------- ----------
4,169,693 4,170,564
Less accumulated depreciation...................... 3,363,969 3,435,456
---------- ----------
Net fixed assets................................... $ 805,724 $ 735,108
========== ==========
</TABLE>
Depreciation expense was $258,439 and $71,487 for the year ended September
30, 1996 and for the three-month period ended December 31, 1996, respectively.
F-42
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- ------------
<S> <C> <C>
Line of credit of up to $2,000,000 under agreement dated
December 27, 1994, collateralized by substantially all of
the Company's assets; availability up to 80% of eligible
accounts receivable at any date; interest payable monthly
at prime plus 6%. In addition to interest obligations,
agreement requires payment of annual facility fee equal
to 1% of total line, as well as monthly and quarterly
administration fees. The agreement terminates on December
27, 1997, after which it is automatically renewable
unless terminated by either party as of any anniversary
date, with 60 days prior written notice. Certain
stockholders of the Company are guarantors on the
Company's behalf......................................... $ 1,864,967 $ 1,685,964
First mortgage note on headquarters premises dated April
12, 1989, original principal of $1,200,000, subject to
fixed monthly installments of principal, and interest at
a rate of 14.75%......................................... 310,000 280,000
Various installment notes payable with interest rates
ranging from 10.75% to 14.75%, and collateralized by
certain independent operator agreements and receivables
from independent operators of the Company. Principal and
interest payments are due monthly over 60-month terms.... 3,228,364 2,947,702
Notes payable, collateralized by certain equipment,
principal and interest due monthly over terms of 24-39
months................................................... 352,297 301,090
----------- -----------
5,755,628 5,214,756
Less current portion 1,232,457 2,769,013
----------- -----------
Notes payable, less current portion $ 4,523,171 $ 2,445,743
=========== ===========
</TABLE>
In the opinion of management, the carrying amount of the notes payable
approximates their fair value. Aggregate principal payments under the Company's
note payable arrangements as of September 30, 1996 are due as follows:
<TABLE>
<S> <C>
1997.............................. $1,232,457
1998.............................. 2,747,898
1999.............................. 542,673
2000.............................. 588,368
2001.............................. 175,732
Thereafter........................ 468,500
----------
Total............................. $5,755,628
==========
</TABLE>
F-43
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
On January 17, 1997, the Company refinanced its existing mortgage note on
its headquarters facility. The new note has a principal balance of $800,000
and is due five years from the date of origination. Interest is incurred at a
rate of 10.75% for the first year, after which the rate becomes variable at
prime plus 2.5%. Interest and principal payments are due monthly based on a
15-year amortization, with a balloon payment due at maturity.
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- --------------
<S> <C> <C>
Federal--Current................................ $ 15,845 $ --
State and local--Current........................ 39,169 12,629
--------- ---------
Total income tax provision...................... $ 55,014 $ 12,629
========= =========
</TABLE>
The Company's effective income tax rates differed from the applicable
Federal statutory rate due to the following:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE
ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- -------------
<S> <C> <C>
Federal statutory rate.......................... 34% 34%
State and local income taxes.................... 13 13
Effect of income of S corporation............... (9) --
Reduction as a result of deferred tax asset val-
uation allowance............................... (43) (57)
Other, primarily nondeductible travel and enter-
tainment....................................... 12 13
--- ---
Effective income tax rate....................... 7% 3%
=== ===
</TABLE>
As of September 30, 1996, for federal income tax purposes, the Company had
net operating loss (NOL) carryforwards of $1,955,055 available to offset
future taxable income, which expire from 2004 to 2010.
The source and tax effects of temporary differences are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- ------------
<S> <C> <C>
NOL carryforwards................................. $ 914,574 $ 671,685
Revenue recognition of independent operator fees.. 857,606 793,672
Valuation allowance............................... (1,772,180) (1,465,357)
----------- -----------
Net deferred tax asset (liability)................ $ -- $ --
=========== ===========
</TABLE>
Income taxes paid amounted to $14,505 and $0 for the year ended September
30, 1996 and for the three-month period ended December 31, 1996, respectively.
F-44
<PAGE>
MANHATTAN INTERNATIONAL LIMOUSINE NETWORK LTD. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. RELATED PARTY TRANSACTIONS
Included in other noncurrent liabilities are loans from officers of the
Company with remaining principal balances of $358,444 and $294,944 as of
September 30, 1996 and December 31, 1996, respectively. The loans have
interest rates of 12.5% and are payable in equal installments of principal and
interest over terms of 15 years. Aggregate principal payments under the loans
were due as follows as of September 30, 1996:
<TABLE>
<S> <C> <C>
1997......................... $ 77,786
1998......................... 10,781
1999......................... 12,209
2000......................... 13,825
2001......................... 15,656
Thereafter................... 228,187
--------
Total........................ $358,444
========
</TABLE>
During the year ended September 30, 1996 and the three-month period ended
December 31, 1996, the Company took one-time charges related to advances to a
non-combined affiliate of approximately $218,000 and $7,000, respectively,
which are included in selling, general and administrative expenses.
8. CONTINGENCIES
The Company is involved in various legal actions which arise in the normal
course of business. Management of the Company does not believe the ultimate
resolution of these actions will have a material effect on the financial
position, results of operations or cash flows of the Company.
9. MAJOR CUSTOMER
The Company has one customer which accounted for approximately 18.0% of
service revenues for the year and three-month periods ended September 30, 1996
and December 31, 1996, respectively.
10. RESTATEMENTS
The Company enters into agreements with independent operators under which
the independent operator contracts to provide chauffeured vehicle services
exclusively to the Company's customers over a contract period. Upon signing
the contract, the Company is entitled to receive a one-time fee from the
independent operator. Previously, the Company recognized the one-time fee as
revenue upon signing of the agreement. In accordance with Opinion No. 20 of
the Accounting Principles Board, "Accounting Changes", the financial
statements have been retroactively restated to report such fees as deferred
revenue which are recognized as revenue over the terms of the contracts (see
Note 2). The effects of such restatements were to increase results of
operations and stockholders' equity by $5,996 and $252,541 for the year ended
September 30, 1996 and the three-month period ended December 31, 1996,
respectively. The Company uses a network of independent service companies to
provide chauffeured vehicle services to its customers. Certain previously
unrecognized costs related to these services have been retroactively recorded.
The effects of such restatements were to decrease results of operations by
$301,984 and $151,565 for the year ended September 30, 1996 and the three-
month period ended December 31, 1996, respectively, and to increase
stockholders' deficiency by $432,671 and $584,236 as of September 30, 1996 and
December 31, 1996, respectively.
11. SUBSEQUENT EVENT
On March 1, 1997, the stockholders of MILN and ILN agreed to sell their
stock to Carey International, Inc., a company providing chauffeured vehicle
services.
F-45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of Camelot Barthropp Limited (formerly Speed 6060 Limited):
We have audited the accompanying balance sheet of Camelot Barthropp Limited
as of December 31, 1995, and the related statement of operations for the
period from August 4, 1995 to December 31, 1995, all expressed in pounds
sterling. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. These standards require that we plan and perform
our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Camelot Barthropp Limited as of December
31, 1995, and the results of its operations for the period from August 4, 1995
to December 31, 1995, in conformity with accounting principles generally
accepted in the United Kingdom (which differ in certain respects from
generally accepted accounting principles in the United States--see note 16).
Coopers & Lybrand
Chartered Accountants and Registered
Auditors
London, England
February 26, 1996, except notes 15 and 16
which are dated February 25, 1997
F-46
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
NOTE 1995
---- ---------
(Pounds)
<S> <C> <C>
Revenues--continuing operations.................................. 1,266,924
Other operating income........................................... 4 7,700
---------
1,274,624
Expenditures--continuing operations
Vehicle operating costs........................................ 97,119
Other external charges......................................... 362,520
Staff costs.................................................... 3 423,286
Depreciation................................................... 4 114,914
Other operating charges........................................ 4 163,363
---------
1,161,202
---------
Net income on ordinary activities before taxation................ 113,422
Tax on ordinary activities....................................... 5 60,256
---------
Net income on ordinary activities after taxation................. 53,166
Dividends payable................................................ --
---------
Net income retained.............................................. 53,166
=========
</TABLE>
The Company has no recognized gains or losses other than the income above and
therefore no separate statement of total recognized gains and losses has been
presented.
There is no difference between the income on ordinary activities before
taxation and the retained income for the period stated above and their
historical cost equivalents.
The Company was incorporated on August 4, 1995, and as a result, there are no
comparative figures.
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
BALANCE SHEET AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NOTE 1995
---- ---------
(Pounds)
<S> <C> <C>
Fixed assets
Tangible assets................................................ 6 659,293
---------
Current assets
Inventories.................................................... 7 9,747
Receivables.................................................... 8 548,103
Called up share capital not paid............................... 911,000
Cash at bank and in hand....................................... 366,912
---------
1,835,762
Current liabilities.............................................. 9 1,530,889
---------
Net current assets............................................... 304,873
---------
964,166
=========
Represented by:
Shareholders' equity
Called up share capital........................................ 11 92,000
Share premium account.......................................... 11 819,000
Retained earnings.............................................. 12 53,166
---------
Total shareholders' equity................................... 964,166
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
1. BASIS OF PREPARATION
The accompanying financial statements of Camelot Barthropp Limited
(previously Speed 6060 Limited) have been prepared in conformity with
accounting principles generally accepted in the United Kingdom ("U.K. GAAP"),
and are presented under the historical cost convention. These principles
differ in certain material respects from generally accepted accounting
principles in the United States ("U.S. GAAP"); see note 16. All amounts are
expressed in pounds sterling ("(Pounds)").
The accompanying financial statements do not represent the U.K. statutory
financial statements of Camelot Barthropp Limited, as certain
reclassifications and changes in presentation and disclosure have been made to
the U.K. financial statements prepared on a statutory basis in order to
conform, more closely with accounting presentation and disclosure requirements
applicable in the United States. The financial statements of Camelot Barthropp
Limited for the period from August 4, 1995 to December 31, 1995, on which the
auditors' report was unqualified, were the first prepared since its
incorporation. These were not full statutory financial statements and
therefore have not been delivered to the Registrar of Companies in England and
Wales.
The ultimate parent undertaking of Camelot Barthropp Limited was The Savoy
Hotel PLC, a company incorporated under the laws of England throughout the
period from August 4, 1995 to December 31, 1995, of these financial
statements.
2. ACCOUNTING POLICIES
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses for an accounting period. Such estimates and assumptions could
change in the future as more information becomes known or circumstances alter,
such that Camelot Barthropp Limited's actual results may differ from the
amounts reported and disclosed in the financial statements.
DEPRECIATION
Depreciation is provided so as to write off the cost being the market value
of motor vehicles acquired from a fellow subsidiary undertaking less the
estimated residual value of fixed assets over their expected useful lives.
Depreciation on a straight line basis, mainly at the following annual rates:
<TABLE>
<S> <C>
Motor vehicles --25%
Furniture and equipment --10%-20%
Improvements to premises --10%
</TABLE>
INVENTORIES
Inventories are valued at the lower of cost or net realizable value.
DEFERRED TAXATION
Provision is made for deferred taxation using the liability method at
current taxation rates on all material timing differences to the extent that
it is probable that a liability or asset will crystallize.
REVENUES
Revenues represent the invoiced value of services provided, excluding sales
related taxes.
F-49
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
FOREIGN CURRENCIES
Assets and liabilities in foreign currencies have been translated into
sterling at the rates ruling at the balance sheet date.
OPERATING LEASES
Rentals paid under operating leases are charged to operations on a straight
line basis over the lease term.
PENSION COSTS
The Company contributes into both defined benefit and defined contribution
schemes. An appropriate share of the costs of the pension schemes administered
by the parent undertaking, which are a defined benefit scheme and a defined
contribution scheme, are charged to operations for this Company in respect of
staff who are members of these schemes. Full details of these schemes are
disclosed in the financial statements of The Savoy Hotel PLC. The pension cost
charge for defined contribution schemes represents the amounts payable to
insurance companies in respect of the funds for the year to December 31.
F-50
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
3. STAFF COSTS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 4, 1995 TO
DECEMBER 31, 1995
-------------------
(Pounds)
<S> <C>
Wages and salaries.......................................... 391,924
Social security costs....................................... 28,242
Pension costs............................................... 3,120
---------------
(Pounds)423,286
===============
Pension costs comprise:
Payments to funded defined contribution schemes........... 320
Charges in respect of group scheme........................ 2,800
---------------
(Pounds) 3,120
===============
The average weekly number of employees during the period was as follows:
NUMBER
---------------
Chauffeurs and support staff................................ 43
Administration.............................................. 6
---------------
49
===============
Directors' remuneration was as follows:
Remuneration as executives................................ Nil
Pension contributions..................................... Nil
Compensation for loss of office........................... Nil
---------------
(Pounds) Nil
===============
Emoluments excluding pension:
Chairman's emoluments..................................... (Pounds) Nil
===============
Highest paid director's emoluments........................ (Pounds) Nil
===============
</TABLE>
The number of directors (including the chairman and highest paid director)
who received emoluments (excluding pension contributions) in the following
ranges was:
<TABLE>
<S> <C>
NUMBER
------
(Pounds)0-(Pounds)5,000............. 4
======
</TABLE>
No director waived emoluments in respect of the period ended December 31,
1995.
The statement of operations for the period from August 4, 1995 to December
31, 1995 includes no head office management recharges from the parent
undertaking in respect to the services provided by the directors of Camelot
Barthropp Limited and other corporate overheads.
F-51
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
4. INCOME ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 4, 1995 TO
DECEMBER 31, 1995
------------------
(Pounds)
<S> <C>
The income on ordinary activities before taxation is stated
after charging:
Marketing recharge from parent........................... 27,484
Depreciation............................................. 114,914
Operating leases--hire of plant and machinery............ 4,217
--other operating leases................................. 10,000
=======
and after crediting:
Rent receivable.......................................... 5,526
Sundry income............................................ 417
Gain on disposal of tangible fixed assets................ 1,757
Other operating income................................... 7,700
=======
</TABLE>
5. TAXATION
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 4, 1995 TO
DECEMBER 31, 1995
------------------
(Pounds)
<S> <C>
UK corporation tax on ordinary activities for the period at
33%....................................................... 60,256
======
</TABLE>
6. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT LEASEHOLD MOTOR FURNITURE AND
PREMISES VEHICLES EQUIPMENT TOTAL
--------------- -------- ------------- --------
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Cost
At August 4, 1995............ -- -- -- --
Additions.................... 7,591 763,686 57,952 829,229
Disposals.................... -- (55,022) -- (55,022)
----- ------- ------ -------
At December 31, 1995......... 7,591 708,664 57,952 774,207
----- ------- ------ -------
Accumulated depreciation
At August 4, 1995............ -- -- -- --
Charge for the Year.......... 770 104,144 10,000 114,914
Disposals.................... -- -- -- --
----- ------- ------ -------
At December 31, 1995......... 770 104,144 10,000 114,914
----- ------- ------ -------
Net Book Value
At December 31, 1995......... 6,821 604,520 47,952 659,293
===== ======= ====== =======
</TABLE>
F-52
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
7.INVENTORIES
<TABLE>
<CAPTION>
1995
---------
(Pounds)
<S> <C>
Raw materials and consumables:
Vehicle spare parts.............................................. 5,369
Petrol and oil................................................... 4,378
---------
9,747
=========
8.RECEIVABLES--AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade receivables.................................................. 337,960
Amounts owed by parent undertaking................................. 155,164
Other receivables.................................................. 4,784
Prepayments and accrued income..................................... 50,195
---------
548,103
=========
9.CURRENT LIABILITIES--AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade accounts payable............................................. 95,414
Borrowings from parent undertaking................................. 230,607
Borrowings from fellow subsidiary.................................. 936,674
Corporation tax.................................................... 60,256
Other taxes and social security.................................... 73,542
Other creditors.................................................... 5,605
Accruals........................................................... 128,791
---------
1,530,889
=========
</TABLE>
10.DEFERRED TAXES
Provision for deferred taxes has been made in the financial statements in
accordance with the Company's accounting policy. The provision and the full
potential liability are as follows:
<TABLE>
<CAPTION>
1995
------------------------
POTENTIAL
PROVISION LIABILITY
--------- --------------
<S> <C> <C>
Accelerated capital allowances..................... -- (Pounds)17,875
=== ==============
</TABLE>
11.SHARE CAPITAL AND SHARE PREMIUM
<TABLE>
<CAPTION>
1995
--------
(Pounds)
<S> <C>
Authorized:
Ordinary Shares of (Pounds)1...................................... 100,000
=======
</TABLE>
F-53
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
The Company was incorporated on August 4, 1995 with 1,000 Ordinary Shares of
(Pounds)1 each. On August 30, 1995 the authorized share capital of the Company
was increased by 99,000 Ordinary Shares of (Pounds)1 each.
<TABLE>
<CAPTION>
NUMBER NOMINAL SHARE TOTAL
ISSUED VALUE PREMIUM CONSIDERATION
------ ------- ------- -------------
<S> <C> <C> <C> <C>
Allotted, called up and fully paid:
Ordinary Shares of (Pounds)1............ 92,000 92,000 819,000 911,000
====== ====== ======= =======
</TABLE>
On August 8, 1995, 1,000 shares were issued to The Savoy Hotel PLC at par.
On August 30, a further 91,000 shares were issued to The Savoy Hotel PLC at a
price of (Pounds)10.00 per share
12. RETAINED EARNINGS
<TABLE>
<CAPTION>
1995
--------
(Pounds)
<S> <C>
At August 4, 1995................................................... --
Retained income for the period...................................... 53,166
-------
At December 31, 1995................................................ 53,166
=======
13. RECONCILIATION OF MOVEMENTS ON SHAREHOLDERS' EQUITY
<CAPTION>
1995
--------
(Pounds)
<S> <C>
Opening shareholders' equity........................................ --
Issue of share capital.............................................. 92,000
Share premium....................................................... 819,000
Total recognized gains for the period............................... 53,166
-------
Closing shareholders' equity........................................ 964,166
=======
</TABLE>
14. FINANCIAL COMMITMENTS
a) The Company has annual commitments under operating leases as set out
below:
<TABLE>
<CAPTION>
1995
------------------
LAND AND
BUILDINGS OTHER
--------- --------
(Pounds) (Pounds)
<S> <C> <C>
Leases which expire:
In the next year...................................... -- 3,363
In the second to fifth years.......................... -- 5,504
After five years...................................... -- --
--- -----
-- 8,867
=== =====
</TABLE>
b) Capital commitments:
<TABLE>
<CAPTION>
1995
--------
(Pounds)
<S> <C>
Capital expenditure contracted for but not provided in the fi-
nancial statements............................................ --
===
Capital expenditure approved by the directors but not con-
tracted for................................................... --
===
</TABLE>
F-54
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
15. POST BALANCE SHEET EVENTS
The parent undertaking sold Camelot Barthropp Limited to Carey
International, Inc. for an initial consideration of (Pounds)788,843. Further
consideration of (Pounds)672,752 will become payable on the parent undertaking
providing certain thresholds of business for Camelot Barthropp Limited are
achieved during the period to March 31, 1998.
16. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("U.K. GAAP"). These
accounting principles differ in certain material respects from the accoounting
principles generally accepted in the United States ("U.S. GAAP"). Described
below are the material differences between U.K. GAAP and U.S. GAAP affecting
the net income and shareholders' equity which are set forth in the tables that
follow.
TRANSFER OF ASSETS BETWEEN FELLOW SUBSIDIARIES
Under U.K. GAAP, assets can be transferred from one subsidiary to a fellow
subsidiary with the same parent undertaking, at their fair value. The
difference between the fair value and the historical cost of these assets will
result in an intragroup gain or loss in the statement of operations of the
subsidiary selling the assets. The assets would remain at their fair value in
the subsidiary that acquired the assets and the associated depreciation charge
would be provided on these fair values. Under U.S. GAAP, assets can only be
transferred from one subsidiary to a fellow subsidiary with the same parent
undertaking, at their historical cost. As a result, under U.S. GAAP, no
intragroup gain or loss would arise from the transaction, the assets would
remain at historical cost and the associated depreciation charge would be
provided on these historical costs.
ALLOCATION OF EXPENSES IN A "CARVE OUT" SITUATION
Under U.K. GAAP, certain costs incurred by the parent undertaking may not be
reflected in the subsidiary financial statements; however, disclosure of this
fact is generally provided in the subsidiary financial statements. Under U.S.
GAAP, historical income statements of a subsidiary should reflect all costs
incurred by the parent undertaking on its behalf, such as officer salaries and
corporate overheads.
DEFERRED TAXES
Under U.K. GAAP, deferred taxation is accounted for using the liability
method to the extent that it is considered probable that a liability will
crystallize in the foreseeable future. Under U.S. GAAP, deferred taxation is
provided for on all temporary differences and carryforwards. Deferred tax
assets are recognised to the extent that it is more likely than not that they
will be realized. Where doubt exists as to whether a deferred tax asset will
be realized, an appropriate valuation allowance is established.
STOCK SUBSCRIPTIONS
Under U.K. GAAP the amount of the shares issued, including those issued
pursuant to a stock subscription receivable, is shown on the face of the
balance sheet. Any subscription receivable due on these shares would be shown
separately in the balance sheet. Under U.S. GAAP, the net amount of the shares
being the amount of the shares issued after deducting any subscriptions
receivable therefrom, is shown on the face of the balance sheet.
F-55
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
The effect of the above noted differences between U.K. and U.S. GAAP are as
follows:
(A)NET INCOME
The approximate effects on net income of material differences between U.K.
and U.S. GAAP are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
AUGUST 4, 1995 TO
DECEMBER 31, 1995
--------------------
(Pounds)
<S> <C>
Net income reported under U.K. GAAP................... 53,166
Transfer of assets -- depreciation adjustment......... 15,590
Allocation of expenses................................ (21,170)
Deferred taxes........................................ (17,875)
Tax effect of U.S. GAAP reconciling adjustments....... 1,844
--------
Net income reported in accordance with U.S. GAAP...... 31,555
========
(B)SHAREHOLDERS' EQUITY
The approximate effects on shareholders' equity of material differences
between U.K. and U.S. GAAP are as follows:
<CAPTION>
AT DECEMBER 31, 1995
--------------------
(Pounds)
<S> <C>
Shareholders' equity reported under U.K. GAAP......... 964,166
Gain on transfer of assets--fixed assets.............. (112,500)
--amounts payable..................................... 112,500
--depreciation adjustment............................. 15,590
Allocation of expenses................................ (21,170)
Stock subscriptions................................... (911,000)
Deferred taxes........................................ (17,875)
Tax effect of U.S. GAAP reconciling adjustments....... 1,844
--------
Shareholders' equity reported in accordance with U.S.
GAAP................................................. 31,555
========
</TABLE>
F-56
<PAGE>
CAMELOT BARTHROPP LIMITED (FORMERLY SPEED 6060 LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM AUGUST 4, 1995 TO DECEMBER 31, 1995
(C)STATEMENTS OF CASH FLOWS
Under U.K. GAAP, wholly owned subsidiaries of a parent undertaking that are
established under the law of any European Community State are exempt from
including a statement of cash flows in their financial statements. Under U.S.
GAAP, the statement of cash flows is required and therefore is shown below:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
AUGUST 4, 1995
TO DECEMBER 31, 1995
--------------------
(Pounds)
<S> <C>
Cash flows from operating activities
Net income.......................................... 31,555
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of fixed assets..... 99,324
Gain on sale of fixed assets...................... (1,757)
Change in operating assets and liabilities:
Receivables..................................... (548,103)
Inventories..................................... (9,747)
Current liabilities............................. 738,861
--------
Net cash provided by operating activities..... 310,133
--------
Cash flows from investing activities:
Proceeds from gain of fixed assets.................. 56,779
--------
Net cash provided by investing activities..... 56,779
--------
Net increase in cash and cash equivalents............. 366,912
Cash and cash equivalents at beginning of year........ --
--------
Cash and cash equivalents at end of year.............. 366,912
========
</TABLE>
F-57
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors of Speed 6060 Limited (formerly Camelot Barthropp Limited):
We have audited the accompanying balance sheets of Speed 6060 Limited as of
December 31, 1994 and 1995, and the related statements of operations for each
of the two years in the period ended December 31, 1995, all expressed in
pounds sterling. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. These standards require that we plan and perform
our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Speed 6060 Limited as of December 31, 1994
and 1995, and the results of its operations for each of the two years in the
period ended December 31, 1995, in conformity with accounting principles
generally accepted in the United Kingdom (which differ in certain respects
from generally accepted accounting principles in the United States--see note
16).
Coopers & Lybrand
Chartered Accountants and Registered
Auditors
London, England
February 26, 1996, except note 16
which is dated February 28, 1997
F-58
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
NOTE 1994 1995
---- --------- ---------
(Pounds) (Pounds)
<S> <C> <C> <C>
Revenues--discontinued operations................... 2,694,693 1,849,242
Other operating income.............................. 4 79,056 38,142
--------- ---------
2,773,749 1,887,384
--------- ---------
Expenditures--discontinued operations
Vehicle operating costs........................... 329,701 216,200
Other external charges............................ 537,423 403,330
Staff costs....................................... 3 1,086,203 710,084
Other operating charges........................... 4 647,327 509,688
--------- ---------
2,600,654 1,839,302
--------- ---------
Operating income.................................... 173,095 48,082
Gain on the disposal of fixed assets to a fellow
subsidiary......................................... -- 112,500
--------- ---------
Income on ordinary activities before tax............ 173,095 160,582
Tax on ordinary activities.......................... 5 62,252 30,604
--------- ---------
Net income on ordinary activities after taxation.... 110,843 129,978
Dividend payable.................................... 110,000 275,000
--------- ---------
Net income (loss) retained.......................... 843 (145,022)
========= =========
</TABLE>
The Company has no recognized gains or losses other than the income (losses)
above and therefore no separate statement of total recognized gains and losses
has been presented.
There is no difference between the income on ordinary activities before
taxation for the years stated above and their historical cost equivalents.
The Company ceased trading at close of business on August 31, 1995 and
consequently the statement of operations for 1995 only reflects the results to
this date.
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
BALANCE SHEETS AT DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
NOTE 1994 1995
---- --------- --------
(Pounds) (Pounds)
<S> <C> <C> <C>
Fixed assets
Tangible assets..................................... 6 848,058 --
--------- -------
Current assets
Inventories......................................... 7 19,650 --
Receivables......................................... 8 377,519 936,674
Cash at bank and in hand............................ 220,248 --
--------- -------
617,417 936,674
Current liabilities--amounts falling due within one
year................................................. 9 415,112 31,333
--------- -------
Net current assets.................................... 202,305 905,341
--------- -------
Total assets less current liabilities............. 1,050,363 905,341
========= =======
Represented by:
Shareholders' equity
Called up share capital............................. 11 43,329 43,329
Retained earnings................................... 12 1,007,034 862,012
--------- -------
Total shareholders' equity........................ 1,050,363 905,341
========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
1. BASIS OF PREPARATION
The accompanying financial statements of Speed 6060 Limited (formerly
Camelot Barthropp Limited) have been prepared in conformity with accounting
principles generally accepted in the United Kingdom ("U.K. GAAP"), and are
presented under the historical cost convention. These principles differ in
certain material respects from generally accepted accounting principles in the
United States ("U.S. GAAP"); see note 16. All amounts are expressed in pounds
sterling ("(Pounds)").
The accompanying financial statements do not represent the U.K. statutory
financial statements of Speed 6060 Limited, as certain reclassifications and
changes in presentation and disclosure have been made to the U.K. financial
statements prepared on a statutory basis in order to conform, more closely
with accounting presentation and disclosure requirements applicable in the
United States. The financial statements of Speed 6060 Limited for the year
ended December 31, 1995, on which the auditors' report was unqualified, were
the latest financial statements to have been delivered to the Registrar of
Companies in England and Wales.
The ultimate parent undertaking of Speed 6060 Limited was The Savoy Hotel
PLC, a company incorporated under the laws of England throughout the period
being January 1, 1994 to December 31, 1995, of these financial statements.
2. ACCOUNTING POLICIES
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses for an accounting period. Such estimates and assumptions could
change in the future as more information becomes known or circumstances alter,
such that Speed 6060 Limited's actual results may differ from the amounts
reported and disclosed in the financial statements.
DEPRECIATION
Depreciation is provided so as to write off the cost less estimated residual
value of fixed assets over their expected useful lives.
Depreciation is provided on a straight line basis, mainly at the following
annual rates:
<TABLE>
<S> <C>
Motor vehicles --25%
Furniture and equipment --10%-20%
Improvements to premises --10%
</TABLE>
INVENTORIES
Inventories are valued at the lower of cost or net realizable value.
DEFERRED TAXATION
Provision is made for deferred taxation using the liability method at
current taxation rates on all material timing differences to the extent that
it is probable that a liability or asset will crystallize.
F-61
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
REVENUES
Revenues represent the invoiced value of services provided, excluding sales
related taxes.
FOREIGN CURRENCIES
Assets and liabilities in foreign currencies have been translated into
sterling at the rates ruling at the balance sheet date.
LEASES
Assets held under capital leases are capitalized in the balance sheet and
are depreciated over their useful lives. The interest element of the
repayments is charged to operations over the period of the contract on a
straight line basis. Rentals paid under operating leases are charged to
operations on a straight line basis over the lease term.
PENSION COSTS
The Company contributes into both defined benefit and defined contribution
schemes. An appropriate share of the costs of the pension schemes administered
by the Parent Undertaking, which are a defined benefit scheme and a defined
contribution scheme, are charged to operations for this Company in respect of
staff who are members of these schemes. Full details of these schemes are
disclosed in the financial statements of The Savoy Hotel PLC. The pension cost
charge for defined contribution schemes represents the amounts payable to
insurance companies in respect of the funds for the year to December 31.
F-62
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
3.STAFF COSTS
<TABLE>
<CAPTION>
1994 1995
----------------- ---------------
(Pounds) (Pounds)
<S> <C> <C>
Wages and salaries....................... 1,002,012 653,498
Social security costs.................... 74,588 50,508
Other pension costs...................... 9,603 6,078
----------------- ---------------
(Pounds)1,086,203 (Pounds)710,084
================= ===============
Other pension costs comprise:
Payments to funded defined contribution
schemes................................. 1,160 640
Charges in respect of group scheme....... 8,443 5,438
----------------- ---------------
(Pounds) 9,603 (Pounds) 6,078
================= ===============
The average weekly number of employees during the year was as follows:
<CAPTION>
NUMBER NUMBER
----------------- ---------------
<S> <C> <C>
Chauffeurs and support staff........... 40 39
Administration......................... 6 5
----------------- ---------------
46 44
================= ===============
Directors' remuneration was as follows:
Remuneration as executives............. Nil Nil
Pension contributions.................. Nil Nil
Compensation for loss of office........ Nil Nil
----------------- ---------------
(Pounds) Nil (Pounds) Nil
----------------- ---------------
Emoluments excluding pension scheme contributions:
Chairman's emoluments.................. (Pounds) Nil (Pounds) Nil
================= ===============
Highest paid directors' emoluments..... (Pounds) Nil (Pounds) Nil
================= ===============
</TABLE>
The number of directors (including the chairman and highest paid director)
who received emoluments (excluding pension contributions) in the following
ranges was:
<TABLE>
<CAPTION>
NUMBER NUMBER
------ ------
<S> <C> <C>
(Pounds)0-(Pounds)5,000........................................ 5 4
=== ===
</TABLE>
No director waived emoluments in respect of the years ended December 31,
1994 and 1995.
The statements of operations for the years ended December 31, 1994 and 1995
include no head office management recharges from the parent undertaking in
respect to the services provided by the directors of Speed 6060 Limited and
other corporate overheads.
F-63
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
4.INCOME ON ORDINARY ACTIVITIES BEFORE TAXATION
The income on ordinary activities before taxation is stated after charging:
<TABLE>
<CAPTION>
1994 1995
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Auditors' remuneration...................................... 10,000 6,000
Marketing recharge from parent.............................. -- 49,001
Depreciation................................................ 343,428 215,588
Operating leases--hire of plant and machinery............... 9,332 6,155
--other............................................... 35,250 20,000
======= =======
and after crediting:
Rent receivable............................................. 14,182 9,027
Sundry income............................................... 1,388 438
Gain on disposal of tangible fixed assets................... 63,486 28,677
Other operating income...................................... 79,056 38,142
======= =======
5.TAXATION
UK corporation tax on income on ordinary activities for the
years at 33%............................................... 63,000 31,333
UK corporation tax credit in respect of previous years...... (748) (729)
------- -------
62,252 30,604
======= =======
</TABLE>
In 1995, the primary reason for the difference between the effective tax
rate (19%) and the nominal rate of UK corporation tax (33%) is that the
transfer of the traded assets of the Company was intra-group and therefore not
subject to corporation tax.
F-64
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
6.TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT FURNITURE
LEASEHOLD MOTOR AND
PREMISES VEHICLES EQUIPMENT TOTAL
--------- ---------- --------- ----------
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Cost
At January 1, 1994............... 36,675 1,464,752 92,233 1,593,660
Additions........................ -- 402,593 49,053 451,646
Disposals........................ -- (382,634) (249) (382,883)
Fully depreciated assets......... (11,355) -- (34,031) (45,386)
------- ---------- -------- ----------
At December 31, 1994............. 25,320 1,484,711 107,006 1,617,037
------- ---------- -------- ----------
Additions........................ -- 115,800 8,075 123,875
Disposals........................ (25,320) (1,600,511) (115,081) (1,740,912)
------- ---------- -------- ----------
At December 31, 1995............. -- -- -- --
======= ========== ======== ==========
Accumulated Depreciation
At January 1, 1994............... 25,234 709,265 54,039 788,538
Charge for the year.............. 2,310 319,191 21,927 343,428
Disposals........................ -- (317,352) (249) (317,601)
Fully depreciated assets......... (11,355) -- (34,031) (45,386)
------- ---------- -------- ----------
At December 31, 1994............. 16,189 711,104 41,686 768,979
Charge for the year.............. 1,540 197,965 16,083 215,588
Disposals........................ (17,729) (909,069) (57,769) (984,567)
------- ---------- -------- ----------
At December 31, 1995............. -- -- -- --
======= ========== ======== ==========
Net Book Value
At December 31, 1994............. 9,131 773,607 65,320 848,058
======= ========== ======== ==========
At December 31, 1995............. -- -- -- --
======= ========== ======== ==========
</TABLE>
In 1995, in accordance with the transfer agreement whereby the assets and
business of the Company were transferred, an exceptional gain on disposal of
(Pounds)112,500 was made. This gain specifically related to the transfer of
motor vehicles which were transferred at fair market value. All other assets
were transferred at net book value.
7.INVENTORIES
<TABLE>
<CAPTION>
1994 1995
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Raw materials and consumables:
Vehicle spare parts........................................... 15,605 --
Petrol and oil................................................ 4,045 --
------- -------
19,650 --
======= =======
8.RECEIVABLES--AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade receivables............................................. 184,969 --
Amounts owed by parent undertaking............................ 104,027 --
Amounts owed by fellow subsidiary............................. -- 936,674
Other receivables............................................. 4,224 --
Prepayments and accrued income................................ 84,299 --
------- -------
377,519 936,674
======= =======
</TABLE>
F-65
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
9.CURRENT LIABILITIES--AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1994 1995
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Trade accounts payable..................................... 76,057 --
Borrowings from parent undertaking......................... 34,915 --
Corporation tax............................................ 63,000 31,333
Other taxes and social security............................ 49,699 --
Other creditors............................................ 11,299 --
Capital lease installments................................. 4,638 --
Accruals................................................... 65,504 --
Dividends payable.......................................... 110,000 --
------- ------
415,112 31,333
======= ======
</TABLE>
10.DEFERRED TAXES
Provision for deferred taxes has been made in the financial statements in
accordance with the Company's accounting policy. The provision and the full
potential liability are as follows:
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------
POTENTIAL POTENTIAL
PROVISION LIABILITY PROVISION LIABILITY
--------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Accelerated capital
allowances................. -- (Pounds) 15,534 -- --
</TABLE>
11.SHARE CAPITAL
<TABLE>
<CAPTION>
1994 1995
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Authorized:
"A' Ordinary Shares of (Pounds)1......................... 20,000 20,000
"B' Ordinary Shares of (Pounds)1......................... 30,000 30,000
------ ------
50,000 50,000
====== ======
Allotted, called up and fully paid:
"A' Ordinary Shares of (Pounds)1......................... 17,329 17,329
"B' Ordinary Shares of (Pounds)1......................... 26,000 26,000
------ ------
43,329 43,329
====== ======
</TABLE>
12.RETAINED EARNINGS
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(Pounds) (Pounds)
<S> <C> <C>
At January 1.......................................... 1,006,191 1,007,034
Transfer to (from) retained earnings.................. 843 (145,022)
--------- ---------
At December 31........................................ 1,007,034 862,012
========= =========
13.RECONCILIATION OF MOVEMENTS ON SHAREHOLDERS' EQUITY
<CAPTION>
1994 1995
--------- ---------
(Pounds) (Pounds)
<S> <C> <C>
Opening shareholders' equity.......................... 1,049,520 1,050,363
Total recognized (losses)/gains for the financial
year................................................. 843 (145,022)
--------- ---------
Closing shareholders' equity.......................... 1,050,363 905,341
========= =========
</TABLE>
F-66
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
14.FINANCIAL COMMITMENTS
a) The Company has annual commitments under operating leases as set out
below:
<TABLE>
<CAPTION>
1994 1995
------------------ ------------------
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
--------- -------- --------- --------
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Leases which expire:
In the next year.................... 30,000 360 -- --
In the second to fifth years........ -- 9,038 -- --
After five years.................... -- -- -- --
------ ----- --- ---
30,000 9,398 -- --
====== ===== === ===
</TABLE>
b) Capital commitments:
The Company has no capital commitments at December 31, 1994 and 1995
15.GUARANTEE
The Company has entered into a Composite Accounting Agreement with Barclays
Bank PLC under which it has executed an unlimited guarantee in respect of the
bank overdraft and other banking facility of the Parent Undertaking and
certain Fellow Subsidiary Undertakings.
16.SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The financial statements are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("U.K. GAAP"). These
accounting principles differ in certain material respects from the accounting
principles generally accepted in the United States ("U.S. GAAP"). Described
below are the material differences between U.K. GAAP and U.S. GAAP affecting
the net income and shareholders' equity which are set forth in the tables that
follow:
Transfer of assets between fellow subsidiaries
Under U.K. GAAP, assets can be transferred from one subsidiary to a fellow
subsidiary with the same parent undertaking, at their fair value. The
difference between the fair value and the historical cost of these assets will
result in an intragroup gain or loss in the statement of operations of the
subsidiary selling the assets. The assets would remain at their fair value in
the subsidiary that acquired the assets. Under U.S. GAAP, assets can only be
transferred from one subsidiary to a fellow subsidiary with the same parent
undertaking, at their historical cost. As a result, under U.S. GAAP no
intragroup gain or loss would arise from the transaction, and the assets would
remain at historical cost.
Allocation of expenses in a "carve out" situation
Under U.K. GAAP, certain costs incurred by the parent undertaking may not be
reflected in the subsidiary financial statements; however, disclosure of the
fact is generally provided in the subsidiary financial statements. Under U.S.
GAAP, historical statements of operations of a subsidiary should reflect all
costs incurred by the parent undertaking on its behalf, such as officer
salaries and corporate overheads.
F-67
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
Deferred taxes
Under U.K. GAAP, deferred taxation is accounted for using the liability
method to the extent that it is considered probable that a liability will
crystallize in the foreseeable future. Under U.S. GAAP, deferred taxation is
provided for on all temporary differences and carryforwards. Deferred tax
assets are recognised to the extent that it is more likely than not that they
will be realized. Where doubt exists as to whether a deferred tax asset will
be realized, an appropriate valuation allowance is established.
Proposed dividends
Under U.K. GAAP dividends paid and proposed are usually shown on the face of
the statement of operations as an appropriation of current year earnings.
Proposed dividends are provided on the basis of recommendation by the
directors and may include dividends that are subject to subsequent approval by
shareholders before they are declared. Under U.S. GAAP, only dividends
approved during the current year are included in the statement of operations.
The effect of the above noted differences between U.K. and U.S. GAAP are as
follows:
(A) NET INCOME
The approximate effects on net income (loss) of material differences between
U.K. and U.S. GAAP are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
--------------------
1994 1995
--------- ---------
(Pounds) (Pounds)
<S> <C> <C>
Net income reported under U.K. GAAP....................... 110,843 129,978
Gain on transfer of assets................................ -- (112,500)
Allocation of expenses.................................... (68,350) (42,341)
Deferred taxes............................................ 2,161 15,534
Tax effect of U.S. GAAP reconciling adjustments........... 22,556 13,973
-------- ---------
Net income reported in accordance with U.S. GAAP.......... 67,210 4,644
======== =========
</TABLE>
(B) SHAREHOLDERS' EQUITY
The approximate effects on shareholders' equity of material differences
between U.K. and U.S. GAAP are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1994 1995
--------- --------
(Pounds) (Pounds)
<S> <C> <C>
Shareholders' equity reported under U.K. GAAP............ 1,050,363 905,341
Gain on transfer of assets............................... -- (112,500)
Allocation of expenses................................... (68,350) (110,691)
Deferred taxes........................................... (15,534) --
Proposed dividend........................................ 110,000 --
Tax effect of U.S. GAAP reconciling adjustments.......... 22,556 36,529
--------- --------
Shareholders' equity reported in accordance with U.S.
GAAP.................................................... 1,099,035 718,679
========= ========
</TABLE>
F-68
<PAGE>
SPEED 6060 LIMITED (FORMERLY CAMELOT BARTHROPP LIMITED)
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(C) STATEMENTS OF CASH FLOWS
Under U.K. GAAP, wholly owned subsidiaries of a parent undertaking that are
established under the law of any European Community State are exempt from
including a statement of cash flows in their financial statements. Under U.S.
GAAP, the statement of cash flows is required and therefore is shown below:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
(Pounds) (Pounds)
<S> <C> <C>
Cash flows from operating activities:
Net income................................ 67,210 4,644
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of fixed as-
sets..................................... 343,428 215,588
Gain on sale of fixed assets.............. (63,486) (28,677)
Change in operating assets and liabili-
ties:
Receivables............................. 54,058 166,047
Inventories............................. 3,797 19,650
Current liabilities..................... (79,729) (156,918)
-------- --------
Net cash provided by operating activi-
ties................................. 325,278 220,334
-------- --------
Cash flows from investing activities:
Proceeds from sale of fixed assets........ 128,768 68,293
Purchases of fixed assets................. (451,646) (123,875)
Net cash used in financing activi-
ties................................. (322,878) (55,582)
-------- --------
Cash flows from financing activities:
Dividends paid.......................... -- (385,000)
Net cash used in financing activi-
ties................................. -- (385,000)
-------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 2,400 (220,248)
Cash and cash equivalents at beginning of
year..................................... 217,848 220,248
-------- --------
Cash and cash equivalents at end of year.. 220,248 --
======== ========
</TABLE>
F-69
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or any of the Underwriters. This Prospectus
does not constitute an offer to sell or the solicitation of any offer to buy
any security other than the shares of Common Stock offered by this Prospectus,
nor does it constitute an offer to sell or a solicitation of any offer to buy
the shares of Common Stock by anyone in any jurisdiction in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that information contained herein is correct as of any time
subsequent to the date hereof.
-------------------
TABLE OF CONTENTS
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<TABLE>
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Page
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<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Acquisition of Manhattan Limousine....................................... 13
Recapitalization......................................................... 13
Use of Proceeds.......................................................... 14
Dilution................................................................. 15
Capitalization........................................................... 16
Dividend Policy.......................................................... 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 25
Management............................................................... 35
Principal Stockholders................................................... 41
Certain Transactions..................................................... 43
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 49
Legal Matters............................................................ 51
Experts.................................................................. 51
Additional Information................................................... 51
Index to Financial Statements............................................ F-1
</TABLE>
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Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
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- -------------------------------------------------------------------------------
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2,900,000 SHARES
CAREY INTERNATIONAL, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
Montgomery Securities
Ladenburg Thalmann & Co. Inc.
, 1997
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the NASD
filing fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 13,138
NASD filing fee............................................... 4,836
Nasdaq listing fee............................................ 38,243
Printing and engraving expenses............................... 500,000
Legal fees and expenses....................................... 550,000
Accounting fees and expenses.................................. 350,000
Blue sky fee.................................................. 5,000
Transfer agent and registrar fees............................. 5,000
Miscellaneous................................................. 133,783
----------
TOTAL..................................................... $1,600,000
==========
</TABLE>
The Company will bear all of the foregoing fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Reference is made to Section 145 of
the DGCL, as amended, which provides that a corporation may indemnify any
person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceedings, had no reasonable cause to believe his or her conduct was
unlawful. Section 145 further provides that a corporation similarly may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite an adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. The Company's Restated Certificate of
Incorporation further provides that the Company shall indemnify its directors
and officers to the full extent permitted by the law of the State of Delaware.
The Company's Certificate of Incorporation provides that the Company's
directors shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent
II-1
<PAGE>
that exculpation from liability is not permitted under the DGCL as in effect
at the time such liability is determined.
The Certificate of Incorporation also provides that each person who was or
is made a party to, or is involved in, any action, suit, proceeding or claim
by reason of the fact that he or she is or was a director, officer or employee
of the Registrant (or is or was serving at the request of the Registrant as a
director, officer, trustee employee or agent of any other enterprise including
service with respect to employee benefit plans) shall be indemnified and held
harmless by the Registrant, to the full extent permitted by Delaware law, as
in effect from time to time, against all expenses (including attorneys' fees
and expenses), judgments, fines, penalties and amounts to be paid in
settlement incurred by such person in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim.
The rights to indemnification and the payment of expenses provided by the
Certificate of Incorporation do not apply to any action, suit, proceeding or
claim initiated by or on behalf of a person otherwise entitled to the benefit
of such provisions. Any person seeking indemnification under the Certificate
of Incorporation shall be deemed to have met the standard of conduct required
for such indemnification unless the contrary shall be established. Any repeal
or modification of such indemnification provisions shall not adversely affect
any right or protection of a director or officer with respect to any conduct
of such director or officer occurring prior to such repeal or modification.
The Company maintains an indemnification insurance policy covering all
directors and officers of the Company and its subsidiaries.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(1) In April and October, 1995, two of the Company's employees purchased
8,600 and 24,080 shares of Common Stock, respectively, for approximately $1.44
per share upon the exercise of options granted under the 1987 Stock Option
Plan.
