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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _______________
Commission file number 1-5728
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ROLLINS TRUCK LEASING CORP.
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(Exact name of registrant as specified in its charter)
DELAWARE 51-0074022
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(State of Incorporation) (I.R.S. Employer Identification Number)
ONE ROLLINS PLAZA, WILMINGTON, DELAWARE 19803
(Address of principal executive offices)
Registrant's telephone number including area code (302) 426-2700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Class which registered
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Common Stock, $1 Par Value NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $442,830,000 as of October 31, 1999.
The number of shares of registrant's common stock outstanding as of October
31, 1999 was 56,812,381.
The following documents are incorporated by reference:
Part of this form into which
Document incorporated
- ---------------------------------------- -----------------------------
Proxy Statement in connection with
Annual Meeting of Shareholders to be
held January 27, 2000 III
<PAGE>
PART I
ITEM I. BUSINESS.
The Registrant, Rollins Truck Leasing Corp., together with its
subsidiaries, is referred to as the "Company" unless the context clearly
indicates otherwise.
(a) General Development of Business
There have been no significant changes in the business of the Company
through September 30, 1999.
Events subsequent to September 30, 1999 that are of significance to the
Company are as follows:
(1) On October 29, 1999, a subsidiary of the Company acquired the net
assets and business of Keen Leasing, Inc. ("Keen") for a purchase price of
$41,942,000 in cash and the assumption of liabilities of $3,264,000. Keen
is a truck rental and leasing business headquartered in Harrisburg,
Pennsylvania, which currently services approximately 1,800 vehicles from 13
locations in Pennsylvania, Maryland and Virginia.
(2) On November 12, 1999, the Company executed a stock purchase
agreement with the UPS Logistics Group ("UPS Logistics"), a unit of United
Parcel Service, Inc., whereby a subsidiary of the Company would acquire UPS
Truck Leasing. UPS Truck Leasing, which has its headquarters in Atlanta,
Georgia, is in the truck rental and leasing business and currently
maintains approximately 9,000 trucks from 54 facilities throughout the
United States.
The Company also executed an asset sales agreement to sell the assets
and business of Rollins Logistics Inc., its dedicated carriage and
logistics subsidiary, to UPS Logistics. Closing under these two agreements
is subject to normal conditions and is expected to occur in early January
2000.
In connection with the above, the Company also will enter into a
Strategic Alliance Agreement (the "Alliance") with UPS Logistics. The
Alliance is for an initial term of five years. Under the terms of the
Alliance, Rollins would become the preferred provider of lease and rental
vehicles and other ancillary services to Worldwide Dedicated Services,
Inc., a unit of the UPS Logistics Group. In turn, the UPS Logistics Group
would become the preferred provider of logistics management and dedicated
logistics services to Rollins and its customers.
The Company is expected to issue 2,000,000 shares of Common Stock as
partial consideration for the purchase of UPS Truck Leasing with the
remainder of the consideration to be paid in cash. The Company is expected
to receive cash as consideration for the sale of Rollins Logistics Inc.
(b) Financial Information about Industry Segments
The Company operates principally in one industry segment and through
its principal subsidiaries, Rollins Leasing Corp. ("Rollins") and Rollins
Logistics Inc., is engaged primarily in full-service truck leasing and rentals
and the provision and management of transportation and logistics systems. All of
the Company's operations currently are conducted within the United States and
Canada. The financial information concerning this business is included in this
1999 Annual Report on Form 10-K.
(c) Narrative Description of Business
Full-service leasing accounts for the major portion of Rollins' revenues.
Under these leases, Rollins purchases vehicles and components that are
custom-engineered to the customer's requirements. This equipment is then leased
to the customer for periods usually ranging from three to eight years. Rollins
provides fuel, oil, tires, washing and regularly scheduled maintenance and
repairs at its facilities. In addition, Rollins arranges for licenses and
insurance, pays highway and use taxes and supplies a 24-hour-a-day emergency
road service to its customers.
1
<PAGE>
Through Rollins Logistics Inc. and its subsidiaries, the Company provides
and manages transportation and logistics systems for companies in a wide range
of industries throughout the United States. These services are designed to meet
the higher demand for the outsourcing of transportation, distribution and
logistics functions. Dedicated Carriage Services analyzes a customer's specific
distribution needs and then custom-designs and operates a
transportation/distribution system, which can include any of the services
mentioned previously plus management, drivers and other operating personnel. The
Company also offers logistics management services and warehouse management to
companies that desire to outsource their distribution and warehousing functions
to a third-party provider. These services can range from selection and
negotiation of core carrier contracts to selection of the most cost effective
carrier for specific traffic lane movements.
The commercial rental fleet, which at September 30, 1999 consisted of more
than 9,600 units with payload capacities ranging from 4,000 to 45,000 pounds,
offers tractors, trucks and trailers to customers for short periods of time
ranging from one day to several months. The Company's commercial rental fleet
also provides additional vehicles to full service lease customers to handle
their peak or seasonal business needs. The rental fleet's average age is
approximately two years. The utilization rate of the rental fleet during fiscal
year 1999 averaged in excess of 85%. Rollins does not offer services in the
consumer one-way truck rental market.
Rollins also furnishes a guaranteed maintenance service to private fleet
customers who choose to own their vehicles. This service includes preventive
maintenance, fuel procurement, tax reporting, permitting, licensing and access
to the Rollins 24-hour-a-day emergency road service.
There are many companies engaged in all aspects of vehicle rental and
leasing, some of which also operate on a nationwide basis and are larger than
the Company's business. Ryder System, Inc. and Penske Truck Leasing Co., L.P.,
Inc. are respectively the largest and second largest competitors in the truck
leasing industry. The Company believes Rollins is the third largest competitor
in the field of full-service leasing and short-term rental of heavy duty trucks
in the United States. Since the unit cost of vehicles and the cost of the
borrowed funds used to purchase such vehicles are believed to be similar for
most vehicle leasing companies, successful competition is based in part on
service.
At September 30, 1999, a total of 3,964 persons were employed by the
Company.
ITEM 2. PROPERTIES.
The Company's headquarters is located in a modern 15-story office building
of approximately 245,000 square feet owned by the Company at One Rollins Plaza,
Wilmington, DE 19803. In addition to providing administrative office space to
the Company and its subsidiaries, a lesser portion of the building is leased to
Matlack Systems, Inc. for its use as administrative offices and corporate
headquarters.
The Company's principal operating properties consist of land and buildings
used in its truck leasing and rental business. These properties generally
consist of an equipment repair facility and administrative offices. Rollins owns
or leases 217 facilities in 41 states and one Canadian province.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor any of its subsidiaries is a party to any material
legal proceedings. The Company and its subsidiaries are engaged in ordinary
routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
2
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
STOCK PRICES AND DIVIDENDS
At September 30, 1999, there were 2,067 holders of record of the Common
Stock.
The range of share prices for the Common Stock on the New York and Pacific
Stock Exchanges and per share dividends paid on Common Stock for the fiscal
years ended September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Prices Dividends
-------------------------------------------------- --------------
1999 1998 1999 1998
---------------------- ----------------------- ---- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Fiscal Quarter
First ..................... $15 1/4 $10 3/16 $12 1/4 $10 5/16 $.05 $.037
Second .................... 14 1/2 9 1/16 14 5/16 11 7/16 .05 .037
Third ..................... 11 3/4 9 5/16 14 11 1/4 .05 .04
Fourth .................... 12 1/4 10 1/16 13 3/8 8 7/8 .05 .04
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
FIVE-YEAR SELECTED FINANCIAL DATA
(Dollars in Millions, Except Per Share Amounts)
Fiscal Year Ended September 30, 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Revenues 627.4 610.2 556.7 513.8 482.6
Earnings before income taxes 92.7 85.1 70.2 55.9 67.1
Net earnings 56.5 52.0 42.8 34.1 41.3
Earnings per share: Basic .98 .86 .68 .52 .61
Earnings per share: Diluted .97 .85 .68 .52 .61
Dividends per common share .20 .15 .13 .12 .11
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At September 30,
Total assets 1,412.9 1,297.5 1,191.8 1,125.2 1,027.0
Equipment on operating leases, net 1,012.3 924.9 847.9 784.3 727.9
Equipment financing obligations 802.5 749.9 671.8 641.4 574.2
Shareholders' equity 320.4 292.0 288.7 284.0 275.6
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</TABLE>
3
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Items in Rollins Truck Leasing Corp.'s Consolidated Statement of Earnings for
the three years ended September 30, 1999 as a percentage of revenues and the
percentage changes in dollar amounts of the items compared with the previous
year are as follows:
<TABLE>
<CAPTION>
Percentage
Percentage of Revenue Increase (Decrease)
----------------------------- ------------------------
Year ended September 30, Year 1999 Year 1998
1999 1998 1997 Over 1998 Over 1997
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 2.8% 9.6%
----- ----- -----
Expenses
Operating 38.1 40.0 41.1 (2.1) 6.7
Depreciation 31.8 30.1 30.5 8.7 7.9
Gain on sale (2.7) (1.6) (2.2) 73.8 (20.0)
Selling and administrative 9.2 9.1 9.1 4.1 10.1
----- ----- -----
76.4 77.6 78.5 1.2 8.3
Operating earnings 23.6 22.4 21.5 8.3 14.4
Interest expense 8.8 8.4 8.9 7.3 4.7
----- ----- -----
Earnings before income taxes 14.8 14.0 12.6 9.0 21.2
Income taxes 5.8 5.5 4.9 9.6 20.7
----- ----- -----
Net earnings 9.0% 8.5% 7.7% 8.6% 21.6%
===== ===== =====
</TABLE>
Fiscal Year 1999 vs. 1998
Revenues increased by $17.2 million as full-service lease and commercial
rental revenues improved over the prior year. Full-service lease, guaranteed
maintenance and logistics revenues represented approximately 72% of total
revenues. Logistics and dedicated revenues declined by 9% due to the loss of two
large accounts at the end of the last fiscal year. Commercial rental revenues,
which represented the remainder of total revenues, increased by 8.9% due in
large part to the increased level of rental business.
Operating expenses decreased by $5.1 million. The decrease resulted from a
reduction in driver payroll of $2.9 million and a reduction in fuel costs of $.8
million both related to the decline in logistics and dedicated revenues. Other
operating expenses on a broad-basis increased as a result of the overall higher
level of business, however, the increase was more than offset by a decrease in
environmental costs as the Company completed its underground storage tank
replacement program by the end of calendar year 1998.
Depreciation expense increased by $15.9 million as a result of the
Company's increased investment in equipment on operating leases and related
transportation service facilities required to support the current level of
business.
Gain on sale of property and equipment increased by $7.2 million and
reflected both higher average selling prices realized on transportation
equipment and an increase in the number of units sold.
Selling and administrative expenses increased by $2.3 million to $57.8
million from $55.5 million in 1998 and reflected the higher level of business.
Increased employee compensation and related benefits and office expenses were
offset in large part by reductions in advertising and insurance costs.
4
<PAGE>
Interest expense increased by $3.8 million due to the increased level of
borrowings experienced during the current year. Interest rates decreased
slightly when compared with the prior year.
The effective income tax rate was 39.1% in 1999 and 38.9% in 1998.
Net earnings increased by $4.5 million to $56.5 million or $.97 per diluted
share from $52.0 million or $.85 per diluted share in 1998. The increased net
earnings resulted from the higher revenues and the increased gain realized from
the sale of property and equipment.
Fiscal Year 1998 vs. 1997
Revenues increased by $53.5 million as full-service lease, logistics and
commercial rental revenues all improved over the prior year. Full-service lease,
guaranteed maintenance and logistics revenues represented approximately 74% of
total revenues. The revenue increase was in large part volume-related as
competitive conditions limited price increases. Commercial rental revenues,
which represented the remainder of total revenues, increased by 14.7% and was in
part due to improved pricing and the increased level of business experienced in
1998.
Operating expenses increased by $15.3 million reflecting the increase in
revenues. The more significant operating expense increases resulted from
increased drivers' wages of $9.0 million and increased shop payroll of $3.1
million. The remainder of the operating expense increase was broad-based and
resulted from the overall higher level of business.
Depreciation increased by $13.4 million principally due to the increased
investment in equipment on operating leases and related transportation service
facilities required to support the current level of business.
Gain on sale of property and equipment decreased by $2.4 million to $9.8
million when compared with the 1997 gain of $12.2 million. The decrease resulted
from lower unit selling prices realized on fewer units of equipment sold.
Selling and administrative expenses increased by $5.0 million to $55.5
million from $50.5 million in 1997. Increased salaries, wages and sales
commissions accounted for $3.0 million of the increase and reflected the higher
level of business in 1998. Increased advertising costs of $1.1 million and
increased information technology costs of $.9 million accounted for the most
significant portion of the remainder of the increase.
Interest expense increased by $2.3 million due to the higher level of
borrowings related to the purchase of additional equipment when compared with
the prior year. Interest rates remained essentially unchanged during the year.
The effective income tax rate was 38.9% in 1998 and 39.0% in 1997.
Net earnings increased by $9.2 million to $52.0 million or $.85 per diluted
share from $42.8 million or $.68 per diluted share in 1997. Higher revenues,
which resulted from the increased volume of business, produced the increased net
earnings.
Liquidity and Capital Resources
The Company's primary operation is the full-service leasing and rental of
tractors, trucks and trailers, which requires substantial amounts of capital and
access to financing sources. At September 30, 1999, equipment on operating
leases of $1,012.3 million represented 71.6% of the Company's assets. Funds for
the acquisition of this equipment are provided principally by the cash flows
from operations, the proceeds from the sale of used equipment and borrowings
under the Company's revolving credit facility. Cash flows from operating
activities of $267.2 million were generated principally from net earnings of
$56.5 million and the noncash depreciation and amortization totaling $199.7
million. Because existing leases provide the primary source of funds from
operations, the Company expects a similar amount of funds to be generated in
2000.
5
<PAGE>
Investing activities reflect the Company's capital expenditures of $355.2
million in 1999 and $332.8 million in 1998. Proceeds from the sale of equipment
amounted to $88.0 million in 1999 and $67.5 million in 1998. At September 30,
1999, the Company's commitment for the purchase of revenue equipment was $161.3
million. Based on the current level of business and including commitments
already made at September 30, 1999, the Company anticipates spending
approximately $425.0 million for equipment and facilities in 2000.
Equipment financing obligations increased to $802.5 million at September
30, 1999 from $749.9 million a year earlier. Borrowings from external sources
included equipment term loans, capitalized leases and, in April 1999, the sale
of $100.0 million of 6.75% Collateral Trust Debentures, Series T, due April 5,
2006.
At September 30, 1999, the Company could sell an additional $55.0 million
of Collateral Trust Debentures under its current shelf registration statement.
Based on its access to the debt markets and relationships with current lending
institutions and others who have expressed an interest in providing financing,
the Company expects to continue to be able to obtain financing for its equipment
and facility purchases at market rates and under satisfactory terms and
conditions.
The Company's principal subsidiary, Rollins Leasing Corp., has revolving
credit facilities available which aggregate $100.0 million at September 30,
1999. These facilities, used primarily to finance vehicle purchases on an
interim basis pending placement of long-term financing, require the maintenance
of specified financial ratios and restrict payments to the Company. At the
option of the banks who provide the facilities, the credit facilities and the
Company's Collateral Trust Debentures may be secured by certain leasing
equipment.
During 1999, the Company's financing activities included an increase in
equipment financing obligations of $52.6 million, payment of dividends of $11.6
million and the purchase and retirement of 1,776,700 shares of $1 par value
common stock for $18.3 million. At September 30, 1999, the Company was
authorized to purchase 733,300 additional shares of its stock.
At September 30, 1999 and 1998, the debt to equity ratio of the Company was
2.5 to 1 and 2.6 to 1, respectively.
Year 2000 ("Y2K") Readiness Disclosure
The Company is aware of the issues related to the approach of the year 2000
as they relate to information technology programming issues which could have a
significant potential impact on its future operations and financial reporting.
In this regard, the Company has assessed and investigated what steps must be
taken to ensure that its critical systems and equipment will function
appropriately after the turn of the century. The assessments included a review
of what systems and equipment need to be changed or replaced in order to
function correctly. The Company has further determined that onboard computer
systems in Company-owned vehicles are not affected by the Y2K issue.
The Company's Y2K project was broken down into Corporate host-based systems
and field-based data collection processes. Overall, the Company's work effort
was allocated approximately 80 percent to host-based systems and 20 percent to
field-based data processes. Essentially all host-based coding and testing has
been completed. Full production with regard to remediated systems also has been
completed. As part of the Company's remediation efforts, the field data
collection systems were rewritten.
With the exception of remediation and implementation consequences not known
to the Company at this time, the Company believes that all systems should be
fully implemented as of November 30, 1999.
As part of the Company's assessment of Y2K issues, consideration was given
to the possible impact upon the Company from using purchased software, suppliers
and outside service providers. The Company's efforts with regard to Y2K issues
are dependent in part upon information received from such suppliers and vendors
upon which the Company has reasonably relied. While it is not possible for the
Company to predict all future outcomes and eventualities, the Company is not
aware, at this time, of any Y2K non-compliant situations with regard to any of
its purchased software or its use of suppliers and outside service providers.
6
<PAGE>
The Company estimates that it will spend approximately $2.0 million to
fully implement its Y2K compliance program of which $1.87 million has been
expended through September 30, 1999. All Y2K costs have been and will continue
to be funded from operations.
The Company has formulated a Y2K contingency plan that addresses potential
short-term business disruptions resulting from losses of power, system
malfunctions and related issues. However, due to the complexity and widespread
nature of such issues, the contingency planning process, of necessity, must be
an ongoing one requiring possible further modification as more information
becomes known regarding: (1) the Company's own systems and facilities, and (2)
the status and changes therein of the Y2K compliance efforts of outside
suppliers and vendors.
While it is not possible for the Company to predict all future outcomes and
eventualities, the Company is not aware, at this time, of any Y2K non-compliant
situations with regard to any of its purchased software or its use of suppliers
and outside service providers which would have a material adverse effect upon
the Company.
Forward-Looking Statements
The Company may make forward-looking statements relating to anticipated
financial performance, business prospects, acquisitions or divestitures, new
products, market forces, commitments and other matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements.
Forward-looking statements typically contain words such as "anticipates",
"believes", "estimates", "expects", "forecasts", "predicts", or "projects", or
variations of these words, suggesting that future outcomes are uncertain.
Various risks and uncertainties may affect the operations, performance,
development and results of the Company's business and could cause future
outcomes to differ materially from those set forth in forward-looking
statements, including the following factors: general economic conditions,
competitive factors and pricing pressures, shift in market demand, the
performance and needs of industries served by the Company, equipment
utilization, management's success in developing and introducing new services and
lines of business, potential increases in labor costs, potential increases in
equipment, maintenance and fuel costs, uncertainties of litigation, the
Company's ability to finance its future business requirements through outside
sources or internally generated funds, the availability of adequate levels of
insurance, success or timing of completion of ongoing or anticipated capital or
maintenance projects, success or timing of closing under acquisitions or
divestitures and efficient integration or utilization of newly acquired
facilities, equipment and personnel, management retention and development,
changes in Federal, State and local laws and regulations, including
environmental regulations, as well as the risks, uncertainties and other factors
described from time to time in the Company's SEC filings and reports.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company, the Independent
Auditors' Report and the financial statement schedules included in this report
are shown on the Index to the Consolidated Financial Statements and Schedules.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
7
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except as presented below, the information called for by this Item 10 is
incorporated by reference from the Company's Proxy Statement to be filed
pursuant to Regulation 14A for the Annual Meeting of Shareholders to be held on
January 27, 2000.
Executive Officers of the Registrant. As of October 31, 1999, the Executive
Officers of the registrant were:
<TABLE>
<CAPTION>
Name Position Age Term of Office
---- -------- --- --------------
<S> <C> <C> <C>
Patrick J. Bagley Vice President-Finance and 52 7/87 to date
Treasurer 1/87 to date
I. Larry Brown President and Chief Executive Officer, 54 1994 to date
Rollins Leasing Corp.
Klaus M. Belohoubek Vice President-General Counsel and Secretary 40 7/99 to date
John W. Rollins Chairman of the Board and 83 1954 to date
Chief Executive Officer 10/74 to date
John W. Rollins, Jr. President and Chief Operating Officer 57 9/75 to date
and Director
Henry B. Tippie Chairman of the Executive Committee 72 3/74 to date
and Vice Chairman of the Board
</TABLE>
I. Larry Brown has been employed by Rollins Leasing Corp., a wholly owned
subsidiary of Rollins Truck Leasing Corp., since 1973. Mr. Brown has been
President of Rollins Leasing Corp. since 1994 and Chief Executive Officer since
1996.
Klaus M. Belohoubek has been Vice President-General Counsel and Secretary
to the Company since 1999 and was Assistant General Counsel from 1990 to 1999.
Mr. Belohoubek also serves as Vice President-General Counsel and Secretary to
Matlack Systems, Inc. and Vice President-General Counsel to Dover Downs
Entertainment, Inc.
The Company's Executive Officers are elected for the ensuing year and until
their successors are elected.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 is incorporated by reference
from the Company's Proxy Statement to be filed pursuant to Regulation 14A for
the Annual Meeting of Shareholders to be held on January 27, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this Item 12 is incorporated by reference
from the Company's Proxy Statement to be filed pursuant to Regulation 14A for
the Annual Meeting of Shareholders to be held on January 27, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended September 30, 1999, the following officers and/or
directors of the Company were also officers and/or directors of Matlack Systems,
Inc.; Patrick J. Bagley, Klaus M. Belohoubek, Michael B. Kinnard, William B.
Philipbar, Jr., John W. Rollins, John W. Rollins, Jr. and Henry B. Tippie. John
W. Rollins owns directly and of record 11.4% of the outstanding shares of Common
Stock of Matlack Systems, Inc. at October 31, 1999.
8
<PAGE>
The following officers and/or directors of the Company were also officers
and/or directors of Dover Downs Entertainment, Inc.; Patrick J. Bagley, Klaus M.
Belohoubek, Michael B. Kinnard, John W. Rollins, John W. Rollins, Jr. and Henry
B. Tippie. John W. Rollins owns directly and of record 32.5% of the outstanding
shares of Common Stock of Dover Downs Entertainment, Inc. at October 31, 1999.
The description of transactions between the Company and Matlack Systems,
Inc. and between the Company and Dover Downs Entertainment, Inc. appears under
the caption "Transactions with Related Parties" of this 1999 Annual Report on
Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements - See accompanying Index to Consolidated
Financial Statements and Schedules.
(2) Financial Statements Schedules - See accompanying Index to
Consolidated Financial Statements and Schedules.
(3) Exhibits:
(3)(a) Restated Certificate of Incorporation of Rollins Truck Leasing
Corp. as last amended on January 25, 1990, as filed with the
Company's Annual Report on Form 10-K for the year ended
September 30, 1997, is incorporated herein by reference.
(3)(b) By-Laws of Rollins Truck Leasing Corp. as last amended on
October 28, 1999.
(4)(a) Collateral Trust Indenture dated as of March 21, 1983, between
RLC CORP. (now known as Rollins Truck Leasing Corp.) and Bank of
America Illinois (formerly Continental Illinois National Bank
and Trust Company of Chicago), as Trustee, as filed with the
Company's Registration Statement No. 33-40476 on Form S-3 dated
May 10, 1991, is incorporated herein by reference.
(4)(b) Third Supplemental Collateral Trust Indenture dated February 20,
1986 to the Collateral Trust Indenture dated March 21, 1983
between RLC CORP. (now known as Rollins Truck Leasing Corp.) and
Bank of America Illinois (formerly Continental Illinois National
Bank and Trust Company of Chicago), as Trustee, as filed with
the Company's Registration Statement No. 33-40476 on Form S-3
dated May 10, 1991, is incorporated herein by reference.
(4)(c) Eighth Supplemental Collateral Trust Indenture dated May 15,
1990 to the Collateral Trust Indenture dated March 21, 1983 as
supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly Continental
Bank, N.A.), as Trustee, as filed with the Company's
Registration Statement No. 33-67682 on Form S-3 dated August 20,
1993 is incorporated herein by reference.
(4)(d) Eleventh Supplemental Collateral Trust Indenture dated March 15,
1993 to the Collateral Trust Indenture dated March 21, 1983 as
supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly Continental
Bank, N.A.), as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated February
14, 1997 is incorporated herein by reference.
(4)(e) Twelfth Supplemental Collateral Trust Indenture dated March 15,
1994 to the Collateral Trust Indenture dated March 21, 1983 as
supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly Continental
Bank, N.A.), as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated February
14, 1997 is incorporated herein by reference.
9
<PAGE>
(4)(f) Thirteenth Supplemental Collateral Trust Indenture dated March
15, 1995 to the Collateral Trust Indenture dated March 21, 1983
as supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly Continental
Bank, N.A.), as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated February
14, 1997 is incorporated herein by reference.
(4)(g) Fourteenth Supplemental Collateral Trust Indenture dated May 15,
1995 to the Collateral Trust Indenture dated March 21, 1983 as
supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly Continental
Bank, N.A.), as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated February
14, 1997 is incorporated herein by reference.
(4)(h) Fifteenth Supplemental Collateral Trust Indenture dated March
15, 1996 to the Collateral Trust Indenture dated March 21, 1983
as supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and First Trust of Illinois, National Association,
as Trustee, as filed with the Company's Registration Statement
No. 333-21835 on Form S-3 dated February 14, 1997 is
incorporated herein by reference.
(4)(i) Sixteenth Supplemental Collateral Trust Indenture dated August
7, 1996 to the Collateral Trust Indenture dated March 21, 1983
as supplemented and amended by a Third Supplemental Indenture
thereto dated as of February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins Truck
Leasing Corp. and First Trust of Illinois, National Association,
as Trustee, as filed with the Company's Registration Statement
No. 333-21835 on Form S-3 dated February 14, 1997 is
incorporated herein by reference.
(4)(j) Seventeenth Supplemental Collateral Trust Indenture dated as of
March 10, 1997 to the Collateral Trust Indenture dated as of
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated as of February 20, 1986 and
by the Eighth Supplemental Indenture dated as of May 15, 1990
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee, as filed with the Company's Annual Report on
Form 10-K for the year ended September 30, 1997, is incorporated
herein by reference.
(4)(k) Eighteenth Supplemental Collateral Trust Indenture dated as of
July 16, 1998 to the Collateral Trust Indenture dated as of
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated as of February 20, 1986, an
Eighth Supplemental Indenture thereto dated as of May 15, 1990
and by the Seventeenth Supplemental Indenture dated as of March
10, 1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee, as filed with the Company's Annual
Report on Form 10-K for the year ended September 30, 1998, is
incorporated herein by reference.
(4)(l) Nineteenth Supplemental Collateral Trust Indenture dated as of
April 5, 1999 to the Collateral Trust Indenture dated as of
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated as of February 20, 1986, an
Eighth Supplemental Indenture thereto dated as of May 15, 1990
and by the Seventeenth Supplemental Indenture dated as of March
10, 1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
(4)(m) Rollins Truck Leasing Corp. Rights Agreement dated as of June 1,
1999 as filed as an Exhibit to Registration Statement on Form
8-A filed by the Company on June 30, 1999 is incorporated herein
by reference.
(4)(n) Asset Purchase Agreement by and among Worldwide Dedicated
Services, Inc., Rollins Truck Leasing Corp., Rollins Logistics
Inc., Rollins Dedicated Carriage Services, Inc. and Rollins
Transportation Systems, Inc. as of November 12, 1999.
(4)(o) Stock Purchase Agreement by and between UPS Logistics Group,
Inc., UPS Truck Leasing, Inc., Rollins Truck Leasing Corp. and
Rollins Leasing Corp. as of November 12, 1999.
10
<PAGE>
(4)(p) Strategic Alliance Agreement to be entered into as of December
31, 1999 in connection with the closing under the Stock Purchase
Agreement filed as Exhibit (4)(o), above.
(10)(a) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1982
Incentive Stock Option Plan, as filed with the Company's Proxy
Statement for the Annual Meeting of Shareholders held on January
27, 1983, is incorporated herein by reference.
(10)(b) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1986 Stock
Option Plan, as filed with the Company's Proxy Statement for the
Annual Meeting of Shareholders held on January 29, 1987, is
incorporated herein by reference.
(10)(c) Rollins Truck Leasing Corp. 1993 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting of
Shareholders held on January 27, 1994, is incorporated herein by
reference.
(10)(d) Rollins Truck Leasing Corp. 1997 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting of
Shareholders held on January 29, 1998, is incorporated herein by
reference.
(21) Rollins Truck Leasing Corp. Subsidiaries at September 30, 1999.
(23) Consent of KPMG LLP, Independent Auditors, providing for
incorporation by reference of their report dated October 27,
1999, except for the note "Subsequent Events" which is as of
November 12, 1999, into Registration Statement No. 333-21835
filed on Form S-3.
(27)(a) Rollins Truck Leasing Corp. Financial Data Schedule at September
30, 1999.
(b) Reports on Form 8-K.
On July 29, 1999, the Company filed a report on Form 8-K which, as an Item
5-Other Event, announced the appointment of Klaus M. Belohoubek, Esquire to the
position of Vice President-General Counsel and Secretary. Additionally, the
filing reported the resignation of Michael B. Kinnard, Esquire, formerly Vice
President-General Counsel and Secretary as he had accepted the position of
President and Chief Operating Officer of Matlack Systems, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATED: December 14, 1999 ROLLINS TRUCK LEASING CORP.
----------------- ---------------------------
(Registrant)
BY: /s/ John W. Rollins, Jr.
-------------------------------------
John W. Rollins, Jr.
President and Chief Operating Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
/s/ Patrick J. Bagley Vice President-Finance and Treasurer December 14, 1999
- ------------------------------- Chief Financial Officer
Patrick J. Bagley Chief Accounting Officer
Director
/s/ John W. Rollins Chairman of the Board and December 14, 1999
- ------------------------------- Chief Executive Officer
John W. Rollins
/s/ Gary W. Rollins Director December 14, 1999
- -------------------------------
Gary W. Rollins
/s/ Henry B. Tippie Chairman of the Executive December 14, 1999
- ------------------------------- Committee and Vice Chairman
Henry B. Tippie of the Board
</TABLE>
11
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(1) Consolidated
------------
Page(s)
-------
Independent Auditors' Report on Financial Statements and
Financial Statement Schedules 13
Consolidated Statement of Earnings for the years ended
September 30, 1999, 1998 and 1997 14
Consolidated Balance Sheet at September 30, 1999 and 1998 15
Consolidated Statement of Cash Flows for the years ended
September 30, 1999, 1998 and 1997 16
Consolidated Statement of Shareholders' Equity for the years\
ended September 30, 1999, 1998 and 1997 17
Notes to the Consolidated Financial Statements 18 to 26
(2) Financial Statement Schedules
Rollins Truck Leasing Corp. (Parent)
Schedule I - Condensed Financial Information
Balance Sheet at September 30, 1999 and 1998 27
Statement of Earnings for the years ended
September 30, 1999, 1998 and 1997 28
Statement of Cash Flows for the years ended
September 30, 1999, 1998 and 1997 29
Notes to the Financial Statements 30
Rollins Truck Leasing Corp. and Subsidiaries Consolidated
Schedule II - Valuation and Qualifying Accounts for the years
ended September 30, 1999, 1998 and 1997 31
Any financial statement schedules otherwise required have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
12
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors
Rollins Truck Leasing Corp.
We have audited the consolidated financial statements of Rollins Truck
Leasing Corp. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules 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 Rollins
Truck Leasing Corp. and subsidiaries as of September 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1999, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
KPMG LLP
Wilmington, Delaware
October 27, 1999, except for the note "Subsequent Events"
which is as of November 12, 1999.
13
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Year Ended September 30,
- ------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $627,397,000 $610,157,000 $556,704,000
- ------------------------------------------------------------------------------------------------
Expenses
Operating 239,162,000 244,260,000 228,957,000
Depreciation 199,342,000 183,465,000 170,039,000
Gain on sale of property and equipment (17,007,000) (9,787,000) (12,230,000)
Selling and administrative 57,805,000 55,530,000 50,457,000
- -------------------------------------------------------------------------------------------------
479,302,000 473,468,000 437,223,000
- ------------------------------------------------------------------------------------------------
Operating earnings 148,095,000 136,689,000 119,481,000
Interest expense, net 55,364,000 51,586,000 49,270,000
- -------------------------------------------------------------------------------------------------
Earnings before income taxes 92,731,000 85,103,000 70,211,000
Income taxes 36,258,000 33,080,000 27,417,000
- -------------------------------------------------------------------------------------------------
Net earnings $ 56,473,000 $ 52,023,000 $ 42,794,000
=================================================================================================
Earnings per share
Basic $ .98 $ .86 $ .68
Diluted $ .97 $ .85 $ .68
Average shares outstanding
Basic 57,833,000 60,340,000 62,681,000
Diluted 58,369,000 61,130,000 63,362,000
</TABLE>
The Notes to the Consolidated Financial Statements are an
integral part of these statements.