(2) The Company granted options to purchase Common Stock pursuant to the
1987 and 1992 Stock Option Plans to individuals who were employees at the time
of grant on the following dates and in the indicated amounts: October 28, 1994
(8,600 shares); February 29, 1996 (12,900 shares); June 1, 1996 (47,017
shares); and June 10, 1996 (12,900 shares). In addition, the Company granted
an option to purchase 12,900 shares of Common Stock pursuant to the 1992 Stock
Option Plan to one of its directors on March 30, 1995. The Company also
granted an option to purchase 12,900 shares of Common Stock pursuant to the
1992 Stock Option Plan to a consultant on June 10, 1996.
(3) In June 1994, in connection with the acquisition of a chauffeured
vehicle service company, the Company issued a Convertible Promissory Note to
Nicholas C. Newman in the original principal amount of $190,000. Under certain
circumstances, any and all of the outstanding principal balance under the Note
is convertible into shares of Common Stock at a conversion price of $9.30 per
share.
(4) In August 1995, in connection with the acquisition of a chauffeured
vehicle service company, the Company issued a Convertible Promissory Note to
D.E.M. Investments in the original principal amount of $600,000. The current
principal balance outstanding under the Note will be converted into shares of
Common Stock upon the closing of this offering at a conversion price of $9.30
per share.
The securities issued in the foregoing transactions were not registered
under the Securities Act in reliance upon exemptions from registration set
forth in Section 4(2) of the Securities Act.
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<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(A) EXHIBITS. Unless otherwise indicated, the following exhibits will be
filed by amendment to this Registration Statement.
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
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<C> <S> <C>
1 Form of Underwriting Agreement
+2.1 Stock Purchase Agreement dated as of March 1, 1997,
by and among Carey International, Inc., Alfred J.
Hemlock and Lupe C. Hemlock
+2.2 Agreement and Plan of Merger dated as of March 1,
1997, by and among Carey International, Inc.,
Manhattan International Limousine Network Ltd., MLC
Acquisition Corporation and Michael Hemlock
+ 3.1 Form of Amended and Restated Certificate of
Incorporation of the Company
+ 3.2 Amended and Restated Bylaws of the Company
4.1 Specimen Stock Certificate
4.2 Form of Warrants
*4.3 Carey International, Inc. Common Stock Purchase
Warrant dated September 1, 1991, issued to Yerac
Associates, L.P.
4.4 Form of Registration Rights Agreement between Carey
International, Inc. and Michael Hemlock
+ 5 Opinion of Nutter, McClennen & Fish, LLP
+10.1 1997 Equity Incentive Plan
*10.2 1992 Stock Option Plan
*10.3 1987 Stock Option Plan
*10.4 Stock Plan for Non-Employee Directors
*10.5 Lease dated July 5, 1989 for 4530 Wisconsin Avenue,
Washington, D.C., between Carey International, Inc.
and 4530 Wisconsin Associates, as lessor, including
Addendum, Exhibit B and Exhibit C; and Second
Amendment to Lease dated August 6, 1993, including
Exhibit A
+10.6 Form of Escrow Agreement by and among Michael
Hemlock, Alfred J. Hemlock, Lupe C. Hemlock and a
bank to be named
*10.7 Current form of Standard Master License Agreement
+10.8 Current form of Standard International License
Agreement
+10.9 Form of Promissory Notes in connection with
Acquisition of Manhattan Limousine
+10.10 Current form of Standard Independent Operator
Agreement
+11 Statements Regarding Computation of Per Share
Earnings
*21 Subsidiaries of the Registrant
+23.1 Consent of Coopers & Lybrand L.L.P.
+23.2 Consent of Coopers & Lybrand L.L.P.
+23.3 Consent of Coopers & Lybrand, Chartered Accountants
and Registered Auditors
+23.4 Consent of Coopers & Lybrand, Chartered Accountants
and Registered Auditors
+23.5 Consent of Nutter, McClennen & Fish, LLP (contained
in Exhibit 5)
*23.6 Consent of Nicholas J. St. George
*24 Power of Attorney (contained in the signature page to
this Registration Statement)
+27 Financial Data Schedule
</TABLE>
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* Previously filed.
+ Filed herewith.
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<PAGE>
(B) FINANCIAL STATEMENT SCHEDULE:
The following Financial Statement Schedule is filed as part of this
Registration Statement.
Report of Independent Accountants
Schedule VIII--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A under the Securities
Act and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF WASHINGTON, THE DISTRICT OF COLUMBIA, ON THE 25TH DAY OF APRIL 1997.
Carey International, Inc.
/s/ Vincent A. Wolfington
By: _________________________________
VINCENT A. WOLFINGTON
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Vincent A. Wolfington Chairman of the
- ------------------------------------- Board and Chief April 25, 1997
VINCENT A. WOLFINGTON Executive Officer
President and
/s/ Don R. Dailey* Director April 25, 1997
- -------------------------------------
DON R. DAILEY
Chief Financial
/s/ David H. Haedicke* Officer April 25, 1997
- -------------------------------------
DAVID H. HAEDICKE
Principal Accounting
/s/ Paul A. Sandt* Officer April 25, 1997
- -------------------------------------
PAUL A. SANDT
Director
/s/ David McL. Hillman* April 25, 1997
- -------------------------------------
DAVID MCL. HILLMAN
Director
/s/ William R. Hambrecht* April 25, 1997
- -------------------------------------
WILLIAM R. HAMBRECHT
Director
/s/ Robert W. Cox* April 25, 1997
- -------------------------------------
ROBERT W. COX
/s/ Vincent A. Wolfington
*By: ___________________________
VINCENT A. WOLFINGTON
ATTORNEY-IN-FACT
Powers of Attorney have been filed with this Registration Statement.
II-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Carey International, Inc.
In connection with our audits of the consolidated financial statements of
Carey International, Inc. and Subsidiaries as of November 30, 1995 and 1996,
and for each of the three years in the period ended November 30, 1996, which
financial statements are included in the Prospectus, we have also audited the
consolidated financial statement schedule listed in Item 16(b) of Part II of
the Registration Statement herein.
In our opinion, this consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information required
to be included therein.
Coopers & Lybrand L.L.P.
Washington, D.C.
January 31, 1997, except for
Notes 1, 2 and 18 as to
which the date is March 1, 1997
1
<PAGE>
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
BALANCE AT BEGINNING CHARGED TO COSTS DEDUCTIONS-- BALANCE AT END
DESCRIPTION OF PERIOD AND EXPENSE WRITE-OFFS OF PERIOD
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<S> <C> <C> <C> <C>
Year ended November 30,
1996
Reserve and allowance
from asset accounts:
Allowance for doubtful
accounts............. $293,796 $498,786 $(257,174) $535,408
Year ended November 30,
1995
Reserve and allowance
from asset accounts:
Allowance for doubtful
accounts............. $203,872 $391,964 $(302,040) $293,796
Year ended November 30,
1994
Reserve and allowance
from asset accounts:
Allowance for doubtful
accounts............. $219,979 $251,733 $(267,840) $203,872
</TABLE>
2
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EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement
+2.1 Stock Purchase Agreement dated as of March 1, 1997,
by and among Carey International, Inc., Alfred J.
Hemlock and Lupe C. Hemlock
+2.2 Agreement and Plan of Merger dated as of March 1,
1997, by and among Carey International, Inc.,
Manhattan International Limousine Network Ltd., MLC
Acquisition Corporation and Michael Hemlock
+3.1 Form of Amended and Restated Certificate of
Incorporation of the Company
+3.2 Amended and Restated Bylaws of the Company
4.1 Specimen Stock Certificate
4.2 Form of Warrants
*4.3 Carey International, Inc. Common Stock Purchase
Warrant dated September 1, 1991, issued to Yerac
Associates, L.P.
4.4 Form of Registration Rights Agreement between Carey
International, Inc. and Michael Hemlock
+5 Opinion of Nutter, McClennen & Fish, LLP
+10.1 1997 Equity Incentive Plan
*10.2 1992 Stock Option Plan
*10.3 1987 Stock Option Plan
*10.4 Stock Plan for Non-Employee Directors
*10.5 Lease dated July 5, 1989 for 4530 Wisconsin Avenue,
Washington, D.C., between Carey International, Inc.
and 4530 Wisconsin Associates, as lessor, including
Addendum, Exhibit B and Exhibit C; and Second
Amendment to Lease dated August 6, 1993, including
Exhibit A
+10.6 Form of Escrow Agreement by and among Michael
Hemlock, Alfred J. Hemlock, Lupe C. Hemlock and a
bank to be named
*10.7 Current Form of Standard Master License Agreement
+10.8 Form of Standard International License Agreement
+10.9 Form of Promissory Notes in connection with
Acquisition of Manhattan Limousine
+10.10 Current Form of Standard Independent Operator
Agreement
+11 Statements Regarding Computation of Per Share
Earnings
*21 Subsidiaries of the Registrant
+23.1 Consent of Coopers & Lybrand L.L.P.
+23.2 Consent of Coopers & Lybrand L.L.P.
+23.3 Consent of Coopers & Lybrand, Chartered Accountants
and Registered Auditors
+23.4 Consent of Coopers & Lybrand, Chartered Accountants
and Registered Auditors
+23.5 Consent of Nutter, McClennen & Fish, LLP (contained
in Exhibit 5)
*23.6 Consent of Nicholas J. St. George
*24 Power of Attorney (contained in the signature page to
this Registration Statement)
+27 Financial Data Schedule
</TABLE>
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* Previously filed.
+ Filed herewith.
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of March 1, 1997
by and among Carey International, Inc., a Delaware corporation ("Carey"), Alfred
J. Hemlock ("AJH") and Lupe C. Hemlock ("LCH"), both residents of New York, New
York (AJH and LCH are collectively referred to herein as "Stockholders").
RECITALS
A. AJH and LCH are the sole record and beneficial holders of all of the
issued and outstanding shares of capital stock of International Limousine
Network Ltd. (the "Company"); and
B. Stockholders desire to sell and Carey desires to purchase, on the terms
and conditions set forth in this Agreement, all of the issued and outstanding
shares of capital stock of the Company (the "Shares");
NOW, THEREFORE, in consideration of the mutual agreements, representations,
warranties, and covenants hereinafter set forth, the parties hereto agree as
follows (with certain capitalized terms used herein being defined in Section
9.1):
1. SALE AND PURCHASE OF THE SHARES
1.1 Sale and Purchase. Upon the terms and subject to the conditions
contained herein, LCH and AJH will sell and transfer, free and clear of all
Encumbrances, to Carey, and Carey will purchase, at the Closing, the Shares.
1.2 Consideration.
(a) In consideration of the sale and transfer pursuant to Section 1.1,
Carey hereby agrees to transfer and deliver to Stockholders or the Escrow Agent,
as applicable, in the method and manner set forth in Sections 1.4:
(i) Upon the execution and delivery of this Agreement by the Stockholders,
Carey shall deliver to the Stockholders by wire transfer in immediately
available funds to the Stockholders two hundred forty thousand U.S. dollars
($240,000) (the "Deposit").
(ii) Six million seven hundred sixty thousand U.S. dollars ($6,760,000)
(the "Cash Consideration");
(iii) A promissory note substantially in the form attached hereto as
Exhibit 1.2(a)(iii) in the principal amount of one million three hundred sixty
thousand U. S. dollars ($1,360,000) bearing interest at 8% per annum, with all
accrued interest payable
<PAGE>
monthly and all principal payable on the first anniversary of the Closing Date
(the "ILN Promissory Note").
(iv) A promissory note substantially in the form attached hereto as
Exhibit 1.2(a)(iv) in the principal amount of three million U.S. dollars
($3,000,000) bearing interest at 8% per annum, with all accrued interest payable
monthly and all principal payable on the first anniversary of the Closing Date
(the "Escrow Promissory Note").
(b) In the event that the Closing occurs after May 20, 1997, unless the
failure of the Closing to occur by such date shall be due to (i) the failure of
the Stockholders to perform or observe the covenants and agreements of such
parties set forth herein or (ii) the failure to be satisfied of the conditions
set forth in Section 5.1, other than those conditions which are not satisfied
due to the fault of Carey or those conditions requiring the Stockholders to
deliver documents and instruments if the Stockholders in good faith stand ready
to deliver such documents and instruments, additional merger consideration (the
"Additional Consideration") shall accrue and be payable at the Closing in an
amount equal to the number of days between May 20, 1997 and the Closing Date
multiplied by six thousand U.S. dollars ($6,000), provided that the amount of
Additional Consolidation shall not exceed five hundred forty thousand U.S.
dollars ($540,000).
1.3 Closing. The closing of the purchase and sale of the Shares and the
related transactions provided for herein (the "Closing") shall take place at
9:00 a.m. on the closing date of the IPO at the offices of Fulbright & Jaworski
L.L.P., 666 Fifth Avenue, New York, New York 10103 or, if there shall not be a
closing of the IPO, at 9:00 a.m. on such day on or before August 20, 1997 as
reasonably selected by Carey, upon at least ten (10) business days notice to the
Stockholders at the offices of Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue
of the Americas, New York, New York 10036.
1.4 Transactions at the Closing.
(a) At the Closing, Stockholders will deliver to Carey the following:
(i) stock certificates evidencing all of the Shares, duly
endorsed by the Stockholders;
(ii) written resignations of each director and officer of ILN,
effective as of the Closing Date;
(iii) the original minute books, stock record books and corporate
seals, if any, of ILN;
(iv) all other documents, certificates and instruments required
to be delivered by Sellers at or prior to the Closing pursuant to this
Agreement; and
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<PAGE>
(v) a copy of each written Company Contract.
(b) At the Closing, Carey will deliver to Stockholders the following:
(i) the Cash Consideration by check in next day funds (unless the
net proceeds of the IPO are paid to Carey in same day funds, in which event the
Cash Consideration will be paid by wire transfer in immediately available funds
to the account or accounts designated by Stockholders);
(ii) the ILN Promissory Note, duly executed by an authorized officer
of Carey;
(iii) all other documents, certificates, instruments or writings
required to be delivered by Carey at or prior to the Closing pursuant to this
Agreement; and
(iv) a certified check payable to or wire transfer to the
Stockholders representing any Additional Consideration owed pursuant to Section
1.2(b).
(c) At the Closing, the Stockholders, Carey, MH and/or MILN as applicable,
will exchange the following:
(i) a duly executed sales and management consulting agreement
between ILN, MILN and AJH substantially in the form attached hereto as Exhibit
1.4(c)(i) (the "Consulting Agreement");
(ii) an escrow agreement among Carey, the Stockholders, and MH
substantially in the form attached hereto as Exhibit 1.4(c)(ii) (the "Escrow
Agreement");
(d) At the Closing, Carey will deliver to the Escrow Agent the Escrow
Promissory Note.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to Carey that,
except as expressly provided in the Disclosure Schedule by specific reference to
a particular Section of this Article 2, the following representations and
warranties are true and correct as of the date hereof (except Section 2.32,
which will be true and correct as of the Closing Date):
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of New York.
The Company is not required to be qualified as a foreign corporation in any
jurisdiction. The Company has the corporate power and authority to own and hold
its properties and to carry on its business.
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<PAGE>
The Company has previously furnished to Carey true and complete copies of its
charter and by-laws, as amended to date.
2.2 Subsidiaries. The Company neither owns, nor has any agreements or
understandings (written or oral) to acquire, any equity securities or other
securities of any corporation, general or limited partnership, limited liability
company, joint venture, or other entity or business, or any direct or indirect
equity or ownership interest in any other business. The Business is, and since
October 1, 1995 has been, conducted solely by ILN and Manhattan International
Limousine Network Ltd., a New York corporation ("MILN"), and not through any
subsidiary, affiliate or joint venture of either of the Stockholders or the
Company or any other entity or person. Neither the Stockholders nor the Company
owns or controls, directly or indirectly, any business or company competitive
with the Business or any business or company that provides services to the
Business or any other chauffeured vehicle services company.
2.3 Power and Authority. The Stockholders have full capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby, and no other action is necessary to authorize this Agreement or the
consummation of the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by the Stockholders and constitutes a legal,
valid and binding obligation of the Stockholders enforceable against them in
accordance with its terms.
2.4 Capitalization. The authorized equity securities of ILN consists of
200 shares of common stock, each without par value (the "ILN Common Stock"), all
of which shares are issued and outstanding; and the Shares represent all issued
and outstanding shares of ILN Common Stock. All of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts, commitments,
agreements or understandings (written or oral) that require the Company to
issue, sell or transfer any of its capital stock or other securities. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company. There are no
agreements, voting trusts, proxies or other agreements or understandings with
respect to the voting or ownership of the capital stock of the Company. None of
the Shares or other securities of the Company was issued in violation of the
Securities Act or state law.
2.5 Ownership and Title to the Shares. LCH and AJH are the sole record
and beneficial holders of the Shares, with each owning one-half of the Shares.
The Stockholders own their respective Shares free and clear of any Encumbrances.
2.6 Validity, etc. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, nor the
consummation of the transactions contemplated hereby or thereby, nor the
compliance by the Stockholders or the Company with any of the terms or
provisions hereof, will (i) violate any provision of the charter or by-laws of
the Company, (ii) violate any statute, code, ordinance, rule, regulation,
-4-
<PAGE>
judgment, order, writ, decree or injunction applicable to either Stockholder or
the Company or any of their respective properties or assets, or (iii) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the respective properties
or assets of the Company or the Stockholders or the Shares under any of the
terms, conditions or provisions of any Company Contract, note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, Permit or other instrument
or obligation to which either of the Stockholders or the Company is a party, or
by which they or any of their respective properties or assets may or be bound or
affected.
2.7 Financial Statements. The Stockholders have previously furnished to
Carey the following financial statements of the Company which are attached
hereto in Schedule 2.7: (i) federal tax returns for 1994 and 1995, prepared
internally by ILN and reviewed by Grubman Associates of New York, CPAs, P.C.
("Grubman"), (collectively, the "ILN Financial Statements"). The Stockholders
and Grubman have reviewed the following financial statements of MILN and ILN
which also are attached hereto in Schedule 2.7: (i) financial statements as of
and for the years ending September 30, 1995 and 1996, audited by Coopers &
Lybrand, L.L.P., consisting of a balance sheet, statement of income and
statement of cash flows, and (ii) financial statements as of and for the three
months ended December 31, 1995 and 1996, prepared with the assistance of Coopers
& Lybrand, L.L.P. (collectively, the "Combined Financial Statements"). The
balance sheet of ILN dated December 31, 1996 and included among the ILN
Financial Statements referred to herein as the "Balance Sheet." All ILN
Financial Statements were prepared from the books and records of ILN, which
books and records are complete and correct. The ILN Financial Statements
accurately present the financial position of ILN as of the dates thereof and the
results of ILN's operations for the periods presented therein, as the case may
be. The Combined Financial Statements accurately present the financial position
of MILN and ILN as of the dates thereof and the results of MILN and ILN's
operations for the periods presented therein, as the case may be, all in
conformity with generally accepted accounting principles ("GAAP"), consistently
applied, subject, in the case of the financial statements for the three months
ended December 31, 1995 and 1996, to normal year-end adjustments. At the
Closing, ILN shall have a Zero Balance Sheet.
2.8 Books and Records. The minute books, stock record books and other
material non-financial records of the Company, all of which have been made
available to Carey, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the Stockholders, the boards of directors, and committees of
the boards of directors of the company, and no meeting of any such stockholders,
board of directors, or committee has been held for which minutes have not
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been prepared and are not contained in such minute books. As of the Closing
Date, all of the books and records referenced in this Section 2.8 will be in the
possession of the Company.
2.9 Absence of Undisclosed Liabilities. Except as and to the extent of
the amounts specifically reflected or reserved against in the Balance Sheet or
set forth in the Disclosure Schedule, the Company does not have any liabilities
or obligations of any nature whatsoever, due or to become due, accrued,
absolute, contingent or otherwise, except for immaterial liabilities and
obligations incurred in the ordinary course of business which are consistent
with past practice. Neither Stockholder knows of any basis for the assertion
against the Company of any liability or obligation not fully reflected or
reserved against in the Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since the date thereof.
2.10 Absence of Adverse Change. Since December 31, 1996 (the "Balance
Sheet Date"), there has been no material adverse change in the business,
financial position, assets, liabilities, results of operations or prospects of
the Company and the other transactions expressly contemplated to occur in
connection with the transactions contemplated hereby. Since the Balance Sheet
Date, other than the transactions expressly contemplated to occur in connection
with the transactions contemplated hereby, the Company has not:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment, or made any change in its business or
operations, other than in the ordinary course of business;
(b) entered into or agreed to enter into any transaction, agreement or
commitment, or suffered the occurrence of any event or events (i) that has
interfered or is reasonably likely to interfere with the normal and usual
operations of the business of the Company or (ii) that, singly or in the
aggregate, has resulted or is reasonably likely to result in a material adverse
change with respect to the Company;
(c) incurred or increased any indebtedness for borrowed money or any
capital lease obligations, or assumed, guaranteed, endorsed or otherwise become
responsible for the obligations of any other individual, partnership, firm, or
corporation (except to endorse checks for collection for deposit in the ordinary
course of business), or made any loan or advance to any individual, partnership,
firm or corporation;
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred or otherwise disposed of, any of
the properties or assets of the Company, including any canceled, released,
hypothecated or assigned indebtedness owed to the Company, or any claims held by
the Company;
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(e) made any investment of a capital nature in excess of $2,500 or entered
into a commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm or
corporation;
(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock or property, or any combination thereof) in respect of
the capital stock of the Company, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of the Company;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus, additional or severance compensation to any officer,
director, shareholder or employee of the Company, or otherwise increased the
compensation paid or payable to any of the foregoing;
(i) sold, assigned or transferred any patents, trademarks, trade names,
logos, copyrights, formulae or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any capital
stock of the Company, (ii) to sell any assets of the Company other than in the
ordinary course of business or (iii) to effect any merger, consolidation or
other reorganization of the Company;
(k) incurred any damage, destruction or loss to any asset owned by the
Company or used in its business;
(l) entered into any material agreement, contract, lease, indenture or
commitment (whether written or oral) or any amendment, waiver or modification to
any existing agreement, contract, lease, indenture or commitment (whether
written or oral); or
(m) agreed, contracted or committed to do any of the foregoing, or agreed
to pay after the Closing any expenses or fees of counsel, accountants or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
2.11 Receivables; Banking Relationships.
(a) Schedule 2.11 provides an accurate and complete breakdown and aging of
all accounts receivable, notes receivable and other receivables of the Company
as of the Balance Sheet Date. All existing receivables of the Company represent
valid obligations of third parties arising from bona fide transactions entered
into in the ordinary course of business.
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(b) Schedule 2.11 accurately lists (i) each account maintained by or for
the benefit of the Company at any bank or other financial institution since 1990
and (ii) each bank or financial institution that has made any loan to or had any
business relationship with the Company since 1990, and for each such bank the
name of the contact officer at the bank. Schedule 2.11 describes the date of and
reason for any termination of or change in any business relationship between the
Company and any such bank or financial institution and, the aggregate amount of
the outstanding loan or account balance (if any) at the date of any such
termination or change.
2.12 Taxes.
(a) The Company and any consolidated, combined or unitary group of which
the Company is or was a member, as the case may be (individually, a "Tax
Affiliate" and, collectively, the "Tax Affiliates"), has (i) prepared and timely
filed all returns, declarations, reports, estimates, information returns and
statements ("Returns") required to have been filed or sent by or with respect to
them to date in respect of any Taxes (as hereinafter defined), and all such
Returns are correct and complete; (ii) timely and properly paid all Taxes that
are shown as due and payable on such Returns; and (iii) complied with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and timely and properly withheld from employee wages and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(b) (i) There are no liens for Taxes upon the assets of the Company or any
Tax Affiliate except liens for Taxes not yet due; (ii) neither the Company nor
any of its Tax Affiliates has requested any extension of time within which to
file any Return which Return has not since been filed; (iii) no deficiency for
any Taxes has been proposed, asserted or assessed against the Company or any of
its Tax Affiliates which has not been resolved and paid in full; (iv) there are
no outstanding waivers or consents given by the Company or any of its Tax
Affiliates regarding the application of the statute of limitations with respect
to any Taxes or Returns; and (v) no federal, state, local or foreign audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(c) Neither the Company nor any of its Tax Affiliates (i) has filed a
consent pursuant to Section 341(f) of the Code (as hereinafter defined) or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Tax Affiliates; or (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by such Company or a
Tax Affiliate or has any knowledge that the Internal Revenue Service (the "IRS")
has proposed any such adjustment or change in accounting method. No property of
the Company or any of its Tax Affiliates is property that the Company, any of
its Tax
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Affiliates or any party to this transaction is or will be required to treat as
being owned by another person pursuant to Section 168(f)(8) of the Code (prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(d) All transactions that could give rise to a substantial understatement
of federal income tax within the meaning of Section 6662 of the Code have been
adequately disclosed in accordance with Section 6662 of the Code. Neither the
Company nor any of its Tax Affiliates is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
(e) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including without limitation all net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, property or other taxes, customs, duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign).
(f) The Company is, and at all times since January 1, 1990 has been, an "S
corporation" as defined in Section 1361(a) of the Code.
2.13 Litigation. There is no (a) action, suit, claim, proceeding or
investigation pending or, to the knowledge of either Stockholder threatened
against or affecting or either stockholder (relating to the Business) or the
Company (whether or not either Stockholder or the Company is a party or
prospective party thereto), at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign; (b) arbitration proceeding
relating to either Stockholder (relating to the Business) or the Company, or (c)
governmental inquiry pending or threatened against or involving either
Stockholder (relating to the Business) or the Company. There are no outstanding
orders, writs, judgments, injunctions, settlement agreements, consent decrees or
decrees of any court, governmental agency or arbitration tribunal against,
involving or affecting either Stockholder (relating to the Business) or the
Company. Neither the Company nor (with respect to any matter relating to the
Business) either Stockholder is in default with respect to any order, writ,
injunction or decree known to or served upon it from any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by either Stockholder (relating to the Business) or the Company pending or
threatened against others.
2.14 Vehicles. Schedule 2.14 contains a true and complete list of all
motor vehicles used in the operation of the Company's business (the "Vehicles"),
including, without limitation, Vehicles owned by or leased to the Company and
Vehicles owned by or leased to
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third parties or Franchisees, and sets forth, with respect to each Vehicle, the
year, make, serial number, model, mileage as of December 31, 1996, whether such
Vehicle is owned or leased, and the identity of the owner or lessee, as the case
may be. Schedule 2.14 sets forth a description of any outstanding financial
obligations of the Company (including financial obligations of third parties
which are guaranteed by either Company) on any Vehicles, including the date of
obligation, deposit, financing source, interest rate, term, dates and amounts of
first and last payments, total amount financed, monthly payment, balloon payment
(if any), outstanding balance, and extent and nature of the Company's
obligations with respect to such vehicles. Except as shown in Schedule 2.14
with respect to Company's Vehicles as to which there are outstanding financial
obligations, the Company has good and marketable title free and clear of all
Encumbrances to the Company's Vehicles. With respect to Vehicles as to which
the Company has outstanding financial obligations, all leases, conditional sales
contracts and financing documents pertaining to such Vehicles are in full force
and effect, and there is not under any of such instruments any existing default
or event of default which with notice or lapse of time or both would constitute
such a default. The Vehicles listed on Schedule 2.14 constitute all motor
vehicles necessary to conduct the Company's business in the manner in which it
has been and is being conducted. All Vehicles are adequate and useable for the
purposes for which they are currently used and each such Vehicle is in good
operating condition, reasonable wear and tear excepted, and has been properly
maintained and repaired. During the past three (3) years, there has not been
any material interruption of the operations of the Business due to condition of
the vehicles used in the operation of the Company's business.
2.15 Compliance with Law. The Company has complied with and is not in
default under, all laws (including, without limitation, franchise disclosure
laws), ordinances, legal requirements, rules, regulations and orders applicable
to it, its assets and the Business. There is no existing law, rule, regulation
or order, and neither of the Stockholders are aware of any proposed law, rule,
regulation or order, whether federal or state, which would prohibit or
materially restrict the Company from, or otherwise materially adversely affect
the Company in, conducting its business, or which would materially restrict
Carey from owning the Shares.
2.16 Licenses and Permits. Schedule 2.16 identifies and provides a brief
description of all licenses, permits, pending applications, consents, approvals
and authorizations of or from any public, governmental or regulatory agency,
used in or otherwise necessary for the conduct of the Business, including,
without limitation, Certificates of Public Convenience and Necessity and other
operating certificates applied for and/or currently outstanding and issued by
any and all regulatory bodies (including, without limitation, the City of New
York and the State of New York) (collectively, the "Permits"), providing with
respect to each Permit the name of the agency issuing the Permit and, if the
holder is other than the Company, the holder's relationship to the Company.
Each person who operates a Vehicle, and every Vehicle, has all required Permits.
The holder of each Permit has complied with all conditions and requirements
imposed by the Permits and the Company has not received any notice of, and
neither Stockholder has any knowledge that,
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any appropriate authority intends to cancel or terminate any of the Permits or
that valid grounds for such cancellation or termination exist. To the knowledge
of the Stockholders no other permits other than the Permits are necessary to
operate the Company's business. The Company owns or has the right to use the
Permits in accordance with the terms thereof without any conflict or alleged
conflict or infringement with the rights of others and subject to no
Encumbrance, and each Permit is valid and in full force and effect, and will not
be terminated or adversely affected by the transactions contemplated hereby.
2.17 Labor and Employee Relations. The Company is not a party to or bound
by any collective bargaining agreement with any labor organization, group or
association covering any of its employees or independent operator franchisees,
and no Stockholder or the Company has any knowledge of any attempt to organize
any employees or independent operator franchisees of the Company by any person,
unit or group seeking to act as their bargaining agent. There are no pending or
threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by the Company or any current or former
independent operator franchisee. To the knowledge of the Stockholders and the
Company, no event has occurred or circumstance exists that could provide a
reasonable basis for any work stoppage or labor dispute.
2.18 Certain Employees. Set forth in Schedule 2.18 is a list of the
names, addresses and telephone numbers of the Company's employees (whether full
or part time) and consultants, together with the title or job classification of
each such person, the base annual and the total compensation paid to each such
person by the Company in 1996 and anticipated to be paid in 1997, and the amount
of accrued vacation and other benefits that each has accumulated as of the date
hereof. None of such persons has an employment agreement or understanding,
whether oral or written, with the Company which is not terminable on thirty (30)
days or less notice by the Company without cost or other liability to the
Company. No person listed on Schedule 2.18 has indicated that he or she intends
to terminate his or her employment with the Company or seek a material change in
his or her duties or status. Each employee or independent contractor of the
Company who is required to be licensed under any applicable federal state or
local law is so licensed.
2.19 Employee Benefits. (a) Schedule 2.19 sets forth a true and
complete list of each benefit plan, arrangement or agreement under which
benefits are provided to employees or other providers of services that is
maintained as of the date of this Agreement (the "Plans") by the Company or by
any trade or business, whether or not incorporated (an "ERISA Affiliate"), all
of which together with the Company would be deemed a "single employer" within
the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
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(b) The Company has heretofore delivered to Carey true and complete copies
(or, if not in written form, summaries) of each of the Plans and all related
documents, including but not limited to (i) the actuarial report for such Plan
(if applicable) for each of the last two years, (ii) the annual report for such
Plan (if applicable) for each of the last two years and (iii) the most recent
determination letter from the Internal Revenue Service (if applicable) for such
Plan (and any application for such determination letter, if one is pending), and
Schedule 2.19 sets forth a true and complete list of all of such documents.
(c) Except as set forth in Schedule 2.19, (i) each of the Plans has been
operated and administered in all material respects in compliance with applicable
laws, including but not limited to ERISA and the Code, (ii) each of the Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified and each Plan which is intended to meet the requirements for tax-
favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements in all material respects, (iii) with respect to each
Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company or any ERISA Affiliate beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable law, (x)
death benefits or retirement benefits under any "employee pension plan", as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of the Company or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v) no
liability under Title IV of ERISA has been incurred by the Company or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to the Company or any ERISA Affiliate of incurring a
material liability thereunder; (vi) no Plan is a "multiemployer pension plan,"
as such term is defined in Section 3(37) or 4001(a)(3) of ERISA, (vii) all
contributions or other amounts payable by the Company as of the Closing Date
with respect to each Plan in respect of current or prior plan years have been
paid or accrued in accordance with generally accepted accounting practices,
Section 302 of ERISA and Section 412 of the Code, and there is no accumulated
funding deficiency with respect to any Plan, (viii) neither the Company, nor any
ERISA Affiliate, has engaged in a transaction in connection with the Company or
any ERISA Affiliate, or any other person or entity, which could subject the
Company or any ERISA Affiliate to a material liability under Section 409 of
ERISA, a material civil penalty assessed pursuant to Section 502(i) or (l) of
ERISA or a material tax imposed pursuant to Section 4975 of the Code, (ix) no
event has occurred and no condition exists with respect to any Plan that could
subject the Company or any ERISA Affiliate to any material tax, fine or penalty
imposed by the Code or ERISA, (x) there are no pending, or to the Stockholders
knowledge, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto, (xi) neither the Company nor any ERISA Affiliate has any material
liability or contingent liability to the Pension Benefit Guaranty Corporation,
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the Internal Revenue Service, any multi-employer plan or the Department of Labor
with respect to any employee pension benefit plan currently or previously
maintained by the Company or any ERISA Affiliate, and (xii) all material
required reports and descriptions (including Form 5500 Annual Reports, Summary
Annual Reports and summary plan descriptions) with respect to the employee
pension benefit plans and employee welfare benefit plans maintained by the
Company or any ERISA Affiliate for its employees have been properly and timely
filed with the appropriate government agency and distributed to participants as
required, and the Company has complied in all material respects with the
requirements of COBRA.
(d) Except as set forth in Schedule 2.19 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, deferred
compensation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of the Company, or any
of their affiliates under any Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Plan or otherwise, or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
2.20 Proprietary Assets; Telephone Numbers.
(a) Schedule 2.20 identifies and provides a brief description of all
Proprietary Assets (as hereinafter defined) owned or licensed to, or otherwise
used by, the Company, including, without limitation, any plan or system utilized
by the Company and furnished to franchisees and affiliates of the Company
regarding: standards and methods of operating, marketing, advertising and public
relations, courtesy and appearance standards, charge card services, reservation
services, insurance programs and equipment standards for conducting a
chauffeured vehicle service business, including improvements in operating
procedures and mix of products and services which may be promoted and sold to
customers of either Company (collectively, the "Company Proprietary Assets").
Except as set forth on Schedule 2.20, the Company has provided services to no
customer or client other than MILN and its customers and clients since December
31, 1994. Schedule 2.20 lists each trademark and service mark owned by or
licensed to, or otherwise used by, the Company and states with respect to each
such trademark or service mark, whether it is registered with the U.S. Patent
and Trademark Office or any state governmental agency. Except as set forth in
Schedule 2.20, the Company has good, valid and marketable title to all of the
Company Proprietary Assets identified therein, free and clear of all
Encumbrances, and have a valid right to use all such Company Proprietary Assets.
Except as set forth in Schedule 2.20, the Company is not obligated to make any
payment to any person or entity for the use of any Company Proprietary Asset.
Except as set forth in Schedule 2.20, the Company has not developed jointly with
any other person or entity any Company Proprietary Asset with respect to which
such other person has any rights.
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(b) The Company has taken reasonably prudent steps to protect and maintain
the confidentiality and secrecy of all Company Proprietary Assets (except
Company Proprietary Assets whose value would be unimpaired by public disclosure)
and otherwise to maintain and protect the value of all Company Proprietary
Assets.
(c) None of the Company Proprietary Assets infringes or conflicts with any
Proprietary Asset owned or used by any other person or entity. The Company is
not infringing, misappropriating or making any unlawful use of, and the Company
has at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other person or
entity. To the knowledge of the Stockholders and the Company, no other person
or entity is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other person or entity infringes or
conflicts with, any Company Proprietary Asset.
(d) The Company Proprietary Assets constitute all the Proprietary Assets
necessary to enable the Company to conduct its business (including, without
limitation, providing services to MILN) in the manner in which such business has
been and is being conducted. Except as set forth in Schedule 2.20: (i) the
Company has not licensed any of the Company Proprietary Assets to any person or
entity and (ii) the Company has not entered into any contract, agreement,
covenant not to compete, or other arrangement limiting its ability to exploit
fully any of its Company Proprietary Assets or to transact business in any
market or geographical area or with any person or entity.
(e) Schedule 2.20 lists all telephone numbers relating to the Company's
business which have been advertised in the Yellow Pages and/or White Pages since
1990. All telephone numbers listed on Schedule 2.20 are in good working order
and no claim has been asserted against the Company adverse to its rights in any
such telephone numbers.
2.21 Tangible Properties. Schedule 2.21 contains a true and complete list
of all tangible personal property, including, without limitation, furniture,
fixtures, equipment, computer hardware and software (but excluding Vehicles)
owned by or leased to the Company (the "Tangible Personal Property"), other than
minor items valued at less than $100. Except with respect to Tangible Personal
Property listed as being leased on Schedule 2.21, the Company has good and
marketable title free and clear of all Encumbrances to the Tangible Personal
Property. With respect to any Tangible Personal Property leased by the Company,
all leases, conditional sale contracts, franchises or licenses pursuant to which
the Company may hold or use (or permit others to hold or use) such Tangible
Personal Property are valid and in full force and effect, and there is not under
any of such instruments any existing default or event of default or event which
with notice or lapse of time or both would constitute such a default; and the
Company's possession and use of such property has not been disturbed and no
claim has been asserted against the Company adverse to its rights in such
leasehold interests. The Tangible Personal Property constitutes all tangible
personal
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property necessary to conduct the Business in the manner in which it has been
and is being conducted. All Tangible Personal Property is adequate and usable
for the purposes for which it is currently used and each item of Tangible
Personal Property, whether owned or leased, is in good operating condition,
reasonable wear and tear excepted, and has been properly maintained and
repaired. During the past three (3) years, there has not been any material
interruption of the operations of the Company's business due to the condition of
any of the Tangible Personal Property.
2.22 Premises.
(a) Schedule 2.22 sets forth a true and complete list and description of
all real property leased by the Company or used in its business (the "Leased
Premises"). A true and correct copy of the lease, as amended to date, to each
of the Leased Premises has been delivered to Carey. Each lease covering a
Leased Premises is in full force and effect (there existing no default under any
such lease which, with the lapse of time or notice or otherwise, would entitle
the lessor to terminate the same), conveys the leased real estate purported to
be conveyed thereunder, is enforceable by the Company. The Company has the
right to use its respective Leased Premises in accordance with the terms of such
leases free and clear of all Encumbrances or other interests or rights of third
parties, except those which do not or would not have a material adverse effect
on the Leased Premises as used in the Company's business. Each of the Leased
Premises is structurally sound, adequately maintained, fully equipped with all
necessary utilities and is in good condition and repair, consistent with the
uses to which it is presently being put or intended to be put. All structures,
improvements and fixtures on the Leased Premises and the current uses of the
Leased Premises conform to any and all applicable federal, state and local laws,
building, health and safety and other ordinances, laws, rules and regulations.
There is no violation of any material covenant, restriction or other agreement
or understanding, oral or written, affecting or relating to title or use of any
Leased Premises. There are no pending or threatened condemnation or similar
proceedings or assessments affecting any of the Leased Premises, nor to the
knowledge of either Stockholder is any such condemnation or assessment
contemplated by any governmental authority.
(b) The Company owns no real property.
2.23 Environmental Matters.
(a) No governmental or private notice of violation, action, suit or other
proceeding to enforce or impose liability under any Environmental Laws, and to
the knowledge of the Company and the Stockholders, no investigation or inquiry
under any Environmental Laws, is pending or threatened against the Company, or
any person or entity for whose conduct the Company is or may be held
responsible, which would affect the Company's business.
(b) No Leased Premises are contaminated with any Hazardous Materials.
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(c) There are no on-site or off-site locations used (currently or in the
past) in the Company's business or by the Company in connection with its
Business for the treatment, storage or disposal of Hazardous Materials. Without
limiting the generality of the foregoing, there are no underground storage tanks
at any Leased Premises, nor are there any PCB-containing transformers at or on
any Leased Premises.
(d) There are no liabilities in connection with the Company's business
relating to the off-site treatment, storage or disposal of Hazardous Materials.
(e) There are no asbestos-containing materials located at any Leased
Premises.
2.24 Insurance. The Company has at all times since its inception through
the date hereof, and will continue to be through the Closing, insured with
reasonable amounts of coverage by responsible insurers in respect of its
properties, assets and business against risks normally insured against by
companies in similar lines of business under similar circumstances. Schedule
2.24 correctly describes (by type, carrier, policy number, limits, premium and
expiration date) the insurance coverage carried by the Company at any time
during the last three (3) years, and coverage carried by the Company on the date
hereof, each of which current coverage, will remain in full force and effect
through the Closing. Neither the Company nor the Stockholders (i) has failed to
give any notice or present any claim under any such policy or binder in due and
timely fashion, (ii) has received notice of cancellation or non-renewal of any
such policy or binder, (iii) is aware of any threatened or proposed cancellation
or non-renewal of any such policy or binder, (iv) has received notice or is
aware of any insurance premiums which will be materially increased in the future
or (v) has permitted any such policy to lapse for any period of time. There are
no outstanding claims under any such policy which have gone unpaid for more than
45 days, or as to which the insurer has disclaimed liability.
2.25 Outstanding Commitments. Schedule 2.25 sets forth a list of all
existing contracts, agreements, contracts, understandings, arrangements, leases,
commitments, licenses, and installment and conditional sales agreements, whether
written or oral, relating to the Company or its Business (collectively, "Company
Contracts") and, with respect to oral Company Contracts a description thereof.
The Company has delivered or made available to Carey true, correct and complete
copies of all written Company Contracts and Schedule 2.25 contains an accurate
and complete description of all Company Contracts which are not in writing. On
or before the Closing Date, the Company shall have paid in full all amounts due
(without regard to any grace period) as of the date hereof and as of the
Closing Date under each of the Company Contracts. The execution, delivery and
performance by the Company of each of the Company Contracts has been authorized
by all necessary corporate action. All of the Company Contracts are in full
force and effect. The Company and each other party to each of the Company
Contracts have performed all the obligations required to be performed by them to
date, have received no notice of default and are not in default (with due notice
or lapse of time or both) under any of the Company Contracts. The Company has
no present expectation or intention of not fully performing all its obligations
under each of the Company
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Contracts, and neither the Stockholders nor the Company has any knowledge of any
breach or anticipated breach by any other party to any of the Company Contracts.
None of the Company Contracts have been terminated, no notice has been given by
any party thereto of any alleged default thereunder by any party thereto, and
neither the Stockholders nor the Company is aware of any intention or right of
any party to any Company Contract to default another party to any Company
Contract. There exists no actual or, to the knowledge the Stockholders or the
Company, threatened termination, cancellation or limitation of the business
relationship of the Company with any party to any Company Contract.
2.26 Governmental Approvals. No registration or filing with, or consent
or approval of or other action by, any federal, state or other governmental
agency or instrumentality is or will be necessary for the valid execution,
delivery and performance by the Company nor any of this Agreement and the
transactions contemplated hereby.
2.27 Certain Payments. Neither the Company nor any director, officer,
agent, or employee of the Company, or any other person associated with or acting
for or on behalf of the Company, has directly or indirectly, (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any person, entity or agency, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company or (iv) in violation of any federal, state or
local law, or (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
2.28 Transactions With Related Parties. Except as set forth in Schedule
2.28 hereto, no stockholder, director, officer or employee of the Company, or
member of the family of any such person, or any corporation, partnership, trust
or other entity in which any such person, or any member of the family of any
such person, has an interest or is an officer, director, trustee, partner or
holder of any equity interest, is a party to any transaction with the Company
which will represent an obligation of the Company after the Closing, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from, or
otherwise requiring payments or involving other obligations to or from, any such
person or firm.
2.30 Brokers or Finders. The Stockholders, the Company and their
respective agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
2.31 Disclosure. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which made, not misleading.
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2.32 Closing Date Representations and Warranties. The representations and
warranties set forth in this Article 2 shall be true and correct on the Closing
Date, as if made on the Closing Date, except (i) as expressly provided in
supplements to the Disclosure Schedule delivered in draft form to Carey two (2)
business days before the Closing Date and in final form substantially similar to
the draft form with respect to representations and warranties which were true
and correct as of the date of this Agreement but which as a result of events
which individually or in the aggregate do not violate Section 4.5(a)-(g) cease
to be true and correct and (ii) as expressly contemplated by this Agreement with
respect to the transfer of Excluded Assets and Excluded Liabilities and
otherwise. In no event shall any such supplements supplement or amend any
representations or warranties in this Article 2 which are to be true and correct
on the date of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF CAREY
Carey represents and warrants to the Stockholders as follows:
3.1 Organization. Carey is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
3.2 Power and Authority. Carey has the corporate power and authority to
execute, deliver and perform this Agreement and the other documents and
instruments contemplated hereby. The execution, delivery and performance by
Carey of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporation action. This Agreement, and each of the
other agreements, documents and instruments to be executed and delivered by
Carey have been duly executed and delivered by, and constitute the valid and
binding obligation of Carey enforceable against Carey in accordance with their
terms.
3.3 Validity, etc. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement and the other documents and instruments
contemplated hereby, nor the consummation of the transactions contemplated
hereby or thereby, nor the compliance by Carey with any of the terms or
provisions hereof, will (i) violate any provision of the charter or by-laws of
Carey, (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Carey or any of its respective
properties or assets, or (iii) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the respective properties or assets of Carey under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Carey is a party, or by which it or its properties or assets may be bound
or affected.
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3.4 Financial Statements. Carey has previously furnished to the
Stockholders financial statements of Carey and its subsidiaries as of and for
the years ending November 30, 1995 and 1996, audited by Coopers & Lybrand,
L.L.P., consisting of balance sheets, statements of operations, statements of
changes in stockholder's equity and statements of cash flows (the "Carey
Financial Statements"). All Carey Financial Statements were prepared from the
books and records of Carey and its subsidiaries, which books and records are
complete and correct. The Carey Financial Statements accurately present Carey's
consolidated financial position as of the dates thereof and the results of
Carey's consolidated operations for the periods presented therein, as the case
may be, all in conformity with GAAP, consistently applied.
3.5 Brokers or Finders. Carey and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. COVENANTS
4.1 Confidential Information. Carey and the Stockholders will, and Carey
will cause its agents and employees to, and the Stockholders will cause the
Company and its agents and employees to, hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of their counsel, by other requirements of law, all Confidential Information (as
hereinafter defined) and will not disclose the same to any third party. If this
Agreement is terminated, (i) Carey will promptly return to the Stockholders or
destroy all documents (including all copies thereof) containing or based upon
Confidential Information pertaining to the Company, and (ii) the Stockholders
will promptly return to Carey or destroy all documents (including all copies
thereof) containing or based upon Confidential Information pertaining to Carey.