14
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
- -------------------------------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 34,280,000 $ 27,015,000
Accounts receivable, net of allowance for doubtful
accounts: 1999-$2,479,000; 1998-$2,452,000 84,482,000 75,227,000
Inventories 8,074,000 7,394,000
Prepaid expenses 18,021,000 18,056,000
Deferred income taxes 5,189,000 7,034,000
- -------------------------------------------------------------------------------------------------------------------
Total current assets 150,046,000 134,726,000
Equipment on operating leases, net 1,012,307,000 924,887,000
Other property and equipment, net 228,445,000 219,343,000
Excess of cost over net assets of businesses acquired 16,117,000 11,816,000
Other assets 5,972,000 6,702,000
- -------------------------------------------------------------------------------------------------------------------
Total assets $1,412,887,000 $1,297,474,000
===================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment financing obligations)
Accounts payable $ 30,077,000 $ 12,246,000
Accrued liabilities 48,372,000 52,023,000
Income taxes payable 1,574,000 1,292,000
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 80,023,000 65,561,000
Equipment financing obligations including maturities due
within one year: 1999-$66,344,000; 1998-$51,699,000 802,458,000 749,876,000
Other liabilities 15,849,000 14,144,000
Deferred income taxes 194,171,000 174,908,000
Commitments and contingent liabilities (see Notes to
the Consolidated Financial Statements)
Shareholders' equity
Common stock, $1 par value,
outstanding: 1999-57,214,551 shares; 1998-58,799,281 shares 57,215,000 58,799,000
Additional paid-in capital -- 11,000
Accumulated other comprehensive income 518,000 941,000
Retained earnings 262,653,000 233,234,000
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 320,386,000 292,985,000
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $1,412,887,000 $1,297,474,000
===================================================================================================================
</TABLE>
The Notes to the Consolidated Financial Statements are an
integral part of these statements.
15
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended September 30,
- -------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 56,473,000 $ 52,023,000 $ 42,794,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 199,732,000 183,805,000 170,380,000
Net gain on sale of property and equipment (17,007,000) (9,787,000) (12,230,000)
Changes in assets and liabilities:
Accounts receivable (6,447,000) (4,062,000) (8,776,000)
Accounts payable and accrued liabilities 13,536,000 1,866,000 8,787,000
Current and deferred income taxes 19,582,000 22,346,000 18,866,000
Other, net 1,343,000 (961,000) 1,754,000
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 267,212,000 245,230,000 221,575,000
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of property and equipment (355,191,000) (332,779,000) (303,058,000)
Proceeds from sales of property and equipment 88,021,000 67,526,000 75,621,000
Acquisition of subsidiary, net of cash acquired (6,935,000) -- --
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (274,105,000) (265,253,000) (227,437,000)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds of equipment financing obligations 179,992,000 186,930,000 140,150,000
Repayment of equipment financing obligations (137,186,000) (108,876,000) (109,690,000)
Payment of dividends (11,569,000) (9,244,000) (8,353,000)
Proceeds of stock options exercised 1,225,000 2,051,000 818,000
Common stock acquired and retired (18,305,000) (41,367,000) (30,633,000)
Other -- (93,000) --
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 14,157,000 29,401,000 (7,708,000)
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,000 -- --
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 7,265,000 9,378,000 (13,570,000)
Cash beginning of period 27,015,000 17,637,000 31,207,000
- -------------------------------------------------------------------------------------------------------------------
Cash end of period $ 34,280,000 $ 27,015,000 $ 17,637,000
===================================================================================================================
Supplemental information
Interest paid $ 53,978,000 $ 48,549,000 $ 49,212,000
Income taxes paid $ 15,995,000 $ 10,734,000 $ 8,551,000
</TABLE>
The Notes to the Consolidated Financial Statements are an
integral part of these statements.
16
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Year Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
$1 Par Value Additional Other Total
Common Paid-in Comprehensive Comprehensive Retained Shareholders'
Stock Capital Income Income Earnings Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1996 $43,384,000 $ -- $ 1,079,000 $240,664,000 $285,127,000
Net earnings $42,794,000 42,794,000 42,794,000
Other comprehensive income
Unrealized gain on securities
(net of tax of $146,000) 229,000 229,000 229,000
Dividends on common stock, $.13 per share (8,353,000) (8,353,000)
Common stock acquired and retired (2,484,000) (377,000) (27,772,000) (30,633,000)
Exercise of stock options 167,000 651,000 818,000
------------ ----------- ----------- ----------- ------------ ------------
Comprehensive income $43,023,000
===========
Balance at September 30, 1997 41,067,000 274,000 1,308,000 247,333,000 289,982,000
Net earnings $52,023,000 52,023,000 52,023,000
Other comprehensive income
Unrealized loss on securities
(net of tax benefit of $233,000) (367,000) (367,000) (367,000)
Dividends on common stock, $.16 per share (9,244,000) (9,244,000)
Common stock acquired and retired (3,091,000) (1,937,000) (36,339,000) (41,367,000)
Exercise of stock options 377,000 1,674,000 2,051,000
Three-for-two common stock split 20,446,000 (20,539,000) (93,000)
---------- ------------ ----------- ----------- ------------ ------------
Comprehensive income $51,656,000
===========
Balance at September 30, 1998 58,799,000 11,000 941,000 233,234,000 292,985,000
Net earnings $56,473,000 56,473,000 56,473,000
Other comprehensive income
Unrealized loss on securities
(net of tax benefit of $455,000) (708,000) (708,000) (708,000)
Foreign currency translation adjustments 285,000 285,000 285,000
Dividends on common stock, $.20 per share (11,569,000) (11,569,000)
Common stock acquired and retired (1,776,000) (1,044,000) (15,485,000) (18,305,000)
Exercise of stock options 192,000 1,033,000 1,225,000
----------- ------------ ----------- ----------- ------------ ------------
Comprehensive income $56,050,000
===========
Balance at September 30, 1999 $57,215,000 $ -- $ 518,000 $262,653,000 $320,386,000
=========== ============ =========== ============ ============
</TABLE>
The Notes to the Consolidated Financial Statements are an
integral part of these statements.
17
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Organization and Accounting Policies
Organization - Rollins Truck Leasing Corp. is engaged primarily in
full-service truck leasing and rentals and the provision and management of
complete truck transportation and distribution systems. All of the Company's
operations currently are conducted within the United States and Canada.
Consolidation - The consolidated financial statements include the accounts
of all subsidiaries. Intercompany transactions and balances among these
subsidiaries have been eliminated.
Revenue recognition - Lease, rental and other transportation service
revenues including contingent rentals, which represent the mileage charges on
full-service leases, are recognized over the terms of the respective contracts.
Earnings per share - The number of weighted average shares used in
computing basic and diluted earnings per share (EPS) are as follows:
1999 1998 1997
---------- ---------- ----------
Basic EPS 57,833,000 60,340,000 62,681,000
Effect of Options 536,000 790,000 681,000
---------- ---------- ----------
Diluted EPS 58,369,000 61,130,000 63,362,000
========== ========== ==========
No adjustments to net earnings available to common shareholders were
required during the periods presented.
Inventories - Inventories of transportation equipment parts and supplies
are valued at the lower of first-in, first-out cost or market.
Property and equipment - Property and equipment is carried at cost, net of
applicable allowances. Tires placed in service on new equipment are capitalized
as part of the original equipment cost. Depreciation is provided on a
straight-line basis. Depreciable lives for equipment on operating leases and
other property and equipment range from 3 to 12 years and 3 to 45 years,
respectively. The cost and related accumulated depreciation of property and
equipment sold or retired are eliminated from the property accounts and the
resulting gain or loss is reflected in the Consolidated Statement of Earnings.
Repairs and maintenance are expensed as incurred. Replacement tires are expensed
when placed in service. Major additions and improvements are capitalized and
written off over the remaining depreciable lives of the assets.
Goodwill - The excess of cost over net assets of businesses acquired prior
to October 30, 1970 amounting to $4,588,000 is not being amortized since its
value, in management's opinion, has not diminished. The excess of cost over net
assets of businesses acquired subsequently is being amortized on a straight-line
basis over 15 to 40 years.
Leasing operations - Leasing operations consist of the long-term leasing
and short-term rental of transportation equipment. All leases are classified as
operating leases and expire on various dates during the next eleven years.
Claims and insurance reserves - The Company retains a specific portion of
insurable risks with regard to public liability and workers' compensation
claims. Retention levels are currently $500,000. Reserves are established for
claims incurred plus an estimate for claims incurred but not reported. Reserve
requirements are evaluated and established utilizing historical trends, the
Company's experience, claim severity and other factors. Claims estimated to be
paid within one year have been classified in accrued liabilities with the
remainder included with other liabilities.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
18
<PAGE>
Fair values of financial instruments - The carrying amounts reported in the
balance sheet for current assets and current liabilities approximate their fair
value at September 30, 1999.
Impairment of long-lived assets - Periodically, the Company evaluates
whether the remaining useful life of long-lived assets requires revision and
assesses the recoverability of remaining unamortized balances. Should factors
indicate that an asset should be evaluated for possible impairment, an estimate
of the asset's cash flow is utilized in evaluating fair value. Should an
impairment be determined, the impaired asset's value would be adjusted and a
charge to operations would be recognized. To date, no impairment losses have
been recognized.
Stock-based compensation - The Company adopted the provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," on October 1, 1996. SFAS No. 123
defines a fair value based method of accounting for stock-based compensation
plans; however, it allows the continued use of the intrinsic value method under
Accounting Principles Board Opinion ("APB"), No. 25, "Accounting for Stock
Issued to Employees." The Company has elected to continue to use the intrinsic
value method.
Comprehensive income - In 1999, the Company adopted the provisions of SFAS
No. 130, "Reporting Comprehensive Income." This statement requires presentation
of comprehensive income (net income plus all other changes in net assets from
non-owner sources) and its components in the financial statements. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.
Foreign currency translation - Assets and liabilities of the Company's
Canadian subsidiary are translated at the rate of exchange in effect on the
balance sheet date; revenues and expenses are translated at the average rates of
exchange prevailing during the year. The related translation adjustments are
reflected as a separate component of accumulated other comprehensive income.
Recent accounting pronouncements - The Company does not expect the adoption
of recently issued accounting pronouncements to have a significant impact on its
results of operations, financial position or cash flows.
Reclassification - Certain prior year amounts have been reclassified to
conform with the current year presentation.
Equipment on Operating Leases
The Company's investment in equipment on operating leases is as follows:
September 30,
-----------------------------------
1999 1998
-------------- --------------
Transportation equipment $1,538,713,000 $1,402,267,000
Less accumulated depreciation (526,406,000) (477,380,000)
-------------- --------------
$1,012,307,000 $ 924,887,000
============== ==============
Commitments for the purchase of transportation equipment amounted to
$161,315,000 at September 30, 1999.
At September 30, 1999, minimum future revenues from non-cancelable leases
are as follows:
Year Ending September 30,
- -------------------------
2000 $261,822,000
2001 219,696,000
2002 176,539,000
2003 129,308,000
2004 86,912,000
Later years 78,571,000
------------
Total future minimum lease revenues $952,848,000
============
19
<PAGE>
Other Property and Equipment
The Company's other property and equipment accounts are as follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Land $ 61,979,000 $ 61,190,000
Transportation service facilities 224,820,000 205,923,000
Other operating assets 41,713,000 39,964,000
Less accumulated depreciation (100,067,000) (87,734,000)
------------- -------------
$ 228,445,000 $ 219,343,000
============= =============
</TABLE>
Accrued Liabilities
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Employee compensation $ 11,909,000 $ 15,018,000
Interest 9,906,000 7,451,000
Taxes other than income 8,991,000 12,684,000
Insurance reserves 6,727,000 6,781,000
Environmental 452,000 3,213,000
Unbilled services and supplies 5,324,000 2,662,000
Other 5,063,000 4,214,000
------------- -------------
$ 48,372,000 $ 52,023,000
============= =============
</TABLE>
Equipment Financing Obligations
Equipment financing obligations are as follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Collateral Trust Debentures:
Series I, 10.35 %, due 2000 $ 50,000,000 $ 50,000,000
Series J, 8 5/8 %, due 1998 -- 30,000,000
Series L, 7 %, due 2003 70,000,000 70,000,000
Series M, 7 %, due 2001 60,000,000 60,000,000
Series N, 8.27 %, due 2002 100,000,000 100,000,000
Series O, 7.25 %, due 2005 50,000,000 50,000,000
Series P, 6.89 %, due 2004 75,000,000 75,000,000
Series Q, 6 7/8 %, due 2001 60,000,000 60,000,000
Series R, 7.30 %, due 2007 75,000,000 75,000,000
Series S, 6.52 %, due 2005 75,000,000 75,000,000
Series T, 6.75 %, due 2006 100,000,000 --
Capital lease obligations 75,732,000 66,330,000
Other equipment financing obligations 11,726,000 38,546,000
------------- -------------
$802,458,000 $ 749,876,000
============ =============
</TABLE>
Credit available under the revolving credit facilities (the "Revolver")
provided by two banks amounted to $100,000,000 at September 30, 1999. At the
option of the banks, the Revolver and the Collateral Trust Debentures may be
secured by certain leasing equipment. Termination of the Revolver would result
in repayment of the outstanding balance over 48 months in equal installments;
otherwise, no repayments are required unless the financing value of the eligible
equipment available as security falls below the outstanding loan balance. The
20
<PAGE>
Revolver provides for the maintenance of specified financial ratios and
restricts payments to the Company by a consolidated subsidiary. Net assets of
all subsidiaries not restricted under the Revolver totaled $93,187,000 at
September 30, 1999.
Capital lease obligations due within one year totaled $9,642,000 at
September 30, 1999 with the balance payable through 2009. Interest rates on
these obligations averaged 5.3% at September 30, 1999. The capital lease
obligations are collateralized by certain leasing equipment.
Other equipment financing obligations due within one year totaled $6,702,000
at September 30, 1999 with the balance payable through 2002. Interest rates on
these obligations averaged 6.0% at September 30, 1999. The other equipment
financing obligations are collateralized by certain leasing equipment. The
Collateral Trust Debentures are secured by notes from Rollins Leasing Corp.
Equipment financing obligations due within one year are not classified as
current liabilities as the Company intends and has the ability to refinance them
on a long-term basis through available credit facilities.
Based on published bid prices at September 30, 1999, the estimated fair
value of the Company's Collateral Trust Debentures was $708,431,000 compared
with the recorded book amount of $715,000,000. The fair value of the remaining
$87,458,000 of equipment indebtedness approximates its recorded amount.
The aggregate amounts of maturities for all indebtedness over the next five
years are as follows: 2000-$66,344,000; 2001-$138,390,000; 2002-$114,674,000;
2003-$83,958,000 and 2004-$89,332,000.
Pension Plans
The Company maintains a noncontributory pension plan for eligible employees
not covered by pension plans under collective bargaining agreements. Pension
costs are funded in accordance with the provisions of the Internal Revenue Code.
The Company also maintains a nonqualified, noncontributory defined benefit
pension plan for certain employees to restore pension benefits reduced by
federal income tax regulations. The cost associated with the plan is determined
using the same actuarial methods and assumptions as those used for the Company's
qualified pension plan.
The following table sets forth the funded status and the amount recognized
in the Company's balance sheet for the plans:
September 30,
-----------------------------
1999 1998
------------ ------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 56,189,000 $ 43,679,000
Service cost 4,132,000 3,449,000
Interest cost 4,004,000 3,415,000
Amendments 3,539,000 --
Actuarial (gain) loss (14,534,000) 7,133,000
Benefits paid (1,854,000) (1,487,000)
------------ ------------
Benefit obligation at end of year 51,476,000 56,189,000
------------ ------------
Change in plan assets:
Fair value of plan assets at beginning of year 48,703,000 53,466,000
Actual return on plan assets 14,196,000 (4,976,000)
Employer contribution 1,700,000 1,700,000
Benefits paid (1,854,000) (1,487,000)
------------ ------------
Fair value of plan assets at end of year 62,745,000 48,703,000
------------ ------------
Funded status 11,269,000 (7,486,000)
Unrecognized net (gain) loss (20,928,000) 2,758,000
Unrecognized prior service cost 3,881,000 639,000
Unrecognized overfunding at adoption (70,000) (140,000)
------------ ------------
Accrued pension cost $ (5,848,000) $ (4,229,000)
============ ============
21
<PAGE>
At September 30, 1999, the assets of the pension plans were invested 79.2%
in equity securities, 17.9% in fixed income securities and the balance in other
short-term interest bearing accounts.
The discount rate in 1999 and 1998 was 8.5% and 7.0%, respectively. The
assumed rate of compensation increase in 1999 and 1998 was 4.5% and 5.0%,
respectively. The expected long-term rate of return on assets in 1999 and 1998
was 9.5% and 9.0%, respectively.
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Service cost $ 4,132,000 $ 3,449,000 $ 2,735,000
Interest cost 4,004,000 3,415,000 2,969,000
Return on plan assets (14,196,000) 4,976,000 (13,043,000)
Net amortization and deferral 9,378,000 (10,378,000) 9,330,000
------------ ------------ ------------
Net periodic pension cost $ 3,318,000 $ 1,462,000 $ 1,991,000
============ ============ ============
</TABLE>
The Company also maintains a defined contribution 401(k) plan which permits
participation by substantially all employees not represented under a collective
bargaining agreement.
The Company expensed payments to multi-employer pension plans required by
collective bargaining agreements of $102,000 in 1999, $119,000 in 1998 and
$129,000 in 1997. The actuarial present value of accumulated plan benefits and
net assets available for benefits to employees under these plans are not
available.
Shareholders' Equity
The Company is authorized to issue 100,000,000 shares of its $1 Par Value
Common Stock and 1,000,000 shares of Preferred Stock. The preferred shares are
without par value, with terms and conditions of each issue as determined by the
Board of Directors.
Each share of common stock includes one common stock purchase right
("Right") which is non-exercisable until certain defined events occur, including
tender offers or the acquisition by a person or group of affiliated or
associated persons of 20% of the Company's common stock. Upon the occurrence of
certain defined events, the Right entitles the holder to purchase additional
stock of the Company or stock of an acquiring company at a 50% discount. The
Right expires on June 30, 2009 unless earlier redeemed by the Company at a price
of $.01 per Right.
Stock Option Plans
Under the Company's stock option plans, options to purchase common stock of
the Company may be granted to officers and key employees at not less than 100%
of the fair market value at the date of grant. Generally, options granted vest
ratably over a six-year period and have a maximum life of eight years.
The Company accounts for these plans under APB No. 25. Accordingly, no
compensation cost has been recognized. Had compensation cost for these plans
been determined consistent with SFAS No. 123, the Company's pro forma net
earnings for 1999, 1998 and 1997 would have been reduced to $55,622,000 ($.95
per diluted share), $51,365,000 ($.84 per diluted share) and $42,524,000 ($.67
per diluted share), respectively. Because the SFAS 123 method of accounting has
not been applied to options granted prior to October 1, 1995, the resulting pro
forma compensation cost may not be representative of that to be expected in
future years.
22
<PAGE>
As of September 30, stock option activity under the Company's plans is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 2,286,755 $ 8.30 2,203,072 $ 6.57 2,374,119 $ 5.91
Granted 425,200 9.66 721,900 10.73 150,000 10.83
Exercised (191,970) 6.38 (478,919) 4.28 (250,904) 3.26
Expired or cancelled (50,025) 9.31 (159,298) 7.53 (70,143) 5.26
--------- -------- --------- -------- --------- --------
Outstanding at
September 30 2,469,960 $ 8.66 2,286,755 $ 8.30 2,203,072 $ 6.57
========= ======== ========= ======== ========= ========
Exercisable at
September 30 898,081 $ 7.42 774,797 $ 6.85 984,880 $ 5.64
========= ======== ========= ======== ========= ========
</TABLE>
The weighted average fair value of options granted during 1999, 1998 and
1997 was $3.40, $3.20 and $3.43, respectively. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions for 1999, 1998 and 1997,
respectively: risk-free interest rates of 6.2%, 4.3% and 6.1%; dividend yields
of 1.7%, 1.7% and 1.9%; expected volatility of .27, .26 and .26 and a weighted
average expected life of the option of 7 years, 7 years and 6 years.
The following table summarizes information regarding stock options
outstanding and exercisable at September 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
--------------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 5.04 - $ 6.33 609,452 2.5 years $ 6.10 320,102 $ 5.89
$ 7.33 - $ 11.00 1,860,508 4.2 years $ 9.50 577,979 $ 8.27
</TABLE>
At September 30, 1999, a total of 1,001,350 shares of common stock were
available for future grants.
Lease Commitments
The Company leases some of the premises and equipment used in its
operations. Leases classified as operating leases expire on various dates during
the next 15 years. Some of the leases are renewable at the Company's option.
Minimum future rental payments required under operating leases having
non-cancelable terms in excess of one year as of September 30, 1999 are as
follows:
Year Ending September 30,
- -------------------------
2000 $ 7,692,000
2001 4,003,000
2002 3,239,000
2003 1,867,000
2004 867,000
Later years 2,019,000
-----------
Total minimum payments required $19,687,000
===========
Total rent expense for all operating leases except those with terms of one
month or less was $8,493,000 in 1999, $7,919,000 in 1998 and $7,624,000 in 1997.
23
<PAGE>
Commitments and Contingent Liabilities
There are various routine claims and legal actions pending against the
Company incidental to the ordinary operation of it business. The Company is of
the opinion, based on the advice of counsel, that it is only remotely likely
that the ultimate resolution of these claims and actions will be material.
Income Taxes
The tax provisions for the three years ended September 30, 1999 are
comprised as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Current:
Federal $ 12,669,000 $ 11,113,000 $ 8,345,000
State 3,549,000 1,824,000 747,000
Deferred:
Federal 18,381,000 17,507,000 15,138,000
State 1,659,000 2,636,000 3,187,000
--------------- --------------- ---------------
Total income taxes $ 36,258,000 $ 33,080,000 $ 27,417,000
=============== =============== ===============
</TABLE>
A reconciliation of the tax provisions for the three years ended September
30, 1999 with amounts calculated by applying the statutory federal tax rate to
earnings before income taxes for those years is as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Federal tax $ 32,456,000 $ 29,786,000 $ 24,574,000
State taxes, net of federal benefit 3,370,000 2,899,000 2,557,000
Other 432,000 395,000 286,000
--------------- --------------- ---------------
Total income taxes $ 36,258,000 $ 33,080,000 $ 27,417,000
=============== =============== ===============
</TABLE>
The tax effect of temporary differences and the tax credit carryforwards
that comprise the current and non-current deferred tax amounts shown on the
balance sheet are as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Depreciation $ 204,468,000 $ 193,303,000
Expenses deductible when paid (10,389,000) (11,522,000)
Alternative minimum tax credit carryforwards (4,979,000) (14,130,000)
Other (118,000) 223,000
--------------- ---------------
Deferred income taxes, net $ 188,982,000 $ 167,874,000
=============== ===============
</TABLE>
At September 30, 1999, the Company had alternative minimum tax credit
carryforwards of $4,979,000 which have no expiration date. The Company has no
tax credit carryforwards for financial reporting purposes since all such credits
have been considered in the determination of deferred tax amounts.
Environmental Regulation
The Company is subject to certain regulations of the Environmental
Protection Agency in that it stores and dispenses petroleum products. Most of
these regulations address testing and replacement of underground tanks. The
Company's adherence to these regulations is part of its normal business
operations. These regulations have not had any material adverse effect upon the
Company.
Transactions with Related Parties
Certain directors and officers of the Company are also directors and
officers of Matlack Systems, Inc. and Dover Downs Entertainment, Inc.
24
<PAGE>
The Company provided administrative services and rented office space to
Matlack Systems, Inc. for aggregate charges of $4,093,000 in 1999, $4,401,000 in
1998 and $3,600,000 in 1997, which have been included in revenues or offset
against operating expense, as appropriate, in the Consolidated Statement of
Earnings.
The Company provided administrative services to Dover Downs Entertainment,
Inc. for aggregate charges of $461,000 in 1999, $430,000 in 1998 and $204,000 in
1997, which have been included in revenues or offset against operating expense,
as appropriate, in the Consolidated Statement of Earnings.
An officer of the Company is the trustee of an employee benefits trust,
which provides certain insurance and health care benefits to employees of the
Company. Contributions to the trust, which were charged to operating or selling
and administrative expense, as appropriate, were $13,720,000 in 1999,
$12,897,000 in 1998 and $12,497,000 in 1997.
In the opinion of management of the Company, the foregoing transactions
were effected at rates that approximate those the Company would have realized or
incurred had such transactions been effected with independent third parties.
Acquisition
On August 2, 1999, a subsidiary of the Company acquired Range
Transportation Systems, Inc. ("Range") in a purchase business combination for
$6,935,000 in cash. Range is based in Toronto, Canada and is engaged in truck
rental and leasing. The acquisition has been accounted for by the purchase
method and, accordingly, the results of operations of Range have been included
in the consolidated financial statements from the date of acquisition. The
excess of the purchase price over fair market value of the underlying assets is
being amortized on a straight-line basis over 15 years.
The pro-forma results for 1999 and 1998, assuming the acquisition had been
made at the beginning of the fiscal year, would not be materially different from
reported results.
Subsequent Event
On October 29, 1999, a subsidiary of the Company acquired the net assets
and business of Keen Leasing, Inc. ("Keen") for a purchase price of $41,492,000
in cash and the assumption of liabilities of $3,264,000. Keen is a truck rental
and leasing business headquartered in Harrisburg, Pennsylvania which currently
services approximately 1,800 vehicles from 13 locations in Pennsylvania,
Maryland and Virginia. The purchase price will be allocated to the assets
acquired and liabilities assumed based upon their estimated fair market values.
The purchase price allocation will be determined during 2000 when additional
information becomes available. Results of operations for Keen will be included
with those of the Company beginning in fiscal 2000 subsequent to the date of
acquisition.
On November 12, 1999, the Company executed a stock purchase agreement with
the UPS Logistics Group, a unit of United Parcel Service, Inc., whereby a
subsidiary of the Company would acquire UPS Truck Leasing, which has its
headquarters in Atlanta, Georgia. UPS Truck Leasing is in the truck rental and
leasing business and currently maintains approximately 9,000 trucks from 54
facilities throughout the United States.
The Company is expected to issue 2,000,000 shares of its $1.00 par value
common stock as partial consideration for the purchase of UPS Truck Leasing with
the remainder of the consideration to be paid in cash. The Company is expected
to receive cash as consideration for the sale of Rollins Logistics Inc.
Year 2000 ("Y2K") Readiness Disclosure (Unaudited)
The Company is aware of the issues related to the approach of the year 2000
as they relate to information technology programming issues which could have a
significant potential impact on its future operations and financial reporting.
In this regard, the Company has assessed and investigated what steps must be
taken to ensure that its critical systems and equipment will function
appropriately after the turn of the century. The assessments included a review
of what systems and equipment need to be changed or replaced in order to
function correctly.
25
<PAGE>
The Company has further determined that onboard computer systems in
Company-owned vehicles are not affected by the Y2K issue.
The Company's Y2K project was broken down into Corporate host-based systems
and field-based data collection processes. Overall, the Company's work effort
was allocated approximately 80 percent to host-based systems and 20 percent to
field-based data processes. Essentially all host-based coding and testing has
been completed. Full production with regard to remediated systems also has been
completed. As part of the Company's remediation efforts, the field data
collection systems were rewritten.
With the exception of remediation and implementation consequences not known
to the Company at this time, the Company believes that all systems should be
fully implemented by November 30, 1999.
As part of the Company's assessment of Y2K issues, consideration was given
to the possible impact upon the Company from using purchased software, suppliers
and outside service providers. The Company's efforts with regard to Y2K issues
are dependent in part upon information received from such suppliers and vendors
upon which the Company has reasonably relied. While it is not possible for the
Company to predict all future outcomes and eventualities, the Company is not
aware, at this time, of any Y2K non-compliant situations with regard to any of
its purchased software or its use of suppliers and outside service providers.
The Company estimates that it will spend approximately $2.0 million to
fully implement its Y2K compliance program of which $1.87 million has been
expended through September 30, 1999. All Y2K costs have been and will continue
to be funded from operations.
The Company has formulated a Y2K contingency plan that addresses potential
short-term business disruptions resulting from losses of power, system
malfunctions and related issues. However, due to the complexity and widespread
nature of such issues, the contingency planning process of necessity must be an
ongoing one requiring possible further modification as more information becomes
known regarding (1) the Company's own systems and facilities, and (2) the status
and changes therein of the Y2K compliance efforts of outside suppliers and
vendors.
While it is not possible for the Company to predict all future outcomes and
eventualities, the Company is not aware, at this time, of any Y2K non-compliant
situations with regard to any of its purchased software or its use of suppliers
and outside service providers which would have a material adverse effect upon
the Company.
Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
December March June September
1999 31 31 30 30
---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $155,345,000 $150,929,000 $156,617,000 $164,506,000
Gross profit $ 50,154,000 $ 45,807,000 $ 53,236,000 $ 56,703,000
Earnings before income taxes $ 23,034,000 $ 18,248,000 $ 25,022,000 $ 26,427,000
Net earnings $ 14,074,000 $ 11,149,000 $ 15,156,000 $ 16,094,000
Earnings per diluted share $ .24 $ .19 $ .26 $ .28
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
1998
----
<S> <C> <C> <C> <C>
Revenues $149,022,000 $145,050,000 $155,215,000 $160,870,000
Gross profit $ 46,858,000 $ 42,419,000 $ 49,731,000 $ 53,211,000
Earnings before income taxes $ 21,173,000 $ 16,259,000 $ 22,570,000 $ 25,101,000
Net earnings $ 12,897,000 $ 9,936,000 $ 13,846,000 $ 15,344,000
Earnings per diluted share $ .21 $ .16 $ .23 $ .26
----------- ------------ ------------ ------------
</TABLE>
26
<PAGE>
SCHEDULE I - Condensed Financial Information
ROLLINS TRUCK LEASING CORP.
BALANCE SHEET
($000 Omitted)
<TABLE>
<CAPTION>
September 30,
-----------------------------
Assets 1999 1998
------ ----------- -----------
<S> <C> <C>
Current assets (excluding notes receivable from subsidiaries)
Cash $ 7,678 $ 11,791
Accounts receivable 99 2,761
Accounts receivable from subsidiaries* 19 72
Other current assets 10 559
----------- -----------
Total current assets 7,806 15,183
Notes receivable from subsidiary* 715,000 645,000
Investments in subsidiaries, at equity* 346,123 330,709
Advances to subsidiaries* 15,040 15,275
Property and equipment, at cost, net of accumulated depreciation 720 854
Other assets 64 150
Deferred income taxes (131) 481
----------- -----------
Total assets $ 1,084,622 $ 1,007,652
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable to subsidiaries* $ 9 $ 15
Accounts payable to others 239 649
Accrued liabilities 518 2,132
Income taxes payable (277) (97)
----------- -----------
Total current liabilities 489 2,699
Collateral Trust Debentures
10.35% Series I, due 2000 50,000 50,000
8 5/8% Series J, due 1998 -- 30,000
7 % Series L, due 2003 70,000 70,000
7 % Series M, due 2001 60,000 60,000
8.27% Series N, due 2002 100,000 100,000
7.25% Series O, due 2005 50,000 50,000
6.89% Series P, due 2004 75,000 75,000
6 7/8% Series Q, due 2001 60,000 60,000
7.30% Series R, due 2007 75,000 75,000
6.52% Series S, due 2005 75,000 75,000
6.75% Series T, due 2006 100,000 --
Advances from subsidiaries* 49,377 67,399
Other liabilities (112) 510
Commitments and contingent liabilities (see Notes to the Financial Statements)
Shareholders' equity
Common stock $1 par value, 100,000,000 shares authorized;
issued and outstanding: 1999: 57,214,551; 1998: 58,799,281 57,215 58,799
Additional paid-in capital 0 11
Retained earnings 262,653 233,234
----------- -----------
Total shareholders' equity 319,868 292,044
----------- -----------
Total liabilities and shareholders' equity $ 1,084,622 $ 1,007,652
=========== ===========
</TABLE>
* Eliminated in consolidation
The Notes to the Financial Statements are an integral part of these statements.
27
<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
STATEMENT OF EARNINGS
($000 Omitted)
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Dividends from subsidiaries $ 41,000 $ 30,000 $ 15,150
Other income 7,015 8,200 7,191
-------- -------- --------
48,015 38,200 22,341
-------- -------- --------
Expenses:
Administrative 3,336 4,541 4,571
Depreciation and amortization 270 279 265
Gain on sale of property and equipment (29) -- --
-------- -------- --------
3,577 4,820 4,836
-------- -------- --------
Earnings before interest and income taxes 44,438 33,380 17,505
Interest income 50,715 44,708 43,286
Interest expense (53,793) (47,031) (44,888)
-------- -------- --------
Earnings before income taxes 41,360 31,057 15,903
Income taxes 380 512 297
-------- -------- --------
Net earnings of Rollins Truck Leasing Corp. 40,980 30,545 15,606
Equity in undistributed net earnings of subsidiaries 15,493 21,478 27,188
-------- -------- --------
Net earnings $ 56,473 $ 52,023 $ 42,794
======== ======== ========
</TABLE>
The Notes to the Financial Statements are an integral part of these statements.
28
<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
STATEMENT OF CASH FLOWS
($000 Omitted)
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings prior to equity in
subsidiaries' undistributed earnings $ 40,980 $ 30,545 $ 15,606
Adjustments to reconcile earnings to net cash
provided by operating activities:
Depreciation and amortization 270 279 265
Changes in assets and liabilities:
Accounts receivable 2,715 (2,691) (123)
Accounts payable and accrued liabilities (2,030) 1,063 798
Current and deferred income taxes 430 (1,283) (1,419)
Other, net 15 (403) 223
Net gain on sale of property and equipment (29) -- --
--------- --------- ---------
Net cash provided by operating activities 42,351 27,510 15,350
--------- --------- ---------
Cash flows from investing activities:
Purchase of equipment (151) (128) (18)
Proceeds from sale of equipment 123 7 --
--------- --------- ---------
Net cash used in investing activities (28) (121) (18)
--------- --------- ---------
Cash flows from financing activities:
Proceeds of equipment financing obligations 100,000 75,000 89,500
Issuance of notes receivable from subsidiary (100,000) (75,000) (75,000)
Repayment of note by subsidiary 30,000 -- 50,000
Repayment of equipment financing obligations (30,000) -- (67,500)
Payment of dividends (11,569) (9,244) (8,353)
Proceeds of stock options exercised 1,225 2,051 818
Common stock acquired and retired (18,305) (41,367) (30,633)
Subsidiary advances and payments (17,787) 31,882 25,754
Other -- (93) --
--------- --------- ---------
Net cash used in financing activities (46,436) (16,771) (15,414)
--------- --------- ---------
Net increase (decrease) in cash (4,113) 10,618 (82)
Cash beginning of period 11,791 1,173 1,255
--------- --------- ---------
Cash end of period $ 7,678 $ 11,791 $ 1,173
========= ========= =========
Supplemental information:
Interest paid $ 47,119 $ 43,528 $ 42,934
Income taxes paid $ (50) $ 1,795 $ 1,716
</TABLE>
The Notes to the Financial Statements are an integral part of these statements.
29
<PAGE>
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
Notes to the Financial Statements
Accounting Policies
The accounting policies of the Company and its subsidiaries are set forth
in the Organization and Accounting Policies note in the consolidated financial
statements of this 1999 Annual Report on Form 10-K.
The Company's principal sources of earnings are dividends and management
fees paid by its subsidiaries. Certain loan agreements restrict payments to the
Company by its subsidiaries. Net assets of subsidiaries not restricted under
such loan agreements totaled $93,187,000 at September 30, 1999. The Company also
realizes cash receipts by assessing subsidiaries for federal taxes on income and
expends cash in payment of such taxes on a consolidated basis. Tax assessments
are based on the amount of federal income taxes which would be payable
(recoverable) by each subsidiary company based on its current year's earnings
(loss) reduced by that subsidiary's applicable portion of any consolidated
credits utilized currently in the consolidated federal income tax return.
Interest income on notes receivable from a subsidiary, which are pledged to
secure the Collateral Trust Debentures (described in the Equipment Financing
Obligations note in the consolidated financial statements of this 1999 Annual
Report on Form 10-K), was $49,646,000, $44,547,000 and $43,286,000 in 1999, 1998
and 1997, respectively.
Commitments and Contingencies
The Company is obligated to a subsidiary for $326,000 annually ($734,000 in
the aggregate) of future rentals under a lease through 2001. Rent expense was
$317,000 in 1999, $302,000 in 1998 and $284,000 in 1997.
Commitments of the Company have been collateralized by bank letters of
credit issued on behalf of the Company in the amount of $8,000,000.
The aggregate amounts of maturities for the Collateral Trust Debentures
during the next five years are as follows: 2000 -- $50,000,000; 2001 --
$120,000,000; 2002 -- $100,000,000 and 2003 -- $70,000,000; and 2004 --
$75,000,000.
30
<PAGE>
ROLLINS TRUCK LEASING CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($000 OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------- ---------- ----------------------- ---------- ----------
Additions
-----------------------
Balance at Charged to Charged Balance at
Year Ended Beginning Costs and to Other End of
September 30, Description of Period Expenses Accounts Deductions Period
- ------------- ----------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1999: Allowance for doubtful accounts $2,452 $1,326 $345(1) $1,644(2) $ 2,479
- ----
1998: Allowance for doubtful accounts $2,126 $1,529 $484(1) $1,687(2) $ 2,452
- ----
1997: Allowance for doubtful accounts $1,928 $1,454 $695(1) $1,951(2) $ 2,126
- ----
</TABLE>
- ----------
(1) Recoveries.
(2) Write-offs.
31
<PAGE>
ROLLINS TRUCK LEASING CORP.
Exhibits to Form 10-K
For Fiscal Year Ended September 30, 1999
Index to Exhibits
Exhibit (3)(b) By-Laws of Rollins Truck Leasing Corp. as last
amended on October 28, 1999
Exhibit (4)(l) Nineteenth Supplemental Collateral Trust Indenture
dated as of April 5, 1999 to the Collateral Trust
Indenture dated as of March 21, 1983 as
supplemented and amended by a Third Supplemental
Indenture thereto dated as of February 20, 1986, an
Eighth Supplemental Indenture thereto dated as of
May 15, 1990 and by the Seventeenth Supplemental
Indenture dated as of March 10, 1997 between
Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
Exhibit (4)(n) Asset Purchase Agreement by and among Worldwide
Dedicated Services, Inc., Rollins Truck Leasing
Corp., Rollins Logistics Inc., Rollins Dedicated
Carriage Services, Inc. and Rollins Transportation
Systems, Inc. as of November 12, 1999.
Exhibit (4)(o) Stock Purchase Agreement by and between UPS
Logistics Group, Inc., UPS Truck Leasing, Inc.,
Rollins Truck Leasing Corp. and Rollins Leasing
Corp. as of November 12, 1999.
Exhibit (4)(p) Strategic Alliance Agreement to be entered into as
of December 31, 1999 in connection with the closing
under the Stock Purchase Agreement filed as Exhibit
(4)(o), above.
Exhibit 21 Rollins Truck Leasing Corp. Subsidiaries at
September 30, 1999
Exhibit 23 Consent of Independent Auditors
Exhibit 27(a) Rollins Truck Leasing Corp. Financial Data Schedule
at September 30, 1999
Exhibit 21
ROLLINS TRUCK LEASING CORP.
Subsidiaries of Registrant at September 30, 1999
JURISDICTION OF
NAME INCORPORATION
- ---- ---------------
Rollins Logistics Inc. Delaware
Rollins Leasing Corp. Delaware
Rollins Properties, Inc. Delaware
Transrisk, Limited Bermuda
Concord Administrative Services, Inc. Delaware
Exhibit 23
Consent of Independent Accountants
The Board of Directors
Rollins Truck Leasing Corp.:
We consent to incorporation by reference in the registration statement (No.
333-21835) on Form S-3 of Rollins Truck Leasing Corp. of our report dated
October 27, 1999, except for the note "Subsequent Events" which is as of
November 12, 1999, relating to the consolidated balance sheets of Rollins Truck
Leasing Corp. and subsidiaries as of September 30, 1999 and 1998 and the related
consolidated statements of earnings, cash flows, and shareholders' equity and
related financial statement schedules for each of the years in the three-year
period ended September 30, 1999, which report appears in the 1999 Annual Report
on Form 10-K of Rollins Truck Leasing Corp.
KPMG LLP
Wilmington, Delaware
December 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 34,280
<SECURITIES> 0
<RECEIVABLES> 86,961
<ALLOWANCES> 2,479
<INVENTORY> 8,074
<CURRENT-ASSETS> 150,046
<PP&E> 1,867,225
<DEPRECIATION> 626,473
<TOTAL-ASSETS> 1,412,887
<CURRENT-LIABILITIES> 80,023
<BONDS> 802,458
0
0
<COMMON> 57,215
<OTHER-SE> 263,171
<TOTAL-LIABILITY-AND-EQUITY> 1,412,887
<SALES> 627,397
<TOTAL-REVENUES> 627,397
<CGS> 0
<TOTAL-COSTS> 438,504
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,364
<INCOME-PRETAX> 92,731
<INCOME-TAX> 36,258
<INCOME-CONTINUING> 56,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-BASIC> .98
<EPS-DILUTED> .97
</TABLE>
BY-LAWS
OF
ROLLINS TRUCK LEASING CORP.
------------------------------------------------------------------
ARTICLE I
The Corporation
Section 1.1 Name. The title of this Corporation is Rollins Truck Leasing
Corp.
Section 1.2 Office. The registered office of this Corporation shall be
located at One Rollins Plaza, Wilmington, County of New Castle, State of
Delaware, or at such other place as the Board of Directors may designate in
accordance with Section 133 of the Delaware Corporation Law.
Section 1.3 Seal. The corporate seal of the Corporation shall have
inscribed thereon the name of the Corporation and the year of its creation
(1954) and the words "Incorporated Delaware".
<PAGE>
ARTICLE II
Stockholders
Section 2.1 Annual Meeting. The annual meeting of stockholders shall be
held at such place within or without the State of Delaware as the Board of
Directors from time to time determine.
A majority of the amount of the stock issued and outstanding and entitled
to vote shall constitute a quorum for the transaction of all business, except as
otherwise provided by law, the charter of the corporation or these by-laws. Each
stockholder shall be entitled to one vote, either in person or by proxy, for
each share of stock standing registered in his or her name on the books of the
Corporation on the record date selected by the Board of Directors in accordance
with these by-laws, unless more or less than one vote per share is, by the terms
of the instrument creating special or preferred shares, conferred upon the
holders thereof.
Notice of the annual meeting shall be mailed by the Secretary to each
stockholder at his or her last known post office address no less than ten days
and no more than fifty days prior thereto.
Section 2.2 Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board of
Directors, the Vice Chairman of the Board of Directors, the Chairman of the
Executive Committee or the President and not by any other person.
Section 2.3 Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation.
Section 2.4 Adjournments. Any meeting of the stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2.5 Quorum. At each meeting of stockholders, except where otherwise
provided by law or the certificate of incorporation or these by-laws, the
holders of a majority of the outstanding shares of stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 2.4 of these
by-laws until a quorum shall attend.
Section 2.6 Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in his absence by the Vice Chairman of
the Board, if any, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing
2
<PAGE>
persons by a chairman designated by the Board of Directors, or in the
absence of such designation by a chairman chosen at the meeting. The Secretary
shall act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.7 Voting; Proxies. Unless otherwise provided in the certificate
of incorporation, each stockholder entitled to vote at any meeting of
stockholders shall be entitled to one vote for each share of stock held by him
which has voting power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or persons to act
for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be conducted by
inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect. All other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these by-laws, be decided by the vote of the
holders of a majority of the outstanding shares of stock entitled to vote
thereon present in person or by proxy at the meeting, provided that (except as
otherwise required by law or by the certificate of incorporation or these
by-laws) the Board of Directors may require a larger vote upon any election or
question.
Section 2.8 Fixing Date for Determination of Stockholders of Record. 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 of exchange or stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which 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 other action. If no record date is fixed: (1) 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, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and (2) the record date for determining stockholders for any other purpose
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
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 2.9 List of Stockholders Entitled To Vote. The Secretary shall
prepare and make, 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. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The 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 who is present. The stock ledger
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list of stockholders or the books of the Corporation, or
to vote
3
<PAGE>
in person or by proxy at any meeting of stockholders.
Section 2.10 Action by Consent Of Stockholders. No action required to be
taken or which may be taken at any annual or special meeting of stockholders of
the Corporation may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
4
<PAGE>
ARTICLE III
Board of Directors
Section 3.1 Number; Qualifications. The Board of Directors shall consist of
up to the number of directors provided for in the Corporation's Certificate of
Incorporation. Directors need not be stockholders.
Section 3.2 Election; Resignation; Removal; Vacancies. At each annual
meeting of stockholders, the stockholders shall elect Directors to replace those
Directors whose terms then expire. Any Director may resign at any time upon
written notice to the Corporation. Stockholders may remove Directors only for
cause. Any vacancy occurring in the Board of Directors for any cause may be
filled only by the Board of Directors, acting by vote of a majority of the
Directors then in office, although less than quorum. Each Director so elected
shall hold office until the expiration of the term of office of the Director
whom he has replaced.
Section 3.3 Notice Of Nomination Of Directors. Nominations for the election
of directors may be made by the Board of Directors or by any stockholder
entitled to vote for the election of directors. Such nominations shall be made
by notice in writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than fourteen days
nor more than fifty days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than twenty-one days'
notice of the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the Corporation not
later than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are proposed by
the Board of Directors shall be given by the Chairman on behalf of the Board.
Each such notice shall set forth (i) the name, age, business address and, if
known, residence address of each nominee proposed in such notice, (ii) the
principal occupation or employment of each such nominee and (iii) the number of
shares of stock of the Corporation which are beneficially owned by each such
nominee. The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 3.4 Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
Section 3.5 Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the President, the Chairman of the Board of Directors, the
Vice Chairman of the Board of Directors, or by the Chairman of the Executive
Committee. Reasonable notice thereof shall be given by the person calling the
meeting, not later than the second day before the date of the special meeting.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board, may participate in any
meeting of such Board or 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 participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 3.7 Quorum; Vote Required For Action; Informal Action. At all
meetings of the Board of Directors a majority of the whole Board shall
constitute a quorum for the transaction
5
<PAGE>
of business. Except in cases in which the certificate of incorporation or these
by-laws otherwise provide, the vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
Unless otherwise restricted by the certificate of incorporation or these
by-laws, 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 or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
Section 3.8 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as a
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.9 Compensation Of Directors. The Directors and members of
standing committees shall receive such fees or salaries as fixed by resolution
of the Executive Committee and in addition will receive expenses in connection
with attendance or participation in each regular or special meeting.
6
<PAGE>
ARTICLE IV
Committees
Section 4.1 Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of the committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have
power or authority in reference to amending the certificate of incorporation of
the Corporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange or all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, or amending these
by-laws. The Board of Directors shall, at the annual organization meeting
thereof, elect an Executive Committee which shall consist of not more than four
members, all of whom shall be members of the Board of Directors. The Executive
Committee shall have and may exercise all of the powers and authority of the
Board of Directors in the management of business and affairs of the Corporation
to the fullest extent permitted by law (as presently allowed under Section
141 (c) to the Delaware General Corporation Law as revised effective July 1,
1996, and as may be allowed in the future pursuant to amendments or revisions to
applicable law).
Section 4.2 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these by-laws.
7
<PAGE>
ARTICLE V
Officers
Section 5.1 Executive Officers; Election; Qualifications; Term of Office;
Resignation; Removal; Vacancies. The officers of the Corporation shall consist
of a Chairman, Vice Chairman, President, Vice Presidents, Secretary, Assistant
Secretaries, Treasurer, Assistant Treasurers, General Counsel, and such other
officers as may from time to time be elected or appointed by the Board of
Directors. The President shall be elected from the Board of Directors. Any
officer may resign at any time upon written notice to the Corporation. The Board
of Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the Corporation. Any number of offices may be held by the same person.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting. In the absence of any
officer, the Board of Directors may delegate his power and duties to any other
officer or to any director for the time being.
Section 5.2 Duties Of The Chairman Of The Board And The Chairman Of The
Executive Committee. The Chairman shall be the Chief Executive Officer of the
Corporation, shall preside at all meetings of the Board, shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board are carried into effect. He shall submit a
complete report of the operations and condition of the Corporation for the year
to the stockholders at their annual meeting. In all cases, where a Chairman of
the Executive Committee is elected, the Chairman of the Executive Committee
shall, in the absence of the Chairman of the Board of Directors, act in the
latter's capacity.
Section 5.3 President. The President shall be the Chief Operating Officer
of the Corporation, shall execute in the name of the Corporation all contracts
and agreements authorized by the Board or the Executive Committee, and shall
affix the seal to any instrument requiring the same, which shall always be
attested by the signature of the President, the Vice President or the Secretary
or any Assistant Secretary or the Treasurer. He may sign certificates of stock;
he shall have general supervision and direction of all the other officers of the
Corporation; he shall submit a complete report of the operations and condition
of the Corporation for the year to the Chairman and to the directors at their
regular meetings, and from time to time shall report to the directors all
matters which the interest of the Corporation may require to be brought to their
notice. He shall have the general powers and duties usually vested in the office
of a President of a corporation.
Section 5.4 Vice President Finance. The Vice President Finance shall be
Chief Accounting and Chief Financial Officer of the Corporation and shall be
responsible to the Board of Directors, the Executive Committee and the President
for all financial control and internal audit of the Corporation and its
subsidiaries. He shall perform such other duties as may be assigned to him by
the Board of Directors, the Executive Committee or the President.
Section 5.5 Vice Presidents. The Vice Presidents elected or appointed by
the Board of Directors shall perform such duties and exercise such powers as may
be assigned to them from time to time by the Board of Directors, the Executive
Committee or the President. In the absence or disability of the President, the
Vice President designated by the Board of Directors, the Executive Committee, or
the President shall perform the duties and exercise the powers of the President.
A Vice President may sign and execute contracts and other obligations pertaining
to the regular course of his duties.
Section 5.6 Secretary. The Secretary shall be ex-officio Secretary of the
Board of Directors and of the standing committees. He shall attend all sessions
of the Board, act as clerk
8
<PAGE>
thereof, record all votes and keep the minutes of all proceedings in a book to
be kept for that purpose. He shall perform like duties for the standing
committees when required. He shall see that the proper notices are given of all
meetings of stockholders and directors, and perform such other duties as may be
prescribed from time to time by the Board of Directors, the Executive Committee,
Chairman or President, and shall be sworn to the faithful discharge of his
duties.
He shall keep the accounts of stock registered and transferred in such form
and manner and under such regulations as the Board of Directors or Executive
Committee may prescribe.
Section 5.7 Treasurer. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors or Executive Committee. He shall disburse the funds of the Corporation
as may be ordered by the Board, the Executive Committee or the President, taking
proper vouchers therefor, and shall render to the President and the Executive
Committee and Directors, whenever they may require it, an account of all his
transactions as Treasurer, and of the financial condition of the Corporation,
and at the annual organization meeting of the Board a like report for the
preceding year.
Section 5.8 General Counsel. The General Counsel shall be the legal adviser
of the Corporation and shall perform such services as the Chairman, President,
Board of Directors or Executive Committee may require.
9
<PAGE>
ARTICLE VI
Stock
Section 6.1 Certificates. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman or Vice
Chairman of the Board of Directors, if any, or the President of the Corporation,
certifying the number of shares owned by him in the Corporation. 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, shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 6.2 Lost, Stolen Or Destroyed Stock Certificates; Issuance Of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
10
<PAGE>
ARTICLE VII
Indemnification
Section 7.1. General. The Company shall indemnify, and advance Expenses (as
hereinafter defined) to, Indemnitee (as hereinafter defined) to the fullest
extent permitted by applicable law in effect on July 23, 1986, and to such
greater extent as applicable law may thereafter from time to time permit. The
rights of Indemnitee provided under the preceding sentence shall include, but
shall not be limited to, the rights set forth in the other Sections of this
Article.
Section 7.2. Proceedings Other Than Proceedings By Or In The Right Of The
Company. Indemnitee shall be entitled to the indemnification rights provided in
this Section 7.2 if, by reason of his Corporate Status (as hereinafter defined),
he is, or is threatened to be made, a party to any threatened, pending, or
completed Proceeding (as hereinafter defined), other than a Proceeding by or in
the right of the Company. Pursuant to this Section 7.2, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 7.3. Proceedings By Or In The Right Of The Company. Indemnitee
shall be entitled to the indemnification rights provided in this Section 7.3 to
the fullest extent permitted by law if, by reason of his Corporate Status, he
is, or is threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Company to procure a judgment in
its favor. Pursuant to this Section 7.3, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the Company.
Section 7.4. Indemnification For Expenses Of A Party Who Is Wholly Or
Partly Successful. Notwithstanding any other provision of this Article, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For purposes of this Section and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
Section 7.5. Indemnification For Expenses Of A Witness. Notwithstanding any
other provision of this Article, to the extent that Indemnitee is, by reason of
his Corporate Status, a witness in any Proceeding, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 7.6. Advancement Of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within twenty days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any
11
<PAGE>
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section 7.7. Procedure For Determination Of Entitlement To Indemnification.
(a) To obtain indemnification under this Article, Indemnitee shall submit
to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The determination of Indemnitee's entitlement to
indemnification shall be made not later than 60 days after receipt by the
Company of the written request for indemnification. The Secretary of the Company
shall, promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested indemnification.
(b) Indemnitee's entitlement to indemnification under any of Sections 7.2,
7.3 or 7.4 of this Article shall be determined in the specific case: (i) by the
Board of Directors by a majority vote of a quorum of the Board consisting of
Disinterested Directors (as hereinafter defined); or (ii) by Independent Counsel
(as hereinafter defined), in a written opinion, if (A) a Change of Control (as
hereinafter defined) shall have occurred and Indemnitee so requests, or (B) if a
quorum of the Board of Directors consisting of Disinterested Directors is not
obtainable or, even if obtainable, such quorum of Disinterested Directors so
directs; or (iii) by the stockholders of the Company; or (iv) as provided in
Section 7.8 of this Article.
(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 7.7(b) of this Article, the
Independent Counsel shall be selected as provided in this Section 7.7(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, and if so requested by Indemnitee in
his written request for indemnification, the Independent Counsel shall be
selected by Indemnitee, and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so selected. In either
event, Indemnitee or the Company, as the case may be, may, within 7 days after
such written notice of selection shall have been given, deliver to the Company
or to Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 7.13 of this Article, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected shall be disqualified from acting as
such. If, within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 7.7(a) hereof, no Independent Counsel shall
have been selected, or if selected shall have been objected to, in accordance
with this Section 7.7(c), either the Company or Indemnitee may petition the
Court of Chancery of the State of Delaware for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person so appointed shall act as Independent Counsel
under Section 7.7(b) hereof. The Company shall pay any and all reasonable fees
and expenses of Independent Counsel incurred by such Independent Counsel in
acting pursuant to Section 7.7(b) hereof, and the Company shall pay all
reasonable fees and expenses incident to the procedures of this Section 7.7(c),
regardless of the manner in which such Independent Counsel was selected or
appointed.
Section 7.8. Presumptions And Effect Of Certain Proceedings. If a Change of
Control shall have occurred, Indemnitee shall be presumed (except as otherwise
expressly provided in this Article) to be entitled to indemnification under this
Article upon submission of a request for indemnification in accordance with
Section 7.7(a) of this Article, and thereafter the Company shall have the burden
of proof to overcome that presumption in reaching a determination contrary to
that
12
<PAGE>
presumption. Whether or not a Change of Control shall have occurred, if the
person or persons empowered under Section 7.7 of this Article to determine
entitlement to indemnification shall not have made a determination within 60
days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification unless (i)
Indemnitee misrepresented or failed to disclose a material fact in making the
request for indemnification, or (ii) such indemnification is prohibited by law.
The termination of any Proceeding described in any of Sections 7.2, 7.3, or 7.4
of this Article, or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Article) of itself
adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal Proceeding, that Indemnitee had reasonable
cause to believe that his conduct was unlawful.
Section 7.9. Remedies Of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 7.7
of this Article that Indemnitee is not entitled to indemnification under this
Article, (ii) advancement of Expenses is not timely made pursuant to Section 7.6
of this Article, or (iii) payment of indemnification is not made within five (5)
days after a determination of entitlement to indemnification has been made or
deemed to have been made pursuant to Sections 7.7 or 7.8 of this Article,
Indemnitee shall be entitled to an adjudication in an appropriate court of the
State of Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration Association.
The Company shall not oppose Indemnitee's right to seek any such adjudication or
award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 7.7 of this Article that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 7.9
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 7.9 the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Sections 7.7 or 7.8 of this Article that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 7.9,
unless (i) Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification, or (ii) such indemnification is
prohibited by law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 7.9 that the
procedures and presumptions of this Article are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Article.
(e) In the event that Indemnitee, pursuant to this Section 7.9, seeks a
judicial adjudication of, or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Article, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 7.13 of this Article) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
13
<PAGE>
or advancement of Expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
Section 7.10. Non-Exclusivity And Survival Of Rights. The rights of
indemnification and to receive advancement of Expenses as provided by this
Article shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the Certificate of
Incorporation, the By-Laws, any agreement, a vote of stockholders or a
resolution of directors, or otherwise. Notwithstanding any amendment, alteration
or repeal of any provision of this Article, Indemnitee shall, unless otherwise
prohibited by law, have the rights of indemnification and to receive advancement
of Expenses as provided by this Article in respect of any action taken or
omitted by Indemnitee in his Corporate Status and in respect of any claim
asserted in respect thereof at any time when such provision of this Article was
in effect. The provisions of this Article shall continue as to an Indemnitee
whose Corporate Status has ceased and shall inure to the benefit of his heirs,
executors and administrators.
Section 7.11. Severability. If any provision or provisions of this Article
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions
of this Article (including without limitation, each portion of any Section of
this Article containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this Article
(including, without limitation, each portion of any Section of this Article
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section 7.12. Certain Persons Not Entitled To Indemnification Or
Advancement Of Expenses. Notwithstanding any other provision of this Article, no
person shall be entitled to indemnification or advancement of Expenses under
this Article with respect to any Proceeding, or any claim therein, brought or
made by him against the Company.
Section 7.13. Definitions. For purposes of this Article:
(a) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner") (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities without the prior approval of at
least two-thirds of the members of the Board of Directors in office immediately
prior to such person attaining such percentage interest; (ii) the Company is a
party to a merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
14
<PAGE>
(b) "Corporate Status" describes the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is not and
was not a party to the Proceeding in respect of which indemnification is sought
by Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
(e) "Indemnitee" includes any person who is, or is threatened to be made, a
witness in or a party to any Proceeding as described in Sections 7.2, 7.3 or 7.4
of this Article by reason of his Corporate Status.
(f) "Independent Counsel" means a law firm, or a member of a law firm, that
is experienced in matters of corporation law and neither presently is, nor in
the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this Article.
(g) "Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 7.9 of this Article to enforce
his rights under this Article.
Section 7.14. Miscellaneous. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.
15
<PAGE>
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 8.2 Waiver Of Notice Of Meetings Of Stockholders, Directors, And
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to 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 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..
Section 8.3 Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes are counted
for such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or the committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum; or (2) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 8.4 Form Of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 8.5 Amendment Of By-Laws. The Board of Directors of the Corporation
is expressly authorized to adopt, amend or repeal the by-laws of the Corporation
by a vote of a majority of the entire Board. The stockholders may make, alter or
repeal any by-law whether or not adopted by them, provided however, that any
such additional by-laws, alterations or repeal may be adopted only by the
affirmative vote of the holders of 75% or more of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class), unless such additional
by-laws, alterations or repeal shall have been recommended to the stockholders
for adoption by a majority of the Board of Directors, in which event such
additional by-laws, alterations or repeal may be adopted by the affirmative vote
of the holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class).
16
ROLLINS TRUCK LEASING CORP.
and
FIRST UNION NATIONAL BANK
as Trustee
NINETEENTH SUPPLEMENTAL INDENTURE
Dated as of April 5, 1999
to the
Collateral Trust Indenture
Dated as of March 21, 1983
6.75% COLLATERAL TRUST DEBENTURES, Series T, DUE APRIL 5, 2006
<PAGE>
TABLE OF CONTENTS*
Page
PARTIES 1
RECITALS:
Execution of Collateral Trust Indenture Supplemental
Indentures 1
Issuance of Series T Debentures 1
Text of Forms:
Form of Face of Series T Debentures 1
Form of Trustee's Authentication Certificate
for Series T Debentures 3
Form of Reverse of Series T Debentures 3
All Things Done 6
GRANTING CLAUSES:
GRANTING CLAUSE I - Securities 7
GRANTING CLAUSE II - Agreements and Assignments 7
GRANTING CLAUSE III - Other Securities and Property 7
HABENDUM 7
GRANT IN TRUST 7
GENERAL COVENANT 7
SECTION 1. Series T Debentures: Terms and Provisions 8
SECTION 2. Authentication and Delivery of Series T Debentures 9
SECTION 3. Maintenance of Office or Agency; Authenticating
Agent for Series T Debentures 9
SECTION 4. Original Indenture Ratified 9
SECTION 5. Trustee Not Responsible 10
SECTION 6. Defined Terms 10
SECTION 7. Counterparts 10
SECTION 8. Applicable Law 10
TESTIMONIUM 11
EXECUTION 11
ACKNOWLEDGEMENTS 11
- ------------
*Note: This Table of Contents has been inserted for convenience and does not
constitute a part of the Nineteenth Supplemental Indenture.
NINETEENTH SUPPLEMENTAL 0INDENTURE (herein called the "Nineteenth
Supplemental Indenture"), dated as of April 5, 1999, between Rollins Truck
Leasing Corp., (formerly RLC CORP.) a Delaware corporation (herein called the
"Corporation"), and FIRST UNION NATIONAL BANK, as Trustee (herein called the
"Trustee").
WHEREAS, the Corporation and the Trustee have heretofore executed and
delivered a Collateral Trust Indenture dated as of March 21, 1983, as
supplemented and amended by a Third Supplemental Indenture thereto dated as of
February 20, 1986, by an Eighth Supplemental Indenture thereto dated May 15,
1990 and by a Seventeenth Supplemental Indenture thereto dated as of March 10,
1997 (the "Original Indenture"; the Original Indenture, and as supplemented by
this Nineteenth Supplemental Indenture, being herein called the "Indenture");
WHEREAS, the Original Indenture provides that the Corporation and the
Trustee may enter into indentures supplemental to the Original Indenture, among
other things, to provide for the issuance from time to time of debentures
(defined in the Original Indenture as "Debentures") of the Corporation;
1
<PAGE>
WHEREAS, the Corporation has determined to issue hereunder a series of
Debentures (herein called the "Series T Debentures") to be designated as "6.52%
Collateral Trust Debentures, Series T, Due April 5, 2006", to be in the
aggregate principal amount of $100,000,000;
WHEREAS, the Series T Debentures and the Trustee's certificate to be
endorsed on the Series T Debentures are to be in the following forms, with
necessary or appropriate variations, omissions and insertions as permitted or
required by the Indenture:
(FORM OF FACE OF Series T DEBENTURES)
Rollins Truck Leasing Corp.
6.75% COLLATERAL TRUST DEBENTURE, Series T, DUE APRIL 5, 2006
$____________________ PPN 775741 AJ 0
No._____________________
Rollins Truck Lesing Corp., a corporation organized and existing under the
laws of the State of Delaware (herein called the "Corporation", which term shall
include any successor corporation to the extent provided in the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of _____________
Dollars on April 5, 2006, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for public and private
debts, and to pay interest on said principal sum at the rate of 6.75% per annum
(and at the same rate per annum on any overdue principal and, to the extent
legally enforceable, overdue installment of interest) in like coin or currency
from the fifth day of April or October, as the case may be, to which interest on
the Series T Debentures has been paid preceding the date hereof (unless the date
hereof is an April 5 or October 5 to which interest has been paid, in which case
from the date hereof, or unless no interest has been paid on the Series T
Debentures since the original issuance of this Debenture, in which case from
April 5, 1999), semiannually on each April 5 and October 5 until payment of said
principal sum has been made or duly provided for. Notwithstanding the foregoing,
if the date hereof is after March 20 or September 20 as the case may be, and
before the following April 5 or October 5, this Debenture shall bear interest
from such April 5 or October 5; provided, however, that if the Corporation shall
default in the payment of interest due on such April 5 or October 5, then this
Debenture shall bear interest from the next preceding April 5 or October 5 to
which interest has been paid or, if no interest has been paid on the Series T
Debentures since the original issuance of this Debenture, from April 5, 1999.