For purposes hereof, "Confidential Information" shall mean all information of
any kind concerning the Company or Carey, except information (i) ascertainable
or obtained from public or published information, (ii) received from a third
party not known to the receiving party to be under an obligation to keep such
information confidential, (iii) that is or becomes known to the public (other
than through a breach of this Agreement), (iv) that was in the receiving party's
possession before disclosure thereof to it in connection with this Agreement,
(v) that was independently developed by the receiving party or (vi) information
about the Company that Carey reasonably determines (after consultation with
counsel for the Stockholders) is required to be included in the IPO Registration
Statement or otherwise disclosed to the public in connection with the IPO.
4.2 Best Efforts. Subject to the terms and conditions hereof, each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations under this Agreement. Each party to this
Agreement agrees that it will use its best efforts consistent with reasonable
business practice to cause all conditions to its obligations and to the other
parties under this Agreement to be satisfied as promptly as possible, and will
not
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undertake a course of action inconsistent with this Agreement or which would
make any of its representations, warranties, agreements or covenants in this
Agreement untrue in any material respect or any conditions precedent to its
obligations under this Agreement unable to be satisfied at or prior to the
Closing.
4.3 Public Announcements. Carey and the Stockholders shall not make any
public announcements, notices or other communications ("Public Announcements")
regarding this Agreement and the transactions contemplated hereby to parties
other than the parties hereto and their respective advisors without the prior
written approval (which shall not be unreasonably withheld or delayed) of (i)
Carey, in the case of proposed Public Announcements by the Stockholders, and
(ii) the Stockholders, in the case of proposed Public Announcements by Carey.
Notwithstanding the foregoing, no such approval shall be required with respect
to filing the IPO Registration Statement or any amendment or supplement thereto
or to any statements made by Carey or its employees, agents and underwriters in
connection with marketing the IPO after filing the IPO Registration Statement.
4.4 Notification of Certain Matters. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of the Notifying Party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 4.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
4.5 Conduct of Business. Prior to the Closing Date, unless Carey shall
have consented in writing thereto, the Stockholders jointly and severally
covenant and agree that they will, except as contemplated by Section 8.4, and
will cause the Company and its officers and employees to:
(a) conduct the operations of the Company according to the Company's
usual, regular and ordinary course in substantially the same manner as
heretofore conducted;
(b) use reasonable efforts to preserve intact the business organization
and goodwill of the Company, keep available the services of the Company's
officers, employees, independent contractors and other service providers, and
maintain satisfactory relationships with those persons having business
relationships with it;
(c) not amend the charter or by-laws of the Company;
(d) promptly notify Carey of (i) any material emergency or other material
change in the Company's condition (financial or otherwise), business,
properties, assets, liabilities, prospects or in the operation of the Company's
properties and; (ii) of any litigation or
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governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(e) not (i) issue any shares of the capital stock, effect any stock split
or otherwise change the capitalization of the Company; (ii) grant, confer or
award any option, warrant, conversion right or other right to acquire any shares
of the capital stock of the Company; (iii) increase any compensation or enter
into or amend any employment agreement with any of the officers, directors or
employees of the Company; (iv) adopt any new Plans (including any severance
provisions, stock option, stock benefit or stock purchase plan) or amend any
existing Plan in any respect; (v) cancel, terminate, amend or modify (or
otherwise impair the rights of the Company under) any Company Contract; (vi)
sell, lease or otherwise dispose of any of the assets of the Company, other than
a conveyance of Excluded Assets in connection with which the Stockholders shall
have complied with Section 8.2(b); or (vii) make or revoke any tax election,
including without limitation the Company's election to be taxed as an "S
corporation" as defined in Section 1361(a) of the Code, under federal law or
under any comparable provision of, state, local or foreign law;
(f) not (i) make any capital expenditure in excess of $2,500; (ii) incur
any long-term indebtedness in addition to that outstanding on the date hereof;
(iii) incur any other indebtedness or liability other than in the ordinary
course of business; (iv) make any loans, advances or capital contributions to,
or investments in, any other person, other than reasonable travel or other
advances to employees in the ordinary course of business consistent with past
practices; (v) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the obligations
of any other person or entity, except to endorse checks for collection or
deposit in the ordinary course of business; or (vi) fail to make any scheduled
or other payment by its due date;
(g) not declare or pay any dividend or distribution on any shares of the
capital stock of either Company; and
(h) take no action that would make any representation or warranty contained
in Section 2.32 untrue or incorrect.
4.6 Continued Effectiveness of Representations and Warranties. From the
date hereof up to and including the Closing Date, the Stockholders will, and
will cause the Company and its officers and employees to, conduct the business
and the affairs of the Company in a manner such that the representations and
warranties contained in Section 2.32 of this Agreement shall be true and correct
on and as of the Closing Date as if made on and as of the Closing Date, except
for actions arising in the ordinary and usual course of business after the date
hereof which would not result in a material adverse change in the properties,
assets, operations or condition (financial or otherwise) or prospects of the
Company or its business.
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4.7 Non-Competition; Non-Solicitation. The Stockholders hereby covenant
and agree that for a period which is the longer of (i) the period commencing on
the date hereof and ending five years hence and (ii) the period commencing on
the date hereof and ending two years after the termination of the Consulting
Agreement, the Stockholders will not, directly or indirectly, (a) engage or
become interested, as owner, employee, partner, through stock ownership (except
ownership of less than one (1) percent of any class of securities which are
listed for trading on any national securities exchange), investment of capital,
lending of money or property, rendering of services, or otherwise, either alone
or in association with others, in the operation, management, financing or
supervision of any type of business or enterprise within the Territory (as
defined below) which is competitive with either the Business or Carey, or (b)
solicit any of the employees or officers of the Company, MILN or Carey for
purposes of obtaining their services for any other business, whether or not such
other business is competitive with the Business or Carey. The "Territory" shall
mean the total territory composed of the area within a circle which has a 75
mile radius around each office in the world maintained by Carey.
4.8 Further Assurances. The Stockholders will use their best efforts to
have all present officers and directors of each Company execute whatever minutes
of meetings or other instruments and take whatever action as may be necessary or
desirable to (i) effect, perfect or confirm of record of otherwise Carey's full
right, title and interest in and to the Shares and the Company's full right,
title and interest to its business, properties and assets now conducted, free
and clear of all Encumbrances and (ii) allow the Company to collect, realize
upon, gain possession of, or otherwise acquire full right, title and interest in
and to such business, properties and assets, or to carry out the intent and
purposes of the transactions contemplated hereby.
4.9 Exclusive Negotiating Rights. The Stockholders agree that until
August 20, 1997, they (i) will not directly or indirectly negotiate or offer to
negotiate or discuss with, solicit or initiate, or entertain or encourage
submission of inquiries, proposals or offers from any third party with respect
to the disposition of the Company, MILN, the Business, the Shares, or the MILN
Shares, or any portion thereof, whether by the sale of assets of the Company,
MILN, or the Business, or the sale of Shares, or some other means that results
in a change of control of the Company or the Business, or of the benefits of all
or substantially all the assets of the Company, MILN, or the Business (an
"Acquisition Proposal") and (ii) will promptly notify Carey of the terms of any
inquiry or proposal that the Stockholders or the Company may receive with
respect to any Acquisition Proposal and of their response thereto.
4.10 Access and Information. The Stockholders will afford, and will cause
the Company to afford, Carey's representatives with reasonable access to the
Company's management, properties, books and records and furnish to Carey and its
representatives all additional financial and operating data and other
information as to the Company's businesses and properties as Carey may from time
to time reasonably request.
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4.11 Additional Covenants of the Stockholders. Between the date of this
Agreement and the Closing Date, the Stockholders hereby covenant and agree they
will:
(a) execute and deliver at the Closing all documents, certificates,
instruments and items referenced in Sections 1.4(a) and (c); and
(b) execute and deliver such other instruments and take such other actions
as may be reasonably required in order to carry out the intent of this
Agreement.
5. CONDITIONS TO CLOSING
5.1 Conditions to Obligations of Carey. The obligations of Carey to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing, or waiver by Carey in writing, in whole
or in part, of each of the following conditions:
(a) All of the representations and warranties of the Stockholders in
Sections 2.1 through 2.31 of this Agreement (considered collectively) and each
of those representations and warranties (considered individually), must have
been accurate in all material respects as of the date of this Agreement; and all
of the representations and warranties of the Stockholders in Section 2.32 of
this Agreement (considered collectively) and each of those representations and
warranties (considered individually) must be accurate in all material respects
as of the Closing Date, as if made on the Closing Date.
(b) All of the covenants and obligations that the Stockholders are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(c) Carey shall have received the opinion of counsel to the Stockholders,
dated the date of the Closing and in form and substance satisfactory to Carey
and its counsel, substantially to the effect set forth on Exhibit 5.1(c), and
the underwriters in the IPO shall be entitled to rely on such opinion and shall
have received a copy thereof.
(d) All third-party consents, approvals and permits required to be
obtained in connection with the transactions contemplated by this Agreement
shall have been obtained and shall be in full force and effect.
(e) The Stockholders shall have executed and delivered to Carey all
documents, certificates, instruments and items referenced in Sections 1.4(a) and
(c).
(f) The Stockholders shall have delivered to Carey a certificate of
Secretary of the Company certifying as to the incumbency of officers and
directors, and the status of record ownership of the Shares.
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(g) The Stockholders shall have delivered to Carey such other
certificates, documents and opinions as Carey and its counsel shall reasonably
require.
(h) There must not have been made or threatened by any person or entity
any claim asserting that such person or entity (i) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of, any other voting, equity, or ownership interest in,
the Company, or (ii) is entitled to all or any portion of the consideration set
forth in Section 1.2.
(i) The conditions to Carey's obligations to consummate the transactions
contemplated by the Merger Agreement set forth in Section 5.1 thereof shall have
been satisfied and the transactions contemplated by the Merger Agreement shall
have been consummated.
5.2 Conditions to Obligations of the Stockholders. The obligations of the
Stockholders to consummate the transactions contemplated by this Agreement
subject to the satisfaction at or prior to the Closing, or waiver by such
parties in writing, in whole or in part, of each of the following conditions:
(a) All of the representations and warranties in Section 3 of this
Agreement (considered collectively), and each of those representations and
warranties (considered individually), (i) must have been accurate in all
material respects as of the date of this Agreement and (ii) must be accurate in
all material respects as of the Closing Date, as if made on the Closing Date.
(b) All of the covenants and obligations that Carey is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and compiled with in
all material respects.
(c) The Stockholders shall have received the opinion, dated the date of
the Closing and in form and substance satisfactory to the Stockholders and their
counsel, of Nutter, McClennen & Fish, LLP, counsel to Carey, substantially to
the effect set forth on Exhibit 5.2(c).
(d) Carey shall have executed and delivered to the Stockholders all
documents, certificates, instruments, and items referenced in Sections 1.4(b)
and (c).
(e) Carey shall have delivered to the Stockholders a certificate of its
Secretary, certifying as to requisite corporate or other action authorizing the
transactions contemplated by this Agreement, and to the incumbency of all
officers signing this Agreement and any instruments to be delivered hereunder.
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(f) The transactions contemplated by the Merger Agreement shall have been
consummated.
6. INDEMNIFICATION
6.1 Agreements to Indemnify.
(a) As used in this Article 6:
(i) "Damages" means claims, damages, liabilities, losses,
judgments, settlements, and expenses, including, without limitation,
all reasonable fees and disbursements of counsel incident to the
investigation or defense of any claim or proceeding or threatened
claim or proceeding.
(ii) "Indemnifying Parties" means the parties obligated to
provide indemnification under this Section 6.1.
(iii) Indemnified Party" shall mean the party entitled to
indemnification under this Section 6.1.
(b) On the terms and subject to the limitations set forth in this
Agreement, MH, AJH and LCH (collectively, "Sellers") shall jointly and severally
indemnify, defend and hold Carey harmless from, against and in respect of any
and all Damages incurred by Carey arising from or in connection with (i) any
actual or alleged breach of any representation, warranty, covenant or agreement
made by either Stockholder in this Agreement, (ii) any severance payments to any
employee of the Company whose employment with the Company is terminated for any
reason during the eighteen-month period commencing on the Closing Date, (iii)
action, suit, claim, proceeding or investigation which is pending or commenced
against the Company before the Closing, (iv) any transactions between the
Company and Air Link Express, Ltd., (v) any failure by the Stockholders timely
to pay any Tax contemplated by Sections 8.2(b) or 8.2(c) of this Agreement and
(vi) anything else for which Carey is entitled to indemnification under Section
6.1(b) of the Merger Agreement.
(c) On the terms and subject to the limitations set forth in this
Agreement, Carey shall indemnify, defend and hold the Stockholders harmless
from, against and in respect of any and all Damages incurred by the Stockholders
arising from, or in connection with any actual or alleged breach of any
representation, warranty, covenant or agreement made by Carey in this Agreement.
(d) The representations, warranties, covenants and agreements set forth
in Articles 2, 3, 4 and 8 shall, for purposes of this Article 6, be deemed to
have survived the Closing Date notwithstanding any contrary terms of this
Agreement, for the period during which claims for indemnification may be made
pursuant to Section 6.2(a) and thereafter shall be
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extinguished and of no further force and effect, and whenever such
representations, warranties, covenants and agreements are referred to in this
Article 6, the text of the same as set forth in Articles 2, 3, 4 and 8 shall be
deemed to be set forth in their entirety herein, and the same are hereby
incorporated herein by such references. Each such representation, warranty,
covenant and agreement shall be deemed to have been relied upon by the party or
parties to which made, notwithstanding any investigation or inspection made by
or on behalf of such party or parties, and notwithstanding any knowledge
acquired (or capable of being acquired) by such party or parties, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with any such
representation, warranty, covenant or agreement, and shall not be affected in
any respect by any such investigation, inspection or knowledge.
(e) The Stockholders hereby agree to each and every provision of Article
6 of the Merger Agreement, and agree to be bound as a Seller and an Indemnifying
Party and to fulfill all of the obligations of a Seller and an Indemnifying
Party under Article 6 of the Merger Agreement, to the same extent as if they
were a party thereto.
6.2 Limitations of Indemnity Obligations. The indemnity obligations of
the Indemnifying Parties under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Indemnifying Parties shall expire on
the second anniversary of the Closing Date with respect to any matter for which
a claim for indemnification has not been made by such date; provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 2.5 and 2.19 (in each case as updated by Section 2.32),
8.1 and 8.2 shall expire at the end of the applicable statute of limitations
period, (ii) the representations and warranties contained in Section 2.23 (as
updated by Section 2.32) shall expire on the fifth (5th) anniversary of Closing
Date (provided that between the second and the fifth anniversaries of the
Closing Date the Indemnifying Parties obligations for breach of Section 2.23 (as
updated by Section 2.33) shall not exceed one hundred thousand dollars
($100,000)), (iii) the representations, warranties and covenants regarding
Taxes, which are contained in Sections 2.12 (as updated by Section 2.32), shall
remain in effect until all claims for Taxes due by or on account of the Company
for any period up to and including the Closing Date have been settled and any
statute of limitations period with respect to such Taxes has expired, and any
claim for indemnification must be made prior to the expiration of the statute of
limitations applicable to the Return to which the Taxes relate and (iv) the
covenant contained in Section 4.7 shall remain in effect through the period
indicated therein; and provided further that the indemnity obligations of the
Indemnifying Parties for claims timely asserted by an Indemnified Party in the
manner provided in this Agreement shall continue until such claims are finally
resolved and discharged.
(b) The aggregate indemnity obligations of the Indemnifying Parties for
any Damages under this Agreement and the Merger Agreement shall not in any event
exceed seven million U.S. dollars ($7,000,000).
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(c) An Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it under this Agreement
and the Merger Agreement exceeds one hundred fifty thousand dollars ($150,000),
in which event such Indemnified Party shall be entitled to indemnification of
the full amount of such Damages. Notwithstanding the immediately preceding
sentence, however, Carey shall be entitled to indemnification for Damages
incurred or suffered by it without regard to such threshold (i) pursuant to
Section 6.1(b)(i) as a result of the breach of Sections 2.5, 2.12 or 2.19 (in
each case as updated by Section 2.32), 4.7, 8.1, 8.2 or 8.4, (ii) pursuant to
Section 6.1(b)(i) as a result of a breach of the representations and warranties
contained in Section 2.23 (as updated by Section 2.32) claimed between the
second and fifth anniversaries of the Closing Date and (iii) pursuant to Section
6.1(b)(ii) through 6.1(b)(vi).
(d) The amount which Sellers are or may be required to pay to Carey
pursuant to this Section 6 shall be reduced (retroactively, if necessary) by any
insurance proceeds or refunds (excluding any tax benefits) actually recovered by
or on behalf of Carey in reduction of the related Damages. If Carey shall have
received the payment required by this Agreement from Sellers in respect of
Damages and shall subsequently receive insurance proceeds or refunds (excluding
any tax benefits) in respect of such Damages, then Carey shall promptly repay to
Sellers a sum equal to the amount of such insurance proceeds or refunds actually
received, net of costs and expenses (including taxes incurred), but not
exceeding the amount paid by Sellers in respect of such Damages.
(e) In addition, the amount of Damages Sellers are required to pay pursuant
to this Section 6 shall be reduced by any tax benefit to Carey. Carey's
accountants shall reasonably determine the tax benefit to be achieved (assuming
federal, state and local tax rates reasonably projected by Carey's accountants
to be in effect in the year in which such tax benefit will be achieved) and the
year in which such tax benefit will be achieved and provide such determination
to Sellers in writing. In connection with any such determinations hereunder,
Carey shall determine in its sole judgment whether to expense or capitalize or
how to otherwise treat any item. If it is projected that a tax benefit will be
achieved in a current year, the amount of such tax benefit will reduce the
Damages to be paid. If such tax benefit is projected to be achieved in a future
year, such tax benefit shall be discounted at 8% per year and such discounted
amount will reduce the Damages to be paid. The accountants' fees for making any
determinations hereunder shall be separately determined and included within the
Damages to be paid (net of tax benefits) by Sellers. Absent manifest error, any
determination by Carey's accountants under this provision shall be final.
6.3 Notice of Claim. The Indemnified Party shall promptly notify the
Indemnifying Parties in writing of any Claim asserted by a third person that
might give rise to any indemnity obligation hereunder (a "Third Party Claim"),
specifying in reasonable detail the nature thereof and indicating the amount
(estimated if necessary) of the Damages that have been or may be sustained by
Carey. Together with or following such notice, the Indemnified Party shall
deliver to the Indemnifying Parties copies of all notices and documents received
by Carey relating to the Third Party Claim (including court papers).
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6.4 Defense and Settlement of Third-Party Claims. The Indemnifying
Parties shall have the right (without prejudice to the right of the Indemnified
Parties to participate at their own expense through counsel of their own
choosing) to defend against any Third Party Claim at their expense and through
counsel of their own choosing and to control such defense if they give written
notice of their intention to do so within 15 business days of their receipt of
notice of such Third Party Claim, and in such event the Indemnified Parties
shall cooperate fully in the defense of such Third Party Claim and shall make
available to the Indemnifying Parties or their counsel all pertinent information
under its control relating thereto. The Indemnified Parties shall have the
right to elect to settle any Third Party Claim; provided, however, the
Indemnifying Parties shall not have any indemnification obligation with respect
to any monetary payment to any third party required by such settlement unless
they shall have consented thereto. The Indemnifying Parties shall have the
right to elect to settle any Third Party Claim subject to the consent of the
Indemnified Parties; provided, however, that if the Indemnified Parties fail to
give such consent within 15 business days of being requested to do so, the
Indemnified Parties shall, at their expense, assume the defense of such Third
Party Claim and regardless of the outcome of such matter, the Indemnifying
Parties' liability hereunder shall be limited to the amount of any such proposed
settlement. The foregoing provisions notwithstanding, in no event may the
Sellers (a) adjust, compromise or settle any Third Party Claim (i) unless such
adjustment, compromise or settlement unconditionally releases the Company, MILN
and Carey from all liability or (ii) if such adjustment, compromise or
settlement affects the absolute and sole right of the Company or MILN to own or
use any of any of their assets (including, without limitation, contract rights)
or (b) defend any Third Party Claim which, if adversely determined, would
materially impair the financial condition, results of operations, business or
prospects of either of the Company, MILN or Carey. To the extent that the
Indemnified Parties assume the defense of a Third Party Claim pursuant to this
Section 6.4, the Indemnifying Parties shall have the right to participate at
their own expense in the defense or settlement of such claim.
6.5 Control of Tax Proceedings.
(a) If a claim shall be made by any taxing authority which, if
successful, would result in an indemnity payment by the Sellers pursuant to this
Section 6 (a "Tax Claim"), or if an audit or administrative proceeding is
commenced by any taxing authority with respect to Taxes that could give rise to
a Tax Claim (a "Tax Audit"), the Sellers shall have the right, at their option,
upon timely notice to Carey, to assume and control the conduct of any such Tax
Audit and the defense of any suit, action or proceeding with respect to any such
Tax Claim at their own expense and with their own counsel (without prejudice to
the right of Carey to participate at its own expense through counsel of its own
choosing), so long as the Sellers have and acknowledge full indemnification
responsibility under this Section 6 for all of the Taxes which are asserted by
the tax authority to be the subject of the Tax Audit or Tax Claim. If Sellers
have indemnification responsibility for less than all of the Taxes which are the
subject of the Tax Audit or Tax Claim, Sellers and Carey shall jointly control
the conduct of such Tax Audit or Tax Claim, each acting in good faith. Carey and
the Sellers shall cooperate in the defense of any Tax Audit or Tax Claim as
provided herein, and each shall keep the other informed of all material
developments and
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events relating to such Tax Audit or Tax Claim, and shall consider in good faith
all requests made by the other in connection with the contest.
(b) In any case in which the Sellers are entitled to and elect to
control the contest, as provided in Section 6.5(a) above, Sellers, at their sole
option may pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority with respect to any Tax
Claim; may, at their sole option, either pay the Taxes claimed and sue for a
refund where applicable law permits such refund suits, or may contest the Tax
Claim in any permissible manner, and prosecute such contest to a determination
in court of initial jurisdiction, and to determination in an appellate court,
and may settle the Tax Claim at any stage in the judicial process; provided,
however, that Sellers may not do so without the consent of Carey, which consent
may not be unreasonably withheld, unless such settlement would materially impair
the financial condition, results of operations, business or prospects of either
of the Companies or Carey, in which case Carey may withhold such consent in its
sole discretion (either initially or at some later time) at any stage of the
administrative and judicial process.
7. TERMINATION; AMENDMENTS; WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual consent of Carey and the Stockholders;
(b) by Carey or the Stockholders if the Closing shall not have occurred on
or before August 20, 1997, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(c) by Carey if there has been a material misrepresentation or material
breach of the representations, warranties, covenants or obligations of the
Stockholders set forth herein, provided that in the case of a breach of any such
covenant or obligation, such breach has not been cured within ten (10) business
days after Carey has notified the Stockholders of such breach; or
(d) by the Stockholders if there has been a material misrepresentation or
material breach of the representations, warranties, covenants and obligations of
Carey set forth herein, provided that in the case of a breach of any such
covenant or obligation, such breach has not been cured within ten (10) business
days after the Stockholders have notified Carey of such breach.
The power of termination provided for by this Section 7.1 will be effective
only after written notice thereof shall have been given to the other parties.
If this Agreement is
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terminated in accordance with this Section 7.1, this Agreement shall be
abandoned without further action by the parties.
7.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 7.1, this Agreement shall forthwith become void and have no
effect, and no party shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
(a) Sections 4.1 and 9.8 shall survive any termination of this Agreement, and
(b) notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved of or released from any liabilities or damages arising
out of its breach of any provision of this Agreement.
7.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing Date, the parties
hereto may, subject to Section 7.3, (a) extend the time for the performance of
any of the obligations or other acts of the parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed by or on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
7.5 Return of Certain Payments. In the event that the Agreement is
terminated pursuant to Sections 7.1(a), or by Carey pursuant to Sections 7.1(b)
and 7.1(c) the Stockholders will promptly return the Deposit to Carey.
8. ADDITIONAL COVENANTS
8.1 Certain Tax Matters.
(a) The Company shall prepare and file any required Return for any
taxable period ending on or before the Closing Date and that is due on or before
the Closing Date. Carey shall cause the Company to prepare and file all
required Returns due after the Closing Date.
(b) Carey and the Stockholders each at no cost to the other shall (i)
furnish or cause to be furnished to the other, upon request, as promptly as
practicable, such information (including access to books and records) and
assistance (including making available personnel familiar with such matters)
relating to the Company as is reasonably necessary for the preparation and
filing of any return, report, statement or for the preparation for any audit and
for the prosecution or defense of any claim, suit or proceeding relating to
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any proposed adjustments of Taxes and (ii) use their best reasonable efforts,
upon request, to obtain any certificate or other document from any taxing
authority, customer of the companies or any other person as may be necessary to
mitigate, reduce or eliminate any Taxes that would otherwise be imposed with
respect to the Company. Unless required by any taxing authority, Carey shall
not file any amended tax return with respect to any Returns of the Company for
any taxable period ending on or before the Closing Date without the consent of
the Stockholders, which consent may not be unreasonably withheld.
8.2 Section 338(h)(10) Election.
Notwithstanding any other provisions of this Agreement to the
contrary:
(a) The Stockholders each agree that, if requested by Carey in writing,
they shall each join with Carey in timely making a joint election under Sections
338(g) and 338(h)(10) of the Code (a "Code Section 338(h)(10) Election") and any
similar election as may be available under applicable state or local law (and in
taking all steps necessary to effectuate the same) with respect to the sale of
the Shares to Carey hereunder.
(b) The Stockholders will report the sale of the Shares on their federal,
state and local income tax Returns in a manner consistent with the Code Section
338(h)(10) Election (and any similar election made under applicable state or
local law).
(c) The Stockholders will be solely responsible for and will timely pay
any federal income Taxes imposed upon the Stockholders or the Company, including
any federal income Taxes due with respect to the taxable period ending on the
Closing Date and any federal income Taxes resulting from the application of
Treasury Regulation (S)1.338(h)(10)-1(e) and Section 1374 of the Code
attributable to the making of the Code Section 338(h)(10) Election.
(d) The Stockholders, on their own behalf, shall jointly and severally
indemnify, defend and hold Carey and the Company harmless from, against and in
respect of any and all federal income Taxes imposed on the Company attributable
to the making of the Code Section 338(h)(10) Election.
(e) Except to the extent otherwise provided in this Section 8.2, nothing
in this Agreement shall be construed to impose upon the Stockholders any
liability for any federal, state or local Taxes, if any, imposed on the Company
by reason of the deemed sale by the Company of all of its assets resulting from
any Code Section 338(h)(10) Election, all of which such Taxes shall be borne and
paid solely by the Company.
(f) The transactions contemplated by this Agreement will cause the Company
to have two short taxable years for the year that includes the Closing Date, an
"S short year" beginning January 1 of such year and ending on the Closing Date
and a "C short year" beginning on the day after the Closing Date and ending on
the next succeeding close of Carey's consolidated return taxable year. The
Stockholders and Carey shall jointly
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determine, in good faith and consistent with the provisions of Temp. Reg.
(S)1.338(b)-2T, the allocation of the total consideration for the Shares among
the assets of the Company and shall prepare all Returns in a manner consistent
with such allocation. The Stockholders shall determine in good faith the
Company's income or loss for the S short year and the amount, if any, of income
or gain arising under Section 1374 of the Code as a result of the Code Section
338(h)(10) Election.
8.3 Further Covenants. The Stockholders shall retain, pay, discharge and
fully perform all indebtedness, obligations, responsibilities and liabilities of
the Company arising out the factoring arrangement between MILN and FINOVA,
including without limitation, any penalties, interest and other liabilities
arising out of the termination of such arrangement.
8.4 Transfer of Excluded Assets.
(a) The Company shall transfer all Excluded Assets and all Excluded
Liabilities to the Stockholders or their designee (the "Transferee"), or the
Stockholders shall transfer cash to the Company, as of 12:01 a.m. on the Closing
Date such that the Company has a Zero Balance Sheet at the Closing, provided,
however, that the assets of the Company shall not include any notes or accounts
receivable. In connection with any transfer from the Company to the Transferee
of any Excluded Liabilities, the Transferee shall obtain the release and/or
agreement of all third parties to the extent necessary to provide that the
Company will have no further obligation of any kind with respect to such
liabilities.
(b) "Zero Balance Sheet" means that all the Company's assets less all
of the Company's liabilities shall equal zero.
(c) "Excluded Assets" means cash and cash equivalents (defined in
accordance with GAAP), all notes and accounts receivable, all security held
therefor and other assets of the Company approved by Carey.
(d) "Excluded Liabilities" means all liabilities of the Company.
(e) The Companies shall not transfer any Excluded Assets or Excluded
Liabilities to any person or entity without obtaining the prior written approval
of Carey and its counsel (which shall not be unreasonably withheld) of the form
and substance of all documents and instruments to be used to effect such
conveyance.
(f) The deferred receivable in the amount of approximately $614,000
from Air Link Express Ltd. will be fully satisfied and extinguished by the
payment of $270,000 or its equivalent prior to the Closing.
(g) The Company shall have no employees and no severance or other
obligations with respect to former employees at the Closing.
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9. MISCELLANEOUS
9.1 Certain Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
"Acquisition Proposal" has the meaning provided in Section 4.9.
"Balance Sheet Date" has the meaning provided in Section 2.10.
"Balance Sheet" has the meaning provided in Section 2.7.
"Business" means the chauffeured vehicle service business and network
affiliates operated by MILN and the business operated by ILN.
"Carey Common Stock" means shares of Common Stock, par value $.01 per
share, of Carey.
"Carey Financial Statements" has the meaning provided in Section 3.4.
"Closing" has the meaning provided in Section 1.3.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended to date.
"Commission" means the Securities and Exchange Commission.
"Company" means International Limousine Network Ltd.
"Company Contracts" has the meaning provided in Section 2.25(a).
"Company Proprietary Asset" has the meaning provided in Section 2.20(a).
"Confidential Information" has the meaning provided in Section 4.1.
"Consulting Agreement" has the meaning provided in Section 1.4(c)(i).
"Damages" as used in Article 6 of this Agreement, has the meaning provided
in Section 6.1(a).
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule 1.
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of
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any kind, including, without limitation, any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environmental Laws" means, individually and collectively, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act of 1976,
the Hazardous Materials Transportation Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Emergency Planning and
Community Right-to-Know Act or any other federal, state or local law regulation,
ordinance, rule or by-law regulating the use, presence, storage, transportation
or disposal of Hazardous Materials.
"ERISA" has the meaning provided in Section 2.19(a).
"ERISA Affiliate" has the meaning provided in Section 2.19(a).
"Escrow Agent" means the escrow agent that is a party to the Escrow
Agreement.
"Escrow Agreement" has the meaning set forth in Section 1.4.
"Escrow Promissory Note" as the meaning provided in Section 1.2(iii).
"Excluded Assets" has the meaning set forth in Section 8.4.
"Excluded Liabilities" has the meaning set forth in Section 8.4.
"FINOVA" means FINOVA Capital Corporation.
"GAAP" means generally accepted accounting principles.
"Hazardous Materials" means, individually and collectively, toxic,
hazardous, explosive or otherwise dangerous materials, substances, pollutants,
contaminants or wastes (as those terms are used in the Environmental Laws),
petroleum products, polychlorinated biphenyls, asbestos, ureaformaldehye foam,
waste oil or radioactive materials.
"ILN Common Stock" has the meaning provided in Section 2.4.
"ILN Financial Statements" has the meaning provided in Section 2.7.
"ILN Promissory Note" has the meaning provided in Section 1.2(ii).
"Indemnifying Parties" as used in Article 6 of this Agreement, has the
meaning provided in Section 6.1(a).
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"IPO" means the initial public offering of shares of Carey Common Stock
under a registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act on or about the date hereof.
"IPO Price" means the price per share at which Carey Common Stock is sold
to the public by Carey in the IPO.
"IPO Registration Statement" means the registration statement Carey will
file with the Commission in connection with the IPO, as the same (and the
prospectus which is a part thereof) may be updated, amended and supplemented
from time to time.
"IRS" means the Internal Revenue Service.
"Leased Premises" has the meaning provided in Section 2.22(a).
"Merger Agreement" means the Agreement and Plan of Merger of even date by
and among Carey, MILN, MILN Acquisition Corporation and MH.
"MH" means Michael Hemlock, a resident of Hewlett, New York.
"MILN" means Manhattan International Limousine Network Ltd.
"MILN Shares" means all 100 issued and outstanding shares of capital stock
of MILN.
"Notifying Party" has the meaning provided in Section 4.4.
"Permits" has the meaning provided in Section 2.16.
"Plans" has the meaning provided in section 2.19(a).
"Proprietary Asset" means any (a) patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or unregistered),
copyright application, mask work, mask work application, trade secret, know-how,
confidential information, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual property right or
intangible asset; or (b) license or right to use or exploit any of the
foregoing.
"Public Announcement" has the meaning provided in Section 4.3.
"Returns" has the meaning provided in Section 2.12(a).
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"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means all 100 issued and outstanding shares of ILN Common Stock.
"Sellers" as used in Article 6 of this Agreement has the meaning provided
in Section 6.1.
"Tangible Personal Property" has the meaning provided in Section 2.22(a).
"Tax Affiliate" has the meaning provided in Section 2.12(a).
"Taxes" has the meaning provided in Section 2.12(e).
"Third Party Claim" has the meaning provided in Section 6.3.
"Vehicles" has the meaning provided in Section 2.14.
"Zero Balance Sheet" has the meaning provided in Section 8.4.
9.2 Entire Agreement. This Agreement constitutes, with the Disclosure
Schedule and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
9.3 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
9.4 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 or by electronic facsimile transmission
(with a confirmation copy mailed by first class mail), when mailed by registered
or certified mail (postage prepaid, return receipt requested) or delivered to a
courier of national reputation to the respective parties as follows:
If to Carey:
Carey International, Inc.
4530 Wisconsin Avenue, N.W.
Washington, DC 20016
Fax: (202) 895-1201
Attention: Vincent A. Wolfington,
Chairman of the Board
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with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Fax: (617) 973-9748
Attention: James E. Dawson, Esq.
If to the Stockholders:
Alfred J. Hemlock
200 Central Park South
New York, New York 10012
Fax: (718) 786-5461
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036-6710
Fax: (212) 336-2222
Attention: Alan Gettner, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
9.6 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.
9.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
9.8 Expenses. Except to the extent otherwise agreed herein, all costs and
expenses in connection with the transactions contemplated by this Agreement (i)
incurred by the Stockholders shall be paid by the Stockholders and (ii) incurred
by Carey shall be paid by Carey.
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9.9. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and 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.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
CAREY INTERNATIONAL, INC.
By: /s/ Vincent A. Wolfington
------------------------------------------
Title: Chairman
/s/ Alfred J. Hemlock
---------------------------------------------
Alfred J. Hemlock
/s/ Lupe C. Hemlock
---------------------------------------------
Lupe C. Hemlock
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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made as of March 1,
1997 by and among Carey International, Inc., a Delaware corporation ("Carey"),
MILN Acquisition Corporation, a Delaware corporation ("Acquisition"), Manhattan
International Limousine Network Ltd., a New York corporation ("MILN"), and
Michael Hemlock, a resident of Hewlett, New York ("MH").
RECITALS
A. MH is the sole record and beneficial owner of all of the issued and
outstanding shares of capital stock of MILN, and Carey is the sole record and
beneficial owner of all the issued and outstanding shares of capital stock of
Acquisition;
B. The parties desire to merge Acquisition with and into MILN in
accordance with the terms and conditions of this Agreement (the "Merger"); and
C. Upon consummation of the Merger, Acquisition will cease to exist and
MILN will become a wholly-owned subsidiary of Carey.
NOW, THEREFORE, in consideration of the mutual agreements, representations,
warranties, and covenants hereinafter set forth, the parties hereto agree as
follows (with certain capitalized terms used herein being defined in Section
9.1):
1. THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement and
in accordance with the NYBCL and the DGCL, at the Effective Time, Acquisition
shall be merged with and into MILN and the separate corporate existence of
Acquisition shall cease. Following the Merger, MILN shall continue as the
Surviving Corporation.
1.2 Effective Time. As soon as practicable after satisfaction or waiver
of all conditions to the Merger, but in any event on or before August 20, 1997,
the parties (i) shall cause certificates of merger (the "Certificates of
Merger") with respect to the Merger to be filed and recorded in accordance with
Section 907 of the NYBCL and Section 252 of the DGCL and (ii) shall take all
such further actions as may be required by law to make the Merger effective.
The Merger shall be effective at the Effective Time. Simultaneously with the
filing of the Certificates of Merger, a closing (the "Closing") shall take place
(a) if there shall be a closing of the IPO, at 9:00 a.m. on the closing date of
the IPO at the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New
York, New York 10103 or, (b) if there shall not be a closing of the IPO, at 9:00
a.m. on such day on or before August 20, 1997 as reasonably selected by Carey,
upon at least ten (10) business days' notice to MILN,
<PAGE>
at the offices of Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue of the
Americas, New York, New York 10036.
1.3 Effects of the Merger. The Merger shall have the effects specified in
the NYBCL and the DGCL.
1.4 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
1.5 Certificate of Incorporation and By-Laws. The certificate of
incorporation of MILN and the by-laws of Acquisition, in each case as in effect
at the Effective Time, shall be the certificate of incorporation and by-laws of
the Surviving Corporation.
1.6 Directors and Officers. At the Effective Time, the directors and
officers of Acquisition shall be the directors and officers of the Surviving
Corporation, each to hold office until their respective successors are duly
elected or appointed and qualified.
1.7 Deposit; Conversion of Stock; Delivery of Promissory Note.
(a) Upon the execution and delivery of this Agreement by MILN and MH,
Carey shall deliver to MH a Carey check payable to MH in the amount of sixty
thousand U.S. dollars ($60,000) (the "Deposit").
(b) At the Effective Time (i) each share of common stock, without par
value, of Acquisition that is issued and outstanding immediately prior to the
Effective Time shall be converted without any action on the part of the holder
thereof into one-tenth (1/10) of one share of MILN Common Stock; and (ii) the
MILN Shares shall be converted without any action on the part of the holder
thereof (A) into the number of whole shares of Carey Common Stock determined by
dividing two million four hundred thousand U.S. dollars ($2,400,000) by the IPO
Price (the "Carey Shares"), (B) the right to receive a promissory note
substantially in the form attached hereto as Exhibit 1.7(a) in the principal
amount of three hundred eighty thousand U.S. dollars ($380,000) bearing interest
at 8% per annum, with all accrued interest payable monthly and all principal
payable on the first anniversary of the Closing Date (the "Promissory Note"),
(C) the right to retain the Deposit and (D) the right to receive the Additional
Merger Consideration (as defined below), if any.
(c) In the event that the Closing occurs after May 20, 1997, unless the
failure of the Closing to occur by such date shall be due to (i) the failure of
MH or MILN to perform or observe the covenants and agreements of such party set
forth herein or (ii) the failure to be satisfied of the conditions set forth in
Section 5.1, other than those conditions which are not satisfied due to the
fault of Carey or those conditions requiring MILN or MH to deliver documents and
instruments if MILN and MH in good faith stand ready to deliver such documents
and instruments, additional merger consideration (the "Additional Merger
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Consideration") shall accrue and be payable at the Closing in an amount equal to
the number of days between May 20, 1997 and the Closing Date multiplied by one
thousand five hundred U.S. dollars ($1,500), provided that the amount of
Additional Merger Consideration shall not exceed one hundred thirty five
thousand U.S. dollars ($135,000).
1.8 Transactions at the Closing.
(a) At the Closing, MILN and MH will deliver to Carey and Acquisition the
following:
(i) stock certificates evidencing all of the MILN Shares;
(ii) written resignations of each director and officer of MILN,
effective as of the Closing Date;
(iii) the original minute books, stock record books and corporate
seals, if any, of MILN;
(iv) all other documents, certificates and instruments required to be
delivered by MILN and MH at or prior to the Closing pursuant to this Agreement;
(v) a copy of each written Company Contract; and
(vi) the underwriters' lock-up agreement in the form attached hereto
as Exhibit 1.8(a)(vi).
(b) At the Closing, Carey and Acquisition will deliver to MILN and MH the
following:
(i) the Promissory Note, duly executed by an authorized officer of
Carey;
(ii) stock certificates evidencing the Carey Shares (A) registered in
the name of MH with respect to the number of Carey Shares equal to $400,000
divided by the IPO Price and (B) registered in the name of the Escrow Agent (as
defined below) with respect to the number of Carey Shares equal to $2,000,000
divided by the IPO Price, and a Carey check payable to MH representing the
payment for any fractional share of Carey Common Stock pursuant to Section
1.9(c) hereof;
(iii) all other documents, certificates, instruments or writings
required to be delivered by Carey and Acquisition at or prior to the Closing
pursuant to this Agreement;
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(iv) a "Section 368(a) Certificate" which shall be reasonably
satisfactory in form and content to counsel to each of Carey and MH in the form
attached hereto as Exhibit 1.8(b)(iv); and
(v) a certified check payable to or wire transfer to MH representing
any Additional Merger Consideration pursuant to Section 1.2.
(c) At the Closing, MILN, MH, EM, AJH, LCH and/or Carey, as applicable,
will exchange the following, which in each case shall be duly executed by the
parties thereto:
(i) an employment agreement between MILN and MH substantially in the
form attached hereto as Exhibit 1.8(c)(i) (the "MH Employment Agreement");
(ii) an employment agreement between MILN and EM substantially in the
form attached hereto as Exhibit 1.8(c)(ii) (the "EM Employment Agreement");
(iii) a registration rights agreement among Carey and MH substatially
in the form attached hereto as Exhibit 1.8(c)(iii) (the "Registration Rights
Agreement");
(iv) an escrow agreement among Carey, MH, AJH, LCH and a bank, as
escrow agent, to be selected by mutual agreement of the parties (the "Escrow
Agent"), which escrow agreement shall be substantially in the form attached
hereto as Exhibit 1.8(c)(iv);
(v) an option agreement among Carey, MILN and AJH substantially in
the form attached hereto as Exhibit 1.8(c)(v) (the "Option Agreement"); and
(vi) an indemnification agreement among Carey, MILN, AJH, LCH and MH
substantially in the form attached hereto as Exhibit 1.8(c)(vi) (the
"Indemnification Agreement").
1.9 Exchange of and Payment for MILN Shares.
(a) The surrender and exchange of the MILN Shares for the Deposit,
Promissory Note, Carey Shares and Additional Merger Consideration, if any (the
"Merger Consideration"), shall occur at the Closing as provided in Section 1.8.
Until surrendered as contemplated by the preceding sentence, any certificate
which immediately prior to the Effective Time shall have represented any MILN
Shares shall be deemed at and after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration.
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(b) No dividends or other distributions declared after the Effective Time
with respect to Carey Common Stock shall be paid to MH until he shall surrender
all certificates representing any MILN Shares in accordance with this Section
1.9. After the surrender of such certificate(s) in accordance with this Section
1.9, MH shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with respect
to the Carey Shares.
(c) Notwithstanding any other provision of this Agreement, no certificates
or scrip representing a fractional share of Carey Common Stock shall be issued
upon the surrender for exchange of certificates which prior to the Effective
Time shall have represented any MILN Shares, no dividend or distribution of
Carey shall relate to any fractional share, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a shareholder of
Carey. In lieu of any fractional share, there shall be paid to MH an amount of
cash equal to the IPO Price multiplied by the fraction of any such fractional
share.
(d) The Merger Consideration and cash in lieu of fractional share thereof
shall be deemed, when issued or paid hereunder, to have been issued or paid, as
the case may be, in full satisfaction of all rights pertaining to the MILN
Shares.
2. REPRESENTATIONS AND WARRANTIES OF MH AND MILN
MH and MILN jointly and severally represent and warrant to Carey and
Acquisition that, except as expressly provided in the Disclosure Schedule by
specific reference to a particular Section of this Article 2, the following
representations and warranties are true and correct as of the date hereof
(except Section 2.33, which will be true and correct as of the Closing Date):
2.1 Organization and Qualification. MILN is a corporation duly organized,
validly existing and in good standing under the laws of New York. MILN is not
and is not required to be qualified as a foreign corporation in any
jurisdiction. MILN has the corporate power and authority to own and hold its
properties and to carry on its business. MILN previously furnished to Carey
true and complete copies of its certificate of incorporation and by-laws, as
amended to date.
2.2 Subsidiaries. MILN does not own, or have any agreements or
understandings (written or oral) to acquire, any equity securities or other
securities of any corporation, general or limited partnership, limited liability
company, joint venture, or other entity or business, or any direct or indirect
equity or ownership interest in any other business. The Business is, and since
October 1, 1995 has been, conducted solely by MILN and International Limousine
Network Ltd., a New York corporation ("ILN"), and not through any subsidiary,
affiliate or joint venture of MH or MILN or any other entity or person. Neither
MH nor MILN owns or controls, directly or indirectly, any business or company
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competitive with the Business or any business or company that provides services
to the Business or any other chauffeured vehicle services company.
2.3 Power and Authority. MILN has full corporate power and authority, and
MH has full capacity, to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation by MILN of the transactions contemplated hereby
has been duly authorized by the board of directors and shareholders of MILN, and
no other action is necessary to authorize this Agreement or the consummation of
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by MILN and MH and constitutes a legal, valid and binding
obligation of MILN and MH enforceable against them in accordance with its terms.
2.4 Capitalization. The authorized equity securities of MILN consist of
200 shares of common stock, each without par value (the "MILN Common Stock"), of
which 100 shares are issued and outstanding; and the MILN Shares represent all
issued and outstanding shares of MILN Common Stock. All of the MILN Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts,
commitments, agreements or understandings (written or oral) that require MILN to
issue, sell or transfer any of its capital stock or other securities. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to MILN. There are no agreements,
voting trusts, proxies or other agreements or understandings with respect to the
voting or ownership of the capital stock of MILN. None of the MILN Shares or
other securities of MILN was issued in violation of the Securities Act or state
law.
2.5 Ownership and Title to the MILN Shares. MH is the sole record and
beneficial holder of all of the MILN Shares. MH owns each of his MILN Shares
free and clear of any Encumbrances.
2.6 Validity, etc. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, nor the
consummation of the transactions contemplated hereby or thereby (including
without limitation the transfer of Excluded Assets set forth in Section 8.3),
nor the compliance by MILN or MH with any of the terms or provisions hereof,
will (i) violate any provision of the certificate of incorporation or by-laws of
MILN, (ii) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to MILN or MH or any of their
respective properties or assets, or (iii) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the respective properties
or assets of MILN or MH or the MILN Shares under any of the terms, conditions or
provisions of any
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Company Contract, note, bond, mortgage, indenture, deed of trust, license,
lease, agreement, Permit or other instrument or obligation to which MH or MILN
is a party, or by which they or any of their respective properties or assets may
or be bound or affected.