The interest so payable on any April 5 or October 5 will, subject to certain
exceptions provided in the Indenture referred to on the reverse hereof, be paid
to the person in whose name this Debenture is registered at the close of
business on March 20 or September 20, as the case may be, next preceding such
April 5 or October 5. Payment of the principal of and interest on this Debenture
will be made at the office or agency of the Corporation in the Borough of
Manhattan, The City of New York, New York; provided, however, that interest may
be paid, at the option of the Corporation, by check mailed to the registered
holder hereof at such holder's address last appearing on the registry books for
the Series T Debentures, or in such other manner as the Corporation may agree
with the holder hereof as contemplated by Section 1(d) of the Nineteenth
Supplemental Indenture referred to on the reverse hereof.
Additional provisions of this Debenture are contained on the reverse hereof
and such provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Debenture shall not be entitled to any of the benefits of the
Indenture or any indenture supplemental thereto, or be valid or obligatory for
any purpose, unless the form of certificate of authentication hereon shall have
been executed by or on behalf of the Trustee (referred to on the reverse hereof)
or a successor trustee thereto under the Indenture.
IN WITNESS WHEREOF, Rollins Truck Leasing Corp. has caused this instrument
to be signed in its name by its President or a Vice President and by its
Secretary or an Assistant Secretary, or by facsimiles of any of their
signatures, and its corporate seal, or a facsimile thereof, to be hereto
affixed.
DATED:
------------------------- Rollins Truck Leasing Corp.
2
<PAGE>
BY: ______________________________
(Title)
(SEAL)
ATTESTED:
- ------------------------------
(Title)
(FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE)
TRUSTEE'S AUTHENTICATION CERTIFICATE
THIS IS ONE OF THE DEBENTURES, OF THE SERIES DESIGNATED THEREIN, DESCRIBED
IN THE WITHIN-MENTIONED INDENTURE.
FIRST UNION NATIONAL BANK,
AS TRUSTEE
BY: ______________________________
AUTHORIZED OFFICER
(FORM OF REVERSE OF Series T DEBENTURES)
This Debenture is one of the Debentures of the Corporation (herein called
the "Debentures"), all duly authorized or from time to time to be duly
authorized and not limited in aggregate principal amount, all issued and to be
issued in one or more series from time to time under and equally secured by a
Collateral Trust Indenture dated as of March 21, 1983, between the Corporation
and First Union National Bank, as Trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture as hereinafter defined),
as supplemented and amended by a Third Supplemental Indenture thereto dated as
of February 20, 1986, by an Eighth Supplemental Indenture, dated as of May 15,
1990, by a Seventeenth Supplemental Indenture, dated as of March 10, 1997, and
as last supplemented by the Nineteenth Supplemental Indenture, dated as of April
5, 1999 (said Indenture, as so supplemented and amended, being herein called the
"Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the property thereby pledged, the
nature and extent of the security, the rights of the holders of the Debentures
in respect of the security, the rights, duties and immunities of the Trustee and
the rights and obligations of the Corporation in respect of the Debentures, and
the terms and conditions upon which the Debentures are, and are to be, secured.
The Debentures may be issued in series, for various principal sums, may mature
at different times, may bear interest at different rates and may otherwise vary
as in the Indenture provided. This Debenture is one of a series designated as
the "6.75% Collateral Trust Debentures, Series T, due April 5, 2006" of the
Corporation (herein called the "Series T Debentures"), duly authorized and
lawfully issued in an aggregate principal amount of $100,000,000 under and
secured by the Indenture.
3
<PAGE>
The provisions of the Indenture may be waived, or modified or amended by
supplemental indenture, to the extent and in the manner provided in the
Indenture, but in certain instances only with the consent of the holders of a
majority in aggregate principal amount of all Debentures at the time
outstanding, and of 66 2/3% in aggregate principal amount of each series of the
Debentures at the time outstanding which is affected by such waiver or
supplemental indenture; provided, however, that, without the written consent of
the holder of this Debenture, no such modification or amendment shall be made so
as to (i) extend the fixed maturity of this Debenture or the time of payment of
interest hereon, or reduce or otherwise modify the terms of payment of the
principal of, or the rate of interest on, this Debenture, or adversely affect
the right of the holder hereof to institute suit for the enforcement of any such
payment, (ii) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture with respect to, or terminate the lien of the
Indenture on, any of the property covered thereby, or deprive the holder hereof
of the security afforded by the lien of the Indenture or (iii) reduce the
percentage of the aggregate principal amount of Debentures, or of Series T
Debentures, required to authorize any such modification or amendment or any
waiver of any provision of, or default under, the Indenture.
In case an Event of Default (as defined in the Indenture) shall occur, the
principal of all the Debentures at any such time outstanding under the Indenture
may be declared or may become due and payable upon the conditions and in the
manner and with the effect provided in the Indenture. The Indenture provides
that in certain events such Event of Default and its consequences may be waived
and such declaration may be rescinded by the holders of outstanding Debentures
in the manner provided in the Indenture.
Any request, demand, authorization, direction, declaration, notice,
consent, waiver or other action by the holder of this Debenture shall bind the
holder of every Debenture issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, in respect of anything done or suffered to
be done by or on behalf of the Trustee or the Corporation in reliance thereon,
whether or not notation of such action is made upon this Debenture.
The Series T Debentures may not be redeemed prior to maturity.
The transfer of this Debenture may be registered by the registered holder
hereof or by his duly authorized attorney at the office or agency of the
Corporation in the Borough of Manhattan, the City of New York, New York, upon
surrender of this Debenture for cancellation, accompanied by a written
instrument of transfer in a form approved by the Corporation, duly executed by
the registered holder of this Debenture or by his duly authorized attorney, and
thereupon one or more new Debentures of the same series and aggregate principal
amount will be issued in the name of the transferee or transferees in exchange
herefor without service charge, except that the Corporation may require payment
of a sum sufficient to pay any stamp taxes or other governmental charges that
may be required with respect thereto, as provided in the Indenture.
The person in whose name this Debenture shall be registered shall be deemed
the absolute owner hereof for all purposes, and payment of or on account of the
principal of and interest on, this Debenture shall be made only to or upon the
written order of such registered owner or his duly authorized attorney. All such
payments shall satisfy and discharge the liability upon this Debenture to the
extent of the amounts so paid.
No recourse shall be had for the payment of the principal of, or interest
on, this Debenture, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Corporation or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
(END OF FORM OF REVERSE OF Series T DEBENTURES)
WHEREAS, the Debentures of any other series are to be substantially in the
forms herein provided for Series T Debentures, with such omissions, insertions
and variations as may be authorized and permitted by this Indenture; and
WHEREAS, all acts and things prescribed by law, by the Certificate of
Incorporation and the By-laws of the Corporation, and all other acts and things
necessary to make the Series T Debentures, when executed by the
4
<PAGE>
Corporation, and authenticated and delivered by the Trustee as in this
Nineteenth Supplemental Indenture provided, the valid, binding and legal
obligations of the Corporation, and to make this Nineteenth Supplemental
Indenture a valid, binding and legal instrument for the security of the Series T
Debentures, in accordance with its terms, have been done and performed;
NOW, THEREFORE, THIS NINETEENTH SUPPLEMENTAL INDENTURE WITNESSETH:
THAT the Corporation, in consideration of these premises, of the acceptance
by the Trustee of the trusts created hereby, of the mutual covenants herein
contained, of the purchase and acceptance of the Debentures by the holders
thereof, of the sum of $10 duly paid by the Trustee to the Corporation at or
before the ensealing and delivery of this Nineteenth Supplemental Indenture and
for other valuable consideration, the receipt whereof is hereby acknowledged,
and in order to secure the payment of the principal of, and premium, if any, and
interest on, all Debentures at any time issued and Outstanding under the
Indenture, according to their tenor and effect, and the performance and
observance by the Corporation of all the covenants and conditions herein and
therein contained on its part to be performed and observed, and to declare the
terms and conditions upon and subject to which the Debentures are, and are to
be, issued and secured, has executed and delivered this Indenture and has
granted, bargained, sold, remised, released, conveyed, assigned, transferred,
mortgaged, pledged, set over, confirmed and warranted, and by these presents
does grant, bargain, sell, remise, release, convey, assign, transfer, mortgage,
pledge, set over, confirm and warrant, to the Trustee, and to its successors in
the trusts and its and their assigns forever, with power of sale, all and
singular the following:
GRANTING CLAUSE I
Securities
Note of Rollins Leasing Corp., a Delaware corporation, dated April 5, 1999,
in the aggregate principal amount of $100,000,000.
GRANTING CLAUSE II
Agreements and Assignments
The following agreements and assignments:
A. A Loan Agreement, dated as of April 5, 1999, between the Corporation and
Rollins Leasing Corp., which Loan Agreement shall be in the form attached hereto
as Exhibit A.
B. Assignment of Loan Agreement, dated as of April 5, 1999, assigning the
Loan Agreement described in Subparagraph A of this Granting Clause II to the
Trustee, which Assignment shall be in the form attached hereto as Exhibit B.
GRANTING CLAUSE III
Other Securities and Property
All other securities and other property, including cash, and any and all
security therefor of whatsoever nature, that may, from time to time hereafter,
by delivery or by writing of any kind, be subjected to the lien hereof by the
Corporation or by anyone on its behalf; and the Trustee is hereby authorized to
receive the same as additional security hereunder. Such subjection to the lien
hereof of such securities or other property, including cash, as additional
security hereunder may be made subject to any reservations, limitations or
conditions which shall not be prohibited by this Indenture and which shall be
set forth in a written instrument executed by the Corporation or the person so
acting on its behalf, respecting the use and disposition of such property or the
proceeds thereof.
TO HAVE AND TO HOLD the Pledged Property unto the Trustee and its
successors and assigns forever;
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the holders
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from time to time of all the Debentures issued hereunder and Outstanding,
without any priority of any of said Debentures over any of the others.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that all the Debentures are
to be issued, authenticated and delivered, and that all property, including
cash, subject or to become subject hereto is to be held, subject to the further
covenants, conditions, uses and trusts hereinafter set forth, and the
Corporation, for itself and its successors and assigns, hereby covenants and
agrees to and with the Trustee and its successors in said trust for the equal
and proportionate benefit and security of those who shall hold the Debentures,
as hereinafter set forth.
SECTION 1. Series T Debentures: Terms and Provisions. Series T Debentures
shall be designated as "6.75% Collateral Trust Debentures, Series T, Due April
5, 2006" of the Corporation, and shall have the following terms and provisions:
(a) Series T Debentures shall be in the form set forth in the recitals
hereto.
(b) The aggregate principal amount of Series T Debentures which may be
issued shall be $100,000,000, except Series T Debentures issued in exchange
for, in lieu of, in substitution for, or upon the registration of transfer
of, other Series T Debentures pursuant to the provisions of Article II and
Section 18.04 of the Original Indenture.
(c) Series T Debentures shall be dated April 5, 1999.
(d) Series T Debentures shall mature April 5, 2006 and shall bear interest
(calculated on the basis of a 360 day year of twelve 30 day months) as
provided in Section 2.06(b) of the Original Indenture, payable semiannually
on April 5 and October 5 in each year, commencing October 5, 1999 at the
rate of 6.75% per annum until the principal thereof shall become due and
payable (whether at the stated maturity, by declaration or otherwise), and
at the rate of 6.75% per annum on any overdue principal, and (to the extent
legally enforceable) any overdue installment of interest. Payment of
principal and interest shall be made at the Corporate Trust Office or at
the other office or agency maintained by the Corporation as provided in
Section 7.02(a) of the Original Indenture, in such coin or currency of the
United States of America as at the time of payment shall be legal tender
for the payment of public and private debts; provided, however, that
interest may be paid, at the option of the Corporation, by check mailed to
the Person entitled thereto at his address last appearing on the registry
books required to be kept pursuant to Section 2.05 of the Original
Indenture.
Notwithstanding anything to the contrary above, the Corporation may
enter into a written agreement with any person who is or is to become the
holder of any of the Series T Debentures providing for the making of all
payments on the account of such Series T Debentures directly to or for the
account of such holder in the manner specified in or pursuant to such
agreement without presentation or surrender thereof if there shall be filed
with the Trustee a copy of such agreement. Notwithstanding any contrary
provision hereof or of the Debentures or the Original Indenture, the
Trustee shall act in accordance with any such agreement so filed with it.
(e) Series T Debentures shall be issued in denominations of $1,000 and
integral multiples thereof and may be fully printed or printed on steel
engraved borders or fully or partly engraved.
(f) Series T Debentures may not be redeemed prior to maturity. All monies
received by the Trustee as a result of any prepayment of the Note made
pursuant to Section 6(a) of the Loan Agreement (as required by Section 7.14
of the Original Indenture) shall be held by the Trustee as additional
collateral security for the Series T Debentures to be applied thereto at
the maturity thereof. Any monies so held may be invested or reinvested by
the Trustee pursuant to Section 9.02 of the Original Indenture.
SECTION 2. Authentication and Delivery of Series T Debentures. On or after
the date of execution and delivery of the Nineteenth Supplemental Indenture and
upon compliance with the provisions of Article IV of the Original Indenture,
Series T Debentures shall be executed by the Corporation and delivered to the
Trustee, and the Trustee shall, upon request, authenticate and deliver such
Series T Debentures upon the
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written order of the Corporation signed by its President or one of its Vice
Presidents and its Treasurer or Controller, an Assistant Treasurer or an
Assistant Secretary.
SECTION 3. Maintenance of Office or Agency; Authenticating Agent for Series
T Debentures. The provisions of Section 7.02 of the Original Indenture shall
apply in all respects to the Series T Debentures to the same extent as if the
words "Series T Debentures" were substituted for the words "Series A Debentures"
in each place in which the latter quotation was employed in the aforesaid
Section.
SECTION 4. Original Indenture Ratified. The Original Indenture as amended
by the Third Supplemental Indenture, dated as of February 20, 1986, by the
Eighth Supplemental Indenture, dated as of May 15, 1990, and by the Seventeenth
Supplemental Indenture, dated as of March 10, 1997, and as supplemented by this
Nineteenth Supplemental Indenture is in all respects ratified and confirmed and
the Nineteenth Supplemental Indenture and all its provisions shall be deemed a
part thereof in the manner and to the extent herein provided, and the Original
Indenture, as modified in the manner and to the extent herein provided, shall be
deemed a part hereof as though fully set forth herein.
SECTION 5. Trustee Not Responsible. The Trustee assumes no responsibility
for or in respect of the validity or sufficiency of the Nineteenth Supplemental
Indenture or the due execution hereof by the Corporation or for or in respect of
the recitals and statements contained herein, all of which are made solely by
the Corporation. The Trustee accepts the trusts created by the Nineteenth
Supplemental Indenture upon the terms and conditions hereof and of the Original
Indenture.
SECTION 6. Defined Terms. All terms used in the Nineteenth Supplemental
Indenture which are defined in the Original Indenture shall have the meanings
assigned to them in the Original Indenture.
SECTION 7. Counterparts. The Nineteenth Supplemental Indenture may be
executed in any number of counterparts, each of which when so executed and
delivered shall be an original; and all such counterparts shall together
constitute but one and the same instrument.
SECTION 8. Applicable Law. This Nineteenth Supplemental Indenture shall be
construed in accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, Rollins Truck Leasing Corp. has caused this Nineteenth
Supplemental Indenture to be executed on its behalf by its President or one of
its Vice Presidents and its corporate seal to be hereto affixed and said seal
and this Nineteenth Supplemental Indenture to be attested by its Secretary or
Assistant Secretary, and First Union National Bank, in evidence of its
acceptance of the trusts hereby created, has caused this Nineteenth Supplemental
Indenture to be executed on its behalf and its corporate seal to be affixed by
one of its Vice Presidents or Assistant Vice Presidents and said seal and this
Indenture to be attested by its Assistant Secretary or one of its Assistant Vice
Presidents, as of April 5, 1999.
Rollins Truck Leasing Corp.
(CORPORATE SEAL) BY:______________________________
Vice President-Finance
Title:
Attest:
- ------------------------------
Secretary
FIRST UNION NATIONAL BANK,
as Trustee
(CORPORATE SEAL) BY:____________________________
Title:
Attest:
- ------------------------------
7
<PAGE>
EXHIBIT A
---------------
ROLLINS TRUCK LEASING CORP.
AND
ROLLINS LEASING CORP.
LOAN AGREEMENT
Dated as of July 16, 1998
-----------------
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LOAN AGREEMENT (herein called the "Agreement") dated as of July 16, 1998
between Rollins Truck Leasing Corp., a corporation organized under the laws of
the State of Delaware (herein called the "Corporation"), and Rollins Leasing
Corp., a corporation organized under the laws of the State of Delaware (herein
called the "Borrower").
WHEREAS, the Borrower desires to borrow from the Corporation, and the
Corporation is willing to lend to the Borrower, a sum not exceeding $75,000,000,
all upon the terms, provisions and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and obligations herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Corporation do hereby agree as follows:
SECTION 1. Certain Definitions. The Corporation proposes to issue its 6.52%
Collateral Trust Debentures, Series T, due July 15, 2005 (herein called the
"Series T Debentures"), in an aggregate principal amount not exceeding
$75,000,000, pursuant to a Collateral Trust Indenture dated as of March 21,
1983, as supplemented and amended by a Third Supplemental Indenture thereto
dated as of February 20, 1986, by an Eighth Supplemental Indenture thereto dated
as of May 15, 1990 and by a Seventeenth Supplemental Indenture thereto dated as
of March 10, 1997 between the Corporation and First Union National Bank, as
Trustee (the "Original Indenture"; the Original Indenture, as supplemented by
the Nineteenth Supplemental Indenture dated as of July 16, 1998, being herein
called the "Indenture"). A copy of the Indenture has been delivered to the
Borrower, receipt of which is hereby acknowledged.
The term "Note" shall mean the 6.52% Demand Promissory Note issued by the
Borrower pursuant to this Agreement, substantially in the form attached hereto
as Annex 1.
In addition to the foregoing, the following terms shall in each case have
the same meaning in this Agreement as they have in the Indenture as amended:
"Debentures", "Equipment Indebtedness", "Note", "Outstanding", "Participating
Subsidiary", "Permitted Indebtedness", "Person", "Pledged Property", "Series T
Debentures", "Trustee" and "Vehicle".
SECTION 2. Sale of Note. Subject to the terms of this Agreement, the
Borrower will sell to the Corporation and the Corporation will purchase from the
Borrower the Note in the principal amount of $75,000,000 at a price of 100% of
such principal amount.
The sale of the Note will take place immediately after the execution and
delivery of this Agreement and upon the delivery,
(a) by the Borrower to the Corporation of the Note, duly executed and
dated July 16, 1998, together with all such assignments, documents and
other instruments as may be required by the Corporation to enable it to
effect the issuance of Series T Debentures referred to in Section 1, and
(b) by the Corporation to the Borrower of a certified or official bank
check or checks in clearing house funds (or in such other form as shall be
acceptable to the Borrower) in an amount equal to $75,000,000; provided,
however, that the obligation of the Corporation to purchase the Note shall
be subject to the condition that, concurrently with the closing in respect
of such purchase, the Corporation shall have issued and sold, and shall
have received payment for, Series T Debentures in an aggregate principal
amount equal to the sum of the principal amount of the Note.
SECTION 3. Pledge and Assignment of Note and Agreement. In consideration of
the purchase of the Note by the Corporation and the benefits to be derived by
the Borrower as a result of the sale of the Note, the Borrower hereby agrees and
consents to the pledge and assignment by the Corporation of the Note and this
Agreement to the Trustee under and pursuant to the Indenture as security for the
Debentures Outstanding and to be Outstanding thereunder.
SECTION 4. Particular Covenants of the Borrower. So long as the Note shall
be outstanding, the Borrower covenants, warrants and agrees as follows:
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<PAGE>
(a) Payment of Principal and Interest. The Borrower will duly and
punctually pay, or cause to be paid, the principal of and interest on,
the Note according to its terms and the terms of this Agreement.
(b) Maintenance of Corporate Existence. Subject to the provisions
of subsection (e) of this Section 4, the Borrower will maintain and
preserve its corporate existence and right to carry on business.
(c) Borrower a Participating Subsidiary; Validity of Note. The
Borrower warrants that at the date of this Agreement it is a
Participating Subsidiary as defined in Section 4 of the Eighth
Supplemental Indenture dated as of May 15, 1990, and that the Note, when
delivered to the Corporation will be, and when pledged and assigned to
the Trustee as security under the Indenture, will continue to be, a
legal and valid outstanding obligation of the Borrower.
(d) Further Assurance. The Borrower will execute and deliver, or
cause to be executed and delivered, all such additional instruments and
do, or cause to be done, all such additional acts as (i) may be
necessary or proper to carry out the purposes of this Agreement and to
subject the Note to the lien of the Indenture, (ii) may be necessary or
proper to effect the transfer, pledge and assignment of the Note and
this Agreement to the Trustee or to any successor trustee and to confirm
the lien of the Indenture on the Note, (iii) may be necessary or proper
in connection with the granting of the security interest under
subsection (f) of this Section 4 or (iv) the Trustee or the Corporation
may reasonably request for any of the foregoing purposes.
(e) Restrictions on Borrower's Disposition of Property,
Consolidation, Merger, etc. The Borrower will not sell, transfer or
otherwise dispose of the beneficial interest in all or substantially all
its property or assets, or be a party to any consolidation, merger or
amalgamation; provided, however, that the Borrower may take any such
action or be such a party if:
(i) the surviving corporation (if other than the Borrower), or
the person to whom all, or substantially all, the property and
assets of the Borrower shall have been transferred, sold or
otherwise disposed of, shall execute and deliver to the Corporation
and to the Trustee an agreement of assumption in which such
surviving corporation or person shall expressly assume the due and
punctual payment of the principal of and interest on, the Note,
according to its tenor and effect, and the due and punctual
performance and observance of all the covenants and conditions of
the Note and this Agreement which are to be performed or observed
by the Borrower, with the same effect as if such surviving
corporation or person had been named herein as a party hereto in
lieu of the Borrower; and
(ii) immediately after such transfer, sale or other
disposition, or consolidation, merger or amalgamation, no default
shall have occurred and be continuing under this Agreement; and
(iii) all the voting stock of the surviving corporation shall
be owned directly or indirectly by the Corporation.
(f) Creation of Security Interest. The Borrower will not create or
permit to exist any claim, lien, security interest or other encumbrance
on any of its Vehicles, or on its interest as lessor in any lease
agreement relating to its Vehicles, except:
(i) lessees' interests in Vehicles under any such lease
agreement; and
(ii) liens, security interests or other encumbrances for taxes
which are not delinquent or which are being contested in good faith
or of mechanics or materialmen arising in the ordinary course of
business in respect of obligations which are not overdue or which
are being contested in good faith; unless (x) such claim, lien,
security interest or other encumbrance is for the benefit of a
holder or holders of Equipment Indebtedness and (y) prior to or
simultaneously with the inception of any such claim, lien, security
interest or other encumbrance, the Borrower shall have executed and
delivered to a Security Trustee (as hereinafter defined), a
security agreement or security agreements and such other documents
as the Security Trustee may reasonably request, each in form and
substance satisfactory to the Trustee, granting to the Security
Trustee the right to perfect a security interest in such Vehicles
of the Borrower, such security interest, when perfected, to be
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<PAGE>
for the equal and ratable benefit of the Trustee, as holder of the
Notes, and such other holder or holders of Equipment Indebtedness. Such
security agreement or security agreements may provide, at the option of
the Borrower, that the security interest granted to the Security Trustee
shall terminate upon the termination of all other claims, liens,
security interests and other encumbrances for the benefit of such other
holder or holders of Equipment Indebtedness. The Security Trustee shall
be such Person as may be selected by the Borrower or any such holder of
Equipment Indebtedness and who shall be entitled to act without
qualification or who shall qualify to act as such under the Trust
Indenture Act of 1939.
SECTION 5. Payments of Principal and Interest. So long as the Note shall
be pledged with the Trustee under the Indenture, any payment of principal or
interest on the Note, or any payments to be made pursuant to Section 6(a),
shall be paid to the Trustee in Chicago Clearing House funds at least one
business day prior to the dates on which the Corporation would be required to
make related payments under the Indenture with respect to the relevant
Debentures. The Trustee shall apply such payments in accordance with the
provisions of the Indenture.
SECTION 6. Prepayment of Note.
(a) Prepayments Pursuant to Section 7.14 of the Original Indenture.
So long as the Note shall be pledged with the Trustee under the
Indenture, the Borrower shall pay, or cause to be paid, to the Trustee,
as prepayments on the Note, amounts which may be required to be paid by
the Borrower pursuant to Section 7.14 of the Original Indenture. Any
such amounts shall be paid as provided in Section 5 of this Agreement
and shall be applied as payment or prepayment on the Note in accordance
with subsection (c) of this Section 6.
(b) Notice of Certain Prepayments. If the Corporation is required
to make payments pursuant to Section 7.14 of the Original Indenture, the
Corporation shall give notice thereof to the Borrower, which notice
shall state the circumstances under which such payments are to be made.
Such notice shall be given not later than the first date on which the
Corporation is required to give notice to the Trustee or to take any
other action with respect to such payments. Failure to give any such
notice to the Borrower or any defect therein shall not, however, affect
the obligation of the Borrower to make the payments required under
subsection (a) of this Section 6.
(c) Prepayments on Principal Amount of Note. All payments made by
the Borrower, or for the account of the Borrower, pursuant to this
Section 6 shall be applied or credited as prepayments on the principal
amount of the Note on the date such payments are received by the
Trustee; provided, however, that to the extent a portion of such
payments or moneys shall be applied or applicable by the Trustee,
directly or indirectly, towards the payment of any interest or premium
in respect of Debentures, such portion shall not be applied or credited
as prepayments on the principal amount of the Note. It is the intention
of this Section 6 that the principal amount of the Note shall be
appropriately adjusted at appropriate times in order that the
obligations to pay principal, premium, if any, and interest contained in
all the Notes of all Participating Subsidiaries shall be sufficient,
after giving effect to any moneys then held by the Trustee under Section
9.01 of the Original Indenture, in the aggregate, to pay all principal,
premium, if any, and interest on all Debentures then Outstanding as the
same become due and payable.
(d) Corporation To Make Certain Payments. When and if the Borrower
shall make any prepayments provided for in this Section 6, the
Corporation shall promptly make such payments and take such other action
with respect to the Debentures as shall be required to be made or taken
by the Corporation in accordance with and pursuant to this Agreement and
the Indenture.
SECTION 7. Presentment of Note Not Required. So long as the Note shall
be pledged with the Trustee under the Indenture, payments of principal
thereof and interest thereon, shall be made without need for any presentment
of the Note, but payments of principal shall be noted thereon by the Trustee.
SECTION 8. Amendments, Consents and Waivers. So long as the Note shall
be pledged with the Trustee under the Indenture (a) this Agreement may be
modified, altered, supplemented or amended upon the execution and delivery of
a written amendment by the parties hereto pursuant to Article XVIII of the
Original Indenture, (b) any covenant or other condition of this Agreement may
be waived as and to the extent
4
<PAGE>
permitted in Section 11.02 of the Original Indenture and (c) any default under
this Agreement and its consequences may be waived as and to the extent permitted
in said Section 11.02 of the Original Indenture.
SECTION 9. Loss, Theft, etc. of Note. Upon receipt of evidence of the
loss, theft, destruction or mutilation of the Note and upon delivery of
indemnity reasonably satisfactory to the Borrower (it being understood that
the written agreement of the Trustee to indemnify the Borrower shall
constitute such indemnity) and, in the case of any such mutilation, upon
surrender and cancellation of the mutilated Note, and, in any case, upon
reimbursement to the Borrower of any reasonable expense incidental thereto,
the Borrower shall make and deliver a new Note of like tenor, in lieu of such
lost, stolen or destroyed Note or in exchange for such mutilated Note.
SECTION 10. Remedies. The holder of the Note, being a party to, or an
assignee of, this Agreement, shall be entitled and empowered to institute any
suits, actions or proceedings at law, in equity or otherwise, whether for the
specific performance of any covenant or agreement contained herein or in the
Note or in aid of the exercise of any power granted herein or in the Note, or
may proceed to enforce the payment of the Note after demand, or to enforce
any other legal or equitable right as the holder of the Note, or may proceed
to take any action authorized or permitted under the terms of the Indenture
with respect to the Note or under any applicable law.
SECTION 11. Remedies Cumulative; Delay or Omission Not a Waiver. Every
remedy given hereunder to the holder of the Note shall not be exclusive of
any other remedy or remedies, and every such remedy shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter given
by statute, law, equity or otherwise. No course of dealing between the
Borrower and the Corporation or the Borrower and the holder of the Note or
any delay or omission on the part of the Corporation or such holder to
exercise any right, remedy or power accruing upon any default hereunder shall
impair any such right, remedy or power or shall be construed to be a waiver
of any such default or of any right of the Corporation or such holder or
acquiescence therein. Every right, remedy and power given hereunder to the
Corporation or to the holder of the Note may be exercised from time to time
and as often as may be deemed expedient by the Corporation or such holder.
SECTION 12. Successors and Assigns. All the covenants, warranties and
agreements contained in this Agreement by or on behalf of the Corporation,
the Borrower or the holder of the Note shall bind and inure to the benefit of
their respective successors and assigns, whether so expressed or not.
SECTION 13. Notices. All notices, presentments and demands to or upon
the Borrower in respect of the Note or this Agreement may be delivered or
mailed to the Borrower at One Rollins Plaza, P.O. Box 1791, Wilmington,
Delaware 19899, or at such other address as the Borrower may specify from
time to time in writing to the Corporation and the Trustee.
All notices to or demands upon the Corporation in respect of the Note or
this Agreement shall be delivered or mailed to the Corporation at One Rollins
Plaza, P.O. Box 1791, Wilmington, Delaware 19899, or at such other address as
the Corporation may specify from time to time in writing to the Borrower and
the Trustee.
SECTION 14. Payment or Notice on Saturday, Sunday, Legal Holiday. If the
date of any payment or the giving of any notice under the Note or this
Agreement shall be (a) a Saturday, a Sunday or a legal holiday at the place
where payment is to be made or notice is to be given or (b) a day on which
banking institutions at the place where payment is to be made or notice is to
be given are authorized by law to remain closed, then such payment or notice
shall be made not later than the next preceding business day which shall not
be a day specified in (a) or (b) above.
SECTION 15. Separability of Provisions. In case any one or more of the
provisions contained in this Agreement or in the Note should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
SECTION 16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, and all such counterparts shall together
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<PAGE>
constitute but one and the same instrument.
SECTION 17. Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf by its President or one of its Vice Presidents
and its corporate seal to be hereto affixed and said seal and this Agreement
to be attested by its Secretary or one of its Assistant Secretaries, all as
of the day and year first above written.
Rollins Truck Leasing Corp.
BY:____________________________
Patrick J. Bagley
Title:
(CORPORATE SEAL)
Attest:
- ------------------------------
Secretary
Rollins Leasing Corp.
BY:___________________________
President
(CORPORATE SEAL) Title:
Attest:
- ------------------------------
Secretary
6
<PAGE>
ANNEX 1
6.52% DEMAND PROMISSORY NOTE
$75,000,000
Date: July 16, 1998
Rollins Leasing Corp., a corporation organized under the laws of
Delaware, for value received, HEREBY PROMISES TO PAY to Rollins Truck Leasing
Corp., a Delaware corporation, or order, upon demand, the principal sum of
Seventy Five Million Dollars ($75,000,000), either in one sum or in several
sums upon demand made from time to time (the receipt of any such sum to be
noted hereon), in every case in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts, at the corporate trust office of First Union
National Bank, in the City of Newark, New Jersey, AND TO PAY interest, at the
said office and in like coin or currency, on the unpaid portion of the said
principal sum from July 16, 1998, until the said principal sum shall have
been paid, such interest to be paid semiannually at the rate of 6.52% per
annum on the 15th day of January and July in each year commencing on the 15th
day of January, 1999 (calculated on the basis of a 360-day year of twelve
30-day months). If any or all installments of said principal sum shall not be
paid when demanded, such overdue principal and, to the extent that payment of
interest on overdue interest is enforceable under applicable law, any overdue
installment of interest on this Demand Promissory Note, shall bear interest
at the rate of 8.52% per annum until paid.
This Demand Promissory Note is the Demand Promissory Note referred to in
the Loan Agreement dated as of July 16, 1998, between Rollins Truck Leasing
Corp. and the maker hereof, and may be prepaid only as provided in said Loan
Agreement.
Rollins Leasing Corp.
BY:______________________________
Title:
1
<PAGE>
Pay to the order of First Union National Bank, as Trustee under the
Collateral Trust Indenture dated as of March 21, 1983, as supplemented and
amended by a Third Supplemental Indenture thereto dated as of February 20,
1986, by an Eighth Supplemental Indenture thereto dated as of May 15, 1990
and by a Seventeenth Supplemental Indenture thereto dated as of March 10,
1997 and as supplemented by a Nineteenth Supplemental Indenture dated as of
July 16, 1998, between Rollins Truck Leasing Corp. and said Trustee, as from
time to time further amended and supplemented.
Rollins Truck Leasing Corp.
BY:______________________________
Title:
2
<PAGE>
EXHIBIT B
----------
ROLLINS TRUCK LEASING CORP.,
FIRST UNION NATIONAL BANK
as Trustee
AND
ROLLINS LEASING CORP.
ASSIGNMENT OF LOAN AGREEMENT
Dated as of July 16, 1998
----------
1
<PAGE>
ASSIGNMENT OF LOAN AGREEMENT
ASSIGNMENT OF LOAN AGREEMENT dated as of July 16, 1998, among Rollins
Truck Leasing Corp., a corporation organized under the laws of the State of
Delaware (herein called the "Corporation"), First Union National Bank, as
Trustee under the Indenture hereinafter referred to (herein called the
"Trustee"), and Rollins Leasing Corp., a corporation organized under the laws
of the State of Delaware (herein called the "Borrower").
WHEREAS, the Trustee is Trustee under a Collateral Trust Indenture dated
as of March 21, 1983, (the "Original Indenture"; the Original Indenture, as
supplemented and amended by a Third Supplemental Indenture thereto dated as
of February 20, 1986, by an Eighth Supplemental Indenture thereto dated as of
May 15, 1990 and by a Seventeenth Supplemental Indenture thereto dated as of
March 10, 1997 and as supplemented by the Nineteenth Supplemental Indenture
dated as of July 16, 1998, being herein called the "Indenture"), between the
Corporation and the Trustee under and pursuant to which there are being and
have been issued certain Collateral Trust Debentures of the Corporation
(herein called the "Debentures"); and
WHEREAS, pursuant to a Loan Agreement (herein called the "Loan
Agreement") dated as of July 16, 1998, between the Corporation and the
Borrower, the Borrower has borrowed from the Corporation, and the Corporation
has loaned to the Borrower, $75,000,000, which is evidenced by a 6.52% Demand
Promissory Note from the Borrower to the Corporation in the principal amount
of $75,000,000 (herein called the "Note"); and
WHEREAS, in order to secure the payment of the principal of, and
premium, if any, and interest on, all Debentures at any time issued and
outstanding under the Indenture, as and to the extent provided in the Indenture,
and the performance and observance by the Corporation of all the covenants and
conditions in the Indenture and the Debentures contained on its part to be
observed and performed, the Corporation has endorsed, assigned and delivered to
the Trustee the Note and is required to assign to the Trustee the Loan
Agreement;
NOW, THEREFORE, THIS ASSIGNMENT WITNESSETH:
1. The Corporation hereby assigns to the Trustee all the right,
title and interest of the Corporation in, to and under the Loan
Agreement in order to secure the payment of the principal of, and
premium, if any, and interest on, all Debentures at any time issued and
outstanding under the Indenture, as and to the extent provided in the
Indenture, and the performance and observance by the Corporation of all
the covenants and conditions in the Indenture and the Debentures
contained on its part to be observed and performed.
2. The Trustee will hold the Loan Agreement and the Note and the
right, title and interest of the Corporation therein in accordance with,
and subject to, the terms of the Indenture.
3. The Borrower acknowledges notice of, and consents to, the
assignment of the Loan Agreement and the Note and of the right, title
and interest of the Corporation therein, all as provided in, and subject
to the terms of, the Indenture and this Assignment.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Assignment to be executed on its behalf by its President or one of its Vice
Presidents or Assistant Vice Presidents and its corporate seal to be hereto
affixed and said seal and this Assignment to be attested by its Secretary or
one of its Assistant Secretaries or Assistant Vice Presidents, all as of the
day and year first above written.
Rollins Truck Leasing Corp.
BY:____________________________
Patrick J. Bagley
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Title:
(CORPORATE SEAL)
Attest:__________________________
Secretary
FIRST UNION NATIONAL BANK,
NATIONAL ASSOCIATION,
as Trustee
BY:________________________
Title:
(CORPORATE SEAL)
Attest:__________________________
Title
2
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Rollins Leasing Corp.
BY:________________________
Title:
(CORPORATE SEAL)
Attest:__________________________
Title
3
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ASSET PURCHASE AGREEMENT
BY AND AMONG
WORLDWIDE DEDICATED SERVICES, INC.,
ROLLINS TRUCK LEASING CORP.,
ROLLINS LOGISTICS INC.,
ROLLINS DEDICATED CARRIAGE SERVICES, INC.,
AND
ROLLINS TRANSPORTATION SYSTEMS, INC.
AS OF NOVEMBER 12, 1999
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TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE.............................................2
Section 1.1 Purchase and Sale.............................................2
Section 1.2 Assets........................................................3
Section 1.3 Excluded Assets...............................................5
Section 1.4 Assumption of Assumed Liabilities.............................5
Section 1.5 Excluded Liabilities..........................................6
Section 1.6 Purchase Price................................................7
Section 1.7 Payment of Purchase Price.....................................7
Section 1.8 Target Working Capital........................................8
Section 1.9 Adjustment of Purchase Price..................................8
Section 1.10 Closing......................................................10
Section 1.11 Deliveries by Seller.........................................11
Section 1.12 Deliveries by Buyer..........................................11
ARTICLE II RELATED MATTERS..............................................12
Section 2.1 Use of Seller's Name and Logos...............................12
Section 2.2 No Ongoing or Transition Services............................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER.....................13
Section 3.1 Organization.................................................13
Section 3.2 Authorization................................................14
Section 3.3 Consents and Approvals; No Violations........................15
Section 3.4 Financial Statements.........................................16
Section 3.5 Absence of Material Adverse Effect...........................16
Section 3.6 Title, Ownership and Related Matters.........................18
Section 3.7 Intellectual Property........................................19
Section 3.8 Computer Software............................................19
Section 3.9 Year 2000 Compliance.........................................19
Section 3.10 Litigation...................................................20
Section 3.11 Compliance with Applicable Law...............................20
Section 3.12 Certain Contracts and Arrangements...........................20
Section 3.13 Employee Benefit Plans; ERISA................................21
Section 3.14 Labor Matters................................................22
Section 3.15 Taxes........................................................22
Section 3.16 Environmental................................................24
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Section 3.17 Officers; Bank Accounts......................................25
Section 3.18 Certain Fees.................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER......................25
Section 4.1 Organization and Authority of Buyer..........................25
Section 4.2 Consents and Approvals; No Violations........................26
Section 4.3 Litigation...................................................26
Section 4.4 Certain Fees.................................................27
ARTICLE V COVENANTS....................................................27
Section 5.1 Conduct of Seller's Business.................................27
Section 5.2 Access to Information........................................28
Section 5.3 Consents.....................................................29
Section 5.4 Reasonable Best Efforts......................................29
Section 5.5 Public Announcements.........................................29
Section 5.6 Covenant to Satisfy Conditions...............................30
Section 5.7 Employees; Employee Benefits.................................30
Section 5.8 Supplemental Disclosure......................................31
Section 5.9 Investigation by Buyer.......................................32
Section 5.10 Additional Actions...........................................32
Section 5.11 Parent Guarantee.............................................33
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PARTIES.....................33
Section 6.1 Conditions to Each Party's Obligation........................33
Section 6.2 Conditions to Obligations of Seller..........................34
Section 6.3 Conditions to Obligations of Buyer...........................35
ARTICLE VII TERMINATION..................................................35
Section 7.1 Termination..................................................35
Section 7.2 Procedure and Effect of Termination..........................37
ARTICLE VIII SURVIVAL OF REPRESENTATIONS..................................38
Section 8.1 Survival of Representations, Warranties and Agreements.......38
ARTICLE IX INDEMNIFICATION..............................................39
Section 9.1 Indemnification Obligations of Seller........................39
Section 9.2 Indemnification Procedure....................................39
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ARTICLE X MISCELLANEOUS................................................41
Section 10.1 Fees and Expenses............................................42
Section 10.2 Further Assurances...........................................42
Section 10.3 Notices......................................................42
Section 10.4 Severability.................................................44
Section 10.5 Binding Effect; Assignment...................................45
Section 10.6 No Third Party Beneficiaries.................................45
Section 10.7 Interpretation...............................................46
Section 10.8 Jurisdiction and Consent to Service..........................46
Section 10.9 Entire Agreement.............................................46
Section 10.10 Governing Law................................................47
Section 10.11 Specific Performance.........................................47
Section 10.12 Counterparts.................................................47
Section 10.13 Amendment, Modification and Waiver...........................47
Section 10.14 Knowledge....................................................48
Section 10.15 Schedules and Exhibits.......................................48
Section 10.16 Arbitration..................................................48
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DEFINED TERMS
Term Section
- ---- -------
Acceptance Notice.......................................................1.9(c)
Acquisition...........................................................Preamble
Affiliate..............................................................10.7(c)
Agreement.............................................................Preamble
Allocation................................................................1.13
Assets.....................................................................1.1
Assumed Contracts.......................................................1.2(e)
Assumed Liabilities........................................................1.4
Buyer.................................................................Preamble
Buyer Auditor...........................................................1.9(b)
Buyer Indemnified Parties..................................................9.1
Buyer Losses...............................................................9.1
Closing....................................................................1.1
Closing Date..............................................................1.10
Closing Date Working Capital............................................1.9(a)
Confidentiality Agreement ..............................................5.2(b)
Contracts.................................................................3.12
Dedicated.............................................................Preamble
employee benefit plan...................................................5.7(a)
employee welfare benefit plan...........................................5.7(a)
Environmental Claims...................................................3.16(b)
Environmental Laws.....................................................3.16(b)
ERISA..................................................................3.13(a)
Excluded Assets............................................................1.3
Excluded Liabilities.......................................................1.5
Final Balance Sheet.....................................................1.9(c)
Final Working Capital Statement.........................................1.9(c)
Financial Statements.......................................................3.4
GAAP....................................................................1.9(b)
Hazardous Materials....................................................3.16(b)
HSR Act....................................................................3.3
Indemnified Claims ........................................................1.5
Intellectual Property...................................................3.7(a)
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Interim Balance Sheet...................................................1.9(b)
IRS....................................................................3.13(b)
Leased Real Property.................................................3.6(a)(i)
Litigation Claims.........................................................3.10
Logistics.............................................................Preamble
Money Rates.............................................................1.7(b)
Objection Notice........................................................1.9(c)
Parent................................................................Preamble
Person.................................................................10.7(b)
Plans..................................................................3.13(a)
Preliminary Balance Sheet...............................................1.9(b)
Preliminary Working Capital Statement...................................1.9(b)
Purchase Price.............................................................1.6
Retained Employees......................................................1.3(g)
Rollins.................................................................1.3(c)
Seller or Sellers.....................................................Preamble
Seller Auditor..........................................................1.9(b)
Seller Benefit Plans...................................................3.13(c)
Seller Material Adverse Effect..........................................3.1(b)
Seller Tradenames and Logos................................................2.1
Staffing Services Agreement.............................................6.2(d)
Target Working Capital.....................................................1.8
Taxes...............................................................3.15(c)(i)
Tax Return.........................................................3.15(c)(ii)
To the Knowledge of Buyer................................................10.14
To the Knowledge of Sellers..............................................10.14
Transferred Employees...................................................1.2(l)
Transition Agreement....................................................6.2(e)
Transportation........................................................Preamble
Unrelated Accounting Firm...............................................1.9(c)
VEBA Audit..............................................................1.5(b)
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SCHEDULES
Schedule 1.2(f) Leases
Schedule 1.2(l) Transferred Employees
Schedule 1.3(a) Permits/Licenses
Schedule 3.1 Foreign Qualifications
Schedule 3.3 Consents
Schedule 3.5 Absence of Change
Schedule 3.6(a)(i) Leased Real Property
Schedule 3.6(a)(iii) Condemnation/Appropriation
Proceedings
Schedule 3.6(b) Necessary Assets
Schedule 3.7 Intellectual Property
Schedule 3.10 Litigation
Schedule 3.12 Contracts
Schedule 3.12(i) Material Default Notices
Schedule 3.13 Employee Benefits
Schedule 3.14 Labor Matters
Schedule 3.15 Taxes
Schedule 3.16(a) Environmental Permits/Licenses
Schedule 3.16(b) Environmental Notices
Schedule 3.17 Officers; Bank Accounts
Schedule 3.20 Bank Accounts
Schedule 5.10 Additional Actions
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EXHIBITS
Exhibit Number
- ------- ------
Current Assets and Liabilities 1.9(a)
Accounting Principles 1.9(b)
Staffing Services Agreement 6.2(d)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of November 12, 1999 (this
"Agreement"), is made and entered into by and between Worldwide Dedicated
Services, Inc., a Delaware corporation ("Buyer"); Rollins Truck Leasing Corp., a
Delaware corporation ("Parent"); Rollins Logistics, Inc., a Delaware corporation
("Logistics"), Rollins Dedicated Carriage Services, Inc., a Delaware corporation
("Dedicated") and Rollins Transportation Systems, Inc., ("Transportation" and
together with Logistics and Dedicated hereinafter, individually occasionally
referred to as the "Sellers" and collectively referred to as "Seller").
W I T N E S S E T H:
WHEREAS, Buyer and Seller desire to enter into this Agreement pursuant to
which Seller proposes to sell to Buyer, and Buyer proposes to purchase from
Seller, the assets used or held for use by Seller in the conduct of its
business, and Buyer proposes to assume certain of the liabilities and
obligations of Seller (the "Acquisition"); and
WHEREAS, Seller and Buyer desire to make certain representations,
warranties and agreements in connection with the Acquisition.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE
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Section 1.1 Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, at the closing provided for in Section 1.10 hereof (the
"Closing") and except as otherwise specifically provided in this Article 1,
Seller shall grant, convey, sell, assign, transfer and deliver to Buyer, and
Buyer will purchase and acquire from Seller, all right, title and interest of
Seller in and to (a) the business of Seller as a going concern and (b) except
for the Excluded Assets (as hereinafter defined), all of the assets, properties
and rights of Seller of every kind and description, tangible and intangible,
wherever situated (which business, assets, properties and rights are hereinafter
collectively referred to as the "Assets"), free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever, except Assumed Liabilities (as
hereinafter defined).
Section 1.2 Assets. Except as otherwise expressly set forth in Section 1.3
hereof, the Assets shall include, without limitation, the following assets,
properties and rights of Seller as of the Closing Date (as hereinafter defined):
(a) all accounts receivable and notes receivable;
(b) all deposits, advances, prepaid expenses and credits;
(c) all inventories, including finished products, work-in-process, raw
materials, spare parts, stores and supplies, office supplies and other inventory
items;
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(d) all machinery, equipment, business machines, computer hardware,
vehicles, furniture, fixtures, tools, parts and other tangible property not
normally included in the inventory used in Seller's business, whether or not
carried on the books of Seller;
(e) except as otherwise set forth in Section 1.3(d), all right, title and
interest of Seller in all contracts (written or oral), agreements or other
instruments, including, without limitation, contracts with customers and
suppliers and all leases of personal property (the "Assumed Contracts");
(f) except as otherwise set forth on Schedule 1.2(f), all leaseholds,
leasehold improvements and other rights relating thereto;
(g) all goodwill, patents, copyrights, methods, know-how, software,
technical documentation, trade secrets, trademarks, trade names and general
intangible (and all rights thereto and applications therefor);
(h) except for the Indemnified Claims (as hereinafter defined), all rights
to causes of action, lawsuits, judgments, claims and demands of any nature
available to or being pursued by Seller, whether arising by way of counterclaim
or otherwise;
(i) all guarantees, warranties, indemnities and similar rights in favor of
Seller;
(j) all governmental permits, licenses or similar rights relating to the
business of Seller, other than those set forth on Schedule 1.3(a);
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(k) all information, files, correspondence, records, data, plans, contracts
and recorded knowledge, including customer and supplier lists and all accounting
or other books and records of Seller;
(l) those employees of Seller listed on Schedule 1.2(l) who will be offered
employment by Buyer on the Closing Date (the "Transferred Employees");
(m) all other tangible and intangible assets of any kind or description,
wherever located, that are carried on the books of Seller or which are owned by
Seller; and
(n) all cash, cash equivalents, marketable securities and bank accounts.
Section 1.3 Excluded Assets. Notwithstanding anything to the contrary set
forth herein, the Assets shall not include the following assets, properties and
rights of Seller (collectively, the "Excluded Assets"):
(a) any governmental permit, license or similar right that by its terms is
not transferable to Buyer, which permits, licenses and similar rights are set
forth on Schedule 1.3(a);
(b) minute books and stock ledger records of Seller;
(c) all rights to the use of the name "Rollins" and all derivatives
thereof;
(d) the rights that accrue to Seller under this Agreement;
(e) the rights to any federal, state, local or foreign income tax refunds;
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(f) all insurance policies of Seller or acquired or assumed by Seller prior
to the Closing Date pertaining to Seller's business and all rights of Seller of
every nature and description under or arising out of such insurance policies;
and
(g) those employees of Seller other than those listed on Schedule 1.2(l)
(the "Retained Employees").
Section 1.4 Assumption of Assumed Liabilities. Except to the extent
specified in Section 1.5, Buyer shall, in connection with the transactions
contemplated hereby, assume and agree to pay, discharge or perform, as
appropriate, all liabilities and obligations of Seller accrued as of the Closing
Date and all liabilities and obligations arising from Seller's operations prior
to the Closing Date (the "Assumed Liabilities").
Section 1.5 Excluded Liabilities. The Assumed Liabilities shall not
include, and in no event shall Buyer assume, agree to pay, discharge or perform
or incur any liability or obligation under this Agreement or otherwise become
responsible in respect of, the following (the "Excluded Liabilities"):
(a) the Indemnified Claims (as hereinafter defined);
(b) the items identified on Schedule 1.5(b);
(c) any liability or obligation for Taxes (as hereinafter defined);
(d) any liability or obligation under any collective bargaining agreement
or otherwise relating to the Retained Employees;
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(e) any liability or obligation to Parent or any of its Affiliates (as
hereinafter defined), including intercompany debt for borrowed money, other than
those obligations specified on Schedule 1.5(e); and
(f) any debt for borrowed money to a third party.
For purposes of this Agreement, the "Indemnified Claims" shall mean those
Litigation Claims marked with an asterisk on Schedule 3.10 and any claim of the
type described below brought against Seller (or Buyer as the successor to
Seller) after the date hereof to the extent based on an occurrence in connection
with Seller's operations prior to the Closing Date: workers' compensation,
vehicle accident or other personal injury or property damage claims normally
covered under a general liability insurance policy, and employee compensation
and benefits (other than employee compensation and benefits accrued as a
liability on the Final Closing Balance Sheet and reflected in the calculation of
the Closing Date Working Capital).
Section 1.6 Purchase Price. Subject to adjustment as provided in Section
1.7(b), the Purchase Price for the Assets will be an amount equal to $67,220,000
plus the assumption by Buyer of the Assumed Liabilities (such amount as adjusted
is hereafter referred to as the "Purchase Price"). The Purchase Price shall be
payable as provided in Section 1.7(a) and (c), together with any necessary
post-closing adjustments as provided in Section 1.7(b).
Section 1.7 Payment of Purchase Price.
(a) At the Closing, Buyer shall deliver or cause to be delivered to Seller
the Purchase Price (prior to the adjustment contemplated by Section 1.7(b)
hereof).
(b) Within five business days after the determination of the Final Working
Capital Statement (as hereinafter defined) in accordance with Section 1.9
hereof, (i) if the amount of the Closing Date Working Capital (as hereinafter
defined) calculated in accordance with
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Section 1.9 is less than 97% of the Target Working Capital (as hereinafter
defined), then Seller shall pay to Buyer an amount equal to the difference
between 97% of the Target Working Capital and the Closing Date Working Capital
plus interest or (ii) if the amount of the Closing Date Working Capital
calculated in accordance with Section 1.9 is greater than 103% of the Target
Working Capital, Buyer shall pay to Seller an amount equal to the difference
between 103% of the Target Working Capital and the Closing Date Working Capital
plus interest. Any payment required under this Section 1.7(b) shall include
interest on the amount of that payment at the prime rate of interest (as
published in the "Money Rates" table of The Wall Street Journal on the Closing
Date) beginning on the Closing Date (as hereinafter defined) and ending on the
date of any such payment.
(c) All payments required under this Section 1.7 shall be made in cash by
wire transfer of immediately available federal funds to such bank account(s) as
shall be designated in writing by the recipient at least three days prior to the
Closing or promptly upon the determination of the Final Balance Sheet (as
hereinafter defined), as the case may be.
Section 1.8 Target Working Capital. "Target Working Capital" shall equal
$7,031,594.
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Section 1.9 Adjustment of Purchase Price.
(a) For purposes of this Agreement, the "Closing Date Working Capital"
shall mean the consolidated book value of those categories of current assets of
Seller listed on Exhibit 1.9(a) less the consolidated book value of those
categories of current liabilities of Seller listed on Exhibit 1.9(a), in each
case as reflected on the Final Balance Sheet.
(b) Promptly following the Closing, Seller shall prepare (i) a balance
sheet reflecting the Assets and the Assumed Liabilities as of the close of
business on the Closing Date (the "Preliminary Balance Sheet"), in accordance
with generally accepted accounting principles ("GAAP") on a basis consistent
with the unaudited consolidated balance sheet of Seller as of September 30, 1999
(the "Interim Balance Sheet"), which principles are set forth on Exhibit 1.9(b),
and (ii) a calculation of the Closing Date Working Capital based on the
Preliminary Balance Sheet (the "Preliminary Working Capital Statement"). Seller
shall engage, and be responsible for the fees and expenses of, KPMG Peat Marwick
LLP (the "Seller Auditor") to audit the Preliminary Balance Sheet and the
Preliminary Working Capital Statement and shall use all commercially reasonable
efforts to deliver to Buyer a final draft of the Preliminary Balance Sheet and
the Preliminary Working Capital Statement within 60 days after the Closing Date,
together with a final report of the Seller Auditor thereon stating that the
audit of the Preliminary Working Capital Statement has been made in accordance
with GAAP on a basis consistent with the Interim Balance Sheet. Representatives
of Buyer shall have the opportunity to observe the taking of the inventory of
Seller in connection with the preparation of the Preliminary Balance Sheet, and
to examine the work
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papers, schedules and other documents prepared by Seller in connection with the
preparation of the Preliminary Balance Sheet and the Preliminary Working Capital
Statement. Seller shall use all commercially reasonable efforts to cause the
Seller Auditor to permit Buyer and its accounting firm (the "Buyer Auditor") to
examine the Seller Auditor's work papers used in connection with its audit of
the Preliminary Balance Sheet and the Preliminary Working Capital Statement.
Buyer shall be responsible for the fees and expenses of the Buyer Auditor.
(c) If Buyer objects to the Preliminary Balance Sheet and the Preliminary
Working Capital Statement, Buyer shall deliver to Seller a written notice of
objection (an "Objection Notice") within 15 days following the delivery thereof.
If Buyer has no objection to the Preliminary Balance Sheet and the Preliminary
Working Capital Statement, Buyer shall promptly deliver to Seller a written
notice of acceptance (an "Acceptance Notice"). The Preliminary Balance Sheet and
the Preliminary Working Capital Statement shall be final and binding on the
parties if an Acceptance Notice is delivered or if no Objection Notice is
delivered to Seller within such 15-day period. Any payment or portion of any
payment required under Section 1.7 not subject to an Objection Notice, shall be
paid within five business days following the delivery of an Objection Notice.
Any Objection Notice shall specify in reasonable detail the items on the
Preliminary Balance Sheet and the Preliminary Working Capital Statement disputed
and shall describe in reasonable detail the basis for the objection and all
information in the possession of Buyer which forms the basis thereof, as well as
the amount in dispute. If an Objection Notice is given, the parties shall
consult with each other with respect to the objection. If the parties are unable
to reach agreement within 15 days after an Objection Notice has been given, any
unresolved disputed items
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shall be promptly referred to an independent accounting firm designated by
agreement of Seller and Buyer (the "Unrelated Accounting Firm"). The Unrelated
Accounting Firm shall be directed to resolve disputed issues in accordance with
the terms of this Agreement and render a written report on the unresolved
disputed issues with respect to the Preliminary Balance Sheet and the
Preliminary Working Capital Statement as promptly as practicable and to resolve
only those issues of dispute set forth in the Objection Notice. The resolution
of the dispute by the Unrelated Accounting Firm shall be final and binding on
the parties. The fees and expenses of the Unrelated Accounting Firm shall be
borne equally by Seller, on the one hand, and Buyer, on the other hand. The
Preliminary Balance Sheet and the Preliminary Working Capital Statement as
finally determined pursuant to this Section 1.9(c) is referred to herein,
respectively, as the "Final Balance Sheet" and the "Final Working Capital
Statement".
Section 1.10 Closing. (a) The Closing of the transactions contemplated by
this Agreement shall take place at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia. If all of the conditions to Closing set forth in
Article VI hereof have been satisfied or waived prior to such time, the Closing
shall take place at 12:01 a.m. Eastern Time on January 1, 2000. If the Closing
does not occur at such time, the Closing shall take place (assuming satisfaction
or waiver of all conditions to Closing) at 11:59 p.m. Eastern Time on January
31, 2000, or at such other time as the parties mutually agree. The date of the
Closing is sometimes referred to herein as the "Closing Date".
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Section 1.11 Deliveries by Seller. At the Closing, Seller will deliver or
cause to be delivered to Buyer (unless delivered previously) the following:
(a) The Transition Agreement (as hereinafter defined), executed by Seller
or its Affiliate;
(b) The Staffing Services Agreement executed by Seller or its Affiliate;
(c) Bills of sale, instruments of assignment, certificates of title and
other conveyance documents, dated the Closing Date, transferring to Buyer all of
Seller's right, title and interest in and to the Assets together with possession
of the Assets;
(d) Documents evidencing the assignment and assumption of the Assumed
Contracts and the Assumed Liabilities and the assignment of any assignable
permits and licenses; and
(e) All other documents, instruments and writings required by Buyer to be
delivered by Seller at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
Section 1.12 Deliveries by Buyer. At the Closing, Buyer will deliver or
cause to be delivered to Seller (unless previously delivered) the following:
(a) The Purchase Price in accordance with Section 1.7 hereof;
(b) The Transition Agreement, executed by Buyer or its Affiliate;
(c) The Staffing Services Agreement, executed by Buyer or its Affiliate;
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(d) Documents evidencing the assignment and assumption of the Assumed
Contracts and the Assumed Liabilities and the assignment of any assignable
permits and licenses; and
(e) All other documents, instruments and writings required by Seller to be
delivered by the buyer at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
Section 1.13 Allocation of Purchase Price. Seller and Buyer will use their
reasonable best efforts to agree on the allocation of the Assets (the
"Allocation") and will use the Allocation in reporting the deemed purchase and
sale of the Assets for federal and state income tax purposes. If the parties are
unable to agree upon the Allocation within 90 days before the due date of filing
any Tax Return (as hereinafter defined) for which the Allocation is relevant,
the Allocation shall be made by an independent accountant selected by the
parties.
ARTICLE II
RELATED MATTERS
Section 2.1 Use of Seller's Name and Logos. It is expressly agreed that
Buyer is not purchasing, acquiring or otherwise obtaining any right, title or
interest in the names "Rollins" or "Rollins Logistics", or any tradenames,
trademarks, identifying logos or service marks related thereto or employing any
part or variation of any of the foregoing or any confusingly similar tradename,
trademark or logo (collectively, the "Seller Tradenames and Logos"). Buyer
agrees that
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neither it nor any of its Affiliates (as hereinafter defined) shall make any use
of the Seller Tradenames and Logos from and after the Closing Date; provided,
however, that Seller (or its Affiliate) shall grant Buyer a ninety (90) day
license for use of the Rollins Logistics logo in order for Buyer to undertake
the deletion or removal of the Rollins Logistics logo in a practical manner.
Section 2.2 No Ongoing or Transition Services. Except as provided in the
Transition Agreement, at the Closing, all data processing, accounting,
insurance, banking, personnel, legal, communications, fuel procurement and other
services provided to Seller by any Affiliate of Seller, including any agreements
or understandings (written or oral) with respect thereto, will terminate.
Section 2.3 Distributions. The parties agree that Seller shall have the
right, at or prior to the Closing, to cause Seller to distribute all cash held
by Seller to its Affiliates, by one or more cash dividends, repurchase of
existing stock and/or other distributions. Except as provided in Section 1.9(b),
no adjustment shall be made to the Purchase Price as a result of any such
dividends, repurchases or other distributions paid to Seller or its Affiliates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1 Organization.
(a) Each of the Sellers is a corporation validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority to own,
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lease and operate its properties and assets and to carry on its operations as
now being conducted. Each of the Sellers is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property or
assets owned, leased or operated by each of the Sellers or the nature of the
business conducted by each of the Sellers makes such qualification necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not individually or in the aggregate have a Seller Material
Adverse Effect (as hereinafter defined). Schedule 3.1 sets forth a list of all
jurisdictions where each of the Sellers is qualified to do business. Seller has
heretofore made available to Buyer complete and correct copies of the
certificate of incorporation and by-laws of each of the Sellers, as currently in
effect.
(b) As used herein, a "Seller Material Adverse Effect" shall mean any
event, change or effect that has occurred which has a material adverse effect
upon the financial condition, operating results or business of Seller; provided,
however, that Seller Material Adverse Effect shall not include any event, change
in or effect upon the financial condition or business of Seller, directly or
indirectly, arising out of, attributable to or as a consequence of: (a)
conditions, events or circumstances generally affecting the vehicle leasing
industry or the overall economy; or (b) the public announcement of either the
execution of this Agreement or the transactions contemplated hereunder.
Section 3.2 Authorization. Each of the Sellers has the corporate power and
authority to execute and deliver this Agreement and perform its respective
obligations hereunder. The execution and delivery of this Agreement and the
performance by each of the Sellers of its
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respective covenants and agreements hereunder has been duly and validly
authorized by the Boards of Directors and shareholders of each Seller and the
Board of Directors of Rollins Truck Leasing Corp., and no other corporate
proceedings on the part of Seller or its Affiliates is necessary to authorize
the execution, delivery and performance of this Agreement or the consummation of
the transactions so contemplated. This Agreement has been duly executed and
delivered by each of the Sellers and constitutes a valid and binding agreement
of each of the Sellers, enforceable against each of the Sellers in accordance
with its terms, except that (a) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws, now or hereafter in effect, relating to or limiting creditors' rights
generally and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
Section 3.3 Consents and Approvals; No Violations. Except as set forth on
Schedule 3.3 and for applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of any of the Sellers; (b) require any
filing with, or the obtaining of any permit, authorization, consent or approval
of, any governmental or regulatory authority; (c) violate, conflict with or
result in a default (or any event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease or other
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contract, instrument or obligation to which any of the Sellers is a party or by
which any of the Sellers or any of their respective assets may be bound; or (d)
violate any order, injunction, decree, statute, rule or regulation applicable to
any of the Sellers, excluding from the foregoing clauses (b), (c) and (d) such
requirements, violations, conflicts, defaults or rights (i) which would not have
Seller Material Adverse Effect and would not adversely affect the ability of any
of the Sellers to consummate the transactions contemplated by this Agreement, or
(ii) which become applicable as a result of the business or activities in which
Buyer is or proposes to be engaged or as a result of any acts or omissions by,
or the status of or any facts pertaining to, Buyer.