2.7 Financial Statements. MILN has previously furnished to Carey the
following financial statements of MILN which are attached hereto in Schedule
2.7: (i) financial statements as of and for the years ending September 30, 1994,
1995 and 1996, audited by Grubman Associates of New York, CPAs, P.C.
("Grubman"), consisting of balance sheets, statements of income, statements of
retained earnings and statements of cash flows, and (ii) financial statements as
of and for the three months ended December 31, 1995 and 1996, prepared
internally by MILN and reviewed by Grubman, consisting of a balance sheet and
income statement (collectively, the "MILN Financial Statements"). MILN, MH and
Grubman have reviewed the following financial statements of MILN and ILN which
also are attached hereto in Schedule 2.7: (i) financial statements as of and
for the years ending September 30, 1995 and 1996, audited by Coopers & Lybrand,
L.L.P., consisting of a balance sheet, statement of income and statement of cash
flows, and (ii) financial statements as of and for the three months ended
December 31, 1995 and 1996, prepared with the assistance of Coopers & Lybrand,
L.L.P. (collectively, the "Combined Financial Statements"). The balance sheet
of MILN dated December 31, 1996 and included among the MILN Financial Statements
is referred to herein as the "Balance Sheet." All MILN Financial Statements
were prepared from the books and records of MILN, which books and records are
complete and correct. The MILN Financial Statements accurately present the
financial position of MILN as of the dates thereof and the results of MILN's
operations for the periods presented therein, as the case may be, all in
conformity with generally accepted accounting principles ("GAAP"), consistently
applied, subject, in the case of the financial statements for the three months
ended December 31, 1995 and 1996, to normal year-end adjustments. The Combined
Financial Statements accurately present the financial position of MILN and ILN
as of the dates thereof and the results of MILN and ILN's operations for the
periods presented therein, as the case may be, all in conformity with GAAP,
consistently applied, subject, in the case of the financial statements for the
three months ended December 31, 1995 and 1996, to normal year-end adjustments.
2.8 Books and Records. The minute books, stock record books, and other
material non-financial records of MILN, all of which have been made available to
Carey, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of MILN contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of MILN, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books, except that resolutions relating to transactions
with financial institutions and with respect to financing of Franchisee
receivables are attached to copies of the original documents relating to such
transactions maintained in the records of MILN and at the Closing such minute
books will contain such resolutions. As of the Closing Date, all of the books
and records referenced in this Section 2.8 will be in the possession of MILN.
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2.9 Absence of Undisclosed Liabilities. Except as and to the extent of
the amounts specifically reflected or reserved against in the Balance Sheet or
set forth in the Disclosure Schedule, MILN does not have any liabilities or
obligations of any nature whatsoever, due or to become due, accrued, absolute,
contingent or otherwise, except for immaterial liabilities and obligations
incurred in the ordinary course of business which are consistent with past
practice. Neither MH nor MILN knows of any basis for the assertion against MILN
of any liability or obligation not fully reflected or reserved against in the
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice since the date thereof.
2.10 Absence of Adverse Change. Since December 31, 1996 (the "Balance
Sheet Date"), there has been no material adverse change in the Business,
financial position, assets, liabilities, results of operations or prospects of
MILN other than the transfer of the Excluded Assets and the other transactions
expressly contemplated to occur in connection with the transactions contemplated
hereby. Since the Balance Sheet Date, other than the transfer of the Excluded
Assets and the other transactions expressly contemplated to occur in connection
with the transactions contemplated hereby, MILN has not:
(a) taken any action or entered into or agreed to enter into any
transaction, agreement or commitment, or made any change in the business or
operations of the Business, other than in the ordinary course of business;
(b) entered into or agreed to enter into any transaction, agreement or
commitment, or suffered the occurrence of any event or events (i) that has
interfered or is reasonably likely to interfere with the normal and usual
operations of the business of MILN or (ii) that, singly or in the aggregate, has
resulted or is reasonably likely to result in a material adverse change with
respect to MILN;
(c) incurred or increased any indebtedness for borrowed money or any
capital lease obligations, or assumed, guaranteed, endorsed or otherwise become
responsible for the obligations of any other individual, partnership, firm, or
corporation (except to endorse checks for collection for deposit in the ordinary
course of business), or made any loan or advance to any individual, partnership,
firm or corporation;
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business, sold, transferred or otherwise disposed of, any of
the properties or assets of MILN, including any canceled, released, hypothecated
or assigned indebtedness owed to MILN, or any claims held by MILN;
(e) made any investment of a capital nature in excess of $2,500 or entered
into a commitment for such investment either by purchase of stock or securities,
contributions to capital, property transfer or otherwise, or by the purchase of
any property or assets of any other individual, partnership, firm or
corporation;
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(f) declared, set aside, or paid any dividend or other distribution
(whether in cash, stock or property, or any combination thereof) in respect of
the capital stock of MILN, or redeemed or otherwise acquired, directly or
indirectly, any shares of capital stock of MILN;
(g) paid any long-term liability, otherwise than in accordance with its
terms;
(h) paid any bonus, additional or severance compensation to any officer,
director, shareholder or employee of MILN, or otherwise increased the
compensation paid or payable to any of the foregoing;
(i) sold, assigned or transferred any patents, trademarks, trade names,
logos, copyrights, formulae or other intangible assets;
(j) contracted with or committed to any third party (i) to sell any capital
stock of MILN, (ii) to sell any assets of MILN other than in the ordinary course
of business or (iii) to effect any merger, consolidation or other reorganization
of MILN;
(k) incurred any damage, destruction or loss to any asset owned by MILN or
used in the Business;
(l) entered into any material agreement, contract, lease, indenture or
commitment (whether written or oral) or any amendment, waiver or modification to
any existing agreement, contract, lease, indenture or commitment (whether
written or oral); or
(m) agreed, contracted or committed to do any of the foregoing, or agreed
to pay after the Closing any expenses or fees of counsel, accountants or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder.
2.11 Receivables; Banking Relationships.
(a) Schedule 2.11 provides an accurate and complete breakdown and aging of
all accounts receivable, notes receivable and other receivables of MILN as of
the Balance Sheet Date. All existing receivables of MILN represent valid
obligations of third parties arising from bona fide transactions entered into in
the ordinary course of business.
(b) Schedule 2.11 accurately lists (i) each account maintained by or for
the benefit of MILN at any bank or other financial institution since 1990 and
(ii) each bank or financial institution that has made any loan to or had any
business relationship with MILN since 1990, and for each such bank the name of
the contact officer at the bank. Schedule 2.11 describes the date of and reason
for any termination of or change in any business relationship between MILN and
any such bank or financial institution and, the aggregate amount of the
outstanding loan or account balance (if any) at the date of any such termination
or change.
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2.12 Taxes.
(a) MILN and any consolidated, combined or unitary group of which it is
or was a member, as the case may be (individually, a "Tax Affiliate" and,
collectively, the "Tax Affiliates"), has (i) prepared and timely filed all
returns, declarations, reports, estimates, information returns and statements
("Returns") required to have been filed or sent by or with respect to them to
date in respect of any Taxes (as hereinafter defined), and all such Returns are
correct and complete; (ii) timely and properly paid all Taxes that are shown as
due and payable on such Returns; and (iii) complied with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and
timely and properly withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under all applicable laws.
(b) (i) There are no liens for Taxes upon the assets of MILN or any Tax
Affiliate except liens for Taxes not yet due; (ii) neither MILN nor any of its
Tax Affiliates has requested any extension of time within which to file any
Return which Return has not since been filed; (iii) no deficiency for any Taxes
has been proposed, asserted or assessed against MILN or any of its Tax
Affiliates which has not been resolved and paid in full; (iv) there are no
outstanding waivers or consents given by MILN or any of its Tax Affiliates
regarding the application of the statute of limitations with respect to any
Taxes or Returns; and (v) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(c) Neither MILN nor any of its Tax Affiliates (i) has filed a consent
pursuant to Section 341(f) of the Code (as hereinafter defined) or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by MILN
or any of its Tax Affiliates; or (ii) is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by MILN or a Tax Affiliate or has any
knowledge that the Internal Revenue Service (the "IRS") has proposed any such
adjustment or change in accounting method. No property of MILN or any of its
Tax Affiliates is property that MILN, any of its Tax Affiliates or any party to
this transaction is or will be required to treat as being owned by another
person pursuant to Section 168(f)(8) of the Code (prior to its amendment by the
Tax Reform Act of 1986) or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code.
(d) All transactions that could give rise to a substantial understatement
of federal income tax within the meaning of Section 6662 of the Code have been
adequately disclosed in accordance with Section 6662 of the Code. Neither MILN
nor any of its Tax Affiliates is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
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(e) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including without limitation all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).
(f) As a result of the transfer of the Excluded Assets to the Transferee
pursuant to Section 8.2 and the Merger, there will be no reduction in MILN's net
operating loss carryforwards.
(g) With respect to any Return which Carey shall cause MILN to file
pursuant to Section 8.1 hereof, Carey shall not cause MILN to make an election
to forego the carryback of any net operating losses reflected on such Return; if
any such carryback of net operating losses results in a refund of Taxes, such
refund shall be for the sole benefit of Carey, but shall also constitute a tax
benefit to Carey under Section 6.1(e) hereof.
2.13 Litigation. There is no (a) action, suit, claim, proceeding or
investigation pending or, to the knowledge of MH or MILN, threatened against or
affecting MH (relating to the Business) or MILN (whether or not MILN or MH is a
party or prospective party thereto), at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; (b) arbitration
proceeding relating to MH (relating to the Business) or MILN, or (c)
governmental inquiry pending or threatened against or involving MH (relating to
the Business) or MILN. There are no outstanding orders, writs, judgments,
injunctions, settlement agreements, consent decrees or decrees of any court,
governmental agency or arbitration tribunal against, involving or affecting MH
(relating to the Business) or MILN. Neither MILN nor (with respect to any matter
relating to the Business) MH is in default with respect to any order, writ,
injunction or decree known to or served upon it from any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by MH (relating to the Business) or MILN pending or threatened against
others.
2.14 Vehicles. Schedule 2.14 contains a true and complete list of all
motor vehicles used in the operation of the Business (the "Vehicles"),
including, without limitation, Vehicles owned by or leased to MILN (the "Company
Vehicles") and Vehicles owned by or leased to Franchisees (the "Franchisee
Vehicles"), and sets forth, with respect to each Vehicle, the year, make, serial
number, model, mileage as of December 31, 1996, whether such Vehicle is owned or
leased, and whether such Vehicle is a Company Vehicle or a Franchisee Vehicle.
Schedule 2.14 sets forth a description of any outstanding financial obligations
of MILN (including financial obligations of third parties which are guaranteed
by MILN) on any Vehicles, including the date of obligation, deposit, financing
source, interest rate, term, dates and amounts of first and last payments, total
amount financed, monthly payment,
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balloon payment (if any), outstanding balance, and extent and nature of MILN's
obligations with respect to such vehicles. Except as shown in Schedule 2.14
with respect to Company Vehicles as to which there are outstanding financial
obligations, MILN has good and marketable title free and clear of all
Encumbrances to the Company Vehicles. With respect to Vehicles as to which MILN
has outstanding financial obligations, all leases, conditional sales contracts
and financing documents pertaining to such Vehicles are in full force and
effect, and there is not under any of such instruments any existing default or
event of default which with notice or lapse of time or both would constitute
such a default. The Vehicles listed on Schedule 2.14 constitute all motor
vehicles necessary to conduct the Business in the manner in which it has been
and is being conducted. All Company Vehicles, and, to MILN's knowledge, based
upon its practice of regularly inspecting Franchise Vehicles, all Franchise
Vehicles are adequate and useable for the purposes for which they are currently
used and each such Vehicle is in good operating condition, reasonable wear and
tear excepted, and has been properly maintained and repaired. During the past
three (3) years, there has not been any material interruption of the operations
of the Business due to condition of the vehicles used in the operation of the
Business.
2.15 Compliance with Law. MILN has complied with and is not in default
under, all laws (including, without limitation, franchise disclosure laws),
ordinances, legal requirements, rules, regulations and orders applicable to it,
its assets and the Business. There is no existing law, rule, regulation or
order, and neither MILN nor MH is aware of any proposed law, rule, regulation or
order, whether federal or state, which would prohibit or materially restrict
MILN from, or otherwise materially adversely affect MILN in, conducting the
Business, or which would materially restrict Carey from owning the MILN Shares.
2.16 Licenses and Permits. Schedule 2.16 identifies and provides a brief
description of all licenses, permits, pending applications, consents, approvals
and authorizations of or from any public, governmental or regulatory agency,
used in or otherwise necessary for the conduct of the Business, including,
without limitation, Certificates of Public Convenience and Necessity and other
operating certificates applied for and/or currently outstanding and issued by
any and all regulatory bodies (including, without limitation, the City of New
York and the State of New York) (collectively, the "Permits"), providing with
respect to each Permit the name of the agency issuing the Permit and, if the
holder is other than MILN, the holder's relationship to MILN. Each Franchisee,
and every other chauffeur who operates a Vehicle, and every Vehicle, has all
required Permits. The holder of each Permit has complied with all conditions
and requirements imposed by the Permits and MILN has not received any notice of,
and neither MILN nor MH has any knowledge that, any appropriate authority
intends to cancel or terminate any of the Permits or that valid grounds for such
cancellation or termination exist. To the knowledge of MH or MILN, no other
permits other than the Permits are necessary to operate the Business. MILN owns
or has the right to use the Permits in accordance with the terms thereof without
any conflict or alleged conflict or infringement with the rights of others and
subject to no
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Encumbrance, and each Permit is valid and in full force and effect, and will not
be terminated or adversely affected by the transactions contemplated hereby.
2.17 Labor and Employee Relations. MILN is not a party to or bound by any
collective bargaining agreement with any labor organization, group or
association covering any of its employees or independent operator franchisees,
and neither MILN nor MH has any knowledge of any attempt to organize any
employees or independent operator franchisees of MILN by any person, unit or
group seeking to act as their bargaining agent. There are no pending or
threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by MILN or any current or former independent
operator franchisee. To the knowledge of MH or MILN, no event has occurred or
circumstance exists that could provide a reasonable basis for any work stoppage
or labor dispute.
2.18 Certain Employees. Set forth in Schedule 2.18 is a list of the
names, addresses and telephone numbers of MILN's employees (whether full or part
time) and consultants, together with the title or job classification of each
such person, the base annual and the total compensation paid to each such person
by MILN in 1996 and anticipated to be paid in 1997, and the amount of accrued
vacation and other benefits that each has accumulated as of the date hereof.
None of such persons has an employment agreement or understanding, whether oral
or written, with MILN which is not terminable on thirty (30) days or less notice
by MILN without cost or other liability to MILN. No person listed on Schedule
2.18 has indicated that he or she intends to terminate his or her employment
with MILN or seek a material change in his or her duties or status. Each
employee or Franchisee of MILN who is required to be licensed under any
applicable federal state or local law is so licensed.
2.19 Employee Benefits. (a) Schedule 2.19 sets forth a true and
complete list of each benefit plan, arrangement or agreement under which
benefits are provided to employees or other providers of services that is
maintained as of the date of this Agreement (the "Plans") by MILN or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), all of
which together with MILN would be deemed a "single employer" within the meaning
of Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(b) MILN has heretofore delivered to Carey true and complete copies (or,
if not in written form, summaries) of each of the Plans and all related
documents, including but not limited to (i) the actuarial report for such Plan
(if applicable) for each of the last two years, (ii) the annual report for such
Plan (if applicable) for each of the last two years and (iii) the most recent
determination letter from the Internal Revenue Service (if applicable) for such
Plan (and any application for such determination letter, if one is pending), and
Schedule 2.19 sets forth a true and complete list of all of such documents.
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(c) Except as set forth in Schedule 2.19, (i) each of the Plans has been
operated and administered in all material respects in compliance with applicable
laws, including but not limited to ERISA and the Code, (ii) each of the Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified and each Plan which is intended to meet the requirements for tax-
favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements in all material respects, (iii) with respect to each
Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of MILN or any ERISA Affiliate beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable law, (x)
death benefits or retirement benefits under any "employee pension plan", as that
term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits
accrued as liabilities on the books of MILN or (z) benefits the full cost of
which is borne by the current or former employee (or his beneficiary), (v) no
liability under Title IV of ERISA has been incurred by MILN or any ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to MILN or any ERISA Affiliate of incurring a material
liability thereunder; (vi) no Plan is a "multiemployer pension plan," as such
term is defined in Section 3(37) or 4001(a)(3) of ERISA, (vii) all contributions
or other amounts payable by MILN as of the Closing Date with respect to each
Plan in respect of current or prior plan years have been paid or accrued in
accordance with generally accepted accounting practices, Section 302 of ERISA
and Section 412 of the Code, and there is no accumulated funding deficiency with
respect to any Plan, (viii) neither MILN, nor any ERISA Affiliate, has engaged
in a transaction in connection with MILN or any ERISA Affiliate, or any other
person or entity, which could subject MILN or any ERISA Affiliate to a material
liability under Section 409 of ERISA, a material civil penalty assessed pursuant
to Section 502(i) or (l) of ERISA or a material tax imposed pursuant to Section
4975 of the Code, (ix) no event has occurred and no condition exists with
respect to any Plan that could subject MILN or any ERISA Affiliate to any
material tax, fine or penalty imposed by the Code or ERISA, (x) there are no
pending, or to MILN's knowledge, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the Plans or any
trusts related thereto, (xi) neither MILN nor any ERISA Affiliate has any
material liability or contingent liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, any multi-employer plan or the
Department of Labor with respect to any employee pension benefit plan currently
or previously maintained by MILN or any ERISA Affiliate, and (xii) all material
required reports and descriptions (including Form 5500 Annual Reports, Summary
Annual Reports and summary plan descriptions) with respect to the employee
pension benefit plans and employee welfare benefit plans maintained by MILN or
any ERISA Affiliate for its employees have been properly and timely filed with
the appropriate government agency and distributed to participants as required,
and MILN has complied in all material respects with the requirements of COBRA.
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(d) Except as set forth in Schedule 2.19 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, deferred
compensation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of MILN, or any of their
affiliates under any Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan or otherwise, or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
2.20 Proprietary Assets; Telephone Numbers.
(a) Schedule 2.20 identifies and provides a brief description of all
Proprietary Assets (as hereinafter defined) owned or licensed to, or otherwise
used by MILN, including, without limitation, any plan or system utilized by MILN
and furnished to franchisees and affiliates of MILN regarding: standards and
methods of operating, marketing, advertising and public relations, courtesy and
appearance standards, charge card services, reservation services, insurance
programs and equipment standards for conducting a chauffeured vehicle service
business, including improvements in operating procedures and mix of products and
services which may be promoted and sold to customers of MILN (collectively, the
"Company Proprietary Assets"). Schedule 2.20 lists each trademark and service
mark owned by or licensed to, or otherwise used by, MILN and states with respect
to each such trademark or service mark, whether it is registered with the U.S.
Patent and Trademark Office or any state governmental agency. Except as set
forth in Schedule 2.20, MILN has good, valid and marketable title to all of the
Company Proprietary Assets identified therein, free and clear of all
Encumbrances, and has a valid right to use all such Company Proprietary Assets.
Except as set forth in Schedule 2.20, MILN is not obligated to make any payment
to any person or entity for the use of any Company Proprietary Asset. Except as
set forth in Schedule 2.20, MILN has not developed jointly with any other person
or entity any Company Proprietary Asset with respect to which such other person
has any rights.
(b) MILN has taken reasonably prudent steps to protect and maintain the
confidentiality and secrecy of all Company Proprietary Assets (except Company
Proprietary Assets whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the value of all Company Proprietary Assets.
(c) None of the Company Proprietary Assets infringes or conflicts with any
Proprietary Asset owned or used by any other person or entity. MILN is not
infringing, misappropriating or making any unlawful use of, and MILN has not at
any time infringed, misappropriated or made any unlawful use of, or received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other person or entity. To the knowledge
of MH and MILN, no other person or entity is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned
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or used by any other person or entity infringes or conflicts with, any Company
Proprietary Asset.
(d) The Company Proprietary Assets constitute all the Proprietary Assets
necessary to enable MILN to conduct the Business in the manner in which the
Business has been and is being conducted. Except as set forth in Schedule 2.20:
(i) MILN has not licensed any of the Company Proprietary Assets to any person or
entity and (ii) MILN has not entered into any contract, agreement, covenant not
to compete, or other arrangement limiting its ability to exploit fully any of
its Company Proprietary Assets or to transact business in any market or
geographical area or with any person or entity.
(e) Schedule 2.20 lists all telephone numbers relating to the Business
which have been advertised in the Yellow Pages and/or White Pages as well as any
other telephone numbers used by MILN for the purpose of taking reservations for
the Business since 1990. All telephone numbers listed on Schedule 2.20 are in
good working order and no claim has been asserted against MILN adverse to its
rights in any such telephone numbers.
2.21 Tangible Properties. Schedule 2.21 contains a true and complete list
of all tangible personal property, including, without limitation, furniture,
fixtures, equipment, computer hardware and software (but excluding Vehicles)
owned by or leased to MILN (the "Tangible Personal Property"), other than minor
items valued at less than $100. Except with respect to Tangible Personal
Property listed as being leased on Schedule 2.21, MILN has good and marketable
title free and clear of all Encumbrances to the Tangible Personal Property.
With respect to any Tangible Personal Property leased by MILN, all leases,
conditional sale contracts, franchises or licenses pursuant to which MILN may
hold or use (or permit others to hold or use) such Tangible Personal Property
are valid and in full force and effect, and there is not under any of such
instruments any existing default or event of default or event which with notice
or lapse of time or both would constitute such a default; and MILN's possession
and use of such property has not been disturbed and no claim has been asserted
against MILN adverse to its rights in such leasehold interests. The Tangible
Personal Property constitutes all tangible personal property necessary to
conduct the Business in the manner in which it has been and is being conducted.
All Tangible Personal Property is adequate and usable for the purposes for which
it is currently used and each item of Tangible Personal Property, whether owned
or leased, is in good operating condition, reasonable wear and tear excepted,
and has been properly maintained and repaired. During the past three (3) years,
there has not been any material interruption of the operations of the Business
due to the condition of any of the Tangible Personal Property.
2.22 Premises.
(a) Schedule 2.22 sets forth a true and complete list and description of
all real property leased by MILN or used in the Business (the "Leased
Premises"). A true and correct copy of the lease, as amended to date, to each
of the Leased Premises has been delivered to Carey. Each lease covering a
Leased Premises is in full force and effect (there
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existing no default under any such lease which, with the lapse of time or notice
or otherwise, would entitle the lessor to terminate the same), conveys the
leased real estate purported to be conveyed thereunder, is enforceable by MILN.
MILN has the right to use its Leased Premises in accordance with the terms of
such leases free and clear of all Encumbrances or other interests or rights of
third parties, except those which do not or would not have a material adverse
effect on the Leased Premises as used in the Business. Each of the Leased
Premises is structurally sound, adequately maintained, fully equipped with all
necessary utilities and is in good condition and repair, consistent with the
uses to which it is presently being put or intended to be put. All structures,
improvements and fixtures on the Leased Premises and the current uses of the
Leased Premises conform to any and all applicable federal, state and local laws,
building, health and safety and other ordinances, laws, rules and regulations.
There is no violation of any material covenant, restriction or other agreement
or understanding, oral or written, affecting or relating to title or use of any
Leased Premises. There are no pending or threatened condemnation or similar
proceedings or assessments affecting any of the Leased Premises, nor to the
knowledge of MH or MILN is any such condemnation or assessment contemplated by
any governmental authority.
(b) Other than the Facility, MILN does not own any real property.
Schedule 2.22 sets forth a true and complete list of all deeds and other
instruments (as recorded) by which MILN acquired the Facility and all title
insurance policies, environmental surveys, opinions, abstracts and surveys in
the possession or control of MILN or its consultants and relating to such
property, and a true and correct copy of each such document has been delivered
to Carey (collectively, the "Facility Documents"); provided, however, that MH
makes no representation or warranty with respect to the accuracy of the contents
of any Facility Documents. The Facility is free and clear of all Encumbrances
and is not subject to any rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature, except (i) the matters
listed on Schedule 2.22, (ii) matters disclosed in the title policy prepared in
connection with the mortgage loan from Continental Bank for the Facility, a true
and correct copy of which has been delivered to Carey and (iii) zoning laws and
other land use restrictions that do not impair the present use of the Facility.
There are no pending special or betterment assessments against the Facility.
MILN has not granted to any person a right of first refusal, purchase option or
right of first offer to purchase the Facility. To the knowledge of MILN and MH,
and except as shown on the surveys included among the Facility Documents, all
buildings and structures at the Facility lie wholly within the boundaries of the
Facility and do not encroach upon the property of, or otherwise conflict with
the property rights of, any other person or entity. To the knowledge of MILN
and MH, the building and any other structure at the Facility is structurally
sound, adequately maintained, fully equipped with all necessary utilities and is
in good condition and repair, consistent with the uses to which it is presently
being put or intended to be put. Except as set forth in the Facility Documents,
MILN has not received any governmental notices that the structures, improvements
and fixtures at the Facility and the current uses of the Facility violate any
applicable federal, state and local laws, building, health and safety and other
ordinances, laws, rules and regulations. MILN has not received any notice of
any violation of any land use covenant or restriction affecting or relating to
title or use of the Facility.
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The transactions described in this Agreement do not trigger or result in any,
conveyance, transfer or mortgage tax relative to the Facility or any of the
mortgages, deeds of trust or security agreements related thereto, except
applicable New York City and New York State real property transfer taxes arising
as a result of the Merger. There are no pending or threatened condemnation or
similar proceedings or assessments affecting the Facility, nor to the knowledge
of MH or MILN, is any such condemnation or assessment contemplated by any
governmental authority.
2.23 Environmental Matters.
(a) No governmental or private notice of violation, action, suit or other
proceeding to enforce or impose liability under any Environmental Laws, and to
the knowledge of MH and MILN, no investigation or inquiry under any
Environmental Laws, is pending or threatened against MILN, or any person or
entity for whose conduct MILN is or may be held responsible, which would affect
the Business. To the knowledge of MH and MILN, true and correct copies of all
reports concerning environmental matters with respect to the Facility have been
delivered to Carey, each of which reports is listed on Schedule 2.23.
(b) Neither the Facility nor any Leased Premises is contaminated with any
Hazardous Materials.
(c) There are no on-site or off-site locations used (currently or in the
past) in the Business or by MILN in connection with the Business for the
treatment, storage or disposal of Hazardous Materials. Without limiting the
generality of the foregoing, there are no underground storage tanks at the
Facility (or any Leased Premises), nor are there any PCB-containing transformers
at or on the Facility (or any Leased Premises).
(d) There are no liabilities in connection with the Business relating to
the off-site treatment, storage or disposal of Hazardous Materials.
(e) There are no asbestos-containing materials located at the Facility (or
any Leased Premises).
2.24 Insurance. MILN has at all times since its inception through the
date hereof, and will continue to be through the Closing, insured with
reasonable amounts of coverage by responsible insurers in respect of its
properties, assets and business against risks normally insured against by
companies in similar lines of business under similar circumstances. Schedule
2.24 correctly describes (by type, carrier, policy number, limits, premium and
expiration date) the insurance coverage carried by MILN at any time during the
last three (3) years, and coverage carried by MILN on the date hereof, each of
which current coverage, will remain in full force and effect through the
Closing. Neither MILN nor MH (i) has failed to give any notice or present any
claim under any such policy or binder in due and timely fashion, (ii) has
received notice of cancellation or non-renewal of any such policy or
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binder, (iii) is aware of any threatened or proposed cancellation or non-renewal
of any such policy or binder, (iv) has received notice or is aware of any
insurance premiums which will be materially increased in the future or (v) has
permitted any such policy to lapse for any period of time. There are no
outstanding claims under any such policy which have gone unpaid for more than 45
days, or as to which the insurer has disclaimed liability.
2.25 Outstanding Commitments.
(a) Schedule 2.25 sets forth a list of all existing contracts (including,
without limitation, Franchise Contracts, Affiliate Contracts, Farm-Out Contracts
and contracts or other rights related to providing services to hotels and
airlines), agreements, contracts, understandings, arrangements, leases,
commitments, licenses, and installment and conditional sales agreements, whether
written or oral, relating to MILN or the Business (collectively, "Company
Contracts") and, with respect to oral Company Contracts an accurate and complete
summary of the material provisions. MILN has delivered or made available to
Carey true, correct and complete copies of all written Company Contracts and
Schedule 2.25 contains an accurate and complete description of all Company
Contracts which are not in writing. The execution, delivery and performance by
MILN of each of its Company Contracts has been authorized by all necessary
corporate action. All of the Company Contracts are in full force and effect.
MILN and each other party to each of the Company Contracts have performed all
the obligations required to be performed by them to date, have received no
notice of default and are not in default (with due notice or lapse of time or
both) under any of the Company Contracts. MILN has no present expectation or
intention of not fully performing all its obligations under each of the Company
Contracts, and neither MH nor MILN have any knowledge of any breach or
anticipated breach by any other party to any of the Company Contracts. None of
the Company Contracts have been terminated, no notice has been given by any
party thereto of any alleged default thereunder by any party thereto, and
neither MH nor MILN is aware of any intention or right of any party to any
Company Contract to default another party to any Company Contract. There exists
no actual or, to the knowledge of MH or MILN, threatened termination,
cancellation or limitation of the business relationship of MILN with any party
to any Company Contract.
(b) Schedule 2.25 sets forth, with respect to each Franchise Contract, (i)
the name, address, telephone number of each former Franchisee, (ii) a
description of any notes receivable from each Franchisee and former Franchisee,
including the amount of the obligation, date of obligation, interest rate, term,
dates of first and last payments, down payments, total amount financed, monthly
payment, balloon payment (if any) and balance outstanding and (iii) any
agreement to pay any amount to any former Franchisee. Except as set forth on
Schedule 2.25, there are no agreements, commitments, or understandings of any
kind, whether written or oral, between MILN (or its officers, agents, employees
or representatives) and any Franchisee.
(c) Schedule 2.25 sets forth a list and description of all Affiliate
Contracts, including, with respect to each such Affiliate Contract, the name,
address, and telephone
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number of the Affiliate, and the volume of business referred to and received
from each Affiliate during 1996. Section 2.25 also sets forth a list and
description of all Company Contracts with Farm-Outs, including with respect to
each Farm-Out, the name, address and phone number of such Farm-Out, and the
volume of business referred to and received from each Farm-Out during 1996.
Except as set forth on Schedule 2.25, there are no agreements, commitments or
understandings of any kind whether written or oral between MILN (or its
officers, agents, employees or representatives) and any Affiliate or Farm-Out
wherever located.
(d) The statement of MILN's payment practices under various Company
Contracts included in Schedule 2.25 (the "Statement of Payment Practices") is
correct and complete. Since the Balance Sheet Date, MILN paid all amounts under
Company Contracts in compliance with the Statement of Payment Practices.
2.26 Governmental Approvals. Except as explicitly set forth in Schedule
2.26, no registration or filing with, or consent or approval of or other action
by, any federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by MH and
MILN of this Agreement and the transactions contemplated hereby.
2.27 Certain Payments. Neither MILN nor any director, officer, agent, or
employee of MILN, or any other person associated with or acting for or on behalf
of MILN, has directly or indirectly, (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person,
entity or agency, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of MILN or (iv) in violation of any federal, state or local law, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of MILN.
2.28 Transactions With Related Parties. Except as set forth in Schedule
2.28 hereto, no stockholder, director, officer or employee of MILN, or member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or any member of the family of any such person,
has an interest or is an officer, director, trustee, partner or holder of any
equity interest, is a party to any transaction with MILN which will represent an
obligation of MILN after the Closing, including any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from, or otherwise requiring payments or involving
other obligations to or from, any such person or firm.
2.30 Brokers or Finders. MH, MILN and their respective agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
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2.31 Securities Representations of MH. In order to induce Carey to issue
the Carey Shares to MH pursuant to this Agreement, MH hereby represents and
warrants to Carey as follows:
(a) MH has received and carefully reviewed the Carey Financial Statements
and such other information, if any, as MH has requested concerning Carey.
(b) MH has had a reasonable opportunity to ask questions of and receive
answers from Carey concerning Carey and all such questions, if any, have been
answered to the full satisfaction of MH; and MH has received all the information
he considers necessary or appropriate for deciding whether to enter this
Agreement and acquire the Carey Common Stock;
(c) MH has such knowledge and expertise in financial and business matters
that he is capable of evaluating the merits and risks involved in an investment
in the Carey Shares;
(d) except as set forth in this Agreement, no representations or
warranties have been made to MH by Carey, or any agent, employee or affiliate of
Carey; and in entering into this transaction MH is not relying upon any
information other than that contained in the Carey Financial Statements, this
Agreement and the results of independent investigations, if any, by MH;
(e) MH has been furnished with one or more drafts of a registration
statement that is being prepared in connection with the IPO and acknowledges
that Carey makes no representations or warranties of any kind concerning such
draft registration statement(s);
(f) MH is acquiring the Carey Shares for investment purposes only, solely
for his own account (and not as a nominee or agent), and not with a view towards
the resale or distribution of any part thereof, and MH has no present intention
of selling, granting any participation in, or otherwise distributing the same;
(g) MH is familiar with Rule 144 of the Securities Act and understands
the resale limitations imposed thereby; MH understands that (i) the Carey Shares
have not been registered under the Securities Act or the securities laws of any
state, based upon an exemption from such registration requirements for nonpublic
offerings pursuant to the Securities Act and applicable state securities laws;
(ii) the Carey Shares are and will be "restricted securities" as said term is
defined in Rule 144 of the Securities Act; (iii) the Carey Shares may not be
sold or otherwise transferred unless they have been first registered under the
Securities Act and all applicable state securities laws, or unless exemptions
from such registration provisions are available with respect to said resale or
transfer; (iv) Carey is under no obligation to register the Carey Shares under
the Securities Act or any state securities laws, or to take any action to make
any exemption from any such registration provisions available except as provided
in the Registration Rights Agreement; (v) the certificates for the Carey Shares
will bear a legend to the effect that the transfer of the
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securities represented thereby is subject to the provisions hereof; and (vi)
stop transfer instructions will be placed with the transfer agent, if any, for
the Carey Shares;
(h) MH will not sell or otherwise transfer any of the Carey Shares unless
and until (i) said Carey Shares shall have first been registered under the
Securities Act and all applicable state securities laws; or (ii) MH shall have
first delivered to Carey a written opinion of counsel (which counsel and
opinion, in form and substance, shall be reasonably satisfactory to Carey), to
the effect that the proposed sale or transfer is exempt from the registration
provisions of the Securities Act and, if the Carey Shares are not then listed on
a national exchange or the Nasdaq National Market, all applicable state
securities laws;
(i) it is understood that the certificates evidencing the Carey Shares
may bear one or all of the following legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NEITHER SUCH SHARES NOR ANY PORTION THEREOF OR INTEREST
THEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE OR
DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED EVIDENCE OF SUCH
EXEMPTION SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION)."
(ii) Any legend required by the laws of the State of Delaware or
applicable state securities laws.
(j) MH is an "accredited investor," as such term is defined in Rule
501(a) of the Securities Act; and
2.32 Disclosure. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which made, not misleading.
2.33 Closing Date Representations and Warranties.
(a) The representations and warranties set forth in this Article 2 shall
be true and correct on the Closing Date, as if made on the Closing Date, except
(i) as expressly provided in supplements to the Disclosure Schedule delivered to
Carey two (2) business days before the Closing Date with respect to
representations and warranties which were true and correct as of the date of
this Agreement but which as a result of events which individually or
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in the aggregate do not violate Section 4.5(a)-(k) cease to be true and correct
and (ii) as expressly contemplated by this Agreement with respect to the
transfer of Excluded Assets and otherwise. In no event shall any such
supplements supplement or amend any representations or warranties in this
Article 2 which are to be true and correct on the date of this Agreement.
(b) Schedule 2.16, as supplemented, will list the name of each Permit
holder other than MILN and the holder's relationship to MILN. Schedule 2.20,
as supplemented, will list each customer serviced by MILN since December 31,
1994 and provide for each such customer, the name, address, telephone number and
name of contact. Schedule 2.25, as supplemented, will set forth the name,
address and telephone number of each Franchisee.
3. REPRESENTATIONS AND WARRANTIES OF CAREY AND ACQUISITION
Carey and Acquisition represent and warrant to MH and MILN as follows:
3.1 Organization. Each of Carey and Acquisition is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
3.2 Power and Authority. Each of Carey and Acquisition has the corporate
power and authority to execute, deliver and perform this Agreement and the other
documents and instruments contemplated hereby. The execution, delivery and
performance by Carey and Acquisition of this Agreement and the documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action. This
Agreement, and each of the other agreements, documents and instruments to be
executed and delivered by Carey and Acquisition have been duly executed and
delivered by, and constitute the valid and binding obligation of Carey and
Acquisition enforceable against Carey and Acquisition in accordance with their
terms.
3.3 Validity, etc. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement and the other documents and instruments
contemplated hereby, nor the consummation of the transactions contemplated
hereby or thereby, nor the compliance by Carey and Acquisition with any of the
terms or provisions hereof, will (i) violate any provision of the charter or
by-laws of Carey or Acquisition, (ii) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
Carey or Acquisition or any of their respective properties or assets, or (iii)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Encumbrance upon any of the
respective properties or assets of Carey or Acquisition under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Carey or
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Acquisition is a party, or by which Carey or Acquisition or their properties or
assets may be bound or affected.
3.4 Financial Statements. Carey has previously furnished to MILN
financial statements of Carey and its subsidiaries as of and for the years
ending November 30, 1995 and 1996, audited by Coopers & Lybrand, L.L.P.,
consisting of balance sheets, statements of operations, statements of changes in
stockholder's equity and statements of cash flows (the "Carey Financial
Statements"). All Carey Financial Statements were prepared from the books and
records of Carey and its subsidiaries, which books and records are complete and
correct. The Carey Financial Statements accurately present Carey's consolidated
financial position as of the dates thereof and the results of Carey's
consolidated operations for the periods presented therein, as the case may be,
all in conformity with GAAP, consistently applied.
3.5 Brokers or Finders. Carey and Acquisition and their respective agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
4. COVENANTS
4.1 Confidential Information. Carey, Acquisition, MH and MILN will, and
will cause their respective agents and employees to, hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of their counsel, by other requirements of law, all Confidential
Information (as hereinafter defined) and will not disclose the same to any third
party. If this Agreement is terminated, (i) Carey and Acquisition will promptly
return to MILN or destroy all documents (including all copies thereof)
containing or based upon Confidential Information pertaining to MILN, and (ii)
MH and MILN will promptly return to Carey or destroy all documents (including
all copies thereof) containing or based upon Confidential Information pertaining
to Carey. For purposes hereof, "Confidential Information" shall mean all
information of any kind concerning MILN or Carey, except information (i)
ascertainable or obtained from public or published information, (ii) received
from a third party not known to the receiving party to be under an obligation to
keep such information confidential, (iii) that is or becomes known to the public
(other than through a breach of this Agreement), (iv) that was in the receiving
party's possession before disclosure thereof to it in connection with this
Agreement, (v) that was independently developed by the receiving party or (vi)
information about MILN that Carey reasonably determines (after consultation with
MH's counsel) is required to be included in the IPO Registration Statement or
otherwise disclosed to the public in connection with the IPO.
4.2 Best Efforts. Subject to the terms and conditions hereof, each party
to this Agreement agrees to fully cooperate with the others and the others'
counsel, accountants and representatives in connection with any steps required
to be taken as part of its obligations
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under this Agreement. Each party to this Agreement agrees that it will use its
best efforts consistent with reasonable business practice to cause all
conditions to its obligations and to the other parties under this Agreement to
be satisfied as promptly as possible, and will not undertake a course of action
inconsistent with this Agreement or which would make any of its representations,
warranties, agreements or covenants in this Agreement untrue in any material
respect or any conditions precedent to its obligations under this Agreement
unable to be satisfied at or prior to the Closing.
4.3 Public Announcements. Carey, Acquisition, MH and MILN shall not make
any public announcements, notices or other communications ("Public
Announcements") regarding this Agreement and the transactions contemplated
hereby to parties other than the parties hereto and their respective advisors
without the prior written approval (which shall not be unreasonably withheld or
delayed) of (i) Carey, in the case of proposed Public Announcements by MH or
MILN and (ii) MH, in the case of proposed Public Announcements by Carey or
Acquisition. Notwithstanding the foregoing, no such approval shall be required
with respect to filing the IPO Registration Statement or any amendment or
supplement thereto or to any statements made by Carey or its employees, agents
and underwriters in connection with marketing the IPO after filing the IPO
Registration Statement.
4.4 Notification of Certain Matters. Each of the parties (the "Notifying
Party") shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event that would be likely to cause any representation or
warranty of the Notifying Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of the Notifying Party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 4.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
4.5 Conduct of Business. Prior to the Closing Date, unless Carey shall
have consented in writing thereto, MH and MILN jointly and severally covenant
and agree to:
(a) conduct the operations of MILN according to MILN's usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
(b) use reasonable efforts to preserve intact the business organization and
goodwill of MILN, keep available the services of MILN's officers, employees,
Franchisees and other service providers, and maintain satisfactory relationships
with those persons having business relationships with it;
(c) not amend the certificate of incorporation or by-laws of MILN;
(d) promptly notify Carey of (i) any material emergency or other material
change in MILN's condition (financial or otherwise), business, properties,
assets, liabilities,
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prospects or in the operation of MILN's properties and; (ii) of any litigation
or governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(e) not (i) issue any shares of the capital stock, effect any stock split
or otherwise change the capitalization of MILN; (ii) grant, confer or award any
option, warrant, conversion right or other right to acquire any shares of the
capital stock of MILN; (iii) accelerate the vesting or exercisability of any
option, warrant, conversion right or other right to acquire any shares of the
capital stock of MILN; (iv) increase any compensation or enter into or amend any
employment agreement with any of the officers, directors or employees of MILN,
except that MILN may make increases of no more than 8% in the salaries of non-
managerial employees in the ordinary course of business; (v) adopt any new Plans
(including any severance provisions, stock option, stock benefit or stock
purchase plan) or amend any existing Plan in any respect; (vi) cancel,
terminate, amend or modify (or otherwise impair the rights of MILN under) any
Company Contract; or (vii) sell, lease or otherwise dispose of any of the assets
of MILN, other than (A) a conveyance of Excluded Assets in connection with which
MH and MILN have previously satisfied Section 8.2(b) and (B) the resale of
vehicles purchased from Franchisees pursuant to Section 4.5(f)(i);
(f) not (i) make any capital expenditure in excess of $2,500, except that
MILN may purchase vehicles under lease to Franchisees for resale, provided that
all such vehicles shall be resold prior to the Closing; (ii) incur any long-term
indebtedness in addition to that outstanding on the date hereof; (iii) incur any
other indebtedness or liability other than in the ordinary course of business;
(iv) make any loans, advances or capital contributions to, or investments in,
any other person, other than reasonable travel or other advances to employees
and advances to Franchisees in the ordinary course of business consistent with
past practices; (v) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the obligations
of any other person or entity, except to endorse checks for collection or
deposit or the guaranty of Franchisee obligations under Franchisee Vehicle
leases, all in the ordinary course of business consistent with past practice; or
(vi) fail to make any scheduled or other payment by its due date;
(g) continue to make advances to Franchisees in the ordinary course of
business consistent with past practices;
(h) not declare or pay any dividend or distribution on any shares of the
capital stock of MILN, other than a dividend or distribution of Excluded Assets
in connection with which MH and MILN have previously satisfied Section 4.11;
(i) not consent to, authorize or approve (i) any change in zoning or
similar land use classification for the Facility or (ii) any special assessments
with respect to the Facility;
(j) comply with the Statement of Payment Practices in the payment by MILN
of all amounts under Company Contracts;
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(k) no buyback agreements will be entered into between MILN and inactive or
dormant Franchisees whose notes payable to MILN have been written off or are
planned to be written off; and
(l) take no action that would make any representation or warranty contained
in Section 2.33 untrue or incorrect.
4.6 Continued Effectiveness of Representations and Warranties. From the
date hereof up to and including the Closing Date, MH, MILN and MILN's officers
and employees shall conduct the Business and the affairs of MILN in a manner
such that the representations and warranties contained in Section 2.33 of this
Agreement shall be true and correct on and as of the Closing Date as if made on
and as of the Closing Date, except for actions arising in the ordinary and usual
course of business after the date hereof which would not result in a material
adverse change in the properties, assets, operations or condition (financial or
otherwise) or prospects of the Business or MILN.
4.7 Non-Competition; Non-Solicitation. MH hereby covenants and agrees
that for a period which is the longer of (i) the period commencing on the date
hereof and ending five years hence and (ii) the period commencing on the date
hereof and ending two years after the termination of the MH Employment
Agreement, MH will not, directly or indirectly, (a) engage or become interested,
as owner, employee, partner, through stock ownership (except ownership of less
than one (1) percent of any class of securities which are listed for trading on
any national securities exchange), investment of capital, lending of money or
property, rendering of services, or otherwise, either alone or in association
with others, in the operation, management, financing or supervision of any type
of business or enterprise within the Territory (as defined below) which is
competitive with either the Business or Carey, or (b) solicit any of the
employees or officers of MILN, ILN or Carey for purposes of obtaining their
services for any other business, whether or not such other business is
competitive with the Business or Carey. The "Territory" shall mean the area
within a circle which has a 75 mile radius from the office of Carey's New York
subsidiary.
4.8 Further Assurances. MH and MILN will use their best efforts to have
all present officers and directors of MILN execute whatever minutes of meetings
or other instruments and take whatever action as may be necessary or desirable
to (i) effect, perfect or confirm of record or otherwise Carey's full right,
title and interest in and to the MILN Shares and MILN's full right, title and
interest to their respective businesses, properties and assets now conducted,
free and clear of all Encumbrances and (ii) allow MILN to collect, realize upon,
gain possession of, or otherwise acquire full right, title and interest in and
to such businesses, properties and assets, or to carry out the intent and
purposes of the transactions contemplated hereby.
4.9 Exclusive Negotiating Rights. MH and MILN agree that until August 20,
1997, they (i) will not directly or indirectly negotiate or offer to negotiate
or discuss with, solicit or initiate, or entertain or encourage submission of
inquiries, proposals or offers from
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any third party with respect to the disposition of MILN, the Business, the MILN
Shares, or any portion thereof, whether by the sale of assets of MILN or the
Business, or the sale of MILN Shares, or some other means that results in a
change of control of MILN or the Business, or of the benefits of all or
substantially all the assets of MILN or the Business (an "Acquisition Proposal")
and (ii) will promptly notify Carey of the terms of any inquiry or proposal that
MH or MILN may receive with respect to any Acquisition Proposal and of their
response thereto.
4.10 Access and Information.
(a) MH will cause MILN to afford, and MILN will afford, Carey's
representatives with reasonable access to their management, properties, books
and records and furnish to Carey and its representatives all additional
financial and operating data and other information as to their businesses and
properties as Carey may from time to time reasonably request; provided, however,
that MH shall not be required to disclose the names of the customers or
Franchisees of MILN, which information Carey has agreed does not have to be
disclosed until delivery of supplement to the Disclosure Schedule pursuant to
Section 2.33.
(b) Carey's rights under this Section 4.10 shall include, without
limitation, the right (i) to review MILN's title to the Facility; (ii) at
reasonable times, upon proper notice and in such a manner as does not
unreasonably interfere with the conduct of the Business, to make or have made
such reasonable surveys, studies, inspections and tests of the Facility as Carey
desires, including, without limitation, inspections of the structural,
electrical and mechanical systems within the building which is a part of the
Facility and the condition of soils and subsurfaces of the land which is a part
of the Facility, which studies, inspections and tests may include, without
limitation, an asbestos survey, soil borings, percolation tests and studies and
an assessment of the Property for the presence of any Hazardous Material; and
(iii) to contact and consult with governmental authorities regarding the zoning,
building code and other governmental permits and approvals necessary under
applicable laws for the operation of the Business at the Facility. All such
items shall be obtained and reviewed at Carey's sole cost and expense and shall
remain the property of Carey.
4.11 Additional Covenants of MH and MILN. Between the date of this
Agreement and the Closing Date, MH and MILN hereby covenant and agree they will:
(a) execute and deliver at the Closing all documents, certificates,
instruments and items referenced in Sections 1.8(a) and (c); and
(b) execute and deliver such other instruments and take such other actions
as may be reasonably required in order to carry out the intent of this
Agreement.
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5. CONDITIONS TO CLOSING
5.1 Conditions to Obligations of Carey and Acquisition. The obligations
of Carey and Acquisition to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing, or waiver
by Carey and Acquisition in writing, in whole or in part, of each of the
following conditions:
(a) All of the representations and warranties of MH and MILN in Section 2.1
through 2.32 of this Agreement (considered collectively) and each of those
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement; and all of
the representations and warranties of MH and MILN in Section 2.33 of this
Agreement (considered collectively) and each of those representations and
warranties (considered individually) must be accurate in all material respects
as of the Closing Date, as if made on the Closing Date.
(b) All of the covenants and obligations that MH or MILN are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(c) Carey and Acquisition shall have received the opinion of counsel to
MILN, dated the date of the Closing and in form and substance satisfactory to
Carey and its counsel, substantially to the effect set forth on Exhibit 5.1(c),
and the underwriters in the IPO shall be entitled to rely on such opinion and
shall have received a copy thereof.
(d) All third-party consents, approvals and permits required to be obtained
in connection with the transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect.
(e) MH and MILN shall have executed and delivered to Carey all documents,
certificates, instruments and items referenced in Sections 1.8(a) and (c).
(f) MH and MILN shall have delivered to Carey and Acquisition a certificate
of the Secretary of MILN certifying as to requisite corporate or other action
authorizing the transactions contemplated by this Agreement, the incumbency of
officers and directors, and the status of record ownership of MILN's
shareholders.
(g) MH and MILN shall have delivered to Carey and Acquisition such other
certificates, documents and opinions as Carey and its counsel shall reasonably
require.
(h) There must not have been made or threatened by any person or entity any
claim asserting that such person or entity (i) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, any other voting,
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equity, or ownership interest in, MILN, or (ii) is entitled to all or any
portion of the Merger Consideration.
(i) The physical condition of the Facility shall be substantially the same
on the Closing Date it was of the date of this Agreement, reasonable wear and
tear excepted.
(j) Carey shall have obtained an owner's title insurance policy for the
Facility in form and content (including, without limitation, any exceptions to
title or the policy) reasonably acceptable to Carey and its counsel.
(k) The conditions to Carey's obligations to consummate the transactions
contemplated by the ILN Agreement set forth in Section 5.1 thereof shall have
been satisfied and the transactions contemplated by the ILN Agreement shall have
been consummated.
(l) With respect to those companies listed on Schedule 5.1(l) to whom MILN
provides chauffeured vehicle services, all such companies (i) are currently
active customers of MILN, currently producing substantially the same revenue for
MILN as they have in the past, and are expected to continue to produce such
revenue in the future, and (ii) at the time of Closing, either (A) shall have
written contracts with MILN or (B) MILN, AJH and MH shall have used their best
efforts to procure such written contracts.
(m) The Federal Communications Commission shall have granted any required
consent to the transactions contemplated by this Agreement and to Carey's
ownership and operation of the Stations.
5.2 Conditions to Obligations of MH and MILN. The obligations of MH and
MILN to consummate the transactions contemplated by this Agreement subject to
the satisfaction at or prior to the Closing, or waiver by such parties in
writing, in whole or in part, of each of the following conditions:
(a) All of the representations and warranties in Section 3 of this
Agreement (considered collectively), and each of those representations and
warranties (considered individually), (i) must have been accurate in all
material respects as of the date of this Agreement and (ii) must be accurate in
all material respects as of the Closing Date, as if made on the Closing Date.
(b) All of the covenants and obligations that Carey and Acquisition are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
compiled with in all material respects.
(c) MH and MILN shall have received the opinion, dated the date of the
Closing and in form and substance satisfactory to MH and MILN and their counsel,
of Nutter,
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McClennen & Fish, LLP, counsel to Carey and Acquisition, substantially to the
effect set forth on Exhibit 5.2(c).
(d) Carey and Acquisition shall have executed and delivered to MH and MILN
all documents, certificates, instruments, and items referenced in Sections
1.8(b) and (c).
(e) Carey and Acquisition shall have delivered to MH and MILN certificates
of their Secretaries, certifying as to requisite corporate or other action
authorizing the transactions contemplated by this Agreement, and to the
incumbency of all officers signing this Agreement and any instruments to be
delivered hereunder.
(f) The transactions under the ILN Agreement shall have been consummated.
(g) The Federal Communications Commission shall have granted any required
consent to the transactions contemplated by this Agreement and to Carey's
ownership and operation of the Stations.
6. INDEMNIFICATION
6.1 Agreements to Indemnify.
(a) As used in this Article 6:
(i) "Damages" means claims, damages, liabilities, losses, judgments,
settlements, and expenses, including, without limitation, all
reasonable fees and disbursements of counsel incident to the
investigation or defense of any claim or proceeding or threatened
claim or proceeding.
(ii) "Indemnifying Parties" means the parties obligated to provide
indemnification under this Section 6.1.
(iii) Indemnified Party" shall mean the party entitled to
indemnification under this Section 6.1.
(b) On the terms and subject to the limitations set forth in this
Agreement, MH, LCH and AJH (collectively, "Sellers") shall jointly and severally
indemnify, defend and hold Carey harmless from, against and in respect of any
and all Damages incurred by Carey arising from or in connection with (i) any
breach of any representation, warranty, covenant or agreement made by MH or MILN
in this Agreement, (ii) any severance payments to any person who was employed
prior to the Closing by MILN whose employment with MILN is terminated for any
reason before the Closing or during the eighteen-month period commencing on the
Closing Date (other than severance payments to MH and EM to the extent that they
are terminated by MILN under their Management Agreements other than for
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cause), (iii) any action, suit, claim, proceeding or investigation which is
pending or commenced against MILN before the Closing, (iv) any transactions
between MILN and Air Link Express, Ltd. or FINOVA; and (v) anything else for
which Carey is entitled to indemnification under Section 6.1(b) of the ILN
Agreement.
(c) On the terms and subject to the limitations set forth in this
Agreement, Carey shall indemnify, defend and hold MH harmless from, against and
in respect of any and all Damages incurred by MH arising from, or in connection
with any actual or alleged breach of any representation, warranty, covenant or
agreement made by Carey in this Agreement.
(d) The representations, warranties, covenants and agreements set forth in
Articles 2, 3, 4 and 8 shall, for purposes of this Article 6, be deemed to have
survived the Closing Date notwithstanding any contrary terms of this Agreement,
for the period during which claims for indemnification may be made pursuant to
Section 6.2(a) and thereafter shall be extinguished and of no further force and
effect, and whenever such representations, warranties, covenants and agreements
are referred to in this Article 6, the text of the same as set forth in Articles
2, 3, 4 and 8 shall be deemed to be set forth in their entirety herein, and the
same are hereby incorporated herein by such references. Each such
representation, warranty, covenant and agreement shall be deemed to have been
relied upon by the party or parties to which made, notwithstanding any
investigation or inspection made by or on behalf of such party or parties, and
notwithstanding any knowledge acquired (or capable of being acquired) by such
party or parties, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with any such representation, warranty, covenant or agreement, and
shall not be affected in any respect by any such investigation, inspection or
knowledge.
(e) MH hereby agrees to each and every provision of Article 6 of the ILN
Agreement, and agrees to be bound as a Seller and an Indemnifying Party and to
fulfill all obligations of a Seller and an Indemnifying Party under Article 6 of
the ILN Agreement, to the same extent as if he was a party to the ILN Agreement.
6.2 Limitations of Indemnity Obligations. The indemnity obligations of
the Indemnifying Parties under this Agreement shall be subject to the following
limitations:
(a) The indemnity obligations of the Indemnifying Parties shall expire on
the second anniversary of the Closing Date with respect to any matter for which
a claim for indemnification has not been made by such date; provided, however,
that such obligations with respect to (i) the representations and warranties
contained in Sections 2.5 and 2.19 (in each case as updated by Section 2.33) of
this Agreement shall expire at the end of the applicable statute of limitations
period, (ii) the representations and warranties contained in Section 2.23 (as
updated by Section 2.33) of this Agreement shall expire on the fifth (5th)
anniversary of the date of the Closing Date (provided that between the second
and the fifth anniversaries of the Closing Date the Indemnifying Parties
obligations for breach of Section 2.23 (as updated by Section 2.33) shall not
exceed one hundred thousand dollars ($100,000)),
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(iii) the representations, warranties and covenants regarding Taxes, which are
contained in Sections 2.12 (as updated by Section 2.33) and 8.1, shall remain in
effect until all claims for Taxes due by or on account of MILN for any period up
to and including the Closing Date have been settled and any statute of
limitations period with respect to such Taxes has expired, and any claim for
indemnification must be made prior to the expiration of the statute of
limitations applicable to the Return to which the Taxes relate and (iv) the
covenant contained in Section 4.7 shall remain in effect through the period
indicated therein; and provided further that the indemnity obligations of the
Indemnifying Parties for claims timely asserted by an Indemnified Party in the
manner provided in this Agreement shall continue until such claims are finally
resolved and discharged.
(b) The aggregate indemnity obligations of the Indemnifying Parties for any
Damages under this Agreement and the ILN Agreement shall not in any event exceed
seven million U.S. dollars ($7,000,000).
(c) An Indemnified Party shall be entitled to indemnification only if the
aggregate and collective Damages incurred or suffered by it under this Agreement
and the ILN Agreement exceeds one hundred fifty thousand dollars ($150,000), in
which event such Indemnified Party shall be entitled to indemnification of the
full amount of such Damages. Notwithstanding the immediately preceding sentence,
however, Carey shall be entitled to indemnification for Damages incurred or
suffered by it without regard to such threshold (i) pursuant to Section
6.1(b)(i) as a result of the breach of Sections 2.5, 2.12, or 2.19 (in each case
as updated by Section 2.33), 4.7, 8.1 or 8.2, (ii) pursuant to Section 6.1(b)(i)
as a result of a breach of the representations and warranties contained in
Section 2.23 (as updated by Section 2.33) claimed between the second and fifth
anniversaries of the Closing Date, (iii) pursuant to Section 6.1(b)(i) as a
result of a breach of Section 4.5 and (iv) pursuant to Sections 6.1(b)(ii)
through 6.1(b)(v).
(d) The amount which Sellers are or may be required to pay to Carey
pursuant to this Section 6 shall be reduced (retroactively, if necessary) by any
insurance proceeds or refunds (excluding any tax benefits) actually recovered by
or on behalf of Carey in reduction of the related Damages. If Carey shall have
received the payment required by this Agreement from Sellers in respect of
Damages and shall subsequently receive insurance proceeds or refunds (excluding
any tax benefits) in respect of such Damages, then Carey shall promptly repay to
Sellers a sum equal to the amount of such insurance proceeds or refunds actually
received, net of costs and expenses (including taxes incurred), but not
exceeding the amount paid by Sellers in respect of such Damages.
(e) In addition, the amount of Damages Sellers are required to pay pursuant
to this Section 6 shall be reduced by any tax benefit to Carey. Carey's
accountants shall reasonably determine the tax benefit to be achieved (assuming
federal, state and local tax rates reasonably projected by Carey's accountants
to be in effect in the year in which such tax benefit will be achieved) and the
year in which such tax benefit will be achieved and provide such determination
to Sellers in writing. In connection with any such determinations
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hereunder, Carey shall determine in its sole judgment whether to expense or
capitalize or how to otherwise treat any item. If it is projected that a tax
benefit will be achieved in a current year, the amount of such tax benefit will
reduce the Damages to be paid. If such tax benefit is projected to be achieved
in a future year, such tax benefit shall be discounted at 8% per year and such
discounted amount will reduce the Damages to be paid. The accountants' fees for
making any determinations hereunder shall be separately determined and included
within the Damages to be paid (net of tax benefits) by Sellers. Absent manifest
error, any determination by Carey's accountants under this provision shall be
final.
6.3 Notice of Claim. The Indemnified Party shall promptly notify the
Indemnifying Parties in writing of any Claim asserted by a third person that
might give rise to any indemnity obligation hereunder (a "Third Party Claim"),
specifying in reasonable detail the nature thereof and indicating the amount
(estimated if necessary) of the Damages that have been or may be sustained by
Carey. Together with or following such notice, the Indemnified Party shall
deliver to the Indemnifying Parties copies of all notices and documents received
by Carey relating to the Third Party Claim (including court papers).
6.4 Defense and Settlement of Third-Party Claims. The Indemnifying
Parties shall have the right (without prejudice to the right of the Indemnified
Parties to participate at their own expense through counsel of their own
choosing) to defend against any Third Party Claim at their expense and through
counsel of their own choosing and to control such defense if they give written
notice of their intention to do so within 15 business days of their receipt of
notice of Third Party Claim, and in such event the Indemnified Parties shall
cooperate fully in the defense of such Third Party Claim and shall make
available to the Indemnifying Parties or their counsel all pertinent information
under its control relating thereto. The Indemnified Parties shall have the
right to elect to settle any Third Party Claim; provided, however, the
Indemnifying Parties shall not have any indemnification obligation with respect
to any monetary payment to any third party required by such settlement unless
they shall have consented thereto. The Indemnifying Parties shall have the
right to elect to settle any Third Party Claim subject to the consent of the
Indemnified Parties; provided, however, that if the Indemnified Parties fail to
give such consent within 15 business days of being requested to do so, the
Indemnified Parties shall, at their expense, assume the defense of such Third
Party Claim and regardless of the outcome of such matter, the Indemnifying
Parties' liability hereunder shall be limited to the amount of any such proposed
settlement. The foregoing provisions notwithstanding, in no event may the
Sellers (a) adjust, compromise or settle any Third Party Claim (i) unless such
adjustment, compromise or settlement unconditionally releases MILN, ILN and
Carey from all liability or (ii) if such adjustment, compromise or settlement
affects the absolute and sole right of MILN, ILN or Carey to own or use any of
any their assets (including, without limitation, contract rights) or (b) defend
any Third Party Claim which, if adversely determined, would materially impair
the financial condition, results of operations, business or prospects of MILN or
Carey. To the extent that the Indemnified Parties assume the defense of a Third
Party Claim pursuant, the Indemnifying Parties shall have the right to
participate at their own expense in the defense or settlement of such claim.
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6.5 Control of Tax Proceedings.
(a) If a claim shall be made by any taxing authority which, if
successful, would result in an indemnity payment by the Sellers pursuant to this
Section 6 (a "Tax Claim"), or if an audit or administrative proceeding is
commenced by any taxing authority with respect to Taxes that could give rise to
a Tax Claim (a "Tax Audit"), the Sellers shall have the right, at their option,
upon timely notice to Carey, to assume and control the conduct of any such Tax
Audit and the defense of any suit, action or proceeding with respect to any such
Tax Claim at their own expense and with their own counsel (without prejudice to
the right of Carey to participate at its own expense through counsel of its own
choosing), so long as the Sellers have and acknowledge full indemnification
responsibility under this Section 6 for all of the Taxes which are asserted by
the tax authority to be the subject of the Tax Audit or Tax Claim. If Sellers
have indemnification responsibility for less than all of the Taxes which are the
subject of the Tax Audit or Tax Claim, Sellers and Carey shall jointly control
the conduct of such Tax Audit or Tax Claim, each acting in good faith. Carey and
the Sellers shall cooperate in the defense of any Tax Audit or Tax Claim as
provided herein, and each shall keep the other informed of all material
developments and events relating to such Tax Audit or Tax Claim, and shall
consider in good faith all requests made by the other in connection with the
contest.
(b) In any case in which the Sellers are entitled to and elect to
control the contest, as provided in Section 6.5(a) above, Sellers, at their sole
option may pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority with respect to any Tax
Claim; may, at their sole option, either pay the Taxes claimed and sue for a
refund where applicable law permits such refund suits, or may contest the Tax
Claim in any permissible manner, and prosecute such contest to a determination
in court of initial jurisdiction, and to determination in an appellate court,
and may settle the Tax Claim at any stage in the judicial process; provided,
however, that Sellers may not do so without the consent of Carey, which consent
may not be unreasonably withheld, unless such settlement would materially impair
the financial condition, results of operations, business or prospects of MILN or
Carey, in which case Carey may withhold such consent in its sole discretion
(either initially or at some later time) at any stage of the administrative and
judicial process.
7. TERMINATION; AMENDMENTS; WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual consent of Carey, Acquisition, MH and MILN;
(b) by Carey and Acquisition or by MILN and MH if the Closing shall not
have occurred on or before August 20, 1997, unless the failure of the Closing to
occur by such
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<PAGE>
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
(c) by Carey and Acquisition if there has been a material misrepresentation
or material breach of the representations, warranties, covenants or obligations
of MH or MILN set forth herein, provided that in the case of a breach of any
such covenant or obligation, such breach has not been cured within ten (10)
business days after Carey and Acquisition have notified MH or MILN of such
breach; or
(d) by MH and MILN if there has been a material misrepresentation or
material breach of the representations, warranties, covenants and obligations of
Carey or Acquisition set forth herein, provided that in the case of a breach of
any such covenant or obligation, such breach has not been cured within ten (10)
business days after MH and MILN have notified Carey of such breach.
The power of termination provided for by this Section 7.1 will be effective
only after written notice thereof shall have been given to the other parties.
If this Agreement is terminated in accordance with this Section 7.1, this
Agreement shall be abandoned without further action by the parties.
7.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 7.1, this Agreement shall forthwith become void and have no
effect, and no party shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
(a) Sections 4.1 and 9.8 shall survive any termination of this Agreement, and
(b) notwithstanding anything to the contrary contained in this Agreement, no
party shall be relieved of or released from any liabilities or damages arising
out of its breach of any provision of this Agreement.
7.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Closing Date, the parties
hereto may, subject to Section 7.3, (a) extend the time for the performance of
any of the obligations or other acts of the parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed by or on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
7.5 Return of Certain Payments. In the event that the Agreement is
terminated pursuant to Sections 7.1(a), or by Carey and Acquisition pursuant to
Sections 7.1(b) or (c), MH will promptly return the Deposit to Carey.
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<PAGE>
8. ADDITIONAL COVENANTS
8.1 Tax Matters.
(a) MILN shall prepare and file any required Return for any taxable
period ending on or before the Closing Date and that is due on or before the
Closing Date. Carey shall cause MILN to prepare and file all required Returns
due after the Closing Date.
(b) Carey and MH each at no cost to the other shall (i) furnish or
cause to be furnished to the other, upon request, as promptly as practicable,
such information (including access to books and records) and assistance
(including making available personnel familiar with such matters) relating to
MILN as is reasonably necessary for the preparation and filing of any return,
report, statement or for the preparation for any audit and for the prosecution
or defense of any claim, suit or proceeding relating to any proposed adjustments
of Taxes and (ii) use their best reasonable efforts, upon request, to obtain any
certificate or other document from any taxing authority, customer of the
companies or any other person as may be necessary to mitigate, reduce or
eliminate any Taxes that would otherwise be imposed with respect to MILN.
Unless required by any taxing authority, Carey shall not file any amended tax
return with respect to any returns of MILN which were filed before the Closing
Date without the consent of MH, which consent may not be unreasonably withheld.
8.2 Transfer of Excluded Assets.
(a) Between the date hereof and the Closing Date, MILN shall transfer
to MH or his designee (the "Transferee") the following as of 12:01 a.m. on the
Closing Date (collectively, the "Excluded Assets") :
(i) all cash and cash equivalents (defined in accordance with
GAAP) that MILN possesses; provided, however that neither MH nor MILN shall be
permitted to convert any non-cash assets of MILN into cash or cash equivalents
other than in the ordinary course of business consistent with past practices;
(ii) all trade accounts receivable, excluding those arising from
Affiliates or Farm-Outs, that MILN possesses (the "Excluded Receivables") and
all obligations to FINOVA; and
(iii) all deposits that MILN has made to secure indebtedness to
FINOVA in an amount not to exceed $450,000 and any accrued interest thereon.
(b) MILN shall not convey any Excluded Assets to any person or entity
without obtaining the prior written approval of Carey and its counsel (which
shall not be unreasonably withheld) of the form and substance of all documents
and instruments to be used to effect such conveyance.
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(c) The Transferee shall not take any action with respect to any
Deferred Receivable from Air Link Express Ltd. without the written consent of
Carey, which consent will not be unreasonably withheld.
(d) MH and Carey agree that each shall pay one-half of the New York
City and New York State transfer taxes arising with respect to the Facility as a
result of the Merger. Further, MH and Carey agree to pay any other expenses to
the extent provided in Section 9.8.
(e) MILN, MH and Carey agree that the Excluded Assets shall have the
fair market value set forth on Schedule 8.2 hereto, and any reporting of the
value of the Excluded Assets on any Return shall be consistent therewith.
8.3 Further Covenants.
(a) By no later than one business day following the Closing Date:
(i) MH shall retain, pay, discharge and fully perform all
indebtedness, obligations, responsibilities and liabilities of MILN arising out
the factoring arrangement between MILN and FINOVA, including without limitation,
any penalties, interest and other liabilities arising out of the termination of
such arrangement.
(ii) Carey shall pay, discharge and fully perform (i) all of
MILN's indebtedness and obligations under the mortgage on the Facility and (ii)
notes to various MILN investors in the aggregate principal amount of $2,947,702
as of the Balance Sheet Date.
(b) After the Closing Date, Carey shall cause MILN to collect the
Excluded Receivables on behalf of the Transferee in the ordinary course of
business consistent with Carey's usual collection practices and, after deducting
any third party costs of collection, remit to the Transferee, on the last
business day of each month (the "Receivables Payment Date"), all net proceeds
from Excluded Receivables collected by MILN since the last Receivables Payment
Date. MH covenants and agrees that he will cooperate with MILN in its efforts
to collect the Excluded Receivables and will take no action (i) to collect any
Excluded Receivables, except as expressly directed by MILN, or (ii) adverse to
any trade debtor of MILN. No Excluded Receivable shall be referred to a third
party for collection or legal action without the prior agreement of MH and MILN.
MILN shall have no collection responsibility after December 31, 1997.
9. MISCELLANEOUS
9.1 Certain Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
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<PAGE>
"Acquisition Proposal" has the meaning provided in Section 4.9.
"Affiliate" means any person or entity which provides chauffeured vehicle
service to MILN and which MILN considers to be an affiliate.
"Affiliate Contract" means any contract, agreement, commitment, arrangement
or understanding, whether oral or written, between MILN (or the officers,
employees or agents of MILN), and any Affiliate or former Affiliate.
"AJH" means Alfred J. Hemlock, a resident of New York, New York.
"Balance Sheet Date" has the meaning provided in Section 2.10.
"Balance Sheet" has the meaning provided in Section 2.7.
"Business" means the chauffeured vehicle service business and network of
affiliates operated by MILN and the business operated by ILN.
"Carey Common Stock" means shares of Common Stock, par value $.01 per
share, of Carey.
"Carey Financial Statements" has the meaning provided in Section 3.4.
"Carey Shares" has the meaning provided in Section 1.7(a).
"Certificates of Merger" has the meaning provided in Section 1.2.
"Closing" has the meaning provided in Section 1.3.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended to date.
"Commission" means the Securities and Exchange Commission.
"Company Contracts" has the meaning provided in Section 2.25(a).
"Company Proprietary Asset" has the meaning provided in Section 2.20(a).
"Company Vehicles" has the meaning provided in Section 2.14.
"Confidential Information" has the meaning provided in Section 4.1.
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<PAGE>
"Damages" as used in Article 6 of this Agreement, has the meaning provided
in Section 6.1(a).
"DGCL" means the Delaware General Corporation Law.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule 1.
"Effective Time" means such time as the Certificates of Merger are filed
with (i) the Secretary of State of New York in accordance with Section 907 of
the NYBCL and (ii) the Secretary of State of Delaware in accordance with Section
252 of the DGCL.
"EM" means Edward I. Martinez, a resident of Freehold, New Jersey
"EM Employment Agreement" has the meaning provided in Section 1.8(c)(ii).
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including, without limitation, any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"ERISA" has the meaning provided in Section 2.19(a).
"ERISA Affiliate" has the meaning provided in Section 2.19(a).
"Environmental Laws" means, individually and collectively, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act of 1976,
the Hazardous Materials Transportation Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Emergency Planning and
Community Right-to-Know Act or any other federal, state or local law,
regulation, ordinance, rule or by-law regulating the use, presence, storage,
transportation or disposal of Hazardous Materials.
"Excluded Assets" has the meaning provided in Section 8.2.
"Excluded Receivables" has the meaning provided in Section 8.2.
"Facility" means the real property (but not the equipment and other
personal property) located at 13-05 43rd Street Avenue, Long Island City, New
York.
"Facility Documents" has the meaning provided in Section 2.22(b).
"Farm-Out" means any person or entity which provides chauffeured vehicle
services to MILN other than Franchisees and Affiliates.
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<PAGE>
"Farm-Out Contract" means any contract, agreement, understanding,
arrangement or commitment, whether written or oral, between MILN and any Farm-
Out or former Farm-Out.
"Financial Statements" has the meaning provided in Section 2.7.
"FINOVA" means FINOVA Capital Corporation.
"Franchise Contract" means any contract, agreement, understanding,
arrangement or commitment, whether written or oral, as amended to date, between
MILN and any Franchisee or former Franchisee (including, without limitation,
franchise agreements and agreements to repay over time the franchise equity of
terminated franchisees, but not any contract, agreement, understanding,
arrangement or commitment with any former Franchisee which is not executory).
"Franchisee" means any person or entity which provides chauffeured vehicle
services to MILN and which MILN considers to be a franchisee.
"Franchisee Vehicles" has the meaning provided in Section 2.14.
"GAAP" means generally accepted accounting principles.
"Hazardous Materials" means, individually and collectively, toxic,
hazardous, explosive or otherwise dangerous materials, substances, pollutants,
contaminants or wastes (as those terms are used in the Environmental Laws),
petroleum products, polychlorinated biphenyls, asbestos, ureaformaldehye foam,
waste oil or radioactive materials.
"ILN Agreement" means the Stock Purchase Agreement of even date herewith
among Carey, Lupe C. Hemlock and Alfred J. Hemlock.
"Indemnifying Parties" as used in Article 6 of this Agreement, has the
meaning provided in Section 6.1(a).
"IPO" means the initial public offering of shares of Carey Common Stock
under a registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act on or about the date hereof.
"IPO Price" means the price per share at which Carey Common Stock is sold
to the public by Carey in the IPO.
"IPO Registration Statement" means the registration statement Carey will
file with the Commission in connection with the IPO, as the same (and the
prospectus which is a part thereof) may be updated, amended and supplemented
from time to time.
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<PAGE>
"IRS" means the Internal Revenue Service.
"Knowledge of MH" or "MH's knowledge" or similar phrases as used in this
Agreement means the knowledge of both MH and AJH.
"LCH" means Lupe C. Hemlock, a resident of New York, New York.
"Leased Premises" has the meaning provided in Section 2.22(a).
"Merger Consideration" has the meaning provided in Section 1.9.
"MH" means Michael Hemlock, a resident of Hewlett, New York.
"MH Employment Agreement" has the meaning provided in Section 1.4(c)(ii).
"MILN Common Stock" has the meaning provided in Section 2.4.
"MILN Shares" means all 100 outstanding shares of MILN Common Stock.
"Notifying Party" has the meaning provided in Section 4.4.
"NYBCL" means the New York Business Corporation Law.
"Permits" has the meaning provided in Section 2.16.
"Plans" has the meaning provided in section 2.19(a).
"Promissory Note" has the meaning provided in Section 1.7(b).
"Proprietary Asset" means any (a) patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or unregistered),
copyright application, mask work, mask work application, trade secret, know-how,
confidential information, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual property right or
intangible asset; or (b) license or right to use or exploit any of the
foregoing.
"Public Announcement" has the meaning provided in Section 4.3.
"Registration Rights Agreement" has the meaning provided in Section
1.8(c)(iii).
"Returns" has the meaning provided in Section 2.12(a).
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" as used in Article 6 of this Agreement has the meaning provided
in Section 6.1.
"Statement of Payment Practices" has the meaning set forth in Section
2.25(e).
"Stations" means conventional business stations WXV972 (854.06250/MHZ),
WNMY775 (853.61250 MHZ) and KNHH506 (854.7375 MHZ), all operational in New York,
New York, licensed either to Manhattan Limousine Ltd. or MILN.
"Surviving Corporation" means the corporation that survives the Merger.
"Tangible Personal Property" has the meaning provided in Section 2.22(a).
"Tax Affiliate" has the meaning provided in Section 2.12(a).
"Taxes" has the meaning provided in Section 2.12(e).
"Third Party Claim" has the meaning provided in Section 6.3.
"Transferee" has the meaning provided in Section 8.2.
"Vehicles" has the meaning provided in Section 2.14.
9.2 Entire Agreement. This Agreement constitutes, with the Disclosure
Schedule and the Exhibits hereto, the entire agreement among the parties with
respect to the subject matter hereto and supersedes all other prior agreements
and understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
9.3 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
9.4 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 or by electronic facsimile transmission
(with a confirmation copy mailed by first class mail), when mailed by registered
or certified mail (postage prepaid, return receipt requested) or delivered to a
courier of national reputation to the respective parties as follows:
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<PAGE>
If to Carey or Acquisition:
Carey International, Inc.
4530 Wisconsin Avenue, N.W.
Washington, DC 20016
Fax: (202) 895-1201
Attention: Vincent A. Wolfington,
Chairman of the Board
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Fax: (617) 973-9748
Attention: James E. Dawson, Esq.
If to MH or MILN:
Michael Hemlock
13-05 43rd Street Avenue
Long Island City, New York 11101
Fax: (718) 786-5461
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036-6710
Fax: (212) 336-2222
Attention: Alan Gettner, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
9.6 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.
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9.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
9.8 Expenses. Except to extent otherwise agreed herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement (i) incurred by either MILN or MH shall be paid by MH and (ii)
incurred by Carey or Acquisition shall be paid by Carey shall be paid by the
party incurring such expenses.
9.9. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and 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.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
CAREY INTERNATIONAL, INC.
By: /s/ Vincent A. Wolfington
------------------------------------
Title: Chairman
---------------------------------
MILN ACQUISITION CORPORATION
By: /s/ Vincent A. Wolfington
------------------------------------
Title: President
---------------------------------
MANHATTAN INTERNATIONAL
LIMOUSINE NETWORK LTD.
By: /s/ Michael Hemlock
------------------------------------
Title: President
---------------------------------
/s/ Michael Hemlock
---------------------------------------
Michael Hemlock
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<PAGE>
Exhibit 3.1
-----------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAREY INTERNATIONAL, INC.
Carey International, Inc. (the "Corporation") filed its original
Certificate of Incorporation with the Delaware Secretary of State on October 10,
1979. A Restated Certificate of Incorporation was filed with the Delaware
Secretary of State on December 20, 1991, and subsequently was amended by: (i) a
Certificate of Amendment filed with the Delaware Secretary of State on August 5,
1992 and (ii) a Certificate of Amendment filed with the Delaware Secretary of
State on _______________, 1997 (as amended, the "First Restated Certificate").
This Amended and Restated Certificate of Incorporation was duly adopted by a
majority of the stockholders of the Corporation on ______________, 1997, in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware (the "GCL"). Prompt written notice of
the adoption of this Amended and Restated Certificate of Incorporation shall be
given to those stockholders who have not consented in writing thereto, as
provided in Section 228 of the GCL.
Upon the filing of this Amended and Restated Certificate of Incorporation
with the Secretary of State of Delaware (the "Effective Time"), the following
shall occur:
(i) Each of the 42,070 shares of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be redeemed
by the Corporation at a price of $50 plus approximately 2.044 shares
of Common Stock, notwithstanding any provision to the contrary
contained in Article Fourth, Section Two 3(C) or any other provision
of the First Restated Certificate in effect immediately before the
Effective Time;
(ii) Each of the 9,580 shares of Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be
automatically converted into and exchanged for approximately 69.286
shares of Common Stock, notwithstanding any provision to the contrary
contained in Article Fourth, Section Two 4(C) or any other provision
of the First Restated Certificate in effect immediately before the
Effective Time;
(iii) Each of the 46,890 shares of Series G Preferred Stock issued and
outstanding immediately prior to the Effective Time (such number being
<PAGE>
inclusive of all issued and outstanding shares of Series G
Preferred Stock other than 3,000 shares held of record by IBJS
Capital Corporation), shall be automatically converted into and
exchanged for approximately 16.288 shares of Common Stock
notwithstanding any provision to the contrary contained in Article
Fourth, Section Two 4(C) or any other provision of the First
Restated Certificate in effect immediately before the Effective
Time;
(iv) All of the 10,000 shares of Series F Preferred Stock issued and
outstanding immediately prior to the Effective Time and all of the
3,000 shares of Series G Preferred Stock held of record by IBJS
Capital Corporation shall be redeemed by the Corporation
notwithstanding any provision to the contrary contained in Article
Fourth, Section Two 3(C) or any other provision of the First
Restated Certificate in effect immediately before the Effective
Time;
(v) The number of shares of stock authorized for issuance shall be
increased from 10,000,000 to 21,000,000;
(vi) The number of shares of Common Stock authorized for issuance shall
be increased from 9,512,950 to 20,000,000;
(vii) The number of shares of Preferred Stock authorized for issuance
shall be increased from 173,050 to 1,000,000;
(viii) The authorized but unissued shares of Class A Common Stock shall be
eliminated; and
(ix) The designations of Class A Common Stock, Series A Preferred Stock,
Series B Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock shall be eliminated
and replaced with a "blank check" Preferred Stock provision
entitling the Board to designate the rights and preferences of
Preferred Stock.
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<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAREY INTERNATIONAL, INC.
FIRST: The name of the corporation is Carey International, Inc.
-----
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The aggregate number of shares of stock which the Corporation
------
shall have authority to issue is twenty-one million (21,000,000) shares,
consisting of twenty million (20,000,000) shares of common stock, $.01 par value
(the "Common Stock"), and one million (1,000,000) shares of preferred stock,
$.01 par value (the "Preferred Stock"). Except as otherwise provided by law,
the shares of stock of the Corporation, regardless of class, may be issued by
the Corporation from time to time in such amounts, for such consideration and
for such corporate purposes as the Board of Directors may from time to time
determine. A description of the different classes and series of the
Corporation's capital stock and a statement of the designations and the relative
rights, preferences and limitations of the shares of each class and series of
capital stock are as follows:
A. Common Stock
------------
1. Voting Rights. Except as otherwise provided by the GCL or in
-------------
this Article FOURTH (or in any certificate of designation establishing a series
of Preferred Stock), the holders of Common Stock shall exclusively possess all
voting power. Each holder of record of issued and outstanding Common Stock
shall be entitled to one (1) vote on all matters for each share so held.
2. Dividends. Subject to the rights and preferences, if any, of the
---------
holders of Preferred Stock, each issued and outstanding share of Common Stock
shall entitle the record holder thereof to receive an equal portion of cash
dividends and distributions out of funds legally available therefor, when, as
and if declared by the Board of Directors, in such amounts and at such times as
the Board of Directors shall determine.
3. Liquidation. Upon any voluntary or involuntary liquidation,
-----------
dissolution or winding up of the Corporation, after there shall have been paid
to or set aside for the holders
<PAGE>
of any class of capital stock having preference over the Common Stock in such
circumstances the full preferential amounts to which they are respectively
entitled, the holders of the Common Stock, and of any class or series of capital
stock entitled to participate in whole or in part therewith as to the
distribution of assets, shall be entitled, after payment or provision for
payment of all debts and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for distribution, in cash or in
kind, in proportion to their holdings.
B. Preferred Stock
---------------
The Board of Directors of the Corporation is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of Preferred
Stock in one or more series and to fix and state the voting powers,
designations, preferences and relative participating, optional or other special
rights of the shares of each series and the qualifications, limitations and
restrictions thereof, including, but not limited to, determination of one or
more of the following:
(i) the distinctive designations of each such series and the number
of shares which shall constitute such series, which number may be increased
(except where otherwise provided by the Board of Directors in creating such
series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by the Board of Directors;
(ii) the annual rate or amount of dividends payable on shares of
such series, whether such dividends shall be cumulative or non-cumulative,
the conditions upon which and the dates when such dividends shall be
payable, the date from which dividends on cumulative series shall accrue
and be cumulative on all shares of such series issued prior to the payment
date for the first dividend of such series, the relative rights of
priority, if any, of payment of dividends on shares of that class or
series, and the participating or other special rights, if any, with respect
to such dividends;
(iii) whether such series will have any voting rights in addition to
those prescribed by law and, if so, the terms and conditions of the
exercise of such voting rights;
(iv) whether the shares of such series shall be redeemable or
callable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed or called, which price may
vary under different conditions and at different redemption or call dates;
(v) the amount or amounts payable upon the shares of such series in
the event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, and the relative rights of priority, if any, of
payment of shares of such series;
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<PAGE>
(vi) whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and
the manner of its application, including the price or prices at which such
shares may be redeemed or purchased through the application of such fund;
(vii) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and if so convertible or exchangeable, the conversion price or
prices, or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(viii) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Preferred Stock and whether such shares may be reissued as shares of the
same or any other series of stock;
(ix) the conditions and restrictions, if any, on the payment of
dividends or on the making of other distributions on, or the purchase,
redemption or other acquisition by the Corporation, or any subsidiary
thereof, of, the Common Stock or any other class (or other series of the
same class) ranking junior to the shares of such series as to dividends or
upon liquidation, dissolution or winding up; and
(x) the conditions and restrictions, if any, on the creation of
indebtedness of the Corporation, or any subsidiary thereof, or on the issue
of any additional stock ranking on parity with or prior to the shares of
such series as to dividends or upon liquidation, dissolution or winding up.
All shares within each series of Preferred Stock shall be alike in every
particular, except with respect to the dates from which dividends, if any, shall
commence to accrue.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(i) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. No director need be a
stockholder.
(ii) The Board of Directors shall have the power to make, alter,
amend, change, add to or repeal the By-Laws of the Corporation, subject to
the right of the stockholders to make, alter, amend, change, add to or
repeal the By-Laws, provided that any such action by the stockholders shall
require the affirmative vote of the holders of at least seventy-five
percent (75%) of the then combined voting power of all outstanding
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shares of stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class.
(iii) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any class or
series of stock having a preference over the Common Stock with respect to
the election of additional directors under specified circumstances, the
number of directors of the Corporation shall be as from time to time fixed
by, or in the manner provided in, the By-Laws of the Corporation. Election
of directors need not be by written ballot unless the By-Laws so provide.
The nominees for director, other than those who may be elected by the
holders of any class or series of stock having preference over the Common
Stock with respect to the election of directors under specified
circumstances, shall be divided into three classes, as nearly equal in
number as may be, the term of office of those of the first class to expire
at the first annual meeting of stockholders after their election, the term
of office of those of the second class to expire at the second annual
meeting of stockholders after their election, and the term of office of
those of the third class to expire at the third annual meeting of
stockholders after their election. At each annual election held after the
initial election of directors, the directors to succeed those whose terms
expire shall be elected for a term of office to expire upon the third
annual meeting of stockholders after their election. In all events, the
members of each class of directors shall hold office until their successors
are duly elected and qualified.
(iv) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any class or
series of stock having a preference over the Common Stock with respect to
the election of directors under specified circumstances, newly created
directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(v) Except as otherwise fixed pursuant to the provisions of
Article FOURTH hereof relating to the rights of the holders of any class or
series of stock having a preference over the Common Stock with respect to
the election of directors under specified circumstances, any director may
be removed from office without cause only by the affirmative vote of the
holders of at least 75% of the then combined voting power of all
outstanding shares of stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class.
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(vi) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the GCL as the same exists or may
hereafter be amended. Any repeal or modification of this Article FIFTH by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification with respect to acts or omissions occurring prior to
such repeal or modification.
(vii) The Corporation shall indemnify any officer or director who,
as a result of his or her acting as an officer or director of the
Corporation, was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and upon request shall pay any
expense incurred by any officer or director in connection with any such
action, suit or proceeding in advance of the final disposition of such
matter, all to the fullest extent permitted by Delaware law.
(viii) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation and any By-Law
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
(ix) Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provisions contained in the GCL) outside the
State of Delaware at such places as may be designated from time to time by
the Board of Directors or in the By-Laws of the Corporation.
(x) If at any time the Corporation shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of
1934, for so long as such class is so registered, any action by the
stockholders of such class must be taken at an annual or special meeting of
stockholders and may not be taken by written consent.
SIXTH: Whenever a compromise or arrangement is proposed between the
-----
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as said
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court directs. If a majority in number representing three-fourths in value of
the creditors or class or creditors, and/or stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, then said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the application has
been made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change or
-------
repeal any of the provisions contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 75% of the then combined voting
power of all outstanding shares of the Corporation entitled to vote generally in
the election of directors, voting together as a single class, shall be required
to alter, amend or adopt any provision inconsistent with, or repeal, paragraphs
(i), (ii), (iii), (iv), (v), (viii) or (x) of Article FIFTH or this Article
SEVENTH or any provision hereof or thereof.
The undersigned Chief Executive Officer of the Corporation, Vincent A.
Wolfington, whose mailing address is Carey International, Inc., 4530 Wisconsin
Avenue, N.W., 5th Floor, Washington, D.C. 20016, hereby executes this Amended
And Restated Certificate of Incorporation on this ____ day of ____________ ,
1997.
CAREY INTERNATIONAL, INC.
By:
___________________________________
Vincent A. Wolfington,
Chief Executive Officer
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Exhibit 3.2
-----------
BY-LAWS OF
CAREY INTERNATIONAL, INC.
ARTICLE I
Offices
The registered office shall be in the City of Wilmington, County of New
Castle, State of Delaware, and the name of the resident agent in charge thereof
is the Corporation Service Company.
The corporation may also have offices at such other places within or
without the State of Delaware as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section l. Place of Meetings. All meetings of stockholders for any
--------- -----------------
purpose shall be held at such place, within or without the State of Delaware, as
shall be designated by the Board of Directors and stated in the notice of the
meeting.
Section 2. Annual Meeting. An annual meeting of the stockholders of the
--------- --------------
corporation, for the election of Directors to succeed those whose terms expire
and for the transaction of such other business as may properly come before the
meeting, shall be held on such date and at such time as shall be fixed from time
to time by the Board of Directors and stated in the notice of the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
---------- -----------------
called by the Chairman or by order of the Board of Directors. Business
transacted at any special meeting shall be confined to the purpose or purposes
stated in the notice of such meeting.
Section 4. Notice of Meeting. Notice of the time and place of holding
--------- -----------------
each annual meeting and each special meeting of stockholders shall be given by
the Secretary, not less than ten nor more than sixty days before the meeting, to
each stockholder of record entitled to vote at such meeting. Notices of all
meetings of stockholders shall state the purposes for which the meetings are
held.
Section 5. List of Stockholders. At least ten days before every meeting
--------- --------------------
of stockholders a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder,
shall be prepared by the Secretary, who shall have charge of the stock ledger.
Such list shall be open for said ten days to the examination
of any stockholder, for any purpose germane to the meeting, during ordinary
business hours, either at a place specified in the notice of the meeting (which
place shall be within the city
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where the meeting is to be held) or, if no such other place has been so
specified, at the place where the meeting is to be held. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder present at the meeting.
Section 6. Quorum. At any meeting of stockholders, the holders of issued
--------- ------
and outstanding shares of capital stock which represent a majority of the votes
entitled to be cast thereat, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time until a
quorum shall be present or represented. Unless the adjournment is for more than
thirty days or a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally called.
Section 7. Voting. At any meeting of the stockholders, every stockholder
--------- ------
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder and bearing
a date not more than eleven months prior to said meeting. When a quorum is
present at any meeting, except with respect to the election of directors, the
holders of shares of stock present in person or represented by proxy, which
shares represent a majority of votes cast on any question before the meeting,
shall decide the question, unless the question is one upon which by express
provision of law or of the certificate of incorporation or of these By-laws a
different vote is required, in which case such express provision shall govern
and control the decision of such question. The election of directors shall be
decided by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote thereon.
Section 8. Fixing of Record Date. (a) In order that the corporation may
--------- ---------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action other than stockholder action by
written consent, the Board of Directors may fix a record date, which shall not
precede the date such record date is fixed and shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any such other action. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given. The record date for any other purpose other than
stockholder action by written consent shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply
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to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors.
Section 9. Nomination of Directors. Only persons who are nominated in
---------- ------------------------
accordance with the procedures set forth in the By-laws shall be eligible to
serve as Directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 9, who shall be entitled to vote for the election
of directors at the meeting and who complies with the notice procedures set
forth in this Section 9. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a Director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the class and number of shares
of the corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible to
serve as a Director of the Corporation unless nominated in accordance with the
procedures set forth in this By-law. The Chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-laws, and if he or
she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 9, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder with respect to the
matters set forth in this Section.
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Section 10. Notice of Business. At any meeting of the stockholders, only
----------- -------------------
such business shall be conducted as shall have been brought before the meeting
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the corporation who is a stockholder of record at the time of giving of the
notice provided for in this Section 10, who shall be entitled to vote at such
meeting and who complies with the notice procedures set forth in this Section
10. For business to be properly brought before a stockholder meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder and (d) any material interest in the stockholder in such business.