Section 3.4 Financial Statements. Seller has made available to Buyer: (i)
the unaudited consolidated balance sheets of Seller as of September 30, 1997 and
1998 and the unaudited consolidated statements of income and cash flows thereof
for the respective fiscal years then ended, including the notes thereto; and
(ii) the unaudited consolidated balance sheet of Seller as of September 30, 1999
and the unaudited consolidated statements of income and cash flows thereof for
the six month period then ended, including the notes thereto. All of the
foregoing financial statements are hereinafter collectively referred to as the
"Financial Statements." Except as disclosed in the Financial Statements, the
Financial Statements have been prepared from, and are in accordance with, the
books and records of Seller and present fairly, in all material respects, the
financial position and results of operations of Seller as of the dates and for
the applicable periods indicated, in each case in conformity with GAAP.
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Section 3.5 Absence of Material Adverse Effect. Except as set forth on
Schedule 3.5, since September 30, 1999, Seller has:
(a) conducted its business in the ordinary course;
(b) not sold any asset at a price of more than $100,000 other than in the
ordinary course of business;
(c) maintained accounts receivable, inventory, accounts payable and other
working capital accounts in a manner consistent with normal business practices;
(d) not written up or down the value of any inventory or determined as
collectible any notes or accounts receivable that were previously considered to
be uncollectible, except for write-ups or write-downs and other determinations
in accordance with GAAP and in the ordinary course of business and consistent
with past practice;
(e) not pledged or permitted the imposition of any lien on any of its
assets;
(f) not suffered any change in its financial condition, operating results
or business or suffered any other event or condition of any character which
individually or in the aggregate has had a Seller Material Adverse Effect;
(g) not suffered any damage, destruction or loss of tangible assets,
whether or not covered by insurance, in excess of $250,000, in the aggregate;
(h) not paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), except in each case in
the ordinary course of business;
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(i) not canceled any debts or waived any claims or rights of substantial
value, except in each case in the ordinary course of business; and
(j) not granted any general increase in the compensation payable or to
become payable to its officers, directors, consultants or employees (including
any such increase pursuant to any bonus, severance, termination, pension,
profit-sharing or other plan or commitment) or any special increase in the
compensation payable or to become payable to any officer, director, consultant
or employee, except for (i) normal merit and cost of living increases in the
ordinary course of business and in accordance with past practice and (ii)
severance commitments that are (and shall remain after Closing) the sole
responsibility of Seller and its Affiliates.
Section 3.6 Title, Ownership and Related Matters.
(a) Real Property.
(i) Seller does not own any real property. Schedule 3.6(a)(i) sets
forth a list of the parcels of real property currently leased by Seller or
from which Seller conducts any of its operations (together with all
fixtures and improvements thereon, the "Leased Real Property").
(ii) To the Knowledge of Seller, it has a valid leasehold interest in
the Leased Real Property, free and clear of any mortgage, liens, pledges,
security interests, claims, restrictions or other encumbrances.
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(iii) To the Knowledge of Seller, the improvements on the Leased Real
Property are free from any material structural defects. Except as set forth
on Schedule 3.6(a)(iii), to the Knowledge of Seller, there are no
condemnation or appropriation or similar proceedings pending or threatened
against any of the Leased Real Property or the improvements thereon.
(b) Necessary Assets. To the Knowledge of Seller, except as set forth in
Schedule 3.6(b), it has good and marketable title to its material assets, free
and clear of all liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever.
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Section 3.7 Intellectual Property.
(a) To the Knowledge of Seller (as herein defined), the conduct of its
business does not infringe upon any intellectual property right of any third
party. There are no pending, or to the Knowledge of Seller threatened,
proceedings or litigation or other adverse claims by any Person (as hereinafter
defined) against the use by Seller of any trademarks, trade names, service
marks, service names, logos, assumed names, copyrights, patents or registrations
and applications therefor which are owned by Seller and are necessary for the
operation of the Seller's business as currently conducted (collectively, the
"Intellectual Property"). Schedule 3.7 sets forth a list of all Intellectual
Property owned by Seller.
(b) Seller has valid licenses or other rights to use the Intellectual
Property necessary to permit Seller to conduct its operations as currently
conducted, except (i) for the Seller Tradenames and Logos and (ii) where the
failure to have such ownership, licenses or rights would not have a Seller
Material Adverse Effect.
Section 3.8 Computer Software. Seller has valid licenses or other rights to
use all material computer software programs to permit it to conduct its
operations as currently conducted, except where the failure to have such
ownership, licenses or rights would not have a Seller Material Adverse Effect.
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Section 3.9 Year 2000 Compliance. Seller has provided Buyer true and
complete copies of all material reports and analyses obtained by Seller with
respect to Year 2000 compliance issues concerning its businesses. Seller's major
systems have been modified, tested and certified.
Section 3.10 Litigation. Schedule 3.10 identifies all claims, actions,
suits, proceedings and governmental investigations pending or, to the Knowledge
of Seller, threatened against Seller by or before any court, governmental or
regulatory authority or by any third party (other than claims, actions, suits,
proceedings, and governmental investigations set forth on Schedule 3.16(b) (the
"Litigation Claims").
Section 3.11 Compliance with Applicable Law. To the Knowledge of Seller, it
is in compliance in all material respects with all applicable laws, ordinances,
rules and regulations of any federal, state, local or foreign governmental
authority applicable to Seller or its operations and necessary to carry on its
business as it is currently being conducted, to own or hold under lease the
properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party.
Section 3.12 Certain Contracts and Arrangements. Schedule 3.12 sets forth a
list of the following contracts to which each of the Sellers is a party: (a)
employment agreements; (b) indentures, mortgages, notes, installment
obligations, agreements or other instruments relating to the borrowing of money
or the guaranty by each of the Sellers of any obligation for the borrowing of
money; (c) real property leases; or (d) contracts with Affiliates; or (e) other
agreements, including without limitation, customer contracts, which individually
involve the receipt or payment by each of
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the Sellers after the date hereof of more than $100,000 and are not terminable
without liability to each of the Sellers upon 30 days or less prior written
notice (together with those contracts, agreements and understandings described
in clauses (a), (b), (c) and (d), the "Contracts"). Seller has made available to
Buyer copies of all Contracts. To the Knowledge of Seller, all such Contracts
are valid, binding and enforceable in accordance with their terms and, to the
Knowledge of Seller, neither Seller nor any other party thereto is in material
default under any of the aforesaid Contracts. Schedule 3.12(i) sets forth a list
of all unresolved material default notices received from or given to third
parties pertaining to the Contracts.
Section 3.13 Employee Benefit Plans; ERISA. Except as set forth on Schedule
3.13:
(a) There are no "employee benefit plans" (as defined in Section 3.(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained for the benefit of employees of Seller or other employee benefit,
bonus or fringe benefit plans maintained for the benefit of the employees of
Seller to which, or with respect to which, Seller has a material liability for
the payment of benefits or makes material contributions annually (the "Plans").
(b) Each of the Plans that is subject to ERISA has been administered in
compliance in all material respects with ERISA. Each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has a favorable
determination letter from the Internal Revenue Service (the "IRS") to the effect
that it is so qualified. Except as set forth on Schedule 3.13, none of the Plans
is subject to Title IV of ERISA. There are no pending or, to the Knowledge
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of Seller, threatened material claims (other than routine claims for benefits)
by, on behalf of or against any of the Plans or any trusts which are a part of
such Plans.
(c) Seller has furnished to Buyer a correct, complete and correct copy of
each plan, program, policy or arrangement which is set forth in writing and
which provides cash or property or other compensation related benefits of any
kind or description whatsoever to or on behalf of any current of former employee
or director of Seller or any of their dependents and a complete description of
any such plain, program, policy or arrangement which is not set forth in writing
(collectively, the "Seller Benefit Plans"). A list of each Seller Benefit Plan
is set forth on Schedule 3.13.
Section 3.14 Labor Matters. Seller is in compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours, and is not engaged in any unfair labor or
unlawful employment practice, the violation of or engagement in which would have
a Seller Material Adverse Effect. Except as set forth on Schedule 3.14, there
are no controversies pending or, to the Knowledge of the Seller, threatened,
between it and any of its employees, which controversies have had or are
reasonably likely to have a Seller Material Adverse Effect. Except as set forth
on Schedule 3.14, Seller is not a party to any collective bargaining agreement
or other labor union contract applicable to Persons employed by Seller. There
are no unfair labor practice complaints pending against Seller before the
National Labor Relations Board. To the Knowledge of Seller, there are no
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any of its employees.
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Section 3.15 Taxes.
(a) Seller (i) has timely filed or caused to be filed on a timely basis
with the appropriate taxing authorities all material Tax Returns (as hereinafter
defined) required to be filed by or with respect to Seller (including the
consolidated federal income Tax Returns and any consolidated, combined or
unitary state Tax Returns in which the Seller is included), and (ii) has paid or
made adequate provision for the payment of all Taxes (as hereinafter defined)
shown to be due on such Tax Returns or otherwise due and payable by the Seller.
All such Tax Returns are true, correct and complete in all material respects.
(b) Except as set forth on Schedule 3.15, (i) there are no liens for Taxes
with respect to the assets of Seller (except for statutory liens for current
taxes not yet delinquent) and no material claims with respect to Taxes are being
asserted by any taxing authority in writing; (ii) none of the Tax Returns
applicable to Seller are currently being audited or examined by any taxing
authority and there is no other action or proceeding currently pending
concerning Taxes relating to the Seller; (iii) there is no material unpaid tax
deficiency, determination or proposed assessment currently outstanding against
Seller or for which the Seller could be jointly or severally liable; (iv) there
are no outstanding agreements or waivers extending the statute of limitations
relating to the assessment of Taxes applicable to Seller; (v) the Seller is not
a party to any agreement that would result, separately or in the aggregate, in
the payment of an excess parachute payment pursuant to Section 280G of the Code;
(vi) the Seller is not a member of any partnership or joint venture or the
holder of a beneficial interest in any trust (other than a trust that is treated
as a
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grantor trust or otherwise is disregarded as a separate taxable entity for
federal income tax purposes); and (vii) to the Seller's Knowledge, there are no
proposed reassessments of any of the Assets that will result in a material
increase in the amount of Tax to which such Assets will be subject for periods
after the Closing Date.
(c) As used in this Agreement:
(i) "Taxes" shall mean all taxes, levies, charges or fees including
income, corporation, advance corporation, gross receipts, transfer, excise,
property, sales, use, value-added, license, payroll, pay-as-you-earn,
withholding, social security and franchise or other governmental taxes or
charges, imposed by the United States or any state, county, local or
foreign government, and such term shall include any interest, penalties or
additions to tax attributable to such taxes.
(ii) "Tax Return" shall mean any report, return or statement required
to be supplied to a taxing authority in connection with Taxes.
Section 3.16 Environmental. (a) To the Knowledge of Seller, except as set
forth on Schedule 3.16(a), Seller possesses, and is in compliance with, all
material permits, licenses and government authorizations relating to protection
of the environment, pollution control and hazardous materials applicable to
Seller;
(b) To the Knowledge of Seller, except as set forth on Schedule 3.16(b),
neither Seller nor any of its Affiliates has received notice from a state or
federal governmental authority that Seller is responsible under any applicable
federal, state or local law, regulation or
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ordinance relating to the protection of the environment in effect at the time of
this Agreement (the "Environmental Laws") to investigate and/or remediate
Hazardous Materials (as hereinafter defined) on property Seller leases or
operates on (collectively, the "Environmental Claims"). For purposes of this
Agreement, "Hazardous Materials" shall mean any waste, pollutant, hazardous
substance, toxic, ignitable, reactive or corrosive substance, hazardous waste,
special waste, industrial substance, by-product, process intermediate product or
waste, petroleum or petroleum-derived substance or waste, chemical liquids or
solids, liquid or gaseous products regulated under Environmental Laws; and
(c) There are no underground storage tank systems for which Seller is
responsible under applicable laws or existing agreements which have not been
upgraded or removed in compliance with 40 CFR Part 280 and any other applicable
laws.
Section 3.17 Officers; Bank Accounts. Schedule 3.17 lists each of the
officers of Seller and all of the accounts (and signatures thereto) of Seller
with any bank, brokerage firm or other financial institution or depository.
Section 3.18 Certain Fees. Seller will not have any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
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Section 4.1 Organization and Authority of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has the corporate power and authority to execute and
deliver this Agreement and perform its obligations hereunder. The execution and
delivery of this Agreement and the performance by Buyer of its covenants and
agreements hereunder have been duly and validly authorized by the Board of
Directors of Buyer, and no other corporate proceedings on the part of Buyer are
necessary to authorize the execution, delivery and performance of this Agreement
or the consummation of the transactions so contemplated. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except that (i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 4.2 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the incorporation
documents or by-laws of Buyer; (b) require any filing with, or the obtaining of
any permit, authorization, consent or approval of, any governmental or
regulatory authority; (c) violate, conflict with or result in a default (or any
event which, with notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation
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or acceleration under, any of the terms, conditions or provisions of any note,
mortgage, other evidence of indebtedness, guarantee, license, agreement, lease
or other contract, instrument or obligation to which Buyer is a party or by
which Buyer or any of its assets may be bound; or (d) violate any order,
injunction, decree, statute, rule or regulation applicable to Buyer, excluding
from the foregoing clauses (b), (c) and (d) such requirements, violations,
conflicts, defaults or rights (i) which would not adversely affect the ability
of Buyer to consummate the transactions contemplated by this Agreement or (ii)
which become applicable as a result of any acts or omissions by, or the status
of or any facts pertaining to, Seller.
Section 4.3 Litigation. There is no claim, action, suit, proceeding or
governmental investigation pending or, to the Knowledge of Buyer (as hereinafter
defined), threatened against Buyer, by or before any court, governmental or
regulatory authority or by any third party which challenges the validity of this
Agreement or which would be reasonably likely to adversely affect or restrict
Buyer's ability to consummate the transactions contemplated hereby.
Section 4.4 Certain Fees. Except for the engagement of Warburg Dillon Read,
neither Buyer nor any of its Affiliates has employed any financial advisor or
finder or incurred any liability for any financial advisory or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS
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Section 5.1 Conduct of Seller's Business. Seller agrees that, during the
period from the date of this Agreement to the Closing, except as otherwise
contemplated by this Agreement, the Schedules or consented to by Buyer in
writing, Seller shall:
(a) to use its reasonable best efforts to conduct its business operations
in the ordinary course consistent with past practice;
(b) to use its reasonable best efforts to (i) maintain and preserve its
business operations, (ii) retain the services of its employees, except for
attrition of such employees in the ordinary course of business, and (iii)
maintain, preserve and retain relationships with its suppliers and customers;
(c) not to sell or dispose of any material business assets, except in the
ordinary course of business;
(d) not to amend its certificate of incorporation or bylaws;
(e) not to incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, other than borrowings in the ordinary course of
business consistent with past practice;
(f) not to change its accounting policies except as required by generally
accepted accounting principles; and
(g) not to make any change in employment terms for any of its employees
other than terminations for cause or customary salary increases and adjustments
in benefits in the
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ordinary course of business consistent with past practice, other than severance
commitments that are (and still remain) the sole responsibility of Seller and
its Affiliates.
Section 5.2 Access to Information.
(a) Between the date of this Agreement and the Closing, Seller shall (i)
give Buyer and its authorized representatives reasonable access to all its
books, records, offices and other facilities and properties and to the Seller
Executives (as hereinafter defined); (ii) permit Buyer to make such inspections
thereof as Buyer may reasonably request; and (iii) cause its officers to furnish
Buyer with such financial and operating data and other information with respect
to its business and properties as Buyer may from time to time reasonably
request; provided, however, that any such investigation shall be conducted
during normal business hours under the supervision of Seller's personnel and in
such a manner as to maintain the confidentiality of this Agreement and the
transactions contemplated hereby and not interfere unreasonably with the
business operations of Seller.
(b) All information concerning Seller furnished or provided by Seller or
their Affiliates to Buyer or its representatives (whether furnished before or
after the date of this Agreement) shall be held subject to a confidentiality
agreement by and between United Parcel Service of America, Inc. and Rollins
Leasing Corporation, dated as of August 24, 1999 (the "Confidentiality
Agreement").
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Section 5.3 Consents. (a) Each of Seller and Buyer shall cooperate, and use
its reasonable best efforts, to make all filings (including without limitation
all filings required under the HSR Act) and obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties necessary to consummate the transactions
contemplated by this Agreement. In addition to the foregoing, Buyer agrees to
provide such assurances as to financial capability, resources and
creditworthiness as may be reasonably requested by any third party whose consent
or approval is sought in connection with the transactions contemplated hereby.
(b) With respect to any agreements for which any required consent or
approval is not obtained prior to the Closing, Seller and Buyer shall each use
their reasonable best efforts to obtain any such consent or approval after the
Closing Date until such consent or approval has been obtained.
Section 5.4 Reasonable Best Efforts. Each of Seller and Buyer shall
cooperate, and use its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
Section 5.5 Public Announcements. Except as otherwise agreed to by the
parties, the parties shall not issue any report, statement or press release or
otherwise make any public statements with respect to this Agreement and the
transactions contemplated hereby, except as in the reasonable judgment of the
party may be required by law. Upon the execution of this Agreement and the
Closing, Seller and Buyer will consult with each other with respect to the
issuance of a joint report, statement or press release with respect to this
Agreement and the transactions contemplated hereby.
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Section 5.6 Covenant to Satisfy Conditions. Seller will use its reasonable
best efforts to ensure that the conditions set forth in Article VI hereof are
satisfied, insofar as such matters are within the control of Seller, and Buyer
will use its reasonable best efforts to ensure that the conditions set forth in
Article VI hereof are satisfied, insofar as such matters are within the control
of Buyer. Seller and Buyer further covenant and agree, with respect to a
threatened or pending preliminary or permanent injunction or other order, decree
or ruling or statute, rule, regulation or executive order that would adversely
affect the ability of the parties hereto to consummate the transactions
contemplated hereby, to use all reasonable efforts to prevent or lift the entry,
enactment or promulgation thereof, as the case may be.
Section 5.7 Employees; Employee Benefits. (a) Buyer shall treat all service
completed by a Transferred Employee with Seller or any Affiliate thereof, and
any predecessor thereto, the same as service completed with Buyer for all
purposes, including waiting periods relating to preexisting conditions under
medical plans, vacations, severance pay, eligibility to participate in, vesting
or payment of benefits under, and eligibility for early retirement or any
subsidized benefit provided for under any employee benefit plan (including, but
not limited to, any "employee benefit plan" as defined in Section 3(3) of ERISA)
maintained by Buyer on or after the Closing Date except for purposes of
computing benefits under the actual benefit formula in a pension plan (as
defined in Section 3(2) of ERISA). Prior to the Closing, Seller shall furnish
Buyer with a list of the length of service with it or its Affiliates for each of
the Transferred Employees. For purposes of computing deductible amounts (or like
adjustments or limitations on coverage)
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under any employee welfare benefit plan (including, without limitation, any
"employee welfare benefit plan" as defined in Section 3(l) of ERISA), expenses
and claims previously recognized for similar purposes under the applicable
welfare benefit plan of Seller or any Affiliate shall be credited or recognized
under the comparable plan maintained after the Closing Date by Buyer.
(b) After the Closing Date, Buyer shall be responsible for, and shall
indemnify and hold harmless Seller and their Affiliates and their officers,
directors, employees, Affiliates and agents and the fiduciaries (including plan
administrators) of the Plans, from and against, any and all claims, losses,
damages, costs and expenses (including, without limitation, attorneys' fees and
expenses) and other liabilities and obligations relating to or arising out of
(i) all salaries, bonuses, commissions, vacation entitlements and other benefits
accrued by Seller but unpaid as of the Closing, and (ii) any claims of, or
damages or penalties sought by, any Transferred Employee, or any governmental
entity on behalf of or concerning any Transferred Employee, with respect to any
act or failure to act by Buyer to the extent arising from the employment,
discharge, layoff or termination of any Transferred Employee after the Closing.
Section 5.8 Supplemental Disclosure. If any event or matter arises or comes
to the attention of Seller or Parent after the date of this Agreement which, if
existing or occurring or known to Seller or Parent at the date of this
Agreement, would have been required to be set forth or described in the
Schedules or which is necessary to correct any information in the Schedules
which has been rendered inaccurate thereby in any material respect, then Seller
shall promptly supplement or amend and deliver to Buyer the Schedules which it
has delivered pursuant to this Agreement, and Buyer shall have the right, within
five business days of receipt by Buyer of such supplement or amendment, to
terminate the Agreement pursuant to Section 7.1(e).
Section 5.9 Investigation by Buyer. Buyer has conducted its own independent
review and analysis of the business, operations, technology, assets,
liabilities, results of operations, financial condition and prospects of Seller
and acknowledges that Seller has provided Buyer with access to its personnel,
properties, premises and records for this purpose. In entering into this
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Agreement, Buyer has relied solely upon its own investigation and analysis, and
Buyer (a) acknowledges that neither Seller nor any of its respective directors,
officers, employees, Affiliates, controlling Persons, agents or representatives
makes or has made any representation or warranty, either express or implied, as
to the accuracy or completeness of any of the information provided or made
available to Buyer or its directors, officers, employees, Affiliates,
controlling Persons, agents or representatives, and (b) agrees, to the fullest
extent permitted by law, that neither Seller nor any of its respective
directors, officers, employees, Affiliates, controlling Persons, agents or
representatives shall have any liability or responsibility whatsoever to Buyer
or its directors, officers, employees, Affiliates, controlling Persons, agents
or representatives on any basis (including, without limitation, in contract or
tort, under federal or state securities laws or otherwise) based upon any
information provided or made available, or statements made, to Buyer or its
directors, officers, employees, Affiliates, controlling Persons, agents or
representatives (or any omissions therefrom), except as and only to the extent
expressly set forth herein with respect to the representations and warranties of
Seller in Article III and subject to the limitations and restrictions contained
herein. Buyer's sole rights and remedies relative to transactions contemplated
herein are limited to those set forth herein.
Section 5.10 Additional Actions. Following the Closing, Buyer, Parent and
Seller agree to take such actions with regard to Seller as are specified on
Schedule 5.10.
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Section 5.11 Parent Guarantee. Parent hereby unconditionally and
irrevocably guarantees to Buyer the full payment and performance of all of the
obligations of Seller (and each Seller individually) under this Agreement,
including without limitation under Article IX hereof.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation. The respective
obligation of each party to consummate the transactions contemplated herein is
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No statute, rule or regulation shall have been enacted, promulgated or
enforced by any court or governmental authority which prohibits or restricts the
consummation of the transactions contemplated hereby;
(b) There shall not be in effect any judgment, order, injunction or decree
of any court of competent jurisdiction enjoining the consummation of the
transactions contemplated hereby;
(c) Any waiting periods applicable to the transactions contemplated by this
Agreement under the HSR Act shall have expired or early termination shall have
been granted;
(d) All consents, authorizations, waivers and approvals of any governmental
authority or other regulatory body or from parties to contracts or other
agreements to which Seller is a party as may be required to be obtained in
connection with the performance of this
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Agreement, the failure to obtain which would prevent the consummation of the
transactions contemplated hereby or have a Seller Material Adverse Effect, shall
have been obtained; or
(e) The transactions contemplated by that Stock Purchase Agreement, dated
the date hereof, between Buyer, Seller, UPS Truck Leasing, Inc. and Rollins
Leasing Corp. shall have been consummated simultaneously with the Closing.
Section 6.2 Conditions to Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) The representations and warranties of Buyer contained in Article IV of
this Agreement shall be true and correct in all material respects at the date
hereof and as of the Closing as if made at and as of such time, except for
changes permitted or contemplated hereby and except for representations and
warranties which are as of a specific date;
(b) Buyer shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof;
(c) Buyer shall have delivered to Seller or its Affiliates those items set
forth in Section 1.12 hereof;
(d) Buyer or its Affiliate shall have executed and delivered a staffing
services agreement in the form of Exhibit 6.2(d) hereto (the "Staffing Services
Agreement"); and
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(e) Buyer or its Affiliate shall have executed and delivered a transition
services agreement ("the Transition Agreement") in form and substance reasonably
satisfactory to Buyer and Seller.
Section 6.3 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) The representations and warranties of Seller contained in Article III
of this Agreement shall be true and correct in all material respects at the date
hereof and as of the Closing as if made at and as of such time, except for
changes permitted or contemplated hereby and except for representations and
warranties which are as of a specific date;
(b) Seller shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof;
(c) Seller shall have delivered to Buyer those items set forth in Section
1.11 hereof;
(d) Seller or its Affiliate shall have executed and delivered the Staffing
Services Agreement; and
(e) Seller or its Affiliate shall have executed and delivered the
Transition Agreement.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Seller and Buyer;
(b) by either party if the transactions contemplated hereby shall have been
permanently enjoined by a court of competent jurisdiction, provided that no
party hereto who brought or is affiliated with the party who brought the action
seeking the permanent enjoinment of the transactions contemplated hereby may
seek termination of this Agreement pursuant to this Section 7.1(b);
(c) by Buyer if (i) any of the conditions set forth in Sections 6.1 or 6.3
shall have become incapable of fulfillment and shall not have been waived by
Buyer or (ii) Seller shall breach in any material respect any of its
representations, warranties, covenants or other obligations hereunder and,
within twenty (20) days after written notice of such breach to Seller from
Buyer, such breach shall not have been cured in all material respects or waived
by Buyer, or Seller shall not have provided reasonable assurance to Buyer that
such breach will be cured in all material respects on or before the Closing
Date; or
(d) by Seller if (i) any of the conditions set forth in Sections 6.1 or 6.2
shall have become incapable of fulfillment and shall not have been waived by
Seller or (ii) Buyer
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shall breach in any material respect any of its representations, warranties,
covenants or other obligations hereunder and, within twenty (20) days after
written notice of such breach to Buyer from Seller, such breach shall not have
been cured in all material respects or waived by Seller or Buyer shall not have
provided reasonable assurance to Seller that such breach will be cured in all
material respects on or before the Closing Date;
(e) by Buyer, within five (5) days following receipt of any supplement or
amendment to the Schedules, by written notice to Seller if the matter which
gives rise to such supplement or amendment individually, or together with any
other such matters, in the aggregate has caused any of the representations and
warranties of Seller set forth in Article III (without giving effect to such
supplement or amendment) to be inaccurate in any material respect; or
(f) by Buyer or Seller, at any time on or after February 1, 2000, if the
Closing shall not have occurred on or prior to such date; provided, however,
that the right to terminate this Agreement under this Section 7.1(f) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the primary cause of, or resulted in, the failure of the
Closing to have occurred on or before such date.
Section 7.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 7.1 hereof, written notice thereof shall
forthwith be given by Seller, on the one hand, or Buyer, on the other hand, so
terminating to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
Seller, or Buyer. If this Agreement is terminated pursuant to Section 7.1
hereof:
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(a) each party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same or, upon prior written notice to such party, shall destroy
all such documents, work papers and other materials and deliver notice to the
parties seeking destruction of such documents that such destruction has been
completed, and all confidential information received by any party hereto with
respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 5.2(b) hereof;
(b) all filings, applications and other submissions made pursuant hereto
shall, at the option of Seller, and to the extent practicable, be withdrawn from
the agency or other Person to which made; and
(c) there shall be no liability or obligation hereunder on the part of
Seller or Buyer or any of their respective directors, officers, employees,
Affiliates, controlling Persons, agents or representatives, except that Seller
or Buyer, as the case may be, shall have liability to the other party if the
basis of termination is a willful, material breach by Seller or Buyer, as the
case may be, of one or more of the provisions of this Agreement, and except that
the obligations provided for in this Section in Section 10.1 hereof and in the
Confidentiality Agreement and the non-compete obligations of the Alliance
Agreement shall survive any such termination.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS
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Section 8.1 Survival of Representations, Warranties and Agreements. The
representations and warranties of Seller and Buyer made in Articles III and IV
hereof, respectively, shall not survive the Closing and, except as provided in
Section 7.2(c) hereof, shall not survive any termination of this Agreement;
provided that any covenant or agreement of any party contained herein which by
its terms shall survive the Closing shall survive until fully performed, and
provided, further, that this Section 8.1 is not intended in any way to limit any
covenant or agreement of the parties which contemplates performance after the
Closing, including, without limitation, the covenants and agreements set forth
in Section 5.7 hereof.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification Obligations of Seller. Seller shall defend and
hold harmless Buyer and its Affiliates, each of their respective officers,
directors, employees, agents and representatives and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Buyer Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to the (i) Excluded Liabilities and (ii) any accounts receivable of
Seller reflected in the Closing Date Working Capital that Buyer is unable to
collect within 90 days following the Closing Date; provided (A) Buyer has used
its reasonable best efforts to collect such receivable, (B) in the
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event Buyer seeks indemnity under Section 9.1(ii) of this Agreement, Buyer shall
assign such receivable and all proceeds thereof to Seller and (C) the
indemnification to which Seller is entitled will be limited to the face amount
of any uncollected receivables.
The claims, liabilities, obligations, losses, costs, expenses, penalties,
fines and damages of the Buyer Indemnified Parties described in this Section 9.1
as to which the Buyer Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Buyer Losses."
Section 9.2 Indemnification Procedure.
(a) Promptly after receipt by a Buyer Indemnified Party of notice by a
third party of threatened or filed claim or of the threatened or actual
commencement of any action or proceeding with respect to which such Buyer
Indemnified Party may be entitled to receive payment from the other party for
any Buyer Losses, such Buyer Indemnified Party shall notify Seller, within 30
days of the notice of threatening or filing of such claim or of the threatened
or actual commencement of such action or proceeding; provided, however, that the
failure to so notify Seller shall relieve Buyer from liability under this
Agreement with respect to such claim only if, and only to the extent that, such
failure to notify Seller results in the forfeiture by Seller of rights and
defenses otherwise available to Seller with respect to such claim. Seller shall
have the right, upon written notice delivered to the Buyer Indemnified Party
within 30 days thereafter, to assume the defense of such action or proceeding,
including the employment of counsel reasonably satisfactory to the Buyer
Indemnified Party and the payment of the fees and disbursements of such counsel.
In any action or proceeding with respect to which indemnification is being
sought hereunder, the Buyer Indemnified Party or Seller, whichever is not
assuming the defense of such action, shall have
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the right to participate in such litigation and to retain its own counsel at
such party's own expense. Seller or the Buyer Indemnified Party, as the case may
be, shall at all times use reasonable efforts to keep Seller or the Buyer
Indemnified Party, as the case may be, reasonably apprised of the status of the
defense of any action the defense of which they are maintaining and to cooperate
in good faith with each other with respect to the defense of any such action.
(b) The Buyer Indemnified Party may not settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of Seller. Seller may
not, without the prior written consent of the Buyer Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought hereunder unless (i) simultaneously with
the effectiveness of such settlement, compromise or consent, Seller pays in full
any obligation imposed on the Buyer Indemnified Party by such settlement,
compromise or consent and (ii) such settlement, compromise or consent does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Buyer Indemnified Party or any
of the Buyer Indemnified Party's affiliates.
(c) In the event the Buyer Indemnified Party shall claim a right to payment
pursuant to this Agreement not involving a third party claim covered by Section
9.2(a), the Buyer Indemnified shall send written notice of such claim to Seller.
Such notice shall specify the basis for such claim. As promptly as possible
after the Buyer Indemnified Party has given such notice, such Buyer Indemnified
Party and Seller shall establish the merits and amount of such claim (by mutual
agreement, litigation, arbitration or otherwise) and, within five business days
of the final
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determination of the merits and amount of such claim, Seller shall pay to the
Buyer Indemnified Party immediately available funds in an amount equal to such
claim as determined hereunder.
Section 9.3 Exclusive Remedies. Following the Closing, neither Buyer nor
Seller shall make any claim nor have any remedy against the other party arising
out of or relating to the transactions contemplated hereby other than any claim
arising out of or related to (a) indemnification pursuant to Section 5.7(b) or
9.1 or (b) a breach of any covenant set forth in this Agreement or any agreement
contemplated hereby required to be performed after the Closing.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Except as set forth in this Section 10.1,
whether or not the transactions contemplated herein are consummated pursuant
hereto, each of Seller and Buyer shall pay all fees and expenses incurred by, or
on behalf of, Seller or Buyer, respectively, in connection with, or in
anticipation of, this Agreement and the consummation of the transactions
contemplated hereby.
Section 10.2 Further Assurances. From time to time after the Closing Date,
at the reasonable request of the other party hereto and at the expense of the
party so requesting, each of the parties hereto shall execute and deliver to
such requesting party such documents and take such other action as such
requesting party may reasonably request in order to consummate more effectively
the transactions contemplated hereby.
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Section 10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission; (c) registered or certified mail, postage
prepaid, return receipt requested; or (d) UPS next day air or document exchange.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
If to Seller, to:
Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Fax No. (302) 426-3815
Attention: Patrick J. Bagley
with a copy to:
Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Fax No. (302) 426-3555
Attention: Klaus M. Belohoubek
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If to Buyer, to:
United Parcel Service, Inc.