Notwithstanding anything in the By-laws to the contrary, no business shall be
conducted at a stockholder meeting except in accordance with the procedures set
forth in this Section 10. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of the By-laws,
and if he or she should so determine, he or she shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act, and the rules and regulations thereunder with respect to the matters set
forth in this Section. Nothing in this Section 10 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III
Directors
Section 1. Directors and Their Terms of Office. There shall be a Board of
--------- -----------------------------------
Directors consisting of not less than three nor more than fifteen persons, the
exact number of Directors to be determined from time to time by resolution
adopted by affirmative vote of a majority of the number of Directors required at
the time to constitute a full board as fixed in or determined pursuant to these
By-laws as then in effect. The Directors shall, except as otherwise provided in
Section 3 of this Article, be elected at the annual meeting or at any meeting of
the stockholders held in lieu of such annual meeting, which meeting, for the
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purposes of these By-laws, shall be deemed the annual meeting, and each Director
so elected shall hold office until his or her successor is elected and
qualified. A Director need not be a stockholder. Within the limits above
specified, the number of Directors may at any time be increased or decreased by
vote of the Directors at any meeting of the Directors provided that no decrease
in the number of Directors shall affect the term of any Director in office.
The Directors, other than those who may be elected by the holders of any
class or series of stock having preference over the Common Stock as to dividends
or upon liquidation, shall be classified, with respect to the time for which
they severally hold office, into three classes, designated Class I, Class II and
Class III, as nearly equal in number as possible, with the term of office of one
Class expiring each year. Directors of Class I shall be initially elected to
hold office for a term expiring at the next succeeding annual meeting of
stockholders, Directors of Class II shall be initially elected to hold office
for a term expiring at the second succeeding annual meeting of stockholders and
Directors of Class III shall be initially elected to hold office for a term
expiring at the third succeeding annual meeting of stockholders, with the
members of each Class to hold office until their successors are elected and
qualified. At each subsequent annual meeting of the stockholders of the
corporation, the successors to the Class of directors whose term expires at such
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
Section 2. Powers of Directors. The affairs, property and business of the
--------- -------------------
corporation shall be managed by the Board of Directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by law or by the certificate of incorporation or these By-laws directed or
required to be exercised or done by the stockholders.
Section 3. Vacancies. If any vacancies occur in the Board of Directors
--------- ---------
caused by the death, resignation, retirement, disqualification or removal from
office of any Directors or otherwise, or any new Directorship is created by any
increase in the authorized number of Directors (except as otherwise fixed
pursuant to the provisions of Article FOURTH of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock to elect directors under specified
circumstances), Directors to fill the vacancy or vacancies or to fill the newly
created Directorship shall be elected solely by a majority vote of the Directors
then in office, whether or not a quorum, at any meeting of the Board and the
Directors so chosen shall hold office until their successors, if any, are duly
elected and qualified. Any Director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the Class of
Directors in which the new directorship was created or the vacancy occurred and
until such Director's successor shall have been elected and qualified. No
decrease in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
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Section 4. Annual Meeting of Directors. The first meeting of each newly
--------- ---------------------------
elected Board of Directors may be held without notice immediately after an
annual meeting of stockholders (or a special meeting of stockholders held in
lieu of an annual meeting) at the same place as that at which such meeting of
stockholders was held; or such first meeting may be held at such place (within
or without the State of Delaware) and time as shall be fixed by the consent in
writing of all the Directors, or may be called in the manner hereinafter
provided with respect to the call of special meetings.
Section 5. Regular Meetings of Directors. Regular meetings of the Board
--------- -----------------------------
of Directors may be held at such times and at such place or places (within or
without the State of Delaware) as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting and a notice, if
given, need not specify the purposes thereof.
Section 6. Special Meetings of Directors. Special meetings of the Board
--------- -----------------------------
of Directors may be called at any time by or under the authority of the Chairman
and shall be called by him or her or by the Secretary on written request of any
two Directors or, if the Secretary fails to do so, by two Directors in the name
of the Secretary, to be held in each instance at such place (within or without
the State of Delaware) as the person calling the meeting may designate in the
call thereof. Notice of each special meeting of the Board of Directors, stating
the time and place thereof, shall be given to each Director by the Secretary not
less than twenty-four hours before the meeting. Such notice need not specify
the purposes of the meeting.
Section 7. Quorum; Voting. At any meeting of the Board of Directors a
---------- ---------------
majority of the number of Directors required to constitute a full Board, as
fixed in or determined pursuant to these By-laws as then in effect, shall
constitute a quorum for the transaction of business, but if a quorum shall not
be present at any meeting of Directors, the Directors present thereat may
adjourn the meeting from time to time without notice other than announcement at
the meeting, until a quorum shall be present. Except as otherwise provided by
law or by the certificate of incorporation or by the By-laws, the affirmative
vote of at least a majority of the Directors present at a meeting at which there
is a quorum shall be the act of the Board of Directors.
Section 8. Meetings by Telephone. Members of the Board of Directors or of
--------- ---------------------
any committee thereof may participate in meetings of the Board of Directors or
of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 9. Action Without Meeting. Unless otherwise restricted by the
--------- ----------------------
certificate of incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing and
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the writing or writings are filed with the minutes of proceedings of the Board
of Directors or of such committee.
Section 10. Compensation. By resolution of the Board of Directors, the
---------- ------------
Directors, as such, may receive stated salaries for their services, and may be
allowed a fixed sum and expenses of attendance, if any, for attendance at each
regular or special meeting of the Board. Members of committees may also be
allowed a fixed sum and expenses of attendance, if any, for attending committee
meetings. Nothing herein contained shall preclude any Director from serving the
corporation in any other capacity and receiving compensation for such services.
ARTICLE IV
Executive and Other Committees
The Board of Directors, by the affirmative vote of a majority of the number
of Directors required at the time to constitute a full board as fixed in or
determined pursuant to these By-laws as then in effect, may designate two or
more of its members to constitute an Executive Committee, which committee shall
have, when the Board of Directors is not in session, and may exercise, to the
extent provided by resolution of the Board of Directors, from time to time, all
the powers of the Board of Directors (including all action which may be taken by
the Board of Directors as by law, by the certificate of incorporation or by the
By-laws) insofar as such powers may be lawfully delegated, and may have power to
authorize the seal of the corporation to be affixed to all papers which may
require it.
The Board of Directors, by the affirmative vote of a majority of the number
of Directors required at the time to constitute a full Board as fixed in or
determined pursuant to these By-laws as then in effect, may also appoint other
committees, the members of which may, but need not, be Directors, the number
composing such committees not less than two, and the powers (to be advisory only
if all the members are not Directors) conferred upon them to be determined by
resolution of the Board of Directors.
No committee shall have power or authority to amend the certificate of
incorporation, adopt an agreement of merger or consolidation, recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommend to the stockholders a dissolution
of the corporation or a revocation of a dissolution, or amend the By-laws; and
unless the resolution shall expressly so provide, no committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Vacancies in the membership of committees shall be filled by the Board of
Directors at a regular meeting or at a special meeting.
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At any meeting of any committee a majority of the whole committee shall
constitute a quorum and except as otherwise provided by statute or by the
certificate of incorporation or by the By-laws the affirmative vote of at least
a majority of the members present at a meeting at which there is a quorum shall
be the act of the committee.
The Secretary of the corporation, or in his or her absence, an Assistant
Secretary, or other person designated by a committee, shall act as secretary of
such committee.
The Executive Committee and each of the other committees, except as
otherwise provided by resolution of the Board of Directors, shall fix the time
and place of its meetings within or without the State of Delaware, shall adopt
its own rules and procedure, and shall keep a record of its acts and proceedings
and report the same from time to time to the Board of Directors.
ARTICLE V
Officers
Section l. Officers and Their Election, Term of Office and Vacancies. The
--------- ---------------------------------------------------------
officers of the corporation shall be a Chairman of the Board, a President, a
Secretary, a Treasurer and such Executive Vice Presidents, Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers as the Board of
Directors may from time to time determine and elect or appoint. All officers
shall be elected annually by the Board of Directors at their first meeting
following the annual meeting of stockholders or any special meeting held in lieu
thereof and shall hold office until their successors are duly elected and
qualified. The Chairman of the Board must be a Director. All other officers
may, but need not be, members of the Board of Directors. Two or more offices
may be held by the same person. Any officer elected by the Board of Directors
may be removed at any time by the Board of Directors. If any vacancy shall
occur among the officers, it shall be filled by the Board of Directors.
Section 2. Chairman of the Board. The Chairman of the Board shall be the
--------- ---------------------
chief executive officer of the corporation with full control and responsibility
for management decisions, subject to the supervision and control of the Board of
Directors and such limitations as the Board of Directors may from time to time
impose. The Chairman of the Board when present shall preside at all meetings of
the stockholders. It shall be his or her duty and he or she shall have the
power to see that all orders and resolutions of the Board are carried into
effect. The Chairman of the Board shall perform such additional duties and have
such additional powers as the Directors shall designate. In the absence or
disability of the Chairman of the Board, his or her powers and duties shall be
performed by such officer of the corporation as the Board shall designate.
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Section 3. President. In the absence of the Chairman of the Board,
--------- ---------
except as otherwise voted by the Board of Directors, the President shall preside
at all meetings of the stockholders and of the Board of Directors at which
present. The President shall have such duties and powers as are commonly
incident to the office and such other duties and powers as the Board of
Directors shall from time to time designate.
Section 4. Executive Vice Presidents. In the absence or disability of the
--------- -------------------------
President, his or her powers and duties shall be performed by the Executive Vice
President, if only one, or, if more than one, by the one designated for the
purpose by the Board. Each Executive Vice President shall have such other
powers and perform such other duties as the Board shall from time to time
designate.
Section 5. Treasurer. The Treasurer shall keep full and accurate accounts
--------- ---------
of receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositaries as shall be designated by the Board or in
the absence of such designation in such depositaries as he or she shall from
time to time deem proper. He or she shall disburse the funds of the corporation
as shall be ordered by the Board, taking proper vouchers for such disbursements.
He or she shall promptly render to the President and to the Board such
statements of his or her transactions and accounts as the President and Board
respectively may from time to time require. The Treasurer shall perform such
duties and have such powers additional to the foregoing as the Board may
designate.
Section 6. Assistant Treasurers. In the absence or disability of the
--------- --------------------
Treasurer, his or her powers and duties shall be performed by the Assistant
Treasurer, if only one, or if more than one, by the one designated for the
purpose by the Board. Each Assistant Treasurer shall have such other powers and
perform such other duties as the Board shall from time to time designate.
Section 7. Secretary. The Secretary shall issue notices of all meetings
--------- ---------
of stockholders and Directors and of the executive and other committees where
notices of such meetings are required by law or these By-laws. He or she shall
keep the minutes of meetings of stockholders and of the Board of Directors and
of the executive and other committees, respectively, unless such committees
appoint their own respective secretaries and be responsible for the custody
thereof. Unless the Board shall appoint a transfer agent and/or registrar, the
Secretary shall be charged with the duty of keeping, or causing to be kept,
accurate records of all stock outstanding, stock certificates issued and stock
transfers. He or she shall sign such instruments as require his or her signature
and shall perform such other duties and shall have such powers as the Board of
Directors shall designate from time to time, in all cases subject to the control
of the Board of Directors. The Secretary shall have custody of the corporate
seal, shall affix and attest such seal on all documents whose execution under
seal is duly authorized. In his or her absence at any meeting, an Assistant
Secretary or the Secretary pro tempore shall perform his or her duties thereat.
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Section 8. Assistant Secretaries. In the absence or disability of the
--------- ---------------------
Secretary, his or her powers and duties shall be performed by the Assistant
Secretary, if only one, or, if more than one, by the one designated for the
purpose by the Board. Each Assistant Secretary shall have such powers and
perform such other duties as the Board shall from time to time designate.
Section 9. Salaries. The salaries of officers, agents and employees shall
--------- --------
be fixed from time to time by or under authority from the Board of Directors.
ARTICLE VI
Resignations and Removals
Section 1. Officers, Agents, Employees and Members of Committees. Any
--------- -----------------------------------------------------
officer, agent or employee of the corporation may resign at any time by giving
written notice to the Board of Directors or to the Chairman of the Board or
President or to the Secretary of the corporation; and any member of any
committee may resign by giving written notice either as aforesaid or to the
committee of which he or she is a member or to the chairman thereof. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified, upon receipt thereof, and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
The Board of Directors may at any time, with or without cause, remove from
office or discharge or terminate the employment of any officer, agent, employee
or member of any committee.
Section 2. Directors. Any Director of the corporation may resign at any
--------- ---------
time by giving written notice to the Board of Directors or to the Chairman of
the Board or President or to the Secretary of the corporation. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified, upon receipt thereof; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
When one or more Directors shall resign from the Board of Directors, effective
at a future date, a majority of the Directors then in office, including those
who have so resigned, shall have power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as provided in these
By-laws in the filling of other vacancies. The stockholders of the corporation
entitled to vote upon the election of Directors may, at any time, remove from
office any one or more Directors only with cause, and his or her successor or
their successors shall be elected by the remaining Directors as provided in
these By-laws with respect to the filling of other vacancies. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him or her.
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ARTICLE VII
Indemnification of Directors, Officers and Others
Section 1. The corporation shall indemnify, to the fullest extent
----------
permitted by the General Corporation Law of the State of Delaware as presently
in effect or as hereafter amended:
(a) Subject to the provisions of Section 10, any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether external or internal to the
corporation (other than by action by or in the right of the corporation) by
reason of the fact that he or she is or was a Director or officer of the
corporation, or is or was serving at the request of the corporation as a
Director or officer of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such suit, action or proceeding
if he or she acted in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe that his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
---------------
create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action
or proceeding, that the person had no reasonable cause to believe that his
or her conduct was lawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was a Director or officer of the corporation,
or is or was serving at the request of the corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably
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<PAGE>
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 2. The Board of Directors, in its discretion, may authorize the
---------
corporation to indemnify to the fullest extent permitted by the General
Corporation Law of the State of Delaware (as presently in effect or as hereafter
amended):
(a) Subject to the provisions of Section 10, any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that he or she is or was an employee
or agent of the corporation, or is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him or her in connection with such suit, action
or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
---------------
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, that the person had no
reasonable cause to believe that his or her conduct was lawful.
(b) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he or she is or was an employee or agent of the corporation,
or is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
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<PAGE>
Section 3. Any indemnification under this Article VII (unless required by
---------
law or ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Sections l and 2 of this
Article VII. Such determination shall be made (i) by a majority vote of the
Directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such Directors, or if such Directors
so direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders of the corporation.
Section 4. Expenses incurred by a Director or officer in defending a civil
---------
or criminal action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the Director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this Article VII. Any advance
under this Section 4 shall be made promptly, and in any event within ninety
days, upon the written request of the person seeking the advance.
Section 5. The indemnification and advancement of expenses provided by, or
----------
granted pursuant to, the other Sections of this Article VII shall not be deemed
exclusive of any other rights to which any person, whether or not entitled to be
indemnified under this Article VII, may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office. Each person who is or becomes a Director or officer
as described in Section 1 shall be deemed to have served or to have continued to
serve in such capacity in reliance upon the indemnity provided for in this
Article VII. All rights to indemnification under this Article VII shall be
deemed to be provided by a contract between the corporation and the person who
serves as a Director or officer of the corporation at any time while these By-
laws and other relevant provisions of the General Corporation Law of the State
of Delaware and other applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or obligations then existing.
Section 6. The Board of Directors may at any time and from time to time
---------
cause the corporation to purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
the State of Delaware (as presently in effect or hereafter amended), the
Certificate of Incorporation of the corporation or these By-laws.
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<PAGE>
Section 7. The corporation's indemnification under Sections 1 and 2 of
---------
this Article VII of any person who is or was a Director, officer, employee or
agent of the corporation, or is or was serving, at the request of the
corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be reduced by any
amounts such person receives as indemnification (i) under any policy of
insurance purchased and maintained on his or her behalf by the corporation, (ii)
from such other corporation, partnership, joint venture, trust or other
enterprise, or (iii) under any other applicable indemnification provision.
Section 8. In the discretion of the Board of Directors of the corporation,
---------
for the purposes of this Article VII, references to "the corporation" may also
include any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its Directors or
officers, so that any person who is or was a Director or officer of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a Director or officer of another corporation, partnership, joint
venture, trust or other enterprise, would stand in the same position under the
provisions of this Article VII with respect to the resulting or surviving
corporation as he or she would have with respect to such other constituent
corporation if its separate existence had continued.
Section 9. In addition to and without limiting the foregoing provisions of
---------
this Article VII and except to the extent otherwise required by law, any person
seeking indemnification under or pursuant to Section 1 of this Article VII shall
be deemed and presumed to have met the applicable standard of conduct set forth
in Section l unless the contrary shall be established.
Section 10.
----------
(a) In addition to and without limiting the foregoing provisions of this
Article VII and except to the extent otherwise required by law, (a) it shall be
a condition of the corporation's obligation to indemnify under Sections l(a) and
2(a) of this Article VII (in addition to any other condition in these By-laws or
by law provided or imposed) that the person asserting, or proposing to assert,
the right to be indemnified, promptly after receipt of notice of commencement of
any action, suit or proceeding in respect of which a claim for indemnification
is or is to be made against the corporation, notify the corporation of the
commencement of such action, suit or proceeding, including therewith a copy of
all papers served and the name of counsel retained or to be retained by such
person in connection with such action, suit or proceeding, and thereafter to
keep the corporation timely and fully apprised of all developments and
proceedings in connection with such action, suit or proceeding or as the
corporation shall request, and (b) the fees and expenses of any counsel retained
by a person asserting, or proposing to assert, the right to be indemnified under
Section l(a) or 2(a) of this Article VII shall be at the expense of such person
unless the counsel retained shall have been approved by the corporation in
writing.
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<PAGE>
(b) If a claim for indemnification or advancement of expenses under this
Article VII is not paid in full by the corporation within 90 days after a
written claim therefor has been received by the corporation, the claimant may at
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expenses of prosecuting such claim.
Section 11. For purposes of this Article VII, references to "other
-----------
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service by a Director or officer of the corporation which
imposes duties on, or involves services by, such person with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article VII.
Section 12. To the extent that a Director, officer, agent or employee of
-----------
the corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or in Section 2, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
Section 13. The indemnification and advancement of expenses provided by,
----------
or granted pursuant to, this Article VII shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 14. If any term or provision of this Article VII or the
-----------
application thereof to any person, property or circumstance shall to any extent
be invalid or unenforceable, the remainder of this Article VII or the
application of such term or provision to persons, property or circumstances
other than those as to which it is invalid or unenforceable shall not be
affected thereby, and each term and provision of this Article VII shall be valid
and enforced to the fullest extent permitted by law.
ARTICLE VIII
Capital Stock
Section l. Stock Certificates. Each stockholder shall be entitled to a
--------- ------------------
certificate or certificates representing in the aggregate the shares owned by
him or her and certifying the number and class thereof, which shall be in such
form as this Board shall adopt. Each certificate of stock shall be signed by the
President or Chief Executive Officer or a Vice President, and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant
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Secretary. Any of or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate has ceased to be such
officer, transfer agent or registrar before the certificate is issued, such
certificate may nevertheless be issued by the corporation with the same effect
as if he or she were such officer, transfer agent or registrar at the date of
issue.
Section 2. Transfer of Stock. Shares of stock shall be transferable on
--------- -----------------
the books of the corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
Section 3. Holders of Record. Prior to due presentment for registration
--------- -----------------
of transfer the corporation may treat the holder of record of a share of its
stock as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.
Section 4. Transfer Agent and Registrar. The Board of Directors may at
--------- ----------------------------
any time appoint a transfer agent or agents and/or registrar or registrars for
the transfer and/or registration of shares of stock.
Section 5. Lost, Stolen, Destroyed or Mutilated Stock Certificates. The
--------- ------------------------------------------ ------------
Board of Directors may direct a new stock certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, destroyed or mutilated, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, destroyed or mutilated. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, destroyed or mutilated certificate or certificates,
or his or her legal representative, to (a) advertise the same in such manner as
it shall require and/or (b) give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen, destroyed or
mutilated and/or (c) comply with any other reasonable requirements prescribed by
the Board.
ARTICLE IX
Securities of Other Corporations
Subject to any limitations that may be imposed by the Board of Directors,
the Chairman of the Board of Directors, the President or any person or persons
authorized by the Board may in the name and on behalf of the corporation (i) act
or appoint any other person or persons (with or without powers of substitution)
to act in the name and on behalf of the corporation (as proxy or otherwise), at
any meeting of the holders of stock or other securities of any corporation or
other organization, securities of which shall be held by this
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<PAGE>
corporation, or (ii) express consent or dissent, as a holder of such securities,
to corporate or other action by such other corporation or organization.
ARTICLE X
Checks, Notes, Drafts and Other Instruments
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the corporation may be signed by any officer or
officers or person or persons authorized by the Board of Directors to sign the
same. No officer or person shall sign any such instrument as aforesaid unless
authorized by the Board to do so.
ARTICLE XI
Dividends and Reserves
Section l. Dividends. Dividends upon the capital stock of the corporation
--------- ---------
may, subject to any provisions of the certificate of incorporation, be declared
pursuant to law by the Board of Directors. Dividends may be paid in cash, in
property or in shares of the capital stock.
Section 2. Reserves. Before payment of any dividend there may be set
--------- --------
aside out of any funds of the corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
thinks proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Directors shall think conducive to the interest of
the corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE XII
Corporate Seal
The corporate seal shall be in such form as the Board of Directors may from
time to time prescribe and the same may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
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<PAGE>
ARTICLE XIII
Fiscal Year
The fiscal year of the corporation shall end on November 30 of each year.
ARTICLE XIV
Books and Records
The books, accounts and records of the corporation, except as may be
otherwise required by the laws of the State of Delaware, may be kept outside of
the State of Delaware, at such place or places as the Board of Directors may
from time to time appoint. Except as may otherwise be provided by law, the
Board of Directors shall determine whether and to what extent the books,
accounts, records and documents of the corporation, or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any book, account, record or document of the corporation,
except as conferred by law or by resolution of the stockholders or Board of
Directors.
ARTICLE XV
Notices
Section l. Manner of Giving of Notice. Whenever the provisions of a law,
--------- --------------------------
the certificate of incorporation, the By-laws or rules of a committee require
notice to be given to any Director, officer, stockholder or member of a
committee, they shall not be construed to mean personal notice; such notice may
be given by telegram or by depositing such notice in a post office or letter
box, in a postage paid, sealed wrapper, addressed to such Director, officer,
stockholder or member of a committee at his or her address as the same appears
in the books or records of the corporation (unless he or she shall have filed
with the Secretary a written request that notice intended for him or her be sent
to some other address, in which case it shall be sent to the address designated
in the most recent such request); and the time when such telegram shall be
transmitted or notice deposited shall be deemed to be the time of the giving of
such notice.
Section 2. Waiver of Notice. Whenever notice is required by law, the
--------- ----------------
certificate of incorporation, the By-laws, or as otherwise provided by law, a
written waiver thereof, signed by the person entitled to notice, shall be deemed
equivalent to notice, whether signed before or after the time required for such
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be
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transacted at, nor the purpose of, any regular or special meeting of the
stockholders, Directors or members of a committee of directors need be specified
in any written waiver of notice.
ARTICLE XVI
Severability
If any term or provision of the By-laws, or the application thereof to any
person or circumstance or period of time, shall to any extent be invalid or
unenforceable, the remainder of the By-laws, or the application of such term or
provision to persons or circumstances or periods of time other than those as to
which it is invalid or unenforceable, shall not be affected thereby and each
term and provision of the By-laws shall be valid and enforced to the fullest
extent permitted by law.
ARTICLE XVII
Amendments
The Board of Directors and the stockholders shall each have the power to
adopt, alter, amend and repeal these By-laws; and any By-laws adopted by the
Directors or the stockholders under the powers conferred hereby may be altered,
amended or repealed by the Directors or by the stockholders; provided, however,
that these By-laws shall not be altered, amended or repealed by action of the
stockholders, and no By-law shall be adopted by action of the stockholders,
without the affirmative vote of the holders of at least 75% of the then combined
voting power of all the shares of the corporation entitled to vote generally in
the election of directors, voting together as a single class.
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EXHIBIT 5
---------
NUTTER, McCLENNEN & FISH, LLP
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
April 25, 1997
12856-39
Carey International, Inc.
4530 Wisconsin Avenue, N.W.
Washington D.C. 20016
Ladies/Gentlemen:
Reference is made to the Registration Statement on Form S-1 (File No. 333-
22651) (the "Registration Statement"), and the Prospectus constituting Part I
thereof (the "Prospectus"), which Carey International, Inc., a Delaware
corporation (the "Company"), has filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to 3,335,000 shares of the Company's common stock, $.01 par value
(the "Common Stock"), consisting of (i) 2,900,000 shares of Common Stock to be
sold by the Company and (ii) 335,000 shares to be sold by the Company if
Montgomery Securities and Ladenburg, Thalmann & Co. Inc., as representatives of
the underwriters, exercise in full an over-allotment option granted to such
underwriters.
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of the
Certificate of Incorporation of the Company and all amendments thereto, the
Company's By-laws, certain corporate records of the Company to the date hereof,
certificates of public officials and such other documents, records and materials
as we have deemed necessary in connection with this opinion letter.
Based upon the foregoing and in reliance upon information from time to time
furnished to us by the officers, directors and agents of the Company, we are of
the opinion that the shares of Common Stock, when issued and sold by the Company
upon the terms described in the Registration Statement, will be duly and validly
issued, fully paid and non-assessable.
We understand that this opinion letter is to be used in connection with the
Registration Statement, as finally amended, and hereby consent to the filing of
this opinion letter with and as a part of the Registration Statement as so
amended, and to the reference to our firm in the Prospectus under the heading
"Legal Matters." It is understood that this opinion letter is to be used in
connection with the offer and sale of the aforesaid shares only while said
Registration Statement is effective as so amended and as it may be amended from
time to time as contemplated by Section 10(a)(3) of the Securities Act.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
NUTTER, McCLENNEN & FISH, LLP
<PAGE>
EXHIBIT 10.1
------------
CAREY INTERNATIONAL, INC.
1997 EQUITY INCENTIVE PLAN
SECTION 1 PURPOSE AND DURATION
1.1 Purposes. The purposes of the Plan are to attract, retain and
--------
motivate employees and consultants of the Company, its Parent (if any), and any
present or future Subsidiaries and to enable them to participate in the growth
of the Company by providing for or increasing the proprietary interests of such
persons in the Company.
1.2 Effective Date. The Plan is effective as of the date of its
--------------
adoption by the Board.
1.3 Expiration Date. The Plan shall expire within ten years from
---------------
the date of the adoption of the Plan by the Board. In no event shall any Awards
be made under the Plan after such expiration date, but Awards previously granted
may extend beyond such date.
SECTION 2 DEFINITIONS
As used in the Plan, the following capitalized words shall have the
meanings indicated below:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Award" means, individually or collectively, a grant under the Plan of
Options, SARs, Performance Shares, Restricted Stock or Stock Units.
"Award Agreement" means the written agreement setting forth the terms and
provisions applicable to an Award granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee of the Board appointed by the Board to
administer the Plan in accordance with Section 3.1.
<PAGE>
"Company" means Carey International, Inc., a Delaware corporation, or any
successor thereto.
"Director" means any individual who is a member of the Board.
"Fair Market Value" means, with respect to a Share, the fair market thereof
as of the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Board in good faith but in no event less
than, in the case of newly issued stock, the par value per Share; provided that
if the Board does not adopt or employ any such valuation methodology and Shares
are traded on an exchange or quoted on The Nasdaq National Market, fair market
value shall mean, on the relevant date of determination, the closing price of a
Share traded on the principal exchange for the Shares or, if the Shares are so
traded, the closing or last price quoted on The Nasdaq National Market.
"Grant Date" means the effective date of an Award as specified by the Board
and set forth in the applicable Award Agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
"Non-Employee Director" means a "non-employee director" as that term is
defined in Rule 16b-3 promulgated under the 1934 Act.
"Nonqualified Stock Option" or "NQO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is not intended to be
an ISO.
"Option" means an ISO or an NQO.
"Parent" means a "parent corporation" as that term is defined in Section
424 of the Code.
"Participant" means an individual who has been selected by the Board to
receive an Award under the Plan.
"Performance Cycle" means the period of time selected by the Board during
which performance is measured for the purpose of determining the extent to which
an Award of Performance Shares has been earned. More than one Performance Cycle
may be in progress at any one time and the duration of Performance Cycles may
differ.
-2-
<PAGE>
"Performance Share" means a Share awarded to a Participant under Section 8
of the Plan that entitles the Participant to acquire Shares upon the attainment
of specified performance goals.
"Plan" means the 1997 Equity Incentive Plan set forth in this document and
as hereafter amended from time to time in accordance with Section 13.
"Restricted Period" means the period of time selected by the Board during
which Shares of Restricted Stock are subject to forfeiture and/or restrictions
on transferability.
"Restricted Stock" means Shares awarded to a Participant under Section 9 of
the Plan pursuant to an Award that entitles the Participant to acquire Shares
for a purchase price (which may be zero), subject to such conditions, including
a Company right during a specified period or periods to repurchase the Shares at
their original purchase price (or to require forfeiture of the Shares if the
purchase price was zero) upon the Participant's termination of employment.
"SAR" or "Stock Appreciation Right" means an Award that is designated as an
SAR pursuant to Section 7 of the Plan, granted alone or in connection with a
related Award, entitling a Participant to receive an amount in cash or Shares or
a combination thereof having a value equal to (or if the Board shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
Share on the date of exercise over the Fair Market Value of a Share on the Grant
Date (or over the Option exercise price, if the Stock Appreciation Right was
granted in tandem with an Option) multiplied by the number of Shares with
respect to which the Stock Appreciation Right is exercised.
"Shares" means shares of the Company's common stock, par value $0.01 per
share.
"Stock Unit" means an Award of a Share or a unit valued in whole or in part
by reference to, or otherwise based on, the value of a Share, granted to a
Participant under Section 10 of the Plan.
"Subsidiary" means a "subsidiary corporation" as that term is defined in
Section 424 of the Code.
SECTION 3 ADMINISTRATION OF THE PLAN
3.1 The Board. The Plan shall be administered by the Board. The
---------
Board may, in its discretion, delegate some or all of its powers with respect to
the Plan to the Committee, in which event all references in the Plan to the
Board (except references in
-3-
<PAGE>
Section 13.1) shall be deemed to refer to the Committee. The Committee, if one
is appointed, shall consist of at least two Non-Employee Directors.
3.2 Authority of the Board. The Board shall have the authority to
----------------------
adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the Plan as it shall consider advisable from time to
time, to interpret the provisions of the Plan and any Award, and to decide all
disputes arising in connection with the Plan. The Board's decisions and
interpretations shall be final and binding.
SECTION 4 ELIGIBILITY OF PARTICIPANTS
The persons eligible to receive Awards under the Plan shall be all
executive officers of the Company, its Parent (if any), and any Subsidiaries and
other employees, consultants and advisers who, in the opinion of the Board, are
in a position to make a significant contribution to the success of the Company,
its Parent (if any), and any Subsidiaries. Directors, including directors who
are not employees, of the Company, its Parent (if any), and any Subsidiaries,
shall be eligible to receive Awards under the Plan.
SECTION 5 STOCK AVAILABLE FOR AWARDS
5.1 Number of Shares. Awards may be made under the Plan for up to
----------------
Six Hundred Fifty Thousand (650,000) Shares. Shares issued under the Plan may
consist in whole or in part of authorized but unissued Shares or treasury
Shares.
5.2 Lapsed, Forfeited or Expired Awards. If any Award in respect of
-----------------------------------
Shares expires or is terminated before exercise or is forfeited for any reason,
the Shares subject to such Award, to the extent of such expiration, termination,
or forfeiture, shall again be available for award under the Plan.
5.3 Maximum Number of Shares to a Single Participant in any Calendar
----------------------------------------------------------------
Year. In no event shall any Participant receive in any calendar year Awards
- ---
under the Plan and any other grants for more than One Hundred Thousand (100,000)
Shares.
SECTION 6 STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of the
----------------
Plan, the Board may award Options and determine the number of shares to be
covered by each Option, the exercise price therefor, the term of the Option, and
any other conditions
-4-
<PAGE>
and limitations applicable to the exercise of the Option. The Board may grant
ISOs, NQOs or a combination thereof.
6.2 Exercise Price. Subject to the provisions of this Section 6, the
--------------
exercise price for each Option shall be determined by the Board in its sole
discretion.
6.3 Restrictions on Option Transferability and Exercisability. No
---------------------------------------------------------
Option shall be transferable by the Participant other than by will or the laws
of descent and distribution, and all Options shall be exercisable, during the
Participant's lifetime, only by the Participant; provided, however, that the
Board may provide that an Option is transferable by the Participant and
exercisable by persons other than the Participant upon such terms and conditions
as the Board shall determine.
6.4 Certain Additional Provisions for Incentive Stock Options
---------------------------------------------------------
6.4.1 Exercise Price. In the case of an ISO, the exercise price
--------------
shall be not less than one hundred percent (100%) of the Fair Market Value on
the Grant Date of the Shares subject to the Option; provided, however, that if
on the Grant Date the Participant (together with persons whose stock ownership
is attributed to the Participant pursuant to Section 424(d) of the Code) owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, its Parent (if any) or any Subsidiaries,
the exercise price shall be not less than one hundred and ten percent (110%) of
the Fair Market Value on the Grant Date of the Shares subject to the Option.
6.4.2 Exercisability. Subject to Section 12.3 and 12.4, the aggregate
--------------
Fair Market Value (determined on the Grant Date(s)) of the Shares with respect
to which ISOs are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company, its Parent (if any) and any
Subsidiaries) shall not exceed $100,000.
6.4.3 Eligibility. ISOs may be granted only to persons who are
-----------
employees of the Company, its Parent (if any) or any Subsidiaries on the Grant
Date.
6.4.4 Expiration. No ISO may be exercised after the expiration of
----------
ten (10) years from the Grant Date; provided, however, that if the Option is
granted to a Participant who, together with persons whose stock ownership is
attributed to the Participant pursuant to Section 424(d) of the Code, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, its Parent (if any) or any Subsidiaries, the
ISO may not be exercised after the expiration of five (5) years from the Grant
Date.
-5-
<PAGE>
6.4.5 Compliance with Section 422 of the Code. The terms and
---------------------------------------
conditions of ISOs shall be subject to and comply with Section 422 of the Code
or any successor provision.
6.4.6 Notice to Company of Disqualifying Disposition. Each Participant
----------------------------------------------
who receives an ISO agrees to notify the Company in writing immediately after
the Participant makes a Disqualifying Disposition of any Shares received
pursuant to the exercise of an ISO. The term "Disqualifying Disposition" means
any disposition (including any sale) of Shares before the later of (a) two years
after the Participant was granted the ISO under which the Participant acquired
such Shares, or (b) one year after the Participant acquired the Shares by
exercising the ISO.
6.4.7 Substitute Options. Notwithstanding the provisions of Section
------------------
6.4.1, in the event that the Company, its Parent (if any) or any Subsidiary
consummates a transaction described in Section 424(a) of the Code (relating to
the acquisition of property or stock from an unrelated corporation), individuals
who become employees or consultants of the Company, its Parent (if any) or any
Subsidiary on account of such transaction may be granted ISOs in substitution
for options granted by their former employer. The Board, in its sole discretion
and consistent with Section 424(a) of the Code, shall determine the exercise
price of such substitute Options.
6.5 NQO Presumption. Options granted pursuant to the Plan shall be
---------------
presumed to be NQOs unless expressly designated ISOs in the Award Agreement.
SECTION 7 GRANT OF STOCK APPRECIATION RIGHTS
Subject to the terms and provisions of the Plan, the Board may award SARs
in tandem with another Award (at or after the Grant Date of the other Award), or
alone and unrelated to another Award, and may determine the terms and conditions
applicable thereto, including the form of payment.
SECTION 8 PERFORMANCE SHARES
8.1 Grant of Performance Shares. The Board may award Performance
---------------------------
Shares to Participants and determine the performance goals applicable to each
such Award, the number of Shares for each Performance Cycle, the duration of
each Performance Cycle and all other limitations and conditions applicable to
the awarded Performance Shares. The payment value of each Performance Share
shall be equal to the Fair Market Value of one Share on the date the Performance
Share is earned or, in the discretion of the Board, on the date the Board
determines that the Performance Share has been earned.
-6-
<PAGE>
8.2 Adjustment of Performance Goals. Except as provided in an Award,
-------------------------------
during any Performance Cycle, the Board may adjust the performance goals for the
Performance Cycle as it deems equitable in recognition of unusual or non-
recurring events affecting the Company or its Shares, changes in applicable tax
laws or accounting principles, or such other factors as the Board shall
determine.
8.3 Written Certification. As soon as practical after the end of a
---------------------
Performance Cycle, the Board shall certify in writing the extent to which the
performance goals applicable to each Participant for the Performance Cycle were
achieved or exceeded and the number of Performance Shares which have been earned
on the basis of performance in relation to the established performance goals.
SECTION 9 RESTRICTED STOCK
9.1 Grant of Restricted Stock. The Board may award Shares of
-------------------------
Restricted Stock and determine the purchase price, if any, therefor, the
duration of the Restricted Period, the conditions under which the Shares may be
forfeited to or repurchased by the Company and any other terms and conditions of
the Awards. The Board may modify or waive any restrictions, terms and conditions
with respect to any Restricted Stock. Shares of Restricted Stock may be issued
for whatever consideration is determined by the Board, subject to applicable
law.
9.2 Transferability. Shares of Restricted Stock may not be sold,
---------------
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Board, during the Restricted Period.
9.3 Evidence of Award. Shares of Restricted Stock shall be
-----------------
evidenced in such manner as the Board may determine. Any certificates issued in
respect of Shares of Restricted Stock shall be registered in the name of the
Participant and unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period, the Company shall deliver the
certificates and stock power to the Participant.
9.4 Shareholder Rights. A Participant shall have all the rights of a
------------------
shareholder with respect to Restricted Stock awarded, including voting and
dividend rights, unless otherwise provided in the Award Agreement.
-7-
<PAGE>
SECTION 10 STOCK UNITS
10.1 Grant of Stock Units. Subject to the terms and provisions of the
--------------------
Plan, the Board may award Stock Units subject to such terms, restrictions,
conditions, performance criteria, vesting requirements and payment rules as the
Board shall determine.
10.2 Consideration. Shares awarded in connection with a Stock Unit
-------------
shall be issued for whatever consideration is determined by the Board, subject
to applicable law.
SECTION 11 OTHER AWARDS
The Board shall have the authority to specify the terms and provisions of
other forms of equity-based or equity-related Awards not described above which
the Board determines to be consistent with the purposes of the Plan and the
interests of the Company, which Awards may provide for cash payments based in
whole or in part on the value or future value of Shares, for the acquisition or
future acquisition of Shares, or any combination thereof. Other Awards may also
include cash payments (including the cash payment of dividend equivalents) under
the Plan which may be based on one or more criteria determined by the Board that
are unrelated to the value of the Shares and that may be granted in tandem with,
or independent of, other Awards under the Plan.
SECTION 12 GENERAL PROVISIONS APPLICABLE TO AWARDS
12.1 Legal and Regulatory Matters. The delivery of Shares shall be
----------------------------
subject to compliance with (i) applicable federal and state laws and
regulations, (ii) if the outstanding Shares are listed at the time on any stock
exchange, the listing requirements of such exchange, and (iii) the Company's
counsel's approval of all other legal matters in connection with the issuance
and delivery of the Shares. If the sale of the Shares has not been registered
under the 1933 Act, the Company may require, as a condition to delivery of the
Shares, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing the Shares bear an appropriate legend restricting
transfer.
12.2 Award Agreement. The terms and provisions of an Award shall be
---------------
set forth in an Award Agreement approved by the Board and delivered or made
available to the Participant as soon as practicable following the Grant Date.
-8-
<PAGE>
12.3 Determination of Restrictions on the Award. The vesting,
------------------------------------------
exercisability, payment and other restrictions applicable to an Award (which may
include, without limitation, restrictions on transferability or provision for
mandatory resale to the Company) shall be determined by the Board and set forth
in the applicable Award Agreement. Notwithstanding the foregoing, the Board may
accelerate (i) the vesting or payment of any Award (including an ISO), (ii) the
lapse of restrictions on any Award (including an Award of Restricted Stock) and
(iii) the date on which any Option or SAR first becomes exercisable.
12.4 Mergers, etc. Notwithstanding any other provision of the Plan,
------------
in the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, then if the Board so
determines, all outstanding Awards shall terminate, provided that at least
twenty (20) days prior to the effective date of any such merger, consolidation
or sale of assets, the Board shall either (i) make all outstanding Awards
exercisable immediately prior to the consummation of such merger, consolidation
or sale of assets or (ii) if there is a surviving or acquiring corporation,
arrange, subject to consummation of the merger, consolidation or sale of assets,
to have that corporation or an affiliate of that corporation grant to
Participants replacement Awards, which Awards in the case of ISOs shall satisfy,
in the discretion of the Board, the requirements of section 424(a) of the Code.
12.5 Termination of Employment. For purposes of the Plan, the
-------------------------
following events shall not be deemed a termination of employment of a
Participant: (i) a transfer to the employment of the Company from its Parent (if
any) or from a Subsidiary, or from the Company to its Parent (if any) or to a
Subsidiary, or from one Subsidiary to another, or from the Company's Parent (if
any) to a Subsidiary, or from a Subsidiary to the Company's Parent (if any); or
(ii) an approved leave of absence for military service or sickness, or for any
other purpose approved by the Company, if the Participant's right to employment
is guaranteed either by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Board otherwise so provides in
writing. For purposes of the Plan, employees of a Subsidiary or Parent (if any)
shall be deemed to have terminated their employment on the date on which such
Subsidiary or Parent ceases to be a Subsidiary or Parent of the Company, as the
case may be.
12.6 Date of and Effect of Termination of Employment. The date of a
-----------------------------------------------
Participant's termination of employment for any reason shall be determined in
the sole discretion of the Board. The Board shall have full authority to
determine and specify in the applicable Award Agreement the effect, if any, that
a Participant's termination of employment for any reason will have on the
vesting, exercisability, payment or lapse of restrictions applicable to an
outstanding Award.
-9-
<PAGE>
12.7 Grant of Awards. Each Award may be made alone, in addition to
---------------
or in relation to any other Award. The terms of each Award need not be
identical, and the Board need not treat Participants uniformly.
12.8 Settlement of Awards. No Shares shall be delivered pursuant to
--------------------
any exercise of an Award until payment in full of the price therefor, if any, is
received by the Company. Such payment may be made in whole or in part in cash or
by certified or bank check or, to the extent permitted by the Board at or after
the Grant Date, by delivery of a note or Shares, including Restricted Stock,
valued at their Fair Market Value on the date of delivery, or such other lawful
consideration as the Board shall determine.
12.9 Withholding Requirements and Arrangements. The Participant shall
-----------------------------------------
pay to the Company or make provision satisfactory to the Board for payment of
any taxes required by law to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in Shares,
including Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Participant.
12.10 No Effect on Employment. The Plan shall not give rise to any
-----------------------
right on the part of any Participant to continue in the employ of the Company,
its Parent (if any) or any Subsidiary. The loss of existing or potential profit
in Awards granted under the Plan shall not constitute an element of damages in
the event of termination of the relationship of a Participant even if the
termination is in violation of an obligation of the Company to the Participant
by contract or otherwise.
12.11 No Rights as Shareholder. Subject to the provisions of the Plan
------------------------
and the applicable Award Agreement, no Participant shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until he
or she becomes the holder thereof.
12.12 Adjustments. Upon the happening of any of the following
-----------
described events, a Participant's rights with respect to Awards granted
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the Award Agreement.
12.12.1 Stock Splits and Recapitalizations. In the event the Company
----------------------------------
issues any of its Shares as a stock dividend upon or with respect to the Shares,
or in the event Shares shall be subdivided or combined into a greater or smaller
number of Shares, or if, upon a merger or consolidation (except those described
in Section 12.4), reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, Shares shall be exchanged for other
securities of the Company, securities of
-10-
<PAGE>
another entity, cash or other property, each Participant upon exercising an
Award (for the purchase price to be paid under the Award) shall be entitled to
purchase such number of Shares, other securities of the Company, securities of
such other entity, cash or other property as the Participant would have received
if the Participant had been the holder of the Shares with respect to which the
Award is exercised at all times between the Grant Date of the Award and the date
of its exercise, and appropriate adjustments shall be made in the purchase price
per Share.
12.12.2 Restricted Stock. If any person owning Restricted Stock receives
----------------
new or additional or different shares or securities ("New Securities") in
connection with a corporate transaction described in Section 12.12.1 as a result
of owning such Restricted Stock, the New Securities shall be subject to all of
the conditions and restrictions applicable to the Restricted Stock with respect
to which such New Securities were issued.
12.12.3 Board Determination. Notwithstanding any provision to the
-------------------
contrary, no adjustments shall be made pursuant to this Section 12.12 with
respect to ISOs unless (i) the Board, after consulting with counsel for the
Company, determines that such adjustments would not constitute a "modification,"
"extension" or "renewal" of such ISOs as such terms are defined in Section 424
of the Code, (ii) would cause any adverse tax consequences for the holders of
such ISOs or (iii) the holders of such ISOs consent to the adjustment. No
adjustments to ISOs shall be made for dividends paid in cash or in property
other than securities of the Company.
12.12.4 Fractional Shares. No fractional Shares shall be issued under
-----------------
the Plan. Any fractional Shares which, but for this Section, would have been
issued shall be deemed to have been issued and immediately sold to the Company
for their Fair Market Value, and the Participant shall receive from the Company
cash in lieu of such fractional Shares.
12.12.5 Other Distributions. The Board may adjust the number of Shares
-------------------
subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, acquisitions or dispositions
of stock or property, or any other event if it is determined by the Board that
such adjustment is appropriate to avoid distortion in the operation of the Plan.
12.12.6 Further Adjustment. Upon the happening of any of the events
------------------
described in Sections 12.12.1 or 12.12.5, the class and aggregate number of
Shares set forth in Sections 5.1 and 5.3 hereof that are subject to Awards which
previously have been or subsequently may be granted under the Plan shall be
appropriately adjusted to reflect the events described in such Sections. The
Board shall determine the specific adjustments to be made under this Section
12.12.6.
-11-
<PAGE>
SECTION 13 AMENDMENT AND TERMINATION
13.1 Amendment, Suspension, Termination of the Plan. The Board may
----------------------------------------------
modify, amend, suspend or terminate the Plan in whole or in part at any time;
provided, however, that no modification, amendment, suspension or termination of
the Plan shall be made without shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement; provided,
further, that such modification, amendment, suspension or termination shall not,
without a Participant's consent, affect adversely the rights of such Participant
with respect to any Award previously made.
13.2 Amendment, Suspension, Termination of an Award. The Board may
----------------------------------------------
modify, amend or terminate any outstanding Award, including, without limitation,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization and converting an ISO to a NQO; provided,
however, that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
SECTION 14 LEGAL CONSTRUCTION
14.1 Captions. The captions provided herein are included solely for
--------
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan or serve as a basis for interpretation or construction of
the Plan.
14.2 Severability. In the event any provision of the Plan is held
------------
invalid or illegal for any reason, the illegality or invalidity shall not affect
the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 Governing Law. The Plan and all rights under the Plan shall be
-------------
construed in accordance with and governed by the internal laws of the State of
Delaware.
-12-
<PAGE>
Exhibit 10.6
ESCROW AGREEMENT
----------------
ESCROW AGREEMENT, dated ____ __, 1997, among CAREY INTERNATIONAL, INC.,
a Delaware corporation ("Carey"), Michael Hemlock ("MH"), Alfred J. Hemlock
("AJH") and Lupe C. Hemlock ("LCH"); MH, AJH and LCH are sometimes referred to
collectively as the "Sellers"), and [_________], a New York corporation, as
escrow agent (the "Escrow Agent").
1. Agreement and Plan of Merger; Stock Purchase Agreement. This
------------------------------------------------------
Escrow Agreement is made in connection with the Agreement and Plan of Merger,
dated as of March 1, 1997 (the "Merger Agreement"), among Carey, Manhattan
International Limousine Network Ltd. ("MILN"), MILN Acquisition Corporation
("Acquisition") and MH, pursuant to which Acquisition is to be merged into MILN,
with the result that MILN will survive the Merger and become a wholly-owned
subsidiary of Carey (the "Merger"), and the shares of Common Stock, par value
$.01 per share, of MILN outstanding immediately prior to the Effective Date (as
defined in the Merger Agreement) of the Merger will be converted into the Merger
Consideration (as defined in the Merger Agreement), which includes, without
limitation, the right to receive the number of whole shares of Common Stock, par
value $.01 per share, of Carey determined by dividing
<PAGE>
$2,400,000 million by the IPO Price (as defined in the Merger Agreement)(the
"Carey Aggregate Shares") and $380,000 principal value of Carey's Promissory
Note (the "Carey-MILN Note"), in addition to a $60,000 cash deposit delivered to
MH upon the execution of the Merger Agreement, and (ii) the Stock Purchase
Agreement, dated as of March 1, 1997 (the "Stock Purchase Agreement"), among
Carey, AJH and LCH, pursuant to which Carey is purchasing all of the issued and
outstanding shares of International Limousine Network Ltd. for consideration
consisting of $6,760,000 in cash and $4,360,000 principal amount of Carey's
Promissory Note (the "Carey-ILN Note"), in addition to a $240,000 cash deposit
delivered to AJH and LCH upon execution of the Stock Purchase Agreement.
2. Purpose. This Escrow Agreement is entered into in accordance with the
-------
provisions of the Merger Agreement and the Stock Purchase Agreement to meet
Carey's requirements for indemnification thereunder.
3. Escrow Agent. The Escrow Agent accepts appointment hereunder and
------------
agrees to hold in escrow the Escrow Deposit (as such term is defined in Section
4) in accordance with the terms of this Escrow Agreement.
4. Escrow Deposit.
--------------
4.1. On the Closing Date. In accordance with the
-------------------
2
<PAGE>
provisions of the Merger Agreement and the Stock Purchase Agreement, Carey will
deliver to the Escrow Agent on the date of the closing thereunder (the "Closing
Date") the number of Carey Aggregate Shares equal to $2 million divided by the
IPO Price (the "Carey Shares") (registered in the name of the Escrow Agent) and
$3 million in principal amount of the Carey-ILN Note (payable to the Escrow
Agent as escrow agent), provided that (i) in the event that Carey does not issue
the Carey-ILN Note, electing to pay such amount of the consideration in cash,
Carey will deliver to the Escrow Agent on the Closing Date next day funds
payable to the Escrow Agent, as escrow agent, in the amount of $3 million and
(ii) in the event that Carey does not issue the Carey Shares, electing to pay
such consideration in a promissory note in the principal amount of $2 million
(the "Replacement Note") or an equal amount of cash, Carey will deliver to the
Escrow Agent on the Closing Date such Replacement Note or a next day funds
payable to the Escrow Agent, as escrow agent, in such amount; provided, that if,
--------
pursuant to the Stock Purchase Agreement, Carey is required to deliver the cash
consideration thereunder payable at the Closing thereunder by wire transfer, the
cash payments set forth in this Section 4.1 shall be made by wire transfer of
funds to the account designated by the Escrow Agent.
4.2. Additions to the Escrow Deposit. Section 9 contemplates
-------------------------------
that, if the Carey Shares are not sold prior to the first anniversary of the
Closing Date, they will continue to
3
<PAGE>
be held in escrow hereunder. It is the intention of the parties that the amount
held in escrow during the second year after the Closing Date not be affected by
the market price of the Carey Shares. Accordingly, on the first anniversary of
the date hereof and every three months thereafter, so long as the Escrow Agent
continues to hold the Escrow Deposit hereunder, the Escrow Agent will calculate
the value of the Carey Shares held in escrow based on the latest available
closing price thereof (ignoring whether resale of the Carey Shares is restricted
by contract or under the securities laws). If such value is less than the value
of the Carey Shares held in escrow valued at the IPO Price of $________ per
share (the amount of such difference, the "Deficiency"), MH will deposit with
the Escrow Agent, to be held as a portion of the Escrow Deposit hereunder, such
number of Carey Shares, valued at such market price, as shall be equal in value
to the Deficiency or cash in the amount of the Deficiency. If such value is more
than the value of the Carey Shares then held in escrow valued at the IPO Price
(the amount of such difference, the "Surplus"), the Escrow Agent will distribute
to MH such number of Carey Shares, valued at such market price, as shall be
equal in value to the Surplus.
4.3. Allocation of Escrow Deposit. The Carey Shares and the
----------------------------------
Carey-ILN Note, or their respective equivalents as described in Section 4.1 (the
"Escrow Deposit") shall be allocated as follows:
4
<PAGE>
(a) To MH, the Carey Shares, or if they are sold, the amount of cash
proceeds from such sale held hereunder or the Replacement Note (or
cash in lieu thereof).
(b) To AJH, $1.5 million in principal amount of the Carey-ILN Note or
an equal amount of cash if the Carey-ILN Note is not issued or is paid
off.
(c) To LCH, $1.5 million in principal amount of the Carey-ILN Note or
an equal amount of cash if the Carey-ILN Note is not issued or is paid
off.
Any earnings thereon shall be allocated, (a) if from the Carey Shares, the
Replacement Note or the proceeds thereof, to MH; and (b) if from the Carey-ILN
Note or cash received in lieu thereof or on payment thereof, to each of AJH and
LCH in proportion to their respective interests as shown above.
5. Seller Representative.
---------------------
5.1. Designation. MH, AJH and LCH have designated AJH to act as the
-----------
representative of the Sellers hereunder (the "Seller Representative").
5.2. Replacement. In the event of the death, resignation or
-----------
incapacity of AJH as Seller Representative, the Sellers or their heirs,
administrators, executors and assigns having a majority in interest at the time
in the Escrow Deposit will designate another person (who need not be one
of the
5
<PAGE>
Sellers) as Seller Representative.
5.3. Power to Act. AJH, as Seller Representative, and any successor
------------
Seller Representative shall have the powers and duties set forth in this Escrow
Agreement including the power to give all instructions and make all decisions
hereunder on behalf of the Sellers.
6. Investment of Escrow Deposit.
----------------------------
6.1. Investments. The Escrow Agent will hold (i) the Carey Shares
-----------
until sold at the direction of the Seller Representative or released in
accordance with the provisions hereof and (ii) the Carey-ILN Note and
Replacement Note until the principal thereof is paid or the Carey-ILN Note and
Replacement Note or the proceeds thereof are released pursuant to the provisions
hereof. With respect to any amount of the Escrow Deposit that is comprised of
cash (whether because Carey elects to deliver cash instead of the Carey-ILN Note
or Replacement Note, payment of the principal of the Carey-ILN Note or
Replacement Note or sale of the Carey Shares), the Escrow Agent will, at the
direction of the Seller Representative, invest and reinvest the Escrow Deposit
and the income therefrom in any of the following: (a) readily marketable direct
obligations of the United States or readily marketable obligations for which the
full faith and credit of the United States are pledged to provide for the
payment of the principal thereof and interest thereon and
6
<PAGE>
which, in each case, by their terms mature less than one year from the date of
acquisition thereof, (b) certificates of deposit or bankers' acceptances of any
commercial bank organized and existing under the laws of the United States or
any State thereof or the District of Columbia having a capital and surplus
aggregating not less than $500,000,000 (which commercial bank may be the Escrow
Agent) which by their terms mature less than one year from the date of
acquisition thereof, (c) commercial paper maturing no more than 270 days from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.,
(d) repurchase agreements of commercial banks meeting the qualifications set
forth in subdivision (c) above in respect of the obligations of the types
described in subdivisions (a), (b) or (c) above and obligating such commercial
banks to repurchase such obligations not later than 90 days after the purchase
thereof or (e) such other obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements or other instruments as the
Seller Representative may select and Carey may in its sole discretion approve
(such obligations, certificates of deposit, bankers' acceptances, commercial
paper, repurchase agreements and other instruments in which investments shall
have been made pursuant to subdivisions (a) through (d), (together with the
Carey Shares, the Carey-ILN Note and the Replacement Note, "Investments").
7
<PAGE>
6.2. Sales of Investments. The Escrow Agent shall sell Investments
--------------------
(other than the Carey-ILN Note and the Replacement Note), (a) if requested by
the Seller Representative or (b) upon receipt of a written request from Carey
but, in the case of such a request from Carey, only to the extent that funds are
required to make payments pursuant to Sections 7.2, and 7.3. The Escrow Agent
shall not be responsible for any loss due to fluctuating market rates or the
value of the Carey Shares.
6.3. Reports. The Escrow Agent shall deliver to Carey and the Seller
-------
Representative, as promptly as practicable after the end of each calendar year
and in any case prior to February 28th of the following calendar year, a
statement setting forth the Investments and other property or funds held
hereunder as of, and the income collected from all Investments during the 12-
month period ending December 31st of such year.
6.4. Carey Shares. The Escrow Agent will forward to the Seller
------------
Representative all annual and quarterly reports, proxy statements and other
documents it may receive with respect to the Carey Shares and will vote the
Carey Shares, with respect to any matters as to which the shareholders of Carey
are entitled to vote, in accordance with such instructions as it may receive
from the Seller Representative. Absent such instructions, the Escrow Agent
shall not vote the Carey Shares.
7. Claims.
------
8
<PAGE>
7.1. Request for Payment. In the event that Carey shall claim
-------------------
indemnification under Section 6 of the Merger Agreement or Section 6 of the
Stock Purchase Agreement for Damages (as such term is defined therein), Carey
shall give notice (a "Request for Payment") thereof to the Escrow Agent and the
Seller Representative, setting forth (a) a brief description of the nature of
and basis for such claim, (b) whether such Damages are consequent to a Third-
Party Claim (as such term is defined in Section 6.3 of the Merger Agreement and
Section 6.3 of the Stock Purchase Agreement) and if so, identifying such Third-
Party Claim, (c) the amount of the Damages, (d) any applicable reduction of the
indemnification payable with respect to such Damages pursuant to the provisions
of Section 6 of the Merger Agreement or Section 6 of the Stock Purchase
Agreement (if such reduction is known to Carey at the time of the Request for
Payment) and (e) the net amount (the "Net Claim") for which indemnification is
claimed (if different than the amount of the Damages) and identifying whether
the claim is made under the Merger Agreement, the Stock Purchase Agreement or
both. No payment to Carey under this Escrow Agreement shall be made with respect
to any Request for Payment received after the second anniversary of the Closing
Date unless such Request for Payment states that the Damages for which
indemnification is claimed is consequent to a Third-Party Claim and that Carey
delivered timely initial written notice of such Third-Party Claim to the Seller
Representative pursuant to the provisions of Sections 6.2(a) and
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<PAGE>
6.3 of the Merger Agreement or Section 6.2(a) and 6.3 of the Stock Purchase
Agreement. Carey may amend a Request for Payment so as to increase or decrease
the amount of the Net Claim but unless such Request for Payment is for Damages
consequent to a Third-Party Claim, any such amendment must be delivered by Carey
to the Escrow Agent and the Seller Representative prior to the second
anniversary at the Closing Date.
7.2. Payment of Claims. The Escrow Agent will transfer to Carey out
-----------------
of the principal of the Escrow Deposit the amount of the Net Claim stated in any
Request for Payment (or, in the case of a Net Claim stated in an amended Request
for Payment, the amount of the Net Claim less any amount previously transferred
to Carey with respect thereto) 10 business days after delivery thereof unless
the Seller Representative shall have delivered a notice of objection (a "Notice
of Objection") to Carey and the Escrow Agent, stating the amount, if any, of the
Net Claim that the Sellers do not contest; provided, however, that the Escrow
-------- -------
Agent shall pay Carey any amount of the Net Claim which the Seller
Representative does not contest in its Notice of Objection. Upon receipt of a
Notice of Objection to a Request for Payment or amended Request for Payment, the
Escrow Agent will make no distribution to Carey with respect to the contested
amount of the Net Claim until it has received either (i) a certificate executed
by Carey and the Seller Representative setting forth the amount of the Net Claim
as agreed to by Carey
10
<PAGE>
and the Seller Representative or (ii) if the issue has been submitted to
arbitration pursuant to Section 10, a copy of the arbitral award delivered by
the American Arbitration Association ("AAA") in accordance with Section 10
setting forth a finding as to the amount of the Net Claim, whereupon the Escrow
Agent will promptly transfer to Carey the amount of the Net Claim stated in such
award, less any prior distribution of the uncontested portion thereof. If, after
payment of the Net Claim stated in a Request for Payment, Carey files an amended
Request for Payment reducing the amount of the Net Claim, Carey will refund to
the Escrow Agent the excess of the amount received over such Net Claim (as so
amended), together with interest from the date it received such excess through
the date of refund at the rate of eight percent per annum and the Escrow Agent
will credit such refund to the principal of the Escrow Deposit and such interest
shall be paid to the Seller Representative who shall allocate it among the
Sellers. If a Notice of Objection to payment of a Net Claim stated in any
Request for Payment results in a delay in the payment made by the Escrow Agent
to Carey and if the Notice of Objection does not lead to a reduction in the
amount paid to Carey from that stated in the Request for Payment or a reduction
of less than fifty percent in the amount contested in the Notice of Objection,
the Escrow Agent will also pay Carey from the principal of the Escrow Deposit,
interest at the rate of eight percent per annum from the date payment would have
been made absent such Notice of Objection. If the Notice of Objection
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<PAGE>
leads to a reduction of fifty percent or more in the amount paid to Carey from
that the amount contested in the Notice of Objection, the Escrow Agent will pay
Carey interest from the date payment would have been made absent such Notice of
Objection at a rate equal to the average rate of income received on the Escrow
Deposit as a whole during such period.
7.3. Allocation of Indemnification Payments. Any payment made
--------------------------------------
pursuant to Section 7.1 shall be made first from any principal cash included in
the Escrow Deposit, next from the principal balance of the Carey-ILN Note and
Replacement Note (and Carey agrees to issue a new Carey-ILN Note and Replacement
Note in the principal amount of such prior principal balance, less any such
payment allocated to the Carey-ILN Note and Replacement Note) and finally from
the Carey Shares, valuing such shares at the latest available closing price
thereof (disregarding for this purpose whether the Carey Shares may be sold
freely or are subject to restrictions on resale whether under the Merger
Agreement, the agreements contemplated thereby, or by law) on the business day
immediately prior to the date payment is made. To the extent that
indemnification payments are made from the Carey Shares, Carey may direct the
Escrow Agent to make such payments either (i) in Carey Shares or (ii) in cash
proceeds from the sale of Carey Shares.
8. Distributions of Income. As promptly as
-----------------------
12
<PAGE>
practicable after the end of each calendar month, the Escrow Agent shall
distribute to (a) to MH any dividends received on the Carey Shares and any
income from Investments made with the proceeds of the Carey Shares and (b) to
AJH and LCH, in proportion to their interests as stated in Section 4.2, any
interest payments received on the Carey-ILN Note or on any Investments made from
cash received in lieu of or upon payment of the Carey-ILN Note.
9. Distributions of Principal. (a) This Escrow Agreement
--------------------------
contemplates that, subject to the provisions of Section 7, the principal balance
of the Escrow Deposit be distributed to MH, AJH and LCH as follows:
(i) If Carey Shares are sold before the first anniversary of the
date hereof, any proceeds of such sale exceeding the Adjusted First Year
Minimum Escrow Balance (as determined on the date of such sale) will be
distributed to MH. "Adjusted First Year Minimum Escrow Balance" means, with
respect to the Escrow Deposit an aggregate principal balance or fair market
value, as the case may be, of $5 million, less any amounts paid to Carey
before the first anniversary of the date hereof.
(ii) On the first anniversary of the date hereof, the principal
balance of the Carey-ILN Note will be delivered to AJH and LCH in
proportion to their
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<PAGE>
interests as stated in Section 4.2.
(iii) If Carey Shares are sold between the first and second
anniversaries of the date hereof, any proceeds of such sale exceeding the
Adjusted Second Year Escrow Balance (as determined on the date of such
sale) will be distributed to MH. "Adjusted Second Year Minimum Escrow
Balance" means, with respect to the Escrow Deposit, an aggregate principal
balance or fair market value, as the case may be, of $2 million, less any
amounts paid to Carey before the second anniversary of the date hereof.
(iv) On the second anniversary of the date hereof, the remaining
principal balance of the Escrow Deposit will be distributed to MH.
The distributions contemplated by subdivisions (a)(ii) and (a)(iv) shall be made
by the Escrow Agent on the dates shown above, less any amount as to which Carey
shall notify the Escrow Agent is required to satisfy any pending claims for
Damages ("Pending Claims"), the amount of which has not been finally determined
as of the date of such scheduled distribution (the "Retention Amount"). Any
distributions pursuant to subdivision (a)(i) and (a)(iii) above shall be made by
the Escrow Agent immediately upon receipt of the funds from the sale of the
Carey Shares. If Carey believes that a Retention Amount should be retained to
satisfy Pending Claims, it shall deliver to the Escrow Agent and the Seller
Representative a notice thereof (the
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<PAGE>
"Retention Notice"), stating the Retention Amount Carey believes should be
retained. If the Escrow Agent shall not have received a Retention Notice prior
to the scheduled date of such distribution, it shall promptly make the
distribution in accordance with the provisions hereof. If the Escrow Agent shall
have received a Retention Notice from Carey, the Escrow Agent will deduct from
the distribution otherwise to be made hereunder the Retention Amount set forth
in the Retention Notice of Carey.
If the Seller Representative does not agree with the Retention Amount stated
in the Retention Notice of Carey, he shall, within 10 business days of delivery
of the Retention Notice of Carey, deliver a Notice of Objection thereto to Carey
and the Escrow Agent, but the Escrow Agent shall continue to hold the Retention
Amount stated in such Retention Notice. Upon receipt of a written agreement
executed by Carey and the Seller Representative as to the Retention Amount to be
thus retained or, if Carey and the Seller Representative are unable to reach
such agreement and the issue is submitted to arbitration pursuant to Section 10,
upon receipt of a copy of the arbitral award adjudicating such issue delivered
by AAA in accordance with Section 10, the Escrow Agent will deduct from the
distribution otherwise to be made hereunder the Retention Amount determined in
accordance with such agreement or award. Any amount not so distributed shall
continue to be held by the Escrow Agent and be subject to the provisions of this
Escrow Agreement. The amount of the principal of the Escrow Deposit retained
subsequent to when it would have
15
<PAGE>
otherwise been distributed pursuant to the provisions of this Section 9 may be
reduced as Pending Claims are satisfied or otherwise extinguished and either
Carey or the Seller Representative, by notice delivered to the other and to the
Escrow Agent, may from time to time direct the Escrow Agent to distribute to the
appropriate Seller any part or all of such retained principal, which the Escrow
Agent will do unless it receives within 10 business days of delivery of such
direction a Notice of Objection to such direction, in which case it will refrain
from making such a distribution until it has received an agreement executed by
Carey and the Seller Representative as to the amount to be so distributed or, if
Carey and the Seller Representative are unable to reach such agreement and the
issue has been submitted to arbitration pursuant to Section 10, a copy of the
arbitral award delivered by AAA in accordance with Section 10 stating the amount
to be so distributed certified or otherwise identified to the satisfaction of
the Escrow Agent. The Escrow Agent may, at any time after the second anniversary
of the Closing Date, request Carey and the Seller Representative to give it
instructions as to the disposition of the principal of the Escrow Deposit and
unless directed in writing by either Carey or the Seller Representative to
continue to hold such principal pursuant to the terms of this Escrow Agreement,
shall distribute the remaining principal in accordance with the provisions of
this Section 9.
16
<PAGE>
10. Arbitration. Any dispute arising under or relating to this
-----------
Escrow Agreement, including without limitation the resolution of any issues
raised by any Notice of Objection delivered pursuant to the provisions of this
Escrow Agreement, shall be finally settled by arbitration conducted
expeditiously in accordance with the then existing Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be held in New
York, New York before a single arbitrator unless the amount in controversy
exceeds $500,000, in which case Carey or the Seller Representative may require
that the arbitration be held before three arbitrators. The arbitration shall
begin within ninety (90) days of the initiating party's notice of its intent to
arbitrate unless the parties agree in writing to an extension. The fees and
expenses of the arbitration shall be borne equally by Carey and the Sellers. All
other costs and expenses incurred in connection with the arbitration (including
fees and expenses of counsel) shall be borne by the party incurring such
expenses. The award shall be issued within thirty (30) days after the conclusion
of the arbitration proceedings. The award shall be in writing, and shall be
delivered promptly (i) by the arbitrator to AAA and (ii) by AAA simultaneously
to Carey, the Seller Representative and the Escrow Agent.
11. Responsibilities of Escrow Agent. The Escrow Agent's acceptance
--------------------------------
of its duties under this agreement is subject to the following terms and
conditions which the parties hereto
17
<PAGE>
agree shall govern and control with respect to the rights, duties, liabilities
and immunities of the Escrow Agent:
(1) Anything herein contained to the contrary notwithstanding, the
Escrow Agent shall not be obligated to take any action which might in its
reasonable judgment involve it in any expense or liability unless furnished
with reasonable indemnity.
(2) In making any payment or taking any other action hereunder, the
Escrow Agent may rely and shall be protected in acting or refraining from
acting upon any certificate, opinion, consent or other document believed by
it to be genuine and to have been executed or presented by the proper party
or parties. The Escrow Agent may perform any of the duties provided for
herein either directly or through agents or attorneys and be protected from
any liability in acting, in the absence of bad faith, upon the advice of
attorneys and accountants.
(3) The Escrow Agent shall not be liable for any action taken in
accordance with instructions, requests or directions it is required to
follow under any provision of this Escrow Agreement or otherwise authorized
or within the rights and powers conferred upon it by this Escrow Agreement,
except that nothing contained herein shall relieve the Escrow Agent from
liability for its own negligence or wilful misconduct.
18
<PAGE>
(4) The Escrow Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Escrow Agreement and no
implied covenants or obligations shall be read into this Escrow Agreement,
or the Merger Agreement or the Stock Purchase Agreement against the Escrow
Agent, nor shall the Escrow Agent have any responsibility to inquire into
the validity or enforceability of any agreement made or entered into in
connection with this Escrow Agreement including but not limited to the
Merger Agreement and the Stock Purchase Agreement.
(5) Carey and the Sellers hereby agree, jointly and severally, to
indemnify the Escrow Agent for, and to hold it harmless against, any loss,
liability or reasonable out of pocket expense incurred without negligence
or bad faith on the part of the Escrow Agent, arising out of or in
connection with its entering into this Escrow Agreement and carrying out
its duties hereunder, including the cost and expenses of defending itself
against any claim of liability.
(6) Moneys received by the Escrow Agent hereunder need not be
segregated in any manner except to the extent required by law and may be
deposited under such general conditions as may be prescribed by law in the
general banking department of the Escrow Agent, and the Escrow Agent shall
not be liable for any interest
19
<PAGE>
thereon.
(7) The Escrow Agent makes no representation as to and has no
responsibility for the validity or sufficiency of this Escrow Agreement,
except that the Escrow Agent represents and warrants that its acceptance of
its duties hereunder has been duly and validly authorized by all necessary
corporate or other action and that this Escrow Agreement is valid and
binding in respect of the Escrow Agent in accordance with its terms.
12. Resignation of Escrow Agent; Appointment of Successor. The
-----------------------------------------------------
Escrow Agent acting at any time hereunder may resign at any time by giving
thirty days' prior written notice of resignation to Carey and the Seller
Representative, such resignation to be effective on the date specified in such
notice. The resigning Escrow Agent may appoint by written instrument delivered
to such successor Escrow Agent, Carey and the Seller Representative, or failing
such appointment, Carey and the Seller Representative shall appoint, a bank or
trust company with a combined capital and surplus of at least $500,000,000 as
successor Escrow Agent, whereupon such successor Escrow Agent shall succeed to
all the rights and obligations of the retiring Escrow Agent as of the effective
date of resignation as if originally named herein and the retiring Escrow Agent
shall duly transfer and deliver the Escrow Deposit and other property at the
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time held by the retiring Escrow Agent, provided that if no successor Escrow
--------
Agent shall have been appointed on the effective date of resignation of the
resigning Escrow Agent hereunder, the resigning Escrow Agent may pay the Escrow
Deposit into a court of competent jurisdiction.
13. Fees and Expenses of Escrow Agent. Carey and the Seller
---------------------------------
Representative hereby agree to pay the Escrow Agent reasonable compensation for
the services to be rendered hereunder and to reimburse the Escrow Agent upon
request for all expenses, disbursements, and advances, including reasonable
attorneys' fees, incurred or made by it in connection with carrying out its
duties hereunder. Carey will pay one-half of such fee and expenses. At the
direction of the Seller Representative, the Escrow Agent shall pay such
compensation, expenses, reimbursements and advances, or reimburse the Seller
Representative for his prior payment thereof, from the income or the principal
of the Escrow Deposit.
14. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be delivered or mailed by first-class registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
(a) if to Carey, at:
Carey International, Inc.
4530 Wisconsin Avenue N.W.
Washington, D.C. 20016
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Attention: Vincent A. Wolfington
Chairman and Chief Executive
Officer
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110-2699
Attention: James E. Dawson, Esq.
or at such other address as Carey shall have furnished the Seller Representative
and the Escrow Agent in writing;
(b) if to the Seller Representative, to
Mr. Alfred J. Hemlock
200 Central Park South
New York, New York 10020
with a copy to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, New York 10036
Attention: Alan Gettner, Esq.
or at such other address as the Seller Representative shall have furnished Carey
and the Escrow Agent in writing; or
(c) if to the Escrow Agent, to:
-------------------
or at such other address as the Escrow Agent shall have furnished Carey and the
Seller Representative in writing.
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15. Governing Law. This Escrow Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of New York.
16. Miscellaneous. This Escrow Agreement may be amended only by an
-------------
instrument in writing signed by Carey, the Escrow Agent and the Seller
Representative. This Escrow Agreement may be waived, discharged or terminated
only by an instrument in writing signed by the Escrow Agent and the party
against which such change, waiver, discharge or termination is sought. This
Escrow Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors and assigns. The headings in this Escrow
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof. This Escrow Agreement may be executed in several
counterparts, each of which is an original but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the date first above written.
CAREY INTERNATIONAL, INC.
By:
-------------------------
Title:
----------------------------
23
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Michael Hemlock
----------------------------
Alfred J. Hemlock
-----------------------------
Lupe C. Hemlock
, as Escrow
----------------- Agent
By:
-------------------------
Title:
24
<PAGE>
EXHIBIT 10.8
CAREY INTERNATIONAL, INC.
CAREY INTERNATIONAL SYSTEM MEMBERSHIP AGREEMENT
-----------------------------------------------
This agreement, made on this _____ day of ______________________ 19__, by and
between Carey International, Inc., a Delaware Corporation, having its principal
place of business in Washington, DC, (hereinafter referred to as "Carey
International"), and ______________________
- --------------------------------------------------------------------------------
(Name of Member)
a ____________________________________________ of ____________________________,
having its principal place of business in ____________________________________
(hereinafter referred to as the "Member");
WITNESSETH:
WHEREAS, Carey International owns the proprietary rights to and operates a
world-wide system (hereinafter referred to as the "Carey International System")
for conducting the business of operating and providing for the availability of
chauffeur-driven car-for-hire services (hereinafter referred to as the
"Chauffeur Car-for-Hire Business");
WHEREAS, it is mutually desirable that the Member be authorized by Carey
International to participate in and use the Carey International System in the
conduct of a Chauffeur Care-For-Hire Business in the territory hereinafter
specified; and
WHEREAS, by membership in and promotion of the Carey International System
on the part of the Member, by promotion of the Carey International System
worldwide on the part of Carey International, by the strength of their combined
reputations, and by referrals among members in the Carey International System,
both the Member and Carey International will enjoy increased opportunities in
the Chauffeur Car-For-Hire Business;
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the receipt and sufficiency of which is hereby acknowledged,
it is hereby understood and agreed by and between the parties that:
I. Membership in the Carey International System
--------------------------------------------
(A) Subject to all the terms and conditions hereinafter set forth, Carey
International grants to the Member the privilege to be a member in the
Carey International System (hereinafter referred to as "Membership")
and to use the Carey International System exclusively in the conduct of
a Chauffeur Car-For-Hire Business in and only in the following
territory:
--------------------------------------------------------------------
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<PAGE>
(B) The Member hereby agrees to the following:
(1) To place and to pay for the placement of advertisements in both the
directory listings and the business or commercial sections, equivalent
to the United States Yellow Pages section, of the telephone directory,
which present the name Carey Limousine, only as it is set forth in
form, content, and size in the sample illustration number one (1)
attached hereto as Exhibit A, and the local telephone number;
(2) To advertise the use of the Carey name and logotype in all of the
Members' advertising and promotional material, including, but not
limited to, stationary, yellow pages, promotional advertisements, and
brochures. Such use of the Carey name and logotype shall be in the
form and content as set forth in the Carey Limousine Standards Manual,
a copy of which is attached hereto as Exhibit B; and
(3) To distribute annually, during the term of this Agreement, to Carey
International a copy of the advertisements to be placed in the
directory listings and the business and commercial sections,
equivalent to the United States Yellow Page section, of the telephone
directory and a copy of the Member's contract with the telephone
company, which stipulates the date that the advertisements will appear
or will be distributed.
(C) From the date hereof and during the term of this Agreement and any renewal
hereof, the Member hereby agrees to pay to Carey International as
Membership Fees, payable monthly on or before the last day of each calendar
month, twenty percent (20%) of that portion of the prior calendar month's
gross revenue, less tips, tolls, taxes, and incidental driver expenses,
derived from the Carey International System. Each such monthly payment
shall be accompanied by a statement setting forth the gross revenue, less
tips, tolls, taxes, and incidental driver expenses derived from the Carey
International System Chauffeur Car-For-Hire Business, which statement shall
be signed by the Member and shall contain such detail as Carey
International may from time to time require.
In the event the Chauffeur Car-For-Hire Business results in a billing to
Carey International by the Member, the Member shall deduct the gross
billing amounts from the aforementioned twenty percent (20%) monthly
payment.
(D) For purposes of Paragraph C of Article I, Chauffeur Car-For Hire Business
derived from the Carey International System shall mean business arising
from reservations, referrals, and any other business derived directly or
indirectly from association with Carey International, including but not
limited to additional business arising from reservations or referrals.
-2-
<PAGE>
II. Proprietarv Rights
------------------
(A) The Member agrees, during the term of this Agreement and thereafter,
to acknowledge and to protect Carey International's exclusive right:
(1) to the Carey International System and to all parts thereof,
including without limitation, all bulletins, procedures, supplements,
forms, advertising matter, devices, marks, service marks, trademarks,
insignia, trade names, and slogans from time to time used as a part
of, in connection with, or applicable to said Carey International
System; (2) to all copyrights, trademarks, trademark registrations,
service marks, service mark registrations, trade names, and patents
now or hereafter applied for or granted in connection herewith; (3) to
use and grant the right to others to use the name "Carey" in
connection with the Chauffeur Car-For-Hire Business or in connection
with any other type of Business.
(B) The Member further agrees that all use of the Carey International
System and of all parts thereof by the Member will inure to the
benefit of and be on behalf of Carey International and agrees, during
the term of this Agreement and thereafter, not to dispute or contest,
directly or indirectly, the right of Carey International to the Carey
International System or any part thereof.
(C) Carey International reserve the unconditional right from time to time
to change the Carey International System or any part thereof,
including without limitation, any forms, bulletins, or procedures, and
the Carey International System as so changed or amended from time to
time shall for all purposes be deemed to be the Carey International
System referred to in this Agreement. Any and all improvements in the
Chauffeur Car-For-Hire Business or in the Carey International System
developed during the life of this Agreement shall be and become the
sole and absolute property of Carey International, which may
incorporate the same, or any part thereof, in the Carey System. Carey
International shall have the sole and exclusive right to copyright,
register, and patent such improvements in its own name.
III. The Member's Operations
-----------------------
The Member hereby accepts the privilege of Membership and agrees to
conduct said Chauffeur Car-For-Hire Business in accordance with the
procedures, provisions, methods, rules and regulations of said Carey
International System as now constituted and as the same may from time to
time be changed or amended by Carey International (the right to so change
or amend the same being hereby reserved by Carey International), and,
without limiting the generality of the foregoing, the Member agrees:
(A) To start active operation of a Chauffeur Car-For-Hire Business
hereunder not later than sixty (60) days from the date of this
Agreement and, thereafter, continuously to conduct active Chauffeur
Car-For-Hire Business hereunder, unless
-3-
<PAGE>
otherwise agreed to in advance and in writing by Carey International. In
the event of the Member's failure to comply with this provision, this
Agreement shall automatically terminate and the Member shall forfeit any
and all sums theretofore paid hereunder as fees or otherwise.
(B) To feature prominently, at all times and in conjunction with the Member's
established trade name, the words "Carey Member," "Carey System Member",
Carey International Chauffeur-Driven System Member", or such other form of
words featuring the name Carey International, as Carey International shall
approve in advance and in writing, in all of the member's advertising and
sales promotion material, and to abide by all instructions issued by Carey
International, from time to time, to all Carey International members with
respect to listing and advertising, if any, in commercial and other, if
any, telephone directories. The Member's privilege of using such name or
names, as provided herein, is subject to the condition that the Member will
not use, cause to be used, or attempt to use the same as a corporate or
other enterprise name or as any part of a corporate or other enterprise
name, nor purchase, license, or register vehicles under a name that
includes the name "Carey" in any manner whatsoever, nor use or permit the
use of the name "Carey," alone or in combination with other words, in any
manner whatsoever, except as expressly provided hereby.
(C) To use every reasonable means actively, honestly, and aggressively to
encourage the use of the Carey International System Chauffeur Car-For-Hire
Business worldwide; to solicit and process, without commission to the
Member, except as otherwise provided for the Carey International System
Chauffeur Car-For-Hire Business in all cities worldwide; and to service any
referrals or reservations, from Carey or another member, with at least the
same diligence as any other of the Member's clients.
(D) To conduct said Chauffeur Car-For-Hire Business in an orderly and
businesslike manner; to maintain the premises used in operating as a Carey
International System member in a clean, safe, and orderly manner so as, at
all times, to present a neat and businesslike appearance; and to keep and
maintain all chauffeur-driven vehicles in excellent mechanical and running
order and in safe, efficient, clean, and presentable condition.
(E) Not to use any rates or engage in any practices that tend to mislead the
public regarding the total charges in proportion to the period of service
and the miles traveled by the chauffeur-driven vehicle or that tend to
mislead the public in any other way and to furnish Carey International a
complete schedule of the Member's charges and rates and to notify Carey
International promptly of any changes thereto.
-4-
<PAGE>
(F) To maintain for the account of its customers and itself all such
insurance as may, from time to time, be deemed necessary and desirable
to adequately protect its customers and itself against third party
liability claims, such insurance to include Carey International as a
named insured; and to provide Carey International with a certificate or
certificates of insurance that will reflect such endorsement and proof
of payment therefor. In all cases, policies of insurance so maintained
by the Member will provide that Carey International must be given
thirty (30) days prior notice by the Member's insurance company of any
cancellation of such insurance coverage. All policies shall be renewed
and evidence of renewal delivered to Carey International prior to the
expiration dates thereof.
(G) That the Member, its shareholders, subsidiaries, and affiliated
companies shall not initiate any action to become affiliated with any
other company system, or other entity in the chauffeur-driven service
business without the prior written consent of Carey International.
(H) To conduct said Chauffeur Car-For-Hire Business in compliance with all
local, state, federal, or national laws and all orders, rules, and
regulations issued pursuant thereto. The Member represents and warrants
that this Agreement is lawful and binding pursuant to the applicable
laws, rules, and regulations in the Territory and the Member will
assure compliance with such laws, rules, and regulations and will
notify Carey International of any relevant changes thereto.
(I) The Member shall pay any other member (hereinafter referred to as the
"Referring Member") a commission of twenty percent (20%) of all
revenue, less tips, tolls, taxes, and incidental driver expenses,
generated from each referral client referred from the Referring Member
to the Member; provided that the Referring Member has submitted a
report to the Member identifying all such referral clients and such
other reasonable identifying information as the Members request.
(J) As long as Carey International is a member of the International
Limousine Association, the Member shall also maintain membership in the
International Limousine Association.
IV. Carey International's Operations
--------------------------------
(A) Carey International agrees to use every reasonable means to encourage
the use of the Carey International System worldwide, including entering
into referral agreements with volume sources of Chauffeur Car-For-Hire
Business such as quality hotel association, and when deemed appropriate
by Carey International, to issue for distribution among Carey
International System members, travel agents, and other volume sources
of Chauffeur Car-For-Hire Business, a Carey International System
directory listing members, their addresses, telephone
-5-
<PAGE>
numbers, and information with respect to rates, equipment, and
conditions under which chauffeur-driven vehicles will be supplied.
(B) Carey International authorized the Member, during the life of this
Agreement, to use, in conjunction with the Member's Chauffeur Car-For-
Hire Business and in conjunction with the Member's established trade
name, the name "Carey Member," "Carey System Member," "Carey
International Chauffeur-Driven System Member," or such other form of
words featuring the name "Carey" as Carey International may from time
to time prescribe or approve in advance and in writing, and to use such
name or names in advertising the Member's Chauffeur Car-For-Hire
Business.
(C) Carey shall pay the Member a commission of twenty percent (20% of all
revenues, less tips, tolls, taxes, and incidental driver expenses,
generated from each referral client referred from the Member to Carey
International; provided that the Member has submitted a monthly or
quarterly report to Carey International identifying all such referral
clients and such other reasonable identifying information as Carey
International requests.
V. Limitation of Liability
-----------------------
(A) This Agreement and the membership hereunder shall not be so construed
as to constitute the member, the partner, agent, subsidiary, or legal
representative of Carey International for any purpose whatsoever, and
the Member agrees that the member has no authority to assume or to
incur any obligation or responsibility, express or implied, for or on
behalf of or in the name of Carey International, or to bind, or attempt
to bind Carey International in any manner or thing whatsoever.
(B) In no event will Carey International be liable for any damages caused
by the Member's failure to perform the Member's responsibilities or for
any direct, indirect, special, or consequential damages, howsoever
arising (including but not limited to loss of anticipated profits) in
connection with or arising out of the Member's use of the Carey
International System. Member is responsible for all loss or damage and
contractual liabilities to third persons originating in or in
connection with the Member's use of the Carey International System and
for all claims or demands for damages to property or for injury,
illness, or death of persons, directly or indirectly, resulting
therefrom and Member agrees to defend, indemnify, and save Carey
International harmless of, from, and with respect to any such claims,
loss or damage.
(C) The Member shall be responsible for securing all licenses, permits, or
other consents required for the operation and maintenance of Chauffeur
Car-For-Hire Business pursuant to this Agreement. The member shall pay
all costs for such
-6-
<PAGE>
licenses, permits, or other consents, in addition to all taxes and
assessments levied against the Member and all other business expenses.
Carey International shall bear absolutely no responsibilities for the
licenses, taxes, and expenses of the Member.
VI. Transferability
---------------
(A) This Agreement is personal to the Member and none of the Member's
interest herein nor rights thereunder may be transferred, conveyed, or
assigned by the Member, whether by operation of law or otherwise.
(B) This Agreement and all rights hereunder may be assigned or transferred
by Carey International, and shall inure to the benefit of Carey
International's successors and assigns.
VII. Term and Termination
--------------------
(A) This Agreement and the Membership hereunder are effective on the date
of the execution hereof and shall remain in force for two (2) years,
to be renewed automatically from year to year thereafter, unless
either party provides written notice of intent to terminate this
Agreement or any renewal hereof not less than ninety (90) days prior
to the date of expiration of this Agreement or of any renewal
thereof, such termination to be effective upon the date of the
expiration of this Agreement or of any renewal hereof.
(B) This Agreement shall not be terminated by either party during its
term or any renewal thereof, except under the terms of Paragraph A of
Article VII and the following circumstances:
1. In the event that the Member shall fail to pay when due any
obligations incurred hereunder or incurred in the operation of
the Chauffeur Car-For-Hire Business hereunder, Carey
International, may, at its option, terminate this Agreement upon
not less than thirty (30) days prior written notice, which notice
shall specify the date on which such termination shall become
effective, unless the Member pays such obligations during said
thirty (30) day period;
2. In the event of any attempt by the Member to transfer, convey, or
assign any right under, or interest in, this Agreement, or of the
insolvency, incapacity, appointment of a receiver or Trustee for
the business of the Member, or the filing of a voluntary or
involuntary petition of bankruptcy by or against the Member, in
which event this Agreement shall automatically terminate together
with all right and interest of the Member hereunder.
-7-
<PAGE>
3. Carey International and the Member shall both have the right to
terminate for cause, provided that the party asserting cause
shall provide written notice of intent to terminate not less
than thirty (30) days before the date specified therein as the
date of termination and that the other party shall have thirty
(30) days in which to cure any cause.
(C) In the event of termination of this Agreement, all rights of the
Member hereunder shall thereupon terminate, and the Member shall
immediately thereafter cease to use, by advertising or otherwise,
the Carey International System or any part thereof, to include, but
not limited to, any forms, systems, slogans, signs, marks, symbols,
or devices used in connection with the Carey International System,
and including among other things, any name or names set forth in
paragraph B of Article III hereof or containing the name "Carey" or
any combination of words similar thereto in any manner whatsoever.
The Member shall have no interest in or rights with respect to any
funds collected by Carey International such as system or membership
fees, or for any advertising or sales promotion program, or other
special activities, whether expended or not by Carey International
at the time of such termination or with respect to any commissions
for referrals. Termination of this Agreement shall be in addition to
any other remedies which either party may have under this Agreement
or otherwise.
(D) In the event that termination is initiated by the Member, the Member
agrees that neither it, its subsidiaries, nor affiliates will become
part of any other Chauffeur Car-For-Hire System in the territory
specified in Paragraph A or Article I for a period of one (1) year
following the effective date of termination.
VIII. Miscellaneous
-------------
(A) Any notice required or permitted to be given pursuant to this
Agreement shall be in writing, by telex, telegram, or mail,
(certified or registered, return receipt requested), and, if such
notice be sent by mail, it shall be conclusively deemed to have been
received by the party to whom such notice is addressed, as herein
provided, when deposited in the mail, postage prepaid. All written
communications and notices shall be sent to the respective addresses
set forth below or such other address as may hereinafter be
designated by notice in accordance herewith:
-8-
<PAGE>
7.1. Request for Payment. In the event that Carey shall claim
-------------------
indemnification under Section 6 of the Merger Agreement or Section 6 of the
Stock Purchase Agreement for Damages (as such term is defined therein), Carey
shall give notice (a "Request for Payment") thereof to the Escrow Agent and the
Seller Representative, setting forth (a) a brief description of the nature of
and basis for such claim, (b) whether such Damages are consequent to a Third-
Party Claim (as such term is defined in Section 6.3 of the Merger Agreement and
Section 6.3 of the Stock Purchase Agreement) and if so, identifying such Third-
Party Claim, (c) the amount of the Damages, (d) any applicable reduction of the
indemnification payable with respect to such Damages pursuant to the provisions
of Section 6 of the Merger Agreement or Section 6 of the Stock Purchase
Agreement (if such reduction is known to Carey at the time of the Request for
Payment) and (e) the net amount (the "Net Claim") for which indemnification is
claimed (if different than the amount of the Damages) and identifying whether
the claim is made under the Merger Agreement, the Stock Purchase Agreement or
both. No payment to Carey under this Escrow Agreement shall be made with respect
to any Request for Payment received after the second anniversary of the Closing
Date unless such Request for Payment states that the Damages for which
indemnification is claimed is consequent to a Third-Party Claim and that Carey
delivered timely initial written notice of such Third-Party Claim to the Seller
Representative pursuant to the provisions of Sections 6.2(a) and
9
<PAGE>
Carey International, Inc.
---------------------------------------------------------------------------
ATTN: Membership Department
4545 42nd Street, NW, Suite 301
Washington, DC 20016
Telex: 64318
Member -
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Telex
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(B) All payments required to be made hereunder shall be made in the local
currency of the recipient, except as otherwise provided herein. Unless
otherwise directed in advance and in writing all payments will be remitted
to the same addresses to which all notices hereunder must be sent. In the
event that the Member is prevented by governmental regulations or
intervention from making any payments in the manner or currency required
hereunder, the Member shall deposit such payments in a bank account in such
location as shall be designated by Carey International. Furthermore in
such event, Carey International shall remit any payments due to the Member
in either United States dollars, currency in which the bank account is
kept, or any currency mutually agreed upon by the parties.
(C) No delay, waiver, omission, or forebearance on the part of either party to
exercise any right or power arising out of any branch or default by the
other party of any of the terms, provisions, or covenants hereof, shall
constitute a waiver of any right hereunder or the right to declare any
subsequent breach of default.
(D) The headings contained in this Agreement are for convenience only and shall
not affect the interpretation or meaning of this Agreement.
(E) This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements, understandings, and negotiations, verbal
or written. No amendment or modification of this Agreement shall be
binding unless written and signed by authorized representatives of both
Carey and the Member.