55 Glenlake Parkway
Atlanta, GA 30328
Fax No. (404) 828-6440
Attention: Legal Department
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Fax No. (404) 572-5145
Attention: Michael J. Egan III
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmissions, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
Section 10.4 Severability. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which remaining provisions shall remain in full force and effect and the
application of such invalid or unenforceable provision to Persons or
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circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
Section 10.5 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, directly or indirectly, including, without limitation, by operation
of law, by any party hereto without the prior written consent of the other
parties hereto.
Section 10.6 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Seller, and its successors and permitted assigns, with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer, and its
respective successors and permitted assigns, with respect to the obligations of
Seller, under this Agreement, and for the benefit of the Employees with respect
to the obligations of Buyer under Section 5.7 of this Agreement, and this
Agreement shall not be deemed to confer upon or give to any other third party
any remedy, claim, liability, reimbursement, cause of action or other right.
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Section 10.7 Interpretation.
(a) The Article and Section headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement.
(b) As used in this Agreement, the term "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(c) As used in this Agreement, the term "Affiliate" shall mean a person
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the person specified.
Section 10.8 Jurisdiction and Consent to Service. Without limiting the
jurisdiction or venue of any other court, each of Seller and Buyer (a) agrees
that any suit, action or proceeding arising out of or relating to this Agreement
may be brought solely in the state or federal courts of Delaware; (b) consents
to the exclusive jurisdiction of each such court in any suit, action or
proceeding relating to or arising out of this Agreement; (c) waives any
objection which it may have to the laying of venue in any such suit, action or
proceeding in any such court; and (d) agrees that service of any court paper may
be made in such manner as may be provided under applicable laws or court rules
governing service of process.
Section 10.9 Entire Agreement. This Agreement, the Confidentiality
Agreement,
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the Alliance Agreement, the Schedules and other documents referred to herein or
delivered pursuant hereto which form a part hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
Section 10.11 Specific Performance. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
Section 10.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
Section 10.13 Amendment, Modification and Waiver. This Agreement may be
amended, modified or supplemented at any time by written agreement of Seller and
Buyer. Any failure of Seller or Buyer to comply with any term or provision of
this Agreement may be waived, with respect to Buyer, by Seller and, with respect
to Seller, by Buyer, by an instrument in writing
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signed by or on behalf of the appropriate party, but such waiver or failure to
insist upon strict compliance with such term or provision shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure to
comply.
Section 10.14 Knowledge. "To the Knowledge of Seller" or any similar phrase
contained in this Agreement shall mean the actual knowledge of the officers of
Seller and Parent. "To the Knowledge of Buyer" or any similar phrase contained
in this Agreement shall mean the actual knowledge of the officers of Buyer.
Solely for the purposes of this Section 10.14, the officers of Buyer and Seller
shall be deemed to have actual knowledge of any written notice previously
delivered to Buyer or Seller, respectively.
Section 10.15 Schedules and Exhibits. The Schedules and all exhibits hereto
are hereby incorporated into this Agreement and are hereby made a party hereof
as if set out in full in this Agreement.
Section 10.16 Arbitration.
(a) Any controversy, claim or question or interpretation arising out of or
relating to this Agreement or the breach thereof shall be finally settled by
arbitration in the State of Delaware under the then-effective Commercial
Arbitration Rules of the American Arbitration Association as modified by this
Agreement, and judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction. The award rendered by the arbitrators shall be
final and binding on the parties and not subject to further appeal. Such
arbitration can be initiated by
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written notice by either party to the other party, which notice shall identify
the claimant's selected arbitrator. The party receiving such notice shall
identify its arbitrator within five (5) business days following its receipt of
such notice. The arbitrator selected by the claimant and the arbitrator selected
by the respondent shall, within five (5) business days of their appointment,
select a third neutral arbitrator. In the event that they are unable to do so,
either party may request the American Arbitration Association to appoint the
third neutral arbitrator. The arbitrators shall have the authority to award any
remedy or relief that a court in Delaware could order or grant, including,
without limitation, specific performance of any obligation created under this
agreement, the awarding of punitive damages, the issuance of injunctive or other
provisional relief, or the imposition of sanctions for abuse or frustration of
the arbitration process. The arbitration awards will be in writing and specify
the factual and legal basis for the award.
(b) It is the intent of the parties that any arbitration shall be concluded
as quickly as practicable (but, barring extraordinary circumstances, in any
event not more than twenty (20) days after the date the third arbitrator is
selected). Unless the parties otherwise agree, once commenced, the hearing on
the disputed matters shall be held four days a week until concluded with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrators
shall use their best efforts to issue the final award or awards within a period
of five (5) business days after closure of the proceedings. Failure of the
arbitrators to meet the time limits of this Section 10.16 shall not be a basis
for challenging the award.
(c) The arbitrators shall instruct the non-prevailing party to pay all
costs of the proceedings, including the fees and expenses of the arbitrators and
the reasonable attorneys'
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fees and expenses of the prevailing party. If the arbitrators determine that
there is not a prevailing party, each party shall be instructed to bear its own
costs and to pay one-half of the fees and expenses of the arbitrators.
(d) Notwithstanding the foregoing, nothing contained herein shall prevent
either party from seeking injunctive relief in any court.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WORLDWIDE DEDICATED SERVICES, INC.
By: /s/ Daniel P. DiMaggio
------------------------
Name: Daniel P. DiMaggio
Title: Chief Executive Officer and President
ROLLINS TRUCK LEASING CORP.
By: /s/ Patrick J. Bagley
--------------------------
Name: Patrick J. Bagley
Title: Vice President Finance and Treasurer
ROLLINS LOGISTICS, INC.
By: /s/ Neil L. Vonnahme
--------------------------
Name: Neil L. Vonnahme
Title: Executive Vice President
ROLLINS DEDICATED CARRIAGE
SERVICES, INC.
By: /s/ Neil L. Vonnahme
-----------------------------
Name: Neil L. Vonnahme
Title: Executive Vice President
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ROLLINS TRANSPORTATION SYSTEMS, INC.
By: /s/ James W. McCaughan
------------------------------
Name: James W. McCaughan
Title: President
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STOCK PURCHASE AGREEMENT
by and between
UPS LOGISTICS GROUP, INC.,
UPS TRUCK LEASING, INC.
ROLLINS TRUCK LEASING CORP.
and
ROLLINS LEASING CORP.
As of November 12, 1999
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<PAGE>
TABLE OF CONTENTS
ARTICLE I TRANSFER OF COMPANY SHARES; PURCHASE PRICE.............. 2
Section 1.1 Purchase and Sale ...................................... 2
Section 1.2 Purchase Price ......................................... 3
Section 1.3 Payment of Purchase Price .............................. 3
Section 1.4 Target Working Capital ................................. 4
Section 1.5 Adjustment of Purchase Price ........................... 4
Section 1.6 Closing ................................................ 7
Section 1.7 Deliveries by Seller ................................... 7
Section 1.8 Deliveries by Buyer .................................... 8
ARTICLE II RELATED MATTERS......................................... 9
Section 2.1 Use of Seller's Name and Logos ......................... 9
Section 2.2 No Ongoing or Transition Services ...................... 9
Section 2.3 Distributions .......................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................ 10
Section 3.1 Organization ........................................... 10
Section 3.2 Authorization .......................................... 11
Section 3.3 Capital Stock........................................... 12
Section 3.4 Ownership of the Common Stock .......................... 12
Section 3.5 Consents and Approvals; No Violations .................. 12
Section 3.6 Financial Statements ................................... 13
Section 3.7 Absence of Material Adverse Effect ..................... 14
Section 3.8 Title, Ownership and Related Matters ................... 15
Section 3.9 Intellectual Property .................................. 17
Section 3.10 Computer Software....................................... 17
Section 3.11 Year 2000 Compliance ................................... 17
Section 3.12 Litigation ............................................. 18
Section 3.13 Compliance with Applicable Law ......................... 18
Section 3.14 Certain Contracts and Arrangement ...................... 18
Section 3.15 Employee Benefit Plans; ERISA .......................... 19
Section 3.16 Labor Matters .......................................... 20
Section 3.17 Taxes .................................................. 21
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Section 3.18 Environmental .......................................... 22
Section 3.19 Officers; Bank Accounts ................................ 23
Section 3.20 Certain Fees ........................................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER................. 23
Section 4.1 Organization and Authority of Buyer .................... 24
Section 4.2 Consents and Approvals; No Violations .................. 24
Section 4.3 Litigation ............................................. 25
Section 4.4 Certain Fees ........................................... 25
Section 4.5 Certain Filings ........................................ 26
ARTICLE V COVENANTS............................................... 27
Section 5.1 Conduct of the Company's Business ...................... 27
Section 5.2 Access to Information .................................. 28
Section 5.3 Consents ............................................... 29
Section 5.4 Reasonable Best Effort ................................. 29
Section 5.5 Public Announcements ................................... 29
Section 5.6 Covenant to Satisfy Conditions ......................... 30
Section 5.7 Employees; Employee Benefits ........................... 30
Section 5.8 Certain Tax Matters .................................... 32
Section 5.9 Supplemental Disclosure ................................ 40
Section 5.10 Guarantees ............................................. 41
Section 5.11 Investigation by Buyer ................................. 41
Section 5.12 UPS Owned Facilities ................................... 42
Section 5.13 Rental Fleet Sales ..................................... 42
Section 5.14 Outstanding Debt ....................................... 44
Section 5.15 Reimbursement Program .................................. 44
Section 5.16 Additional Actions ..................................... 44
Section 5.17 Off-Balance Sheet Financing ............................ 45
ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE PARTIES................ 45
Section 6.1 Conditions to Each Party's Obligation .................. 45
Section 6.2 Conditions to Obligations of Seller .................... 46
Section 6.3 Conditions to Obligations of Buyer ..................... 48
ARTICLE VII TERMINATION............................................. 49
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Section 7.1 Termination ............................................ 49
Section 7.2 Procedure and Effect of Termination .................... 50
ARTICLE VIII SURVIVAL OF REPRESENTATIONS............................. 51
Section 8.1 Survival of Representations, Warranties and Agreements.. 52
ARTICLE IX INDEMNIFICATION......................................... 52
Section 9.1 Indemnification Obligations of Seller .................. 52
Section 9.2 Indemnification Procedure .............................. 54
Section 9.3 Orlando North VOH Plume Indemnification ................ 56
Section 9.4 Liability Limits ....................................... 57
Section 9.5 Claims Period .......................................... 57
Section 9.6 Exclusive Remedies ..................................... 58
ARTICLE X MISCELLANEOUS........................................... 58
Section 10.1 Fees and Expenses ...................................... 58
Section 10.2 Further Assurances ..................................... 59
Section 10.3 Notices ................................................ 59
Section 10.4 Severability ........................................... 60
Section 10.5 Binding Effect; Assignment ............................. 61
Section 10.6 No Third Party Beneficiaries ........................... 61
Section 10.7 Interpretation ......................................... 61
Section 10.8 Jurisdiction and Consent to Service .................... 62
Section 10.9 Entire Agreement ....................................... 62
Section 10.10 Governing Law .......................................... 62
Section 10.11 Specific Performance ................................... 63
Section 10.12 Counterparts ........................................... 63
Section 10.13 Amendment, Modification and Waiver ..................... 63
Section 10.14 Knowledge .............................................. 63
Section 10.15 Schedules and Exhibits ................................. 64
Section 10.16 Arbitration ............................................ 64
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DEFINED TERMS
Term Section
- ---- -------
Acceptance Notice........................................................1.5(c)
Access Agreement.........................................................9.3(c)
Adjustment Event.........................................................1.3(a)
Affiliate...............................................................10.7(c)
Agreement..............................................................Preamble
Alliance Agreement.......................................................6.2(d)
Allocation...............................................................5.8(b)
Buyer..................................................................Preamble
Buyer Auditor............................................................1.5(b)
Buyer Basket................................................................9.4
Buyer Indemnified Parties...................................................9.1
Buyer Losses................................................................9.1
Buyer Tax Group.......................................................5.8(a)(i)
Cap Amount..................................................................9.4
Claims Period...............................................................9.5
Closing.....................................................................1.1
Closing Date.............................................................1.6(a)
Closing Date Working Capital.............................................1.5(a)
Code........................................................................1.9
Common Stock.............................................................1.3(a)
Company................................................................Preamble
Company Material Adverse Effect..........................................3.1(b)
Company Shares.........................................................Preamble
Confidentiality Agreement ...............................................5.2(b)
Consultant...............................................................9.3(a)
Contracts..................................................................3.14
Corrective Action........................................................9.3(a)
Employee.................................................................5.7(a)
employee benefit plans...................................................5.7(a)
employee welfare benefit plan............................................5.7(a)
Environmental Claims....................................................3.18(b)
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Environmental Laws......................................................3.18(b)
Environmental Liabilities...................................................9.1
ERISA...................................................................3.15(a)
Exchange Act................................................................4.5
FDEP.....................................................................9.3(a)
Final Balance Sheet......................................................1.5(c)
Final Working Capital Statement..........................................1.5(c)
Financial Statements........................................................3.6
GAAP.....................................................................1.5(b)
Guarantors.................................................................5.10
Hazardous Materials.....................................................3.18(b)
HSR Act.....................................................................3.5
Indemnified Claims .........................................................9.1
Indemnification Statement ..........................................5.8(b)(iii)
Independent Accountants..............................................5.8(a)(ii)
Intellectual Property....................................................3.9(a)
Interim Balance Sheet....................................................1.5(b)
Investor Rights Agreement................................................6.2(e)
Investor Rights Agreement Term Sheet.....................................6.2(e)
IRS.....................................................................3.15(b)
Leased Real Property..................................................3.8(a)(i)
Litigation Claims..........................................................3.12
MADSP....................................................................5.8(b)
Objection Notice.........................................................1.5(c)
Orlando North VOH Plume..................................................9.3(a)
Outstanding Debt............................................................1.2
Owned Real Property...................................................3.8(a)(i)
Parent.................................................................Preamble
Permitted Liens......................................................3.8(a)(ii)
Person..................................................................10.7(b)
Plans...................................................................3.15(a)
Pre-Closing Period..................................................5.8(a)(iii)
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Preliminary Balance Sheet................................................1.5(b)
Preliminary Working Capital Statement....................................1.5(b)
Pre-Closing Period Returns............................................5.8(b)(i)
Prior Operations Liability..................................................9.1
Purchase Price..............................................................1.2
Real Property.........................................................3.8(a)(i)
Realization Amount......................................................5.13(c)
Sale Vehicles...........................................................5.13(a)
SEC.........................................................................4.5
SEC Reports.................................................................4.5
Section 338(h)(10)...................................................5.8(a)(iv)
Securities Act..............................................................4.5
Seller or Sellers......................................................Preamble
Seller Auditor...........................................................1.5(b)
Seller Benefit Plans....................................................3.15(c)
Seller Tradenames and Logos.................................................2.1
Straddle Period......................................................5.8(a)(iv)
Straddle Period Returns..............................................5.8(c)(ii)
Target Working Capital......................................................1.4
Tax Claim............................................................5.8(d)(iv)
Tax Indemnified Party................................................5.8(d)(iv)
Tax Indemnifying Party...............................................5.8(d)(iv)
Taxes................................................................3.17(c)(i)
Tax Return..........................................................3.17(c)(ii)
To the Knowledge of Buyer.................................................10.14
To the Knowledge of Seller................................................10.14
Transition Services Agreement............................................6.2(f)
Unrelated Accounting Firm................................................1.5(c)
UPS........................................................................5.10
UPS Owned Facilities.......................................................5.12
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SCHEDULES
Schedule 3.1 ......................................... Foreign Qualifications
Schedule 3.3 ......................................... Capital Stock
Schedule 3.5 ......................................... Consents
Schedule 3.7 ......................................... Absence of Change
Schedule 3.8 ......................................... Title to Real Property
Schedule 3.8(b) ...................................... Necessary Assets
Schedule 3.9 ......................................... Intellectual Property
Schedule 3.12 ........................................ Litigation
Schedule 3.14 ........................................ Contracts
Schedule 3.15 ........................................ Employee Benefits
Schedule 3.16 ........................................ Labor Matters
Schedule 3.17 ........................................ Taxes
Schedule 3.18 ........................................ Environmental
Schedule 3.19 ........................................ Officers; Bank Accounts
Schedule 5.15 ........................................ Reimbursement for
Environmental
Remediation Activities
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EXHIBITS
Exhibit Number
- ------- ------
Current Assets and Liabilities ........................................ 1.5(a)
Accounting Principles ................................................. 1.5(b)
Strategic Alliance Agreement .......................................... 6.2(d)
Investor Rights Agreement Term Sheet .................................. 6.2(e)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of November 12, 1999
(this "Agreement), is made and entered into by and between UPS Logistics Group,
Inc., a Delaware corporation ("Seller"), UPS Truck Leasing, Inc., a Delaware
corporation (the "Company"), Rollins Leasing Corp., a Delaware corporation
("Buyer"), and Rollins Truck Leasing Corp., a Delaware corporation ("Parent").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock (the "Company Shares") of the Company; and
WHEREAS, pursuant to the terms and conditions of this Agreement, Seller
desires to sell, and Buyer desires to purchase, the Company Shares.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
TRANSFER OF COMPANY SHARES; PURCHASE PRICE
Section 1.1 Purchase and Sale. Subject to the terms and conditions set
forth in this Agreement, at the closing provided for in Section 1.6 hereof (the
"Closing"), Seller agrees to sell, transfer and deliver to Buyer, and Buyer
agrees to purchase, acquire and accept from Seller, the Company Shares.
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Section 1.2 Purchase Price. Subject to adjustment as provided in Section
1.3(b), the Purchase Price will be an amount equal to $171,506,000 minus the
amount of Outstanding Debt (as defined below) (the "Purchase Price"). The
Purchase Price shall be payable as provided in Section 1.3. "Outstanding Debt"
shall mean, as of the Closing Date, any indebtedness of the Company owed to
Seller or any of its Affiliates (as hereinafter defined), as adjusted in
accordance with Section 5.17. Seller shall advise Buyer of the amount of
Outstanding Debt on the day prior to the Closing Date.
Section 1.3 Payment of Purchase Price.
(a) At the Closing, Buyer shall pay to Seller (subject to adjustment as
provided in Section 1.3(b)) the Purchase Price, which shall be paid in the form
of (i) a certificate representing 2,000,000 shares of Parent Common Stock (the
"Common Stock"), (which solely for the purposes of this Section 1.3(a) shall be
deemed to have an aggregate value of $20,000,000) and (ii) the balance in cash.
In the event of any change in the Common Stock between the date of this
Agreement and the Closing by reason of any stock dividend, stock split,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like (an "Adjustment Event"), the number of shares of Common Stock
referenced in Section 1.3(a)(i) shall be appropriately adjusted so that Seller
will receive the same proportionate amount of the Common Stock Seller was
entitled to receive immediately prior to such Adjustment Event.
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(b) Within five business days after the determination of the Final Working
Capital Statement (as hereinafter defined) in accordance with Section 1.5
hereof, (i) if the amount of the Closing Date Working Capital (as hereinafter
defined) calculated in accordance with Section 1.5 is less than 97% of the
Target Working Capital (as hereinafter defined), then Seller shall pay to Buyer
an amount equal to the difference between 97% of the Target Working Capital and
the Closing Date Working Capital plus interest or (ii) if the amount of the
Closing Date Working Capital calculated in accordance with Section 1.5 is
greater than 103% of the Target Working Capital, Buyer shall pay to Seller an
amount equal to the difference between 103% of the Target Working Capital and
the Closing Date Working Capital plus interest. Any payment under this Section
1.3(b) shall include interest on the amount of that payment at the prime rate of
interest (as published in the "Money Rates" table of The Wall Street Journal on
the Closing Date) beginning on the Closing Date (as hereinafter defined) and
ending on the date of any such payment. Any payments required under this Section
1.3(b) shall be paid in cash.
(c) All cash payments required under this Section 1.3 shall be made by wire
transfer of immediately available federal funds to such bank account(s) as shall
be designated in writing by the recipient at least three days prior to the
Closing or promptly upon the determination of the Final Balance Sheet (as
hereinafter defined), as the case may be.
Section 1.4 Target Working Capital. "Target Working Capital" shall equal
$15,289,000.
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Section 1.5 Adjustment of Purchase Price.
(a) For purposes of this Agreement, the "Closing Date Working Capital"
shall mean the book value of those categories of current assets of the Company
listed on Exhibit 1.5(a) less the book value of those categories of current
liabilities of the Company listed on Exhibit 1.5(a), in each case as reflected
on the Final Balance Sheet.
(b) Promptly following the Closing, Seller shall prepare (i) a balance
sheet of the Company as of the Effective Time (the "Preliminary Balance Sheet"),
in accordance with generally accepted accounting principles ("GAAP") on a basis
consistent with the unaudited interim balance sheet of the Company as of
September 30, 1999 (the "Interim Balance Sheet"), which principles are set forth
on Exhibit 1.5(b), and (ii) a calculation of the Closing Date Working Capital
based on the Preliminary Balance Sheet (the "Preliminary Working Capital
Statement"). Seller shall engage, and be responsible for the fees and expenses
of, Deloitte & Touche LLP (the "Seller Auditor") to audit the Preliminary
Balance Sheet and the Preliminary Working Capital Statement and shall use all
commercially reasonable efforts to deliver to Buyer a final draft of the
Preliminary Balance Sheet and the Preliminary Working Capital Statement within
60 days after the Closing Date, together with a final report of the Seller
Auditor thereon stating that the audit of the Preliminary Balance Sheet has been
made in accordance with GAAP on a basis consistent with the Interim Balance
Sheet. Representatives of Buyer shall have the opportunity to observe the taking
of the inventory of the Company in connection with the preparation of the
Preliminary Balance Sheet, and to examine the work papers, schedules and other
documents prepared by Seller in connection with the preparation
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of the Preliminary Balance Sheet and the Preliminary Working Capital Statement.
Seller shall use all commercially reasonable efforts to cause the Seller Auditor
to permit Buyer and its accounting firm (the "Buyer Auditor") to examine the
Seller Auditor's work papers used in connection with its audit of the
Preliminary Balance Sheet and the Preliminary Working Capital Statement. Buyer
shall be responsible for the fees and expenses of the Buyer Auditor.
(c) If Buyer objects to the Preliminary Balance Sheet and the Preliminary
Working Capital Statement, Buyer shall deliver to Seller a written notice of
objection (an "Objection Notice") within 15 days following the delivery thereof.
If Buyer has no objection to the Preliminary Balance Sheet and the Preliminary
Working Capital Statement, Buyer shall promptly deliver to Seller a written
notice of acceptance (an "Acceptance Notice"). The Preliminary Balance Sheet and
the Preliminary Working Capital Statement shall be final and binding on the
parties if an Acceptance Notice is delivered or if no Objection Notice is
delivered to Seller within such 15-day period. Any payment or portion of any
payment required under Section 1.3 not subject to an Objection Notice, shall be
paid within five business days following the delivery of an Objection Notice.
Any Objection Notice shall specify in reasonable detail the items on the
Preliminary Balance Sheet and the Preliminary Working Capital Statement disputed
and shall describe in reasonable detail the basis for the objection and all
information in the possession of Buyer which forms the basis thereof, as well as
the amount in dispute. If an Objection Notice is given, the parties shall
consult with each other with respect to the objection. If the parties are unable
to reach agreement within 15 days after an Objection Notice has been given, any
unresolved disputed items
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shall be promptly referred to an independent accounting firm designated by
agreement of Seller and Buyer (the "Unrelated Accounting Firm"). The Unrelated
Accounting Firm shall be directed to resolve disputed issues in accordance with
the terms of this Agreement and render a written report on the unresolved
disputed issues with respect to the Preliminary Balance Sheet and the
Preliminary Working Capital Statement as promptly as practicable and to resolve
only those issues of dispute set forth in the Objection Notice. The resolution
of the dispute by the Unrelated Accounting Firm shall be final and binding on
the parties. The fees and expenses of the Unrelated Accounting Firm shall be
borne equally by Seller, on the one hand, and Buyer, on the other hand. The
Preliminary Balance Sheet and the Preliminary Working Capital Statement as
finally determined pursuant to this Section 1.5(c) are referred to herein
respectively as the "Final Balance Sheet" and the "Final Working Capital
Statement".
Section 1.6 Closing. (a) The Closing of the transactions contemplated by
this Agreement shall take place at the offices of King & Spalding, 191 Peachtree
Street, Atlanta, Georgia. If all of the conditions to Closing set forth in
Article VI hereof have been satisfied or waived prior to such time, the Closing
shall take place at 12:01 a.m. Eastern Time on January 1, 2000. If the Closing
does not occur at such time, the Closing shall take place (assuming satisfaction
or waiver of all conditions to Closing) at 11:59 p.m. Eastern Time on January
31, 2000, or at such other time as the parties mutually agree. The date of the
Closing is sometimes referred to herein as the "Closing Date."
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(b) Notwithstanding any other provision of Section 1.3, if the Closing
occurs on January 1, 2000, the cash portion of the Purchase Price payable at
Closing shall be paid by Buyer on the first business day following the Closing
Date.
Section 1.7 Deliveries by Seller. At the Closing, Seller will deliver or
cause to be delivered to Buyer (unless delivered previously) the following:
(a) The stock certificate or certificates representing all of the Company
Shares, duly endorsed in blank or accompanied by stock powers duly executed in
blank;
(b) The Transition Agreement (as hereinafter defined), executed by Seller
or its Affiliate;
(c) The Alliance Agreement (as hereinafter defined), executed by Seller or
its Affiliate;
(d) The Investor Rights Agreement (as hereinafter defined), executed by
Seller or its Affiliate; and
(e) All other documents, instruments and writings required by Buyer to be
delivered by Seller at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
Section 1.8 Deliveries by Buyer. At the Closing, Parent and Buyer will
deliver or cause to be delivered to Seller (unless previously delivered) the
following:
(a) The Purchase Price in accordance with Section 1.2 hereof (including a
8
<PAGE>
certificate representing the Common Stock);
(b) The Transition Agreement, executed by Buyer or its Affiliate;
(c) The Alliance Agreement, executed by Buyer or its Affiliate;
(d) The Investor Rights Agreement, executed by Buyer or its Affiliate; and
(e) All other documents, instruments and writings required by Seller to be
delivered by the Buyer at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
ARTICLE II
RELATED MATTERS
Section 2.1 Use of Seller's Name and Logos. It is expressly agreed that
Buyer is not purchasing, acquiring or otherwise obtaining any right, title or
interest in the names "UPS" or "UPS Truck Leasing", or any tradenames,
trademarks, identifying logos or service marks related thereto or employing any
part or variation of any of the foregoing or any confusingly similar tradename,
trademark or logo (collectively, the "Seller Tradenames and Logos"). Buyer
agrees that neither it nor any of its Affiliates shall make any use of the
Seller Tradenames and Logos from and after the Closing Date; provided, however,
that Seller (or its Affiliate) shall grant Buyer a ninety (90) day license for
use of the UPS Truck Leasing logo as it currently appears on the trucks of the
Company in order for Buyer to undertake the deletion or removal of the UPS Truck
Leasing logo from such trucks in a practical manner.
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Section 2.2 No Ongoing or Transition Services. Except as provided in the
Transition Agreement, at the Closing, all data processing, accounting,
insurance, banking, personnel, legal, communications, fuel procurement and other
services provided to the Company by Seller or any Affiliate of Seller, including
any agreements or understandings (written or oral) with respect thereto, will
terminate.
Section 2.3 Distributions. The parties agree that Seller shall have the
right, at or prior to the Closing, to cause the Company to distribute all cash
held by the Company to Seller or its Affiliates, by one or more cash dividends,
repurchase of existing stock and/or other distributions. Except as provided in
Section 1.3(b), no adjustment shall be made to the Purchase Price as a result of
any such dividends, repurchases or other distributions paid to Seller or its
Affiliates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
10
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Section 3.1 Organization.
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware, and has all requisite power and
authority to own, lease and operate its properties and assets and to carry on
its operations as now being conducted. The Company is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
or assets owned, leased or operated by the Company or the nature of the business
conducted by the Company makes such qualification necessary, except where the
failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Company Material Adverse Effect (as
hereinafter defined). Schedule 3.1 sets forth a list of all jurisdictions where
the Company is qualified to do business. Seller has heretofore made available to
Buyer complete and correct copies of the certificate of incorporation and
by-laws of the Company, as currently in effect.
(b) As used herein, a "Company Material Adverse Effect" shall mean any
event, change or effect that has occurred which has a material adverse effect
upon the financial condition, operating results or business of the Company;
provided, however, that a Company Material Adverse Effect shall not include any
event, change in or effect upon the financial condition or business of the
Company, directly or indirectly, arising out of, attributable to or as a
consequence of: (a) conditions, events or circumstances generally affecting the
vehicle leasing industry or the overall economy; or (b) the public announcement
of either the execution of this Agreement or the transactions contemplated
hereunder.
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Section 3.2 Authorization. Seller is a corporation validly existing and in
good standing under the laws of the State of Delaware. Each of Seller and the
Company has the corporate power and authority to execute and deliver this
Agreement and perform its obligations hereunder. The execution and delivery of
this Agreement and the performance by Seller and the Company of its respective
covenants and agreements hereunder has been duly and validly authorized by the
Boards of Directors of Seller, the Company and United Parcel Service of America,
Inc., and the shareholder of the Company, and no other corporate proceedings on
the part of Seller or the Company is necessary to authorize the execution,
delivery and performance of this Agreement or the consummation of the
transactions so contemplated. This Agreement has been duly executed and
delivered by Seller and the Company and constitutes a valid and binding
agreement of Seller and the Company, enforceable against Seller and the Company
in accordance with its terms, except that (a) such enforcement may be subject to
any bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
Section 3.3 Capital Stock. Schedule 3.3 sets forth the authorized, issued
and outstanding capital stock of the Company. The Company Shares constitute all
of the issued and outstanding shares of capital stock of the Company. The
Company Shares have been validly issued and are fully paid and non-assessable.
There are no shares of capital stock of the Company held as
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treasury shares. There are no preemptive rights existing with respect to the
capital stock of the Company. There are not any outstanding securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Company, nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments which could obligate the Company to
issue any shares of its capital stock or equity interests. The Company does not
own, directly or indirectly, any capital stock or any other equity or debt
securities of any corporation, firm, partnership, joint venture, association or
other entity.
Section 3.4 Ownership of the Common Stock. Seller is the sole owner of the
Company Shares. Seller has good title to the Company Shares, free and clear of
all liens, claims, options, security interests or other encumbrances.
Section 3.5 Consents and Approvals; No Violations. Except as set forth on
Schedule 3.5 and for applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of the Company or Seller; (b) require
any filing with, or the obtaining of any permit, authorization, consent or
approval of, any governmental or regulatory authority; (c) violate, conflict
with or result in a default (or any event which, with notice or lapse of time or
both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration under, any of the terms, conditions or
provisions of
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any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement, lease or other contract, instrument or obligation to which the
Company or Seller is a party or by which the Company or Seller or any of their
respective assets may be bound; or (d) violate any order, injunction, decree,
statute, rule or regulation applicable to the Company or Seller, excluding from
the foregoing clauses (b), (c) and (d) such requirements, violations, conflicts,
defaults or rights (i) which would not have a Company Material Adverse Effect
and would not adversely affect the ability of Seller to consummate the
transactions contemplated by this Agreement, or (ii) which become applicable as
a result of the business or activities in which Buyer is or proposes to be
engaged or as a result of any acts or omissions by, or the status of or any
facts pertaining to, Buyer.
Section 3.6 Financial Statements. Seller has made available to Buyer: (i)
the unaudited balance sheets of the Company as of December 31, 1997 and 1998 and
the unaudited statements of income and cash flows thereof for the respective
fiscal years then ended, including the notes thereto; and (ii) the unaudited
balance sheet of the Company as of September 30, 1999 and the unaudited
statements of income and cash flows thereof for the six month period then ended,
including the notes thereto. All of the foregoing financial statements are
hereinafter collectively referred to as the "Financial Statements". Except as
disclosed in the Financial Statements, the Financial Statements have been
prepared from, and are in accordance with, the books and records of the Company
and present fairly, in all material respects, the financial position and results
of operations of the Company as of the dates and for the applicable periods
indicated, in each case in conformity with GAAP.