(F) This Agreement shall be construed according to the laws of New York.
-9-
<PAGE>
6.3 of the Merger Agreement or Section 6.2(a) and 6.3 of the Stock Purchase
Agreement. Carey may amend a Request for Payment so as to increase or decrease
the amount of the Net Claim but unless such Request for Payment is for Damages
consequent to a Third-Party Claim, any such amendment must be delivered by Carey
to the Escrow Agent and the Seller Representative prior to the second
anniversary at the Closing Date.
7.2. Payment of Claims. The Escrow Agent will transfer to Carey out
-----------------
of the principal of the Escrow Deposit the amount of the Net Claim stated in any
Request for Payment (or, in the case of a Net Claim stated in an amended Request
for Payment, the amount of the Net Claim less any amount previously transferred
to Carey with respect thereto) 10 business days after delivery thereof unless
the Seller Representative shall have delivered a notice of objection (a "Notice
of Objection") to Carey and the Escrow Agent, stating the amount, if any, of the
Net Claim that the Sellers do not contest; provided, however, that the Escrow
-------- -------
Agent shall pay Carey any amount of the Net Claim which the Seller
Representative does not contest in its Notice of Objection. Upon receipt of a
Notice of Objection to a Request for Payment or amended Request for Payment, the
Escrow Agent will make no distribution to Carey with respect to the contested
amount of the Net Claim until it has received either (i) a certificate executed
by Carey and the Seller Representative setting forth the amount of the Net Claim
as agreed to by Carey
10
<PAGE>
Exhibit 10.9
------------
PROMISSORY NOTE
_________ ________ ____, 1997
FOR VALUE RECEIVED, Carey International, Inc. a Delaware corporation
("Maker"), promises to pay to the order of _______________, a resident of
Hewlett, New York ("Payee"), in lawful money of the United States of America,
the principal sum of ________________________________________________, together
with interest in arrears on such principal sum at an annual rate equal to 8%
from the date hereof, in the manner provided below.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Agreement and Plan of Merger, dated March
1, 1997, by and among Maker, Payee, _________________________________________
____, and ____________________________, (the "Agreement"), and is subject to
certain of the terms and conditions of the Agreement. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
1. Principal and Interest. The principal amount of this Note, if not
sooner paid, shall be due and payable in full, together with all accrued and
unpaid interest thereon, on the first anniversary of the date hereof. Interest
on the outstanding principal of this Note shall be due and payable monthly on
the last day of each month, commencing on the last day of the month immediately
following the date hereof.
2. Prepayment. Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note.
3. Default. In the event that Maker fails to make any principal or
interest payment within five (5) business days of the due date set forth in
Section 1, all interest and principal may, at Payee's option, become immediately
due and payable, together with interest on such overdue principal and (to the
extent permitted by applicable law) any overdue interest at an annual rate equal
to 11%.
4. Governing Law. This Note will be governed by the laws of the State of
New York without regard to conflicts of laws principles.
5. Parties In Interest. This Note shall bind Maker and its successors and
assigns. This Note shall not be negotiated, assigned or transferred by Payee,
other than to a family limited partnership or limited liability corporation in
which Payee has an interest, without the express prior written consent of Maker,
provided that any such transferee agrees to be bound
<PAGE>
to the same extent as the Payee by the provisions of Section 6 of the Agreement
to the full extend of any proceeds paid under this Note to such transferee.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the
date first stated above.
CAREY INTERNATIONAL, INC.
By:
-------------------------------------------
Title:
MILN
-2-
<PAGE>
EXHIBIT 10.10
CAREY LIMOUSINE [COMPANY]
STANDARD INDEPENDENT OPERATOR AGREEMENT
THIS AGREEMENT made on the _______ day of ___________________________, 19____,
by and between CAREY LIMOUSINE [COMPANY], a Delaware corporation having its
principal place of business in [CITY], [STATE] (hereinafter called the
"Company"), and the following Independent Operator (hereinafter called the
"Independent Operator"):
_______________________________________________________________________________
Address:_______________________________________________________________________
WITNESSETH
WHEREAS, the Company has been organized for the purpose of providing Chauffeur
Driven Service, which is hereby defined and used through this Agreement as the
business of (a) marketing the use of chauffeured cars, (b) utilizing a
reservation system to facilitate the booking of reservations for chauffeured
cars, (c) dispatching chauffeur-driven vehicles to be used by the general public
for an agreed-upon consideration, and (d) billing and collecting for services
Tendered;
WHEREAS, the Independent Operator is a professional chauffeur and an
independent contractor engaged in the business of driving a chauffeured car for
hire;
WHEREAS, the Independent Operator and the Company desire to enter into an
agreement whereby the Independent Operator, in return for the services, business
sources and other benefits of
<PAGE>
the Company, will make available a for-hire vehicle and driver to be utilized in
the Company's Chauffeur Driven Service;
NOW, THEREFORE, in consideration of the payment by the Independent Operator of
the compensation herein mentioned and of the mutual covenants and promises
herein contained, IT IS AGREED as follows:
I. OBLIGATIONS OF THE INDEPENDENT OPERATOR
---------------------------------------
A. Independent Operator Acknowledgment
-----------------------------------
1. The parties intend to create by this Agreement the relationship
of an independent contractor and not an employer-employee, partnership or joint
venture relationship. The Independent Operator shall act as a vendor providing a
service to the Company and, as such, shall have the unrestricted right to
exercise complete control over the manner and means of the operation of his own
business, consistent with the terms of this Agreement. The Independent Operator
and his employees or subcontractors shall not be considered employees of the
Company at any time or for any purpose whatsoever. The Independent Operator
shall under no circumstances be considered or construed to be, or represent
himself as, an agent or representative of the Company and shall not attempt to
negotiate or enter into a contract or an agreement of any nature in the name of,
or on behalf of, the Company without the written consent of the Company, and any
purported contract or agreement in violation of this paragraph shall be null and
void and in no way
-2-
<PAGE>
binding on the Company. This Agreement does not constitute an agreement or
license to use the Carey name.
2. As an independent contractor, the Independent Operator shall
be required to account to the Company in accordance with this Agreement.
3. The Independent Operator shall be an affiliated driver of the
Company, duly licensed as a chauffeur providing a duly licensed for-hire vehicle
("Affiliated Vehicle") to the Company and, as such, shall not have an
affiliation with any other company or other base operator.
4. The Independent Operator agrees that he shall perform his
obligations under this Agreement in a business-like manner, consistent with the
customary high standard of service of the Carey International System of
Licensees and Affiliates, as promulgated by the Company from time to time and in
a way so as to reflect favorably upon the name, goodwill and legal interest of
the Company. This provision is of the essence of this Agreement. The
Independent Operator further agrees that he shall perform his obligations under
this Agreement in compliance with all local, state and federal laws and all
orders, rules and regulations issued pursuant thereto.
5. The Independent Operator agrees to be available during such
hours of the day and days of the week which are necessary to serve the customers
of the Company (hereinafter, the "Period of Availability"). The Independent
Operator further agrees that the Period
-3-
<PAGE>
of Availability will include two weekends out of every four weekends, which two
weekends likewise will be determined in accordance with what is necessary to
serve the customers of the Company.
6. The Independent Operator agrees not to record or charge any
rates, or engage in any practices, which tend to mislead the public in any way.
When meeting his obligations under this Agreement, the Independent Operator
further agrees not to deviate from charging rates promulgated by the Company to
Company's customers. The Independent Operator further agrees that lie shall not
commit or attempt to commit, alone or in concert with another, any act of fraud,
misrepresentation, larceny, or deceit, and shall not solicit or pick up
passengers by means other than pre-arrangement through the Company in accordance
with this Agreement.
7. The Independent Operator agrees that, whereas the Company is
engaged in a business where its customers expect a high standard of general
appearance, manner, temperament, and personality, it is incumbent upon the
Independent Operator to meet those standards and to provide prompt and courteous
service.
B. Driver and Vehicle Requirements
-------------------------------
1. The Independent Operator shall make himself available to the
Company with a duly authorized and inspected vehicle in conformity with all of
the requirements under this Agreement. It is understood that the vehicle which
shall be made available by the Independent Operator shall be maintained at the
Independent Operator's own expense, and said
-4-
<PAGE>
vehicle shall comply with the requirements of all statutes, ordinances and
regulations applicable to chauffeured for-hire vehicles. The Independent
Operator shall be responsible for all fees and expenses incurred in the
operation and maintenance of such vehicle in the performance of his obligations
as set forth in this Agreement. The Independent Operator shall have the right to
purchase, lease, or otherwise obtain his vehicle from any source suitable to
him.
2. The Independent Operator agrees that any vehicle provided
under the terms of this Agreement shall be properly maintained and shall, at all
times during its use on behalf of the Company, be in a safe, clean and
presentable condition, and that said vehicle shall be a late model vehicle no
more than three years old. The Company reserves the right to approve any
vehicle operated by the Independent Operator, such approval not to be
unreasonably withheld; however, the Independent Operator agrees to cooperate and
participate in any vehicle use program of any manufacturer with whom the Company
or the Carey International System of Licensees and Affiliates has entered in to
an agreement related to marketing, advertising, purchase, service and/or
finance. The Independent Operator shall provide and operate no more than one
vehicle except with the written permission of the Company. The Independent
Operator shall be free to exercise individual judgment as a professional with
respect to day-to-day affairs of his business, including where to garage his
vehicle and maintenance of the vehicle provided under this Agreement.
3. The Independent Operator agrees that direct, continued
communication with the Company during the Period of Availability of the car and
driver is of the essence of performance under this Agreement and, accordingly,
he shall subscribe to any radio or data communication system utilized by the
Company, provided the cost is not unreasonable. The
-5-
<PAGE>
Independent Operator further agrees that, during the Period of Availability, he
will carry on his person an audible "beeper" or similar device in an active and
on mode for the period of time daily that is reasonable and necessary to perform
his obligations as an Independent Operator, and shall respond promptly when
signaled by such device.
4. The Independent Operator agrees to have a cellular telephone
installed in the vehicle at his expense and to take all necessary measures to
maintain such telephone in good working order at his expense for use by the
customers of the Company, provided that the cost of use of such cellular
telephone by the Company's customers shall be charged to such customer and
included with gross charges reported.
C. Account of Services
-------------------
1. The Independent Operator shall provide the Company "trip
tickets," or data in a format approved by the Company, which contain an account
of all services rendered, hours of service, customers driven, mileage, and other
matters relevant to the vehicles and the drivers utilized, including a breakdown
of cash tips received and/or the amounts of tips authorized by the customer to
be charged as well as telephone charges. Such "trip tickets" shall be presented
to the Company within forty-eight (48) hours of the end of the day of service at
the Company's place of business or given to the Company, immediately upon
completion of the services rendered, by telephone, radio, or data transmission
in accordance with prevailing Company policy.
-6-
<PAGE>
D. Vehicle and Driver Insurance Requirements
-----------------------------------------
1. In order to meet any obligations imposed by law, the Company's
customers, and the Carey International System of Licensees and Affiliates, the
Independent Operator shall purchase and maintain, in an amount satisfactory to
the Company, worker's compensation, liability, property damage, fire, theft,
comprehensive and collision insurance from an underwriter mutually agreed upon
by the Independent Operator and the Company. The Independent Operator shall
provide the Company, as evidence thereof, certificates of insurance designating
the Company as an additional party insured on such policies. The amounts and
types of insurance coverage maintained by the Independent Operator shall, at a
minimum, be in accordance with those standards set by the Carey International
System of Licensees and Affiliates to which the Company must conform, which will
be promulgated by the Company.
2. The Independent Operator shall pay a pro rata share, based on
the number of Independent Operators entering into an exclusive agreement of this
type with the Company, of the cost of a combined, single limit public liability
and property damage insurance policy up to an amount of Ten Million Dollars
($10,000,000), as available, or of the cost of any other similar type of
insurance to which the Company and Independent Operators may agree.
3. The Independent Operator shall take whatever measures are
necessary to assure that the broker and underwriter providing such insurance
referred to in D (1) and (2) above shall be instructed to notify the Company in
writing with respect to any delinquency or late
-7-
<PAGE>
payment of any premium or payments and any cancellation of the policy or
policies referred to herein.
4. In the event of an accident at any time involving the
Independent Operator or his vehicle, the Independent Operator shall notify the
Company promptly, and in no event later than four (4) hours after the occurrence
of the accident, even when the vehicle was used for purposes other than for
hire.
5. In the event the Independent Operator does not provide to the
Company proof of workers' compensation coverage, the Independent Operator shall
agree to pay a pro-rata share, based on the number of Independent Operators
entering into an agreement of this type with the Company, of the cost of a
workers' compensation policy so as to provide coverage of any claims which may
arise in accordance with federal and/or state law.
6. The Independent Operator shall indemnify the Company from any
loss, cost, damage or expenses (including attorneys' fees) that may arise as a
result of the Independent Operator's failure to comply with the terms of this
Agreement, carelessness, or negligence.
E. Acknowledgment of Exclusivity
-----------------------------
1. The Independent Operator agrees that he shall not become
affiliated with any party, base operator, or other company which provides a
Chauffeur Driven Service or car
-8-
<PAGE>
for hire service without the prior written consent of the Company. During the
term of this Agreement, the Independent Operator shall not render service to, or
acquire any interest whatsoever, whether as an individual proprietor, partner,
associate, shareholder, consultant, trustee, employee, or otherwise, in any
person, partnership, association, corporation, or other entity which is engaged
in a business which in any way competes with the Company.
2. The Independent Operator further agrees that all business or
service rendered by the Independent Operator shall be included in the
information furnished to the Company pursuant to Section I.C.1 of this
Agreement.
3. The Independent Operator agrees that any customers served by
the Independent Operator shall be considered customers of the Company. The
Independent Operator shall not contact customers of the Company without the
prior written approval of the Company. The Independent Operator further agrees
that any and all information about the customers of the Company, including the
customer list, is confidential and proprietary to the Company and is not to be
disclosed or shared in any way with persons or organizations outside the
Company.
4. The Independent Operator agrees that he shall not purport to
act or provide services on behalf of the Company or serve a customer of the
Company unless actually dispatched by the Company. The Independent Operator
shall not under any circumstances solicit customers or guest passengers of
customers of the Company for purposes other than developing business for the
Company. This restriction includes, but is not necessarily limited to,
restricting the Independent Operator from issuing letters or giving personal or
non-Carey business cards and
-9-
<PAGE>
telephone numbers. The Independent Operator acknowledges that professional
ethical standards make it incumbent upon the Independent Operator to consider
this provision of the essence of this Agreement, and failure to adhere to it
shall constitute an irreparable breach of professional conduct and a cause for
termination of this Agreement by the Company.
5. The Independent Operator agrees that during the term of this
Agreement he shall refer to the Company any and all business requested by the
customers of the Company or by any new customers requesting the services of the
Independent Operator.
6. The Independent Operator agrees that neither he nor his
employees and/or affiliates shall promote the use of any telephone number other
than the telephone number of the Company, unless such promotion is approved by
the Company in writing.
7. The Independent Operator agrees to accept any and all business
reasonably dispatched by the Company during the Period of Availability, with the
understanding that once an order is communicated, the Independent Operator shall
complete such order according to the compensation provisions of this contract,
regardless of the time of day.
F. Compensation
------------
1. The Independent Operator shall pay a base fee of
________________________________________________________________ Dollars
($__________) as compensation for the undertakings of the Company generally as
set forth in Section II of this Agreement, in accordance with Rider A attached
hereto.
-10-
<PAGE>
2. The Independent Operator further agrees that the Company shall
retain [PERCENT] ( %) of the adjusted gross revenue including telephone
charges generated by the Independent Operator. The Independent Operator shall
be paid [PERCENT] ( %) of the adjusted gross revenue including telephone
charges generated by the Independent Operator, as well as one hundred percent
(100%) of collected tips (less five percent (5%) on credit card charges)
generated by the Independent Operator. The adjusted gross revenue, as used
herein, is equal to the verified gross charges reported by the Independent
Operator pursuant to section I C (1) of this Agreement, less tips, sales and use
taxes, commissions, fees, system service charges, tolls, and parking expenses.
G. Rules and Regulations
---------------------
The Independent Operator agrees that the Company has the exclusive
right to administer its business and to implement, publish and enforce rules,
regulations, policies and procedures from time to time with respect to its
business, and the Independent Operator shall diligently conform to such rules
and regulations.
II. OBLIGATIONS OF THE COMPANY
--------------------------
A. Sponsorship Requirements
------------------------
The Company agrees to sponsor the licensing of the Independent
Operator as an affiliate of the Company as required by local or state
laws/regulatory commissions.
-11-
<PAGE>
B. Business Promotion
------------------
The Company agrees to develop, promote and market the Chauffeur
Driven Service.
C. Dispatching
-----------
The Company agrees to dispatch the vehicle made available by the
Independent Operator in accordance with its best judgment to properly serve the
customers of the Company. The Company further agrees to use its reasonable
business efforts to dispatch, in order, its Chauffeur Driven Business to the
exclusive Independent Operators and to other Independent Operators associated
with the Company before making referrals to any other parties. The Company
hereby acknowledges that the Independent Operator may have individual
preferences as to the hours of the day and the days of the week for his Period
of Availability. The Company will put forth reasonable efforts to cooperate in
meeting the Independent Operator's preferences in its dispatching practices,
subject to the Company's obligation to serve its customers. In the event that
the Independent Operator wishes not to be available during his normal Period of
Availability, such Independent Operator shall notify the Company no later than
12:00 noon on the Friday preceding the week during which the Independent
Operator wishes not to be available and will specify the day and hours of the
day during which he wishes not to be available.
D. Commercial Place of Business
----------------------------
The Company will maintain the equipment and employ the staff
appropriate for handling all communications from the Company's customers and the
Carey reservation system, and in general provide the facilities of a base
operator at its regular place of business.
-12-
<PAGE>
E. Billing and Collection Requirements
-----------------------------------
The Company agrees that, upon receipt of the daily trip tickets or
account of services rendered from the Independent Operator, the Company shall
verify, compute, bill and collect all reported charges. In agreeing to this
obligation, the Company does not assume risk for loss due to uncollectible
billings of customers obtained by the Independent Operator. Further, where a
dispute exists concerning the correct amount of a billing, the Company shall
determine the amount the Company's customer is to be billed, and that amount
shall be the amount used in computing the adjusted gross revenue in accordance
with sections I F and II E of this Agreement. The Independent Operator shall
have no recourse or right to contact a Company customer with respect to billing
without the prior written authorization of the Company.
F. Payment to the Independent Operator
-----------------------------------
1. The Company agrees to make payment to the Independent Operator
for all verifiable revenues, gratuities, tolls, parking, telephone expenses, and
other incidental expenses attributable to the business of the Independent
Operator as set forth in the Independent Operator's account of services
rendered, less any amount of compensation due to the Company as set forth in
clause I F of this Agreement and less adjustments made pursuant to clause II E
of this Agreement. This payment shall be made on the [DATE OF PAYMENT] day of
each and every month following the month in which the services of the
Independent Operator have generated the revenue; provided, however, that the
Company may, at its discretion, elect to make payments directly to the
Independent Operator by separate checks for gratuities, tolls, parking, and
telephone expenses, as collected. The Independent Operator agrees that any such
payment referred to herein shall be made after deducting any charges related to
insurance payments and other charges, such as lease
-13-
<PAGE>
payments, or as otherwise mutually agreed upon between the Company and the
Independent Operator.
2. The Company agrees to provide the Independent Operator an
account reconciliation with the payment made to the Independent Operator on the
[DATE OF PAYMENT] day of the month. The account reconciliation shall reflect
the payments made by the Company on behalf of the Independent Operator for the
particular month, the amounts deducted by the Company, and the ending balance in
the Independent Operator's account for the month.
G. Price of Standard Independent Operator Agreements
-------------------------------------------------
The Company reserves the right to establish the price for the sale
of Independent Operator agreements by the Company.
III. ADJUSTMENT OF RATES
-------------------
The rates of the Company for Company customers in existence at the
effective date of this Agreement may be changed at the Company's discretion and
in accordance with the Company's obligations to the Carey International System
of Licensees and Affiliates. The Company will give notice to the Independent
Operator of any such changes.
IV. EMPLOYMENT OF THIRD PARTIES BY INDEPENDENT OPERATOR
---------------------------------------------------
As an independent contractor and affiliated driver of the Company, the
Independent Operator is free to employ such individuals as he may wish to aid in
providing the Chauffeur Driven Services under this Agreement, subject to the
following minimum standards:
-14-
<PAGE>
A. Employees of Independent Operator
---------------------------------
1. Any individual employed as a driver by the Independent
Operator shall have all licenses and qualifications necessary for the operation
of a chauffeured vehicle.
2. Any such employee of the Independent Operator shall be subject
to the same terms and conditions as govern the actions of the Independent
Operator under this Agreement.
3. The Independent Operator shall be responsible for ensuring
that any driver or agent employed by him complies with the minimum standards of
performance set forth in this Agreement.
4. The Independent Operator shall provide worker's compensation
insurance for his employees so as to provide coverage for any claims which may
arise, in accordance with federal and/or state law, and he shall provide the
Company with proof of such coverage.
In the event that the Independent Operator elects to employ an
individual pursuant to this paragraph, he shall notify the Company in writing of
his intent, and the Company shall have the right to approve such individual,
such approval not to be unreasonably withheld provided the proposed employee of
the Independent Operator has executed the Back-up Driver/Independent Operator
Agreement as set forth in Rider C hereto.
-15-
<PAGE>
V. ASSIGNMENT OF INTEREST BY INDEPENDENT OPERATOR
----------------------------------------------
This Agreement may not be sold or assigned to a third party. The rights
under this Agreement are extended only to the Independent Operator that is named
in this Agreement.
VI. MERGER, LIQUIDATION, CONSOLIDATION OR TERMINATION OF THE COMPANY'S
------------------------------------------------------------------
CHAUFFEUR DRIVEN SERVICE
------------------------
It is mutually agreed that the Company has the right to sell, lease,
transfer, consolidate, merge or assign all or part of its Chauffeur Driven
Service at any time and within its discretion. This Agreement shall continue to
be binding upon any successor in interest to the Company, provided such
successor in interest shall continue to operate its Chauffeur Driver Service.
It is further agreed that nothing contained in this Agreement shall restrict the
Company from terminating all its Chauffeur Driven Service which shall have the
effect of terminating further rights and obligations of the Company and
Independent Operator under this Agreement.
VII. TERM OF AGREEMENT
-----------------
This Agreement shall become effective on the date hereof and shall be for
a period of ___________ ( ) years unless earlier terminated in accordance
with the provisions of Clauses VI and VIII hereof. This Agreement may not be
extended.
-16-
<PAGE>
VIII. TERMINATION OF AGREEMENT
------------------------
A. If the Independent Operator shall become insolvent or make an
assignment for the benefit of creditors, file a voluntary bankruptcy or petition
for reorganization, or fail to vacate an involuntary bankruptcy or
reorganization petition filed against the Independent Operator within ninety
(90) days of the date of such filing, or fail to vacate the appointment of a
receiver or trustee for the Independent Operator or any portion of his business
within ninety (90) days of such appointment, the Company may, upon thirty (30)
days written notice to the Independent Operator, terminate this Agreement, and
thereupon all the rights of the Independent Operator under this Agreement shall
cease.
B. If the Independent Operator shall violate any provision of this
Agreement or shall fail to conform to the rules and regulations as promulgated
by the Company from time to time, the Company has the right to terminate this
Agreement. The Independent Operator acknowledges and agrees that failure to
perform certain provisions of this Agreement which are of the essence of the
Agreement is cause for immediate termination of this Agreement by the Company.
These include, but are not limited to, the following provisions: I.A.4; I.A.5;
I.B.3; I.E.
C. If the Independent Operator shall misuse Company or customers'
property, be involved in any way of proven theft or embezzlement, or operate a
vehicle Under this Agreement while under the influence of alcohol or under the
influence of drugs, the Company shall have the
-17-
<PAGE>
immediate right to terminate this Agreement, and all of the rights of the
Independent Operator hereunder shall thereupon cease.
D. This Agreement may be terminated upon the mutual written consent of
both parties to this Agreement following thirty (30) days' written notice by the
party seeking termination, regardless of any other clause in this Agreement.
Upon such mutual termination, all the rights and obligations of the Company and
the Independent Operator under this Agreement shall cease.
E. The Company shall have the right to immediately terminate this
Agreement if the Independent Operator (a) fails to pay the base fee set forth in
paragraph F (1) in installments in accordance with the terms of Rider A and
becomes in default under Rider A, or fails to meet the obligations thereunder,
which default or failure to perform is not cured within fifteen (15) days of its
occurrence, or (b) defaults in any other agreements with the Company, including
but not limited to a lease agreement or advance agreement with the Company.
F. If the Company ceases to operate its Chauffeur Driven Service or
goes out of business, this Agreement may be immediately terminated in writing by
the Company.
G. If the Independent Operator ceases to maintain contact and/or make
available a car and driver for the Company for thirty (30) days during any
calendar year without the mutual consent of the Company in writing, this
Agreement shall become null and void automatically.
-18-
<PAGE>
H. If the Independent Operator acts in a way which is derogatory to the
Company and/or detrimental to the good name and reputation of the Company, the
Company shall have the right to immediately terminate this Agreement.
IX. RIGHTS OF PARTIES UPON TERMINATION
----------------------------------
A. In the event of termination of this Agreement, all rights of the
Independent Operator hereunder shall thereupon cease, and the Independent
Operator shall immediately thereafter cease to use, by any means, any Company
business cards or any other Company printed material, the Company's trademark,
trade names; any forms, systems, slogans, signs, emblems, insignia, symbols,
devices or proprietary business methods. If the Independent Operator shall fail
to comply with the requirements of this clause, the Company shall have the right
to proceed by any legal means to cause the cessation of such actions, and the
Independent Operator shall be liable for all damages, attorneys' fees, and court
costs resulting therefrom.
B. In the event of termination of this Agreement, the Independent
Operator shall have no interest or rights with respect to any charges generated
from customers of the Company after the date of termination of this Agreement.
It is further agreed that the Independent Operator shall have an interest only
in charges collected by the Company which were generated by the Independent
Operator on behalf of the Company prior to the date of termination of this
Agreement, provided that the Company shall reserve the right to withhold from
any payment due to the Independent Operator amounts owed to the Company by the
Independent Operator under this Agreement.
-19-
<PAGE>
C. In the event of termination of this Agreement by the Company
pursuant to clause VIII, the Independent Operator hereby agrees that, for a
period of twelve (12) months after the date of such termination, the Independent
Operator shall refer to the Company any and all business requested by customers
of the Company or any customers reported on the Independent Operator's accounts
during the year prior to termination. It is further agreed that in the event
clause VIII C of this Agreement is violated by the Independent Operator, his
employees or affiliates, the Company shall be entitled to liquidated damages in
the amount of Ten Thousand Dollars ($10,000) and the Independent Operator hereby
agrees that such amount shall be immediately due and payable. In the event of
such action, the Independent Operator hereby gives the Company a confession of
judgment for an amount equal to Ten Thousand Dollars ($10,000) plus any costs
related to the collection thereof.
D. In the event of termination of this Agreement at any time after
thirty (30) days following the date of the Agreement, the parties mutually agree
that the base fee, or any portion of the base fee, paid to the Company by the
Independent Operator as set forth in clause I F shall not be refundable to the
Independent Operator.
E. In the event of termination of this Agreement, the Independent
Operator, his employees or affiliates, immediately shall return to the Company
all equipment, material and paperwork of the Company in the possession of the
Independent Operator or his employees or affiliates.
-20-
<PAGE>
F. In the event of termination of this Agreement for any reason
whatsoever, the Independent Operator will not attempt in any manner for a period
of no less than twenty-four (24) months from the date of termination to persuade
any person, firm, or corporation that is a customer or client of the Company to
cease doing business or to reduce the amount of business which any such customer
or client has customarily done or contemplates doing with the Company. The
Independent Operator will not entice or induce any person who is now in the
employ of the Company to become employed by the Independent Operator or any new
employer with whom he may become affiliated, and the Independent Operator will
not disclose to anyone confidential information of the Company or information as
to any client of the Company and any client for whom the Independent Operator
provided service as an Independent Operator for the Company under this
Agreement.
G. The Independent Operator further agrees that in the event of
termination pursuant to paragraph VIII B of this Agreement, it is mutually
acknowledged and agreed that any breach or threatened breach of the provisions
of this Agreement covered herein will cause irreparable injury to the Company
and that money damages will not provide adequate remedy to the Company. The
Independent Operator agrees that the Company may take whatever actions or
remedies are available to it under the law and shall be entitled to any damages
that it may show it has sustained by reason of a failure on the part of the
Independent Operator to comply with such provisions of this Agreement.
-21-
<PAGE>
X. TRADEMARK
---------
A. The Company has the sole interest in the trademark of the Company
and any other use of the name of the Company in connection with this Agreement.
Nothing contained herein shall be construed as conferring upon the Independent
Operator any right or interest in such trademark or any designs, copyrights,
patents, trade names, signs, emblems, insignia or slogans or other marks used in
connection with the Company or other use of the name of the Company.
B. This Agreement shall not be construed to authorize the Independent
Operator to act as an agent, franchisee or representative of the Company for any
purpose whatsoever except to service the customers of the Company pursuant to
this Agreement, and the Independent Operator has no authority to assume or to
incur any obligations or responsibility on behalf of or in the name of the
Company or to bind or attempt to bind the Company in any way.
C. The Independent Operator hereby agrees that he will not use, nor
allow the use, alone or in concert with another, of the name of the Company or
any other trade name or trademarks of the Company, except as specifically
authorized by the Company. In the event of termination of this Agreement for
any reason, the Independent Operator hereby agrees to return to the Company all
materials hearing the trademark, trade names, symbols, slogans, emblems,
insignia, or other designs of the Company.
XI. EXTENSION OF AGREEMENT
----------------------
This Agreement may not be extended.
-22-
<PAGE>
XII. OTHER MATTERS
-------------
A. The Company has the sole right to administer its business and
reserves the right to implement, publish and enforce all rules, regulations,
policies and procedures not inconsistent with the terms and conditions of this
Agreement and the Independent Operator's rights hereunder.
B. The failure of the Company to enforce at any time or for any period
of time any of the terms or conditions of this Agreement shall not be deemed a
waiver of such terms and conditions. No delay, waiver, omission or forbearance
on the part of the Company in exercising any right arising out of a breach by
the Independent Operator of any of the terms, provisions or covenants of this
Agreement shall constitute a waiver by the Company of such right or of the
Company's right to declare any subsequent breach or default.
C. Any notice required or permitted to be given pursuant to this
Agreement shall be in writing, and if such notice be sent by certified or
registered mail, it shall be deemed to have been received by the party to whom
such notice was addressed as herein provided when deposited in the mail. The
same shall be addressed to the Independent Operator at the address set forth
below or at such other address as hereafter may be designated in writing by the
Independent Operator. If said notice is intended for the Company, it shall be
separately addressed to:
Attention: President
Carey Limousine [COMPANY]
[ADDRESS]
[ADDRESS]
-23-
<PAGE>
or to such other address as may hereafter be designated in writing by the
Company. If said notice is intended for the Independent Operator, it shall be
separately addressed to:
____________________________________________ ______________________________
Independent Operator Name Address
______________________________
D. If any provision of this Agreement is held to be contrary to the law
or a decision of a court of competent jurisdiction or a governmental agency from
which appeal has not been taken within the time limit specified by law, then
such provision shall not be effective for purposes of this Agreement, except to
the extent permitted by law, and the remainder of the Agreement shall remain in
full force and effect. In the event that any provision of this Agreement is
held contrary to law as provided above, the Company and the Independent Operator
may, at the option of either party, enter into negotiations concerning a
substitute for such provision.
E. The masculine gender used throughout this Agreement shall be
construed to include the feminine where the context so requires.
F. This Agreement shall be construed according to the laws of the State
of [STATE], and no amendment, change or variance from this Agreement shall be
binding upon either party unless executed in writing and signed on behalf of the
Company by one of its officers and by the Independent Operator. It is agreed
that this Agreement may be amended by the written consent of the parties hereto.
-24-
<PAGE>
G. This Agreement shall supersede any and all agreements to which the
Independent Operator and the Company, its predecessors or assigns, may currently
be or have been a party.
XIII. RIDERS
------
It is mutually agreed that Riders "A", "B" and "C" attached hereto are an
integral part of this Agreement and are incorporated herein. Additional riders
may be executed by the parties hereto and made a part of this Agreement,
provided such additional riders are in writing and signed by the parties.
ACCEPTED:
CAREY LIMOUSINE [COMPANY] INDEPENDENT OPERATOR
By: ______________________________ By:__________________________________
(Signature) (Signature)
__________________________________ _____________________________________
(Name) (Name)
Date: ____________________________ Date: _______________________________
-25-
<PAGE>
RIDER "A"
TO STANDARD INDEPENDENT OPERATOR AGREEMENT
TERMS OF AGREEMENT SECTION I.F.1
--------------------------------
The Independent Operator agrees to pay the Company a base fee of ___________
_____________________________________________________________________ Dollars
($____________). The base fee payment will be comprised of a down-payment of
_____________________________________________________________________ Dollars
($____________), with the balance of
________________________________________________ Dollars ($____________) to be
paid in monthly installments of ______________________________________________
_____________________________ Dollars ($_____________) per month for a period
of __________________________ (_________) months with the final payment in the
_________ month to be in the amount of _______________________________ Dollars
($_____________). The monthly payment will commence in the month following the
month of the date of this Agreement. The monthly payment shall include interest
at the current rate of _______________ percent (___%).
The Independent Operator agrees to arrange his own financing within one year
of the date of the Agreement and, in the event that the Company can accommodate
the Independent Operator by arranging bank financing, at any time during which a
balance is due under this Agreement, the Independent Operator shall utilize such
financial arrangements in accordance with the terms and conditions established
by the bank.
WITNESS INDEPENDENT OPERATOR
_________________________________ _________________________________
Date: ___________________________ Date: ___________________________
<PAGE>
PROMISSORY NOTE
---------------
Date: _________________________________
For value received, __________________________________, (the Independent
Operator) having his/her principal residence at ______________________________
__________________________________________ promises to pay Carey Limousine
[COMPANY] at its offices at [ADDRESS] or at such other places as may be
designated in writing by the holder of this Note, the principal sum of
_____________________________________________________________________ Dollars
($_______________________) as follows:
Monthly installments each in the sum of _______________________________
Dollars ($_________________________) shall be payable to Carey Limousine
[COMPANY] commencing on the last day of _________________________, 19____, and
on the last day of each month thereafter and the entire unpaid principal balance
shall be due and payable on ___________________________, together with all
unpaid accrued interest. The monthly installment shall include interest at the
current rate of ___________________ percent (______%).
The Independent Operator agrees to sign a consent and/or Loan Deduction
authorization Carey limousine [COMPANY] to deduct the Independent Operator's
payment due to Carey limousine [COMPANY] from his/her Independent Operator
Liquidation. The Independent Operator shall have the right to prepay this Note
in whole at any time, or in part from time to time, without premium or penalty,
but with accrued interest on the amount being repaid to the date of such
prepayment. Any sums prepaid will not be readvanced.
<PAGE>
No failure on the part of Carey Limousine [COMPANY] to exercise, and no
delay in exercising any right, remedy or power hereunder or under any other
document or agreement executed in connection herewith shall operate as a waiver
thereof, nor shall any single or partial exercise by Carey Limousine [COMPANY]
of any right, remedy or power hereunder or under any other document or agreement
executed in connection herewith preclude any other or future exercise of any
other right, remedy or power.
If the Note shall be collected by legal proceedings or through any court
or shall be referred to any attorney because of any default, the Independent
Operator agrees to pay a reasonable sum for attorneys' fees and expenses.
This Note is being delivered in, is intended to be performed in and shall
be construed, enforced, and governed by the laws of the State of [STATE],
without regard to principles of conflicts of law.
This Note may not be changed or modified orally, nor may any right or
provision hereof be waived orally, but in each instance only by an instrument in
writing signed by the party against which enforcement of such change,
modification or waiver is sought.
By: ____________________________________
_____________________________ _________________________________________
Witness Independent Operator (Print Name)
<PAGE>
CONSENT AND LOAN DEDUCTION AUTHORIZATION
----------------------------------------
The undersigned authorizes the Company to deduct a monthly sum equal to
_______________________________________________________________________________
Dollars ($______________) from the monthly payment due to the undersigned under
the Promissory Note dated __________________________________________ and to
remit such sum directly to _______________________________________________ as
payment for my obligation to such lender.
You are authorized to make the payments as stated above until my loan is
paid in full or that a balloon payment of ____________________________ Dollars
($____________) is due, whichever may be the case.
In the presence of:
__________________________________ ______________________________
Witness Independent Operator
__________________________________ ______________________________
Witness Carey Limousine [COMPANY]
<PAGE>
RIDER "B"
TO STANDARD INDEPENDENT OPERATOR AGREEMENT
DEFINITIONS
-----------
Professional Chauffeur: One who is trained in the art of chauffeur service, who
- ----------------------
meets high standards of general appearance, manner, temperament, and
personality; who conducts himself or herself in a businesslike manner; and whose
ethical and business behavior is above reproach.
Carey International System of Licensees and Affiliates: The Carey System, which
- ------------------------------------------------------
offers chauffeured car and driver services to customers worldwide in over 420
cities in 65 countries through direct access and the Carey International
Reservation System, which interfaces with major U.S. and international travel
agencies.
Period of Availability: Hours of the day and days of the week during which the
- ----------------------
Independent Operator has promised to make himself and his vehicle available to
serve the customers of the Company.
Base Fee: Represents the up-front vested interest consideration paid by the
- --------
Independent Operator in the contractual relationship with the Company.
Installment Fee: Portion of base fee paid over time in monthly installments.
- ---------------
Company Customer: The term "Company customer" as used in this Agreement shall
- ----------------
mean any natural person, corporation, partnership, association, or any other
type of entity for whom the Company has at any time provided or arranged for
chauffeured service, directly or though its Independent Operators or employees.
Independent Operator Customer: Customers obtained by the Independent Operator
- -----------------------------
prior to the date of this Agreement.
Affiliated Driver: A person who drives a for-hire affiliated vehicle.
- -----------------
Affiliated Vehicle: A for-hire vehicle that is despatched from a Base Operator.
- ------------------
Base Operator: A place of business from which for-hire vehicles are dispatched.
- -------------
Driver: A person who drives a for-hire vehicle.
- ------
Affiliation: The circumstance of an Affiliated Driver and/or Affiliated
- -----------
Vehicle.
<PAGE>
RIDER "C"
TO STANDARD INDEPENDENT OPERATOR AGREEMENT
BACK-UP DRIVER/INDEPENDENT OPERATOR AGREEMENT
---------------------------------------------
<PAGE>
EXHIBIT 11
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<S> <C> <C> <C> <C> <C>
HISTORICAL EARNINGS PER
SHARE
<CAPTION>
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, FEBRUARY 29, FEBRUARY 28,
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (loss)
available to
common shareholders:
Net income (loss)....... ($128,993) ($195,195) $2,816,104 ($58,197) $167,406
Preferred stock
dividends.............. (8,750) (4,375) -- -- --
--------- --------- ---------- --------- ---------
Net income (loss)
available to
common shareholders.... ($137,743) ($199,570) $2,816,104 ($58,197) $167,406
========= ========= ========== ========= =========
Common Stock and Common
Stock Equivalents:
Weighted average shares
outstanding............ 623,092 630,938 655,773 655,773 655,773
Convertible Securities:
Series B Preferred
Stock.................. 663,761 663,761 663,761 663,761 663,761
Series F Preferred
Stock.................. 135,025 135,025 135,025 135,025 135,025
Series G Preferred
Stock.................. 673,638 673,638 673,638 673,638 673,638
Options (calculated on
Treasury Method)
1987 Plan............... 24,561 11,790 21,374 18,186 27,246
Options and warrants
issued within one year
of the offering
(calculated on Treasury
Method):
Vested options repriced
or granted............. 219,706 219,706 219,706 219,706 223,340
Warrants repriced....... 69,799 69,799 69,799 69,799 69,799
--------- --------- ---------- --------- ---------
289,505 289,505 289,505 289,505 292,139
--------- --------- ---------- --------- ---------
287,594 287,594 287,594 287,594 287,594
--------- --------- ---------- --------- ---------
Total common stock and
common
stock equivalents.... 2,409,582 2,404,657 2,439,076 2,435,888 2,447,582
========= ========= ========== ========= =========
Earnings (loss) per
common share............ ($0.06) ($0.08) $1.15 ($0.02) $0.07
========= ========= ========== ========= =========
</TABLE>
<PAGE>
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS (CONTINUED)
<TABLE>
<S> <C> <C>
PRO FORMA EARNINGS PER SHARE
TO GIVE EFFECT TO THE RECAPITALIZATION
(PRESENTED ON THE FACE OF THE NOVEMBER 30, 1996
AND FEBRUARY 28, 1997 HISTORICAL STATEMENT OF
OPERATIONS)
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Pro forma net income:
Net income.......................................... $2,816,104 $ 167,406
Add back interest (tax affected) on debt
included in Recapitalization:
$2,867,546 portion of subordinated note
converted to stock in Recapitalization............. 92,879 23,220
$2,000,000 subordinated note converted
to stock in Recapitalization....................... 206,464 51,616
---------- ----------
Pro forma net income................................ $3,115,447 $ 242,242
========== ==========
Common Stock and Common Stock Equivalents:
Historical weighted average shares outstanding...... 2,439,076 2,447,582
Add back:
Less common stock equivalents included in
historical earnings per share:
Series B Preferred Stock............................ (663,761) (663,761)
Series F Preferred Stock............................ (135,025) (135,025)
Series G Preferred Stock............................ (673,638) (673,638)
Add effect of Recapitalization:
Series A Preferred Stock............................ 86,003 86,003
Series B Preferred Stock............................ 663,761 663,761
Series F & G Preferred Stock........................ 763,748 763,748
Shares for $2,867,546 of subordinated debt.......... 616,544 616,544
Shares for $2,000,000 of subordinated debt.......... 430,015 430,015
---------- ----------
Total pro forma common stock
and common stock equivalents....................... 3,526,723 3,535,229
========== ==========
Pro forma earnings per common share.................. $0.88 $0.07
========== ==========
</TABLE>
<PAGE>
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS (CONTINUED)
<TABLE>
<S> <C> <C>
PRO FORMA EARNINGS PER SHARE
TO GIVE EFFECT TO THE RECAPITALIZATION AND THE
OFFERING
(PRESENTED ON THE FACE OF THE PRO FORMA STATEMENT OF
OPERATIONS)
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1996 1997
------------ ------------
<S> <C> <C>
Pro forma net income................................. $3,224,088 $ 641,988
========== =========
Common Stock and Common Stock Equivalents:
Outstanding shares of the Company................... 655,773 655,773
Shares used to convert subordinated debt:
Shares for $2,867,546 of subordinated debt.......... 616,544 616,544
Shares for $2,000,000 of subordinated debt.......... 430,015 430,015
Shares used to convert preferred stock:
Series A Preferred Stock............................ 86,003 86,003
Series B Preferred Stock............................ 663,761 663,761
Series F Preferred Stock............................ 763,748 763,748
---------- ---------
Total outstanding shares of the Company............. 3,215,844 3,215,844
---------- ---------
Shares issued in acquisition of Manhattan
Limousine.......................................... 200,000 200,000
---------- ---------
Shares to pay off debt in connection with the
offering........................................... 736,583 681,687
Shares used to provide cash for purchase of
Manhattan Limousine................................ 632,617 632,617
Shares used to pay off Manhattan Limousine
acquisition note................................... 424,731 424,731
Shares used to pay off debt assumed in Manhattan
Limousine acquisition.............................. 335,816 335,816
Shares used to pay off debt and redeem preferred
stock as part of Recapitalization.................. 359,852 359,852
---------- ---------
Shares used in offering............................. 2,489,599 2,434,703
---------- ---------
Total shares outstanding............................ 5,905,443 5,850,547
---------- ---------
Common stock equivalents (calculated on Treasury
Method):
Vested options outstanding.......................... 241,080 249,586
Warrants outstanding................................ 69,799 69,799
---------- ---------
Common stock equivalents............................ 310,879 319,385
---------- ---------
Total common stock and
common stock equivalents............................ 6,216,322 6,169,932
========== =========
Pro forma earnings per common share.................. $0.52 $0.10
========== =========
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-22651) of our report dated January 31, 1997, except for Notes 1,2,
17 and 18, as to which the date is March 1, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Carey
International, Inc. and Subsidiaries as of November 30, 1996 and 1995 and for
each year in the three year period ended November 30, 1996, which includes an
explanatory paragraph relating to a restatement for a change in the revenue
recognition method. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Washington, D.C.
April 23, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-22651) of our report dated March 1, 1997, except for Note 10, as
to which the date is April 22, 1997, on our audit of the combined financial
statements of Manhattan International Limousine Network, Ltd. and Affiliate as
of September 30, 1996 and for the year then ended, which includes an explanatory
paragraph relating to a restatement for a change in the revenue recognition
method and to record previously unrecorded costs related to services provided by
independent service companies. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Washington, D.C.
April 23, 1997
<PAGE>
EXHIBIT 23.3
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-1 of our
report dated February 26, 1996, except for note 16 which is dated February 25,
1997, on our audits of the financial statements of Speed 6060 Limited (formerly
Camelot Barthropp Limited) for the years ended December 31, 1994 and
1995. We also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand
-------------------------
COOPERS & LYBRAND
Chartered Accountants and Registered
Auditors
London, United Kingdom
April 23, 1997
<PAGE>
Exhibit 23.4
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-1 of our
report dated February 26, 1996, except for notes 15 and 16 which are dated
February 25, 1997, on our audit of the financial statements of Camelot Barthropp
Limited (formerly Speed 6060 Limited) for the year ended December 31, 1995. We
also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand
--------------------------
Coopers & Lybrand
Chartered Accountants and
Registered Auditors
London, United Kingdom
April 23, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,458,633
<SECURITIES> 0
<RECEIVABLES> 7,909,099
<ALLOWANCES> 546,096
<INVENTORY> 0
<CURRENT-ASSETS> 12,030,947
<PP&E> 3,179,839
<DEPRECIATION> 2,592,552
<TOTAL-ASSETS> 39,378,229
<CURRENT-LIABILITIES> 14,010,209
<BONDS> 0
0
1,115,400
<COMMON> 6,558
<OTHER-SE> 5,721,983
<TOTAL-LIABILITY-AND-EQUITY> 39,378,229
<SALES> 14,141,383
<TOTAL-REVENUES> 14,141,383
<CGS> 9,756,260
<TOTAL-COSTS> 13,575,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 392,347
<INCOME-PRETAX> 320,629
<INCOME-TAX> 153,223
<INCOME-CONTINUING> 167,406
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,406
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