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Section 3.7 Absence of Material Adverse Effect. Except as set forth on
Schedule 3.7, since September 30, 1999, the Company has:
(a) conducted the Company's business in the ordinary course;
(b) not sold any asset of the Company at a price of more than $100,000
other than in the ordinary course of business;
(c) maintained accounts receivable, inventory, accounts payable and other
working capital accounts in a manner consistent with normal business practices;
(d) not written up or down the value of any inventory or determined as
collectible any notes or accounts receivable that were previously considered to
be uncollectible, except for write-ups or write-downs and other determinations
in accordance with GAAP and in the ordinary course of business and consistent
with past practice;
(e) not pledged or permitted the imposition of any lien on any of its
assets;
(f) not suffered any change in its financial condition, operating results
or business or suffered any other event or condition of any character which
individually or in the aggregate has had a Company Material Adverse Effect;
(g) not suffered any damage, destruction or loss of tangible assets,
whether or not covered by insurance, in excess of $250,000, in the aggregate;
(h) not paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), except in each case in
the ordinary course of business;
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(i) not canceled any debts or waived any claims or rights of substantial
value, except in each case in the ordinary course of business; and
(j) not granted any general increase in the compensation payable or to
become payable to its officers, directors, consultants or employees (including
any such increase pursuant to any bonus, severance, termination, pension,
profit-sharing or other plan or commitment) or any special increase in the
compensation payable or to become payable to any officer, director, consultant
or employee, except for (i) normal merit and cost of living increases in the
ordinary course of business and in accordance with past practice and (ii)
severance commitments that are (and shall remain after Closing) the sole
responsibility of Seller and its Affiliates (other than the Company).
Section 3.8 Title, Ownership and Related Matters.
(a) Real Property.
(i) To the Knowledge of Seller, Schedule 3.8(a)(i) sets forth a list of the
parcels of real property owned by the Company (together with the fixtures and
improvements thereon, the "Owned Real Property") and the UPS Owned Facilities
(as hereinafter defined). Schedule 3.8(a)(i) also sets forth a list of the
parcels of real property currently leased by the Company (together with all
fixtures and improvements thereon, the "Leased Real Property" and collectively
with the Owned Real Property and the UPS Owned Facilities, the "Real Property").
(ii) To the Knowledge of Seller, except as set forth on Schedule 3.8(a)(ii)
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the Company has good and marketable title to the Owned Real Property, and an
Affiliate of the Company has good and marketable title to the UPS Owned
Facilities, in each case free and clear of all liens, pledges, security
interests, charges, claims, leasehold interests, tenancies, restrictions and
encumbrances of any nature whatsoever other than (i) liens for taxes not yet due
and payable, (ii) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the ordinary
course of business and not yet delinquent, and (iii) matters of record, zoning,
building or other restrictions, variances, covenants, rights of way,
encumbrances, easements and other minor irregularities in title, none of which,
individually or in the aggregate, interfere with the present use of or occupancy
of any of the Owned Real Property or the UPS Owned Facilities by the Company
(collectively, "Permitted Liens").
(iii) To the Knowledge of Seller, the Seller has a valid leasehold interest
in the Leased Real Property, free and clear of any mortgages, pledges, liens,
security interests or other encumbrances of any nature, except for Permitted
Liens.
(iv) To the Knowledge of Seller, the improvements on the Real Property are
free from any material structural defects. Except as set forth on Schedule
3.8(a)(iv), to the Knowledge of Seller, there are no condemnation or
appropriation or similar proceedings pending or threatened against any of the
Real Property or the improvements thereon.
(b) Necessary Assets. To the Knowledge of Seller, except as set forth in
Schedule 3.8(b), the Company has good and marketable title to its material
assets, free and clear of
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all liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature whatsoever (except, with respect to the Real
Property, Permitted Liens).
Section 3.9 Intellectual Property.
(a) To the Knowledge of Seller (as herein defined), the conduct of the
business of the Company does not infringe upon any intellectual property right
of any third party. There are no pending, or to the Knowledge of Seller
threatened, proceedings or litigation or other adverse claims by any Person (as
hereinafter defined) against the use by the Company of any trademarks, trade
names, service marks, service names, logos, assumed names, copyrights, patents
or registrations and applications therefor which are owned by the Company and
are necessary for the operation of the Company's business as currently conducted
(collectively, the "Intellectual Property"). Schedule 3.9 sets forth a list of
all Intellectual Property owned by the Company.
(b) The Company has valid licenses or other rights to use the Intellectual
Property necessary to permit the Company to conduct its operations as currently
conducted, except (i) for the Seller Tradenames and Logos and (ii) where the
failure to have such ownership, licenses or rights would not have a Company
Material Adverse Effect.
Section 3.10 Computer Software. The Company has valid licenses or other
rights to use all material computer software programs to permit it to conduct
its operations as currently conducted, except where the failure to have such
ownership, licenses or rights would not have a Company Material Adverse Effect.
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Section 3.11 Year 2000 Compliance. Seller has provided Buyer true and
complete copies of all material reports and analyses obtained by the Company or
Seller with respect to Year 2000 compliance issues concerning the Company. The
Company's major systems have been modified, tested and certified.
Section 3.12 Litigation. Schedule 3.12 identifies all claims, actions,
suits, proceedings and governmental investigations pending or, to the Knowledge
of Seller, threatened against the Company by or before any court, governmental
or regulatory authority or by any third party (other than claims, actions,
suits, proceedings and governmental investigation set forth on Schedule 3.18(b))
(the "Litigation Claims").
Section 3.13 Compliance with Applicable Law. To the Knowledge of Seller,
the Company is in compliance in all material respects with all applicable laws,
ordinances, rules and regulations of any federal, state, local or foreign
governmental authority applicable to the Company or its operations and necessary
to carry on its business as it is currently being conducted, to own or hold
under lease the properties and assets it owns or holds under lease and to
perform all of its obligations under the agreements to which it is a party.
Section 3.14 Certain Contracts and Arrangements. Schedule 3.14 sets forth a
list of the following contracts to which the Company is a party: (a) employment
agreements; (b) indentures, mortgages, notes, installment obligations,
agreements or other instruments relating to the borrowing of money or the
guaranty by the Company of any obligation for the borrowing of money; (c) real
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property leases; (d) contracts with Affiliates; or (e) other agreements,
including without limitation, customer contracts, which individually involve the
receipt or payment by the Company after the date hereof of more than $100,000
and are not terminable without liability to the Company upon 30 days or less
prior written notice (together with those contracts, agreements and
understandings described in clauses (a), (b), (c) and (d) the "Contracts").
Seller has made available to Buyer copies of all Contracts. To the Knowledge of
Seller, all such Contracts are valid, binding and enforceable in accordance with
their terms and, to the Knowledge of Seller, neither the Company nor any other
party thereto is in material default under any of the aforesaid Contracts.
Schedule 3.14 sets forth a list of all unresolved material default notices
received from or given to third parties pertaining to the Contracts and
identifies all Contracts containing fuel pricing guarantees.
Section 3.15 Employee Benefit Plans; ERISA. Except as set forth on Schedule
3.15:
(a) There are no "employee benefit plans" (as defined in Section 3.(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
maintained for the benefit of employees of the Company or other employee
benefit, bonus or fringe benefit plans maintained for the benefit of the
employees of the Company to which, or with respect to which, the Company has a
material liability for the payment of benefits or makes material contributions
annually (the "Plans").
(b) Each of the Plans that is subject to ERISA has been administered in
compliance in all material respects with ERISA. Each of the Plans intended to be
"qualified" within
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the meaning of Section 401(a) of the Code has a favorable determination letter
from the Internal Revenue Service (the "IRS") to the effect that it is so
qualified. Except as set forth on Schedule 3.15, none of the Plans is subject to
Title IV of ERISA. There are no pending or, to the Knowledge of Seller,
threatened material claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts which are a part of such
Plans.
(c) Seller has furnished to Buyer a correct, complete and correct copy of
each plan, program, policy or arrangement which is set forth in writing and
which provides cash or property or other compensation related benefits of any
kind or description whatsoever to or on behalf of any current of former employee
or director of Seller or any of their dependents and a complete description of
any such plain, program, policy or arrangement which is not set forth in writing
(collectively, the "Seller Benefit Plans"). A list of each Seller Benefit Plan
is set forth on Schedule 3.15.
Section 3.16 Labor Matters. The Company is in compliance with all federal
and state laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, and is not engaged in any unfair
labor or unlawful employment practice, the violation of or engagement in which
would have a Company Material Adverse Effect. Except as set forth on Schedule
3.16, there are no controversies pending or, to the Knowledge of the Seller,
threatened, between the Company and any of its employees, which controversies
have had or are reasonably likely to have a Company Material Adverse Effect. The
Company is not a party to any
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collective bargaining agreement or other labor union contract applicable to
Persons employed by the Company. There are no unfair labor practice complaints
pending against the Company before the National Labor Relations Board. To the
Knowledge of Seller, there are no strikes, slowdowns, work stoppages, lockouts,
or threats thereof, by or with respect to any employees of the Company.
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Section 3.17 Taxes.
(a) Either Seller or the Company (i) has timely filed or caused to be filed
on a timely basis with the appropriate taxing authorities all material Tax
Returns (as hereinafter defined) required to be filed by or with respect to the
Company (including the consolidated federal income Tax Returns and any
consolidated, combined or unitary state Tax Returns in which the Company is
included), and (ii) has paid or made adequate provision for the payment of all
Taxes (as hereinafter defined) shown to be due on such Tax Returns or otherwise
due and payable by the Company. All such Tax Returns are true, correct and
complete in all material respects.
(b) Except as set forth on Schedule 3.17, (i) there are no liens for Taxes
with respect to the assets of the Company (except for statutory liens for
current taxes not yet delinquent) and no material claims with respect to Taxes
are being asserted by any taxing authority in writing; (ii) none of the Tax
Returns applicable to the Company are currently being audited or examined by any
taxing authority and there is no other action or proceedings currently pending
concerning Taxes relating to the Company; (iii) there is no material unpaid tax
deficiency, determination or proposed assessment currently outstanding against
the Company or for which the Company could be jointly or severally liable; (iv)
there are no outstanding agreements or waivers extending the statute of
limitations relating to the assessment of Taxes applicable to the Company; (v)
neither the Company nor Seller on behalf of the Company has filed a consent
pursuant to Section 341(f) of the Code; (vi) the Company is not a party to any
agreement that would result, separately or in the aggregate, in the payment of
an excess parachute payment pursuant to Section 280G of the Code; (vii) the
Company
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is not a member of any partnership or joint venture or the holder of a
beneficial interest in any trust (other than a trust that is treated as a
grantor trust or otherwise is disregarded as a separate taxable entity for
federal income tax purposes); and (viii) to the Company's knowledge, there are
no proposed reassessments of any property owned by the Company that will result
in a material increase in the amount of Tax to which such property will be
subject for periods after the Closing Date.
(c) As used in this Agreement:
(i) "Taxes" shall mean all taxes, levies, charges or fees including income,
corporation, advance corporation, gross receipts, transfer, excise, property,
sales, use, value-added, license, payroll, pay-as-you-earn, withholding, social
security and franchise or other governmental taxes or charges, imposed by the
United States or any state, county, local or foreign government, and such term
shall include any interest, penalties or additions to tax attributable to such
taxes.
(ii) "Tax Return" shall mean any report, return or statement required to be
supplied to a taxing authority in connection with Taxes.
Section 3.18 Environmental.
(a) To the Knowledge of Seller, except as set forth on Schedule 3.18(a),
the Company possesses, and is in compliance with, all material permits, licenses
and government authorizations relating to protection of the environment,
pollution control and hazardous materials applicable to the Company;
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(b) To the Knowledge of Seller, except as set forth on Schedule 3.18(b),
neither the Company nor any of its Affiliates has received notice from a state
or federal governmental authority that the Company is responsible under any
applicable federal, state, or local law, regulation or ordinance relating to the
protection of the environment in effect at the time of this Agreement (the
"Environmental Laws") to investigate and/or remediate Hazardous Materials (as
hereinafter defined) on property the Company owns or on which it operates
(collectively, the "Environmental Claims"). For purposes of this Agreement,
"Hazardous Materials" shall mean any waste, pollutant, hazardous substance,
toxic, ignitable, reactive or corrosive substance, hazardous waste, special
waste, industrial substance, by-product, process intermediate product or waste,
petroleum or petroleum-derived substance or waste, chemical liquids or solids,
liquid or gaseous products regulated under Environmental Laws; and
(c) Except as set forth in Schedule 3.18(c), the underground storage tank
systems for which the Company is responsible under applicable laws or existing
agreements have been upgraded or removed in compliance with 40 CFR Part 280 and
any other applicable laws.
Section 3.19 Officers; Bank Accounts. Schedule 3.19 lists each of the
officers of the Company and all of the accounts (and signatures thereto) of the
Company with any bank, brokerage firm or other financial institution or
depository.
Section 3.20 Certain Fees. The Company will not have any liability for any
financial advisory or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Authority of Buyer. Each of the Parent and
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Parent owns all of the issued and
outstanding stock of Buyer. Each of Parent and Buyer has the corporate power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
Parent and Buyer of its respective covenants and agreements hereunder have been
duly and validly authorized by the Board of Directors of Parent and Buyer and
the sole shareholder of Buyer, and no other corporate proceedings on the part of
Parent or Buyer are necessary to authorize the execution, delivery and
performance of this Agreement or the consummation of the transactions so
contemplated. This Agreement has been duly executed and delivered by Parent and
Buyer and constitutes a valid and binding agreement of Parent and Buyer,
enforceable against Parent and Buyer in accordance with its terms, except that
(i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 4.2 Consents and Approvals; No Violations. Except for applicable
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requirements of the HSR Act, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the incorporation
documents or by-laws of Parent or Buyer; (b) require any filing with, or the
obtaining of any permit, authorization, consent or approval of, any governmental
or regulatory authority; (c) violate, conflict with or result in a default (or
any event which, with notice or lapse of time or both, would constitute a
default) under, or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions or provisions of any note,
mortgage, other evidence of indebtedness, guarantee, license, agreement, lease
or other contract, instrument or obligation to which Parent or Buyer is a party
or by which Parent or Buyer or any of its assets may be bound; or (d) violate
any order, injunction, decree, statute, rule or regulation applicable to Parent
or Buyer, excluding from the foregoing clauses (b), (c) and (d) such
requirements, violations, conflicts, defaults or rights (i) which would not
adversely affect the ability of Parent or Buyer to consummate the transactions
contemplated by this Agreement or (ii) which become applicable as a result of
any acts or omissions by, or the status of or any facts pertaining to, Parent or
Buyer.
Section 4.3 Litigation. There is no claim, action, suit, proceeding or
governmental investigation pending or, to the Knowledge of Buyer (as hereinafter
defined), threatened against Parent or Buyer, by or before any court,
governmental or regulatory authority or by any third party which challenges the
validity of this Agreement or which would be reasonably likely to adversely
affect or restrict Parent's or Buyer's ability to consummate the transactions
contemplated hereby.
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Section 4.4 Certain Fees. Except for the engagement of Merrill Lynch
neither Buyer nor any of its Affiliates has employed any financial advisor or
finder or incurred any liability for any financial advisory or finders' fees in
connection with this Agreement or the transactions contemplated hereby.
Section 4.5 Certain Filings. Parent has filed all forms, reports,
statements and documents required to be filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1997 (collectively, the "SEC Reports"),
each of which has complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations promulgated thereunder, or the Securities Exchange
Act of 1934 (the "Exchange Act"), and the rules and regulations promulgated
thereunder, each as in effect on the date so filed. None of the SEC Reports
(including, but not limited to, any financial statements or schedules included
or incorporated by reference therein) contained when filed any untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
ARTICLE V
COVENANTS
Section 5.1 Conduct of the Company's Business. Seller agrees that, during
the
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period from the date of this Agreement to the Closing, except as otherwise
contemplated by this Agreement, the Schedules or consented to by Buyer in
writing, Seller shall cause the Company:
(a) to use its reasonable best efforts to conduct its business operations
in the ordinary course consistent with past practice;
(b) to use its reasonable best efforts to (i) maintain and preserve its
business operations, (ii) retain the services of its employees, except for
attrition of such employees in the ordinary course of business, and (iii)
maintain, preserve and retain relationships with its suppliers and customers;
(c) not to sell or dispose of any material business assets, except in the
ordinary course of business;
(d) not to amend its certificate of incorporation or bylaws;
(e) not to incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, other than borrowings in the ordinary course of
business consistent with past practice;
(f) not to change its accounting policies except as required by generally
accepted accounting principles; and
(g) not to make any change in employment terms for any of its employees
other than terminations for cause or customary salary increases and adjustments
in benefits in the ordinary course of business consistent with past practice,
other than severance commitments that are (and
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still remain) the sole responsibility of Seller and its Affiliates (other than
the Company).
Section 5.2 Access to Information.
(a) Between the date of this Agreement and the Closing, Seller shall (i)
give Buyer and its authorized representatives reasonable access to all books,
records, offices and other facilities and properties of the Company, including
Phase I and/or Phase II environmental audits, and to the Company Executives (as
hereinafter defined); (ii) permit Buyer to make such inspections thereof as
Buyer may reasonably request; and (iii) cause the officers of the Company to
furnish Buyer with such financial and operating data and other information with
respect to the business and properties of the Company as Buyer may from time to
time reasonably request; provided, however, that any such investigation shall be
conducted during normal business hours under the supervision of Seller's
personnel and in such a manner as to maintain the confidentiality of this
Agreement and the transactions contemplated hereby and not interfere
unreasonably with the business operations of Seller or the Company.
(b) All information concerning Seller or the Company furnished or provided
by Seller or their Affiliates to Buyer or its representatives (whether furnished
before or after the date of this Agreement) shall be held subject to a
confidentiality agreement by and between Seller and Buyer, dated as of August
24, 1999 (the "Confidentiality Agreement").
Section 5.3 Consents. (a) Each of Seller and Buyer shall cooperate, and use
its reasonable best efforts, to make all filings (including without limitation
all filings required under the
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HSR Act) and obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other third parties
necessary to consummate the transactions contemplated by this Agreement. In
addition to the foregoing, Buyer agrees to provide such assurances as to
financial capability, resources and creditworthiness as may be reasonably
requested by any third party whose consent or approval is sought in connection
with the transactions contemplated hereby.
(b) With respect to any agreements for which any required consent or
approval is not obtained prior to the Closing, Seller and Buyer shall each use
their reasonable best efforts to obtain any such consent or approval after the
Closing Date until such consent or approval has been obtained.
Section 5.4 Reasonable Best Efforts. Each of Seller and Buyer shall
cooperate, and use its reasonable best efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
Section 5.5 Public Announcements. Except as otherwise agreed to by the
parties, the parties shall not issue any report, statement or press release or
otherwise make any public statements with respect to this Agreement and the
transactions contemplated hereby, except as in the reasonable judgment of the
party may be required by law. Upon the execution of this Agreement and the
Closing, Seller and Buyer will consult with each other with respect to the
issuance of a joint report, statement or press release with respect to this
Agreement and the transactions contemplated hereby.
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Section 5.6 Covenant to Satisfy Conditions. Seller will use its reasonable
best efforts to ensure that the conditions set forth in Article VI hereof are
satisfied, insofar as such matters are within the control of Seller, and Buyer
will use its reasonable best efforts to ensure that the conditions set forth in
Article VI hereof are satisfied, insofar as such matters are within the control
of Buyer. Seller and Buyer further covenant and agree, with respect to a
threatened or pending preliminary or permanent injunction or other order, decree
or ruling or statute, rule, regulation or executive order that would adversely
affect the ability of the parties hereto to consummate the transactions
contemplated hereby, to use all reasonable efforts to prevent or lift the entry,
enactment or promulgation thereof, as the case may be.
Section 5.7 Employees; Employee Benefits. (a) Buyer shall treat all service
completed by an Employee (as hereinafter defined) with the Company or any
Affiliate thereof, and any predecessor thereto, the same as service completed
with Buyer for all purposes, including waiting periods relating to preexisting
conditions under medical plans, vacations, severance pay, eligibility to
participate in, vesting or payment of benefits under, and eligibility for early
retirement or any subsidized benefit provided for under any employee benefit
plan (including, but not limited to, any "employee benefit plan" as defined in
Section 3(3) of ERISA) maintained by Buyer on or after the Closing Date except
for purposes of computing benefits under the actual benefit formula in a pension
plan (as defined in Section 3(2) of ERISA). Prior to the Closing, Seller shall
furnish
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Buyer with a list of the length of service with the Company or its Affiliates
for each of the Employees. For purposes of computing deductible amounts (or like
adjustments or limitations on coverage) under any employee welfare benefit plan
(including, without limitation, any "employee welfare benefit plan" as defined
in Section 3(l) of ERISA), expenses and claims previously recognized for similar
purposes under the applicable welfare benefit plan of the Company or any
Affiliate shall be credited or recognized under the comparable plan maintained
after the Closing Date by Buyer. For purposes of this Agreement, "Employee"
shall mean each person employed by the Company as of the Closing.
(b) After the Closing Date, Buyer shall be responsible for, and shall
indemnify and hold harmless Seller and their Affiliates and their officers,
directors, employees, Affiliates and agents and the fiduciaries (including plan
administrators) of the Plans, from and against, any and all claims, losses,
damages, costs and expenses (including, without limitation, attorneys' fees and
expenses) and other liabilities and obligations relating to or arising out of
(i) all salaries, bonuses, commissions, vacation entitlements and other benefits
accrued by the Company but unpaid as of the Closing, and (ii) any claims of, or
damages or penalties sought by, any Employee, or any governmental entity on
behalf of or concerning any Employee, with respect to any act or failure to act
by Buyer to the extent arising from the employment, discharge, layoff or
termination of any Employee after the Closing.
(c) At least 30 days prior to the Closing, Buyer shall provide Seller with
a list of those employees of the Company that Buyer desires to employ
immediately following the Closing. Seller will take necessary actions to assure
that as of the Closing only those persons (and other persons
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approved by Buyer) are employed by the Company and shall assume all costs
associated therewith.
(d) Any Employee that is terminated by Buyer during 2000 will be paid for
accrued vacation in accordance with the Company's prior practice; provided that
the aggregate liability of Buyer for such payments will not exceed the vacation
accrual on the Final Balance Sheet.
Section 5.8 Certain Tax Matters.
(a) Certain Definitions. As used in this Agreement:
(i) "Buyer Tax Group" means the affiliated group, within the meaning of
Section 1504(a) of the Code, of which Buyer is the common parent.
(ii) "Independent Accountants" means Arthur Andersen & Co.
(iii) "Pre-Closing Period" means any taxable period, including that portion
of any Straddle Period, which ends on or before the Effective Time.
(iv) "Section 338(h)(10) Election" means the election to be made by Buyer
and Seller pursuant to Section 338(h)(10) of the Code, as described in Section
5.8(b) hereof.
(v) "Straddle Period" means any taxable period that includes (but does not
end on) the Closing Date.
(b) Section 338(h)(10) Election. Seller will join with Buyer in making the
Section 338(h)(10) Election to treat the transaction hereunder as the deemed
sale of the assets of the Company for federal and state income tax purposes.
Seller and Buyer will use their reasonable best
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efforts to agree on the allocation of the "MADSP" among the assets of the
Company pursuant to the applicable Treasury Regulations under Section 338 of the
Code (the "Allocation") and will use the Allocation in reporting the deemed
purchase and sale of the assets of the Company for federal and state income tax
purposes. If the parties are unable to agree upon the Allocation within 90 days
before the due date of filing any Tax Return for which the Allocation is
relevant, the Allocation shall be made by the Independent Accountants.
(c) Return Filing, Refunds, Credits and Transfer Taxes.
(i) Except with regard to Tax Returns for Straddle Periods, Seller shall
prepare, or cause to be prepared, and file, or cause to be filed, on a timely
basis all Tax Returns of or including the Company for all Pre-Closing Periods
(the "Pre-Closing Period Returns"). Seller shall pay, or cause to be paid, all
Taxes with respect to the Company shown to be due on the Pre-Closing Period
Returns.
(ii) Buyer shall prepare, or cause to be prepared, and shall file, or cause
to be filed, on a timely basis all Tax Returns other than the Pre-Closing Period
Returns with respect to the Company, including Tax Returns, if any, for the
Straddle Period (the "Straddle Period Returns"). Buyer shall pay, or cause to be
paid, all Taxes shown to be due on such Tax Returns.
(iii) Buyer shall provide Seller with copies of any Straddle Period Returns
at least thirty business days prior to the due date thereof (giving effect to
any extensions thereto), accompanied by a statement calculating in reasonable
detail Seller's indemnification obligation
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pursuant to Section 5.8(e) hereof (the "Indemnification Statement"). Seller
shall have the right to review such Straddle Period Returns and Indemnification
Statement prior to the filing of such Straddle Period Returns. If Seller
disputes any amounts shown to be due on such Tax Returns or the amount
calculated in the Indemnification Statement, Seller and Buyer shall consult and
resolve in good faith any issues arising as a result of the review of such
Straddle Period Return and Indemnification Statement. If Seller agrees to the
Indemnification Statement amount, Seller shall pay to Buyer an amount equal to
the Taxes shown on the Indemnification Statement less any amounts paid by Seller
or Company on or before the Effective Time with respect to estimated taxes
(which have not been taken into account in determining the Indemnification
Statement amount) not later than three business days before the due date
(including any extensions thereof) for payment of Taxes with respect to such
Straddle Period Return. If the parties are unable to resolve any dispute within
fifteen business days after Seller's receipt of such Straddle Period Return and
Indemnification Statement, such dispute shall be resolved by the Independent
Accountants, which shall resolve any issue in dispute as promptly as
practicable. If the Independent Accountants are unable to make a final
determination with respect to any disputed issue prior to the due date
(including any extensions) for the filing of the Straddle Period Return in
question, (A) Buyer shall file, or shall cause to be filed, such Straddle Period
Return without such final determination having been made and (B) Seller shall
pay to Buyer, not later than three days before the due date (including any
extensions thereof) for the payment of Taxes with respect to such Straddle
Period Return, an amount tentatively determined by the Independent Accountants
as the proper amount chargeable to
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Sellers pursuant to this Section 5.8. Upon delivery to Seller and Buyer by the
Independent Accountants of its final determination, appropriate adjustments
shall be made to the amount paid by Seller in accordance with the immediately
preceding sentence in order to reflect the final decision of the Independent
Accountants. The determination by the Independent Accountants shall be final,
conclusive and binding on the parties.
(iv) Seller and Buyer shall reasonably cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all Tax Returns (including
amended returns and claims for refund), including maintaining and making
available to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods relating
to Taxes. Buyer recognizes that Seller will need access, from time to time,
after the Effective Time, to certain accounting and tax records and information
held by the Company to the extent such records and information pertain to events
occurring prior to the Effective Time; therefore, Buyer agrees that from and
after the Effective Time Buyer shall, and shall cause the Company to, (A) retain
and maintain such records until such time as Seller determines that such
retention and maintenance is no longer necessary and (B) allow Seller and their
agents and representatives (and agents and representatives of its Affiliates) to
inspect, review and make copies of such records as Seller reasonably may deem
necessary or appropriate from time to time. Buyer shall indemnify Seller from
and against any penalties, additions to tax or interest imposed on Seller as a
result of any failure of Buyer to provide tax records or other information to
Seller in a timely manner.
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(v) Buyer shall not, and shall cause the Company not to, dispose of or
destroy any of the business records and files of the Company relating to Taxes
in existence at the Effective Time without first offering to turn over
possession thereof to Seller by written notice to Seller at least thirty days
prior to the proposed date of such disposition or destruction.
(vi) Any refunds and credits of Taxes of the Company or similar benefit
(including any interest or similar benefit) which are not included as assets or
as a reduction of a liability or reserve on the Interim Balance Sheet but which
are received by the Company or Buyer or for which the Company is entitled to a
credit with respect to (A) Taxes paid for any taxable period ending on or before
the Effective Time or (B) Taxes for which Seller has indemnified the Buyer under
the Agreement, shall be for the account of Seller, and if received or utilized
by Buyer or the Company, shall be paid to Seller within five business days after
Buyer or Company receives such refund or utilizes such credit. Except as
provided in the next sentence, any refunds or credits of the Company with
respect to any Straddle Period shall be apportioned between Seller, on the one
hand, and Buyer, on the other hand, on the basis of an interim closing of the
books. In the case of a refund or credit attributable to any Taxes that are
imposed on a periodic basis and are attributable to the Straddle Period, other
than Taxes based upon or related to gross or net income or receipts, the refund
or credit of such Taxes of the Company for the Pre-Closing Period shall be
deemed to be the amount of such refund or credit for the Straddle Period
multiplied by a fraction the numerator of
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which is the number of days in the Straddle Period ending on the Closing Date
and the denominator of which is the number of days in the Straddle Period.
(vii) Notwithstanding any other provisions of this Agreement to the
contrary, all sales, use, transfer, gains, stamp, duties, recording and similar
Taxes incurred in connection with the transactions contemplated by this
Agreement shall be paid by Buyer and Buyer shall, at its own expense, accurately
file or cause to be filed all necessary Tax Returns and other documentation with
respect to such Taxes and timely pay all such Taxes. If required by applicable
law, Seller will join in the execution of any such Tax Returns or such other
documentation.
(d) Elections. Except as may be required by law, Buyer shall not, and shall
cause the Company not to, make, amend, or revoke any Tax election if such action
would adversely affect Seller or any Person (other than the Company) as to whom
or with whom Seller has filed a consolidated return with respect to any taxable
period ending on or before the Effective Time or for the Pre-Closing Period or
any Tax refund with respect thereto.
(e) Tax Indemnification.
(i) Buyer shall indemnify, defend and hold harmless Seller and its
Affiliates, at any time after the Closing, from and against any liability for
Taxes of the Company for any taxable period ending after the Effective Time
except for Straddle Periods, in which case Buyer's indemnity will cover only
that portion of any such Taxes that is not attributable to the Pre-Closing
Period.
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(ii) Seller shall indemnify, defend and hold harmless Buyer and its
Affiliates, at any time after the Closing, from and against any liability for
Taxes of the Company (including any joint or several liability imposed under
Treasury Regulation Section 1.1502-6 or any similar provision of state, local or
foreign Tax law as a result of the inclusion of the Company in any consolidated,
combined or unitary Tax Return), except as provided in Section 5.8(c)(vii)
hereof, for the Pre-Closing Period (including the portion of any Straddle Period
ending on the Closing Date).
(iii) In determining the responsibility of Seller and Buyer for Taxes
attributable to any Straddle Period, Taxes based upon or related to gross or net
income or receipts shall be apportioned on the basis of an interim closing of
the books as of the Effective Time, and all other Taxes shall be prorated on a
daily basis.
(iv) If a claim for Taxes shall be made by any taxing authority in writing,
which, if successful, might result in an indemnity payment pursuant to this
Section 5.8, the party seeking indemnification (the "Tax Indemnified Party")
shall promptly notify the other party (the "Tax Indemnifying Party") in writing
of such claim (a "Tax Claim") within a reasonably sufficient period of time to
allow the Tax Indemnifying Party effectively to contest such Tax Claim, and in
reasonable detail to apprise the Tax Indemnifying Party of the nature of the Tax
Claim, and provide copies of all correspondence and documents received by it
from the relevant taxing authority. Failure to give prompt notice of a Tax Claim
hereunder shall affect the Tax Indemnifying Party's
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obligation under this Section to the extent that the Tax Indemnifying Party is
prejudiced by such failure to give prompt notice.
(v) With respect to any Tax Claim which might result in an indemnity
payment to Buyer pursuant to this Section 5.8(e) (including, without limitation,
Taxes of the Company for a Straddle Period), Seller shall control all
proceedings taken solely in connection with such Tax Claim, provided that Seller
acknowledges in writing its liability to indemnify Buyer hereunder with respect
to such Tax Claim. Without limiting the foregoing, Seller may in its reasonable
discretion and at its sole expense pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with any taxing authority with
respect to any Tax Claim for which Seller may have an Indemnification obligation
hereunder, and may, in its reasonable discretion, either pay the Tax claimed and
sue for a refund where applicable law permits such refund suits or contest such
Tax Claim. Neither Buyer nor Seller shall under any circumstances settle or
otherwise compromise any Tax Claim without first obtaining the other parties
prior written consent, which consent shall not be unreasonably withheld. In
connection with any proceeding taken in connection with such Tax Claim, (A)
Seller shall keep Buyer informed of all material developments and events
relating to such Tax Claim if involving a material liability for Taxes and (B)
Buyer shall have the right, at its sole expense, to participate in any such
proceedings. Buyer shall cooperate with Seller in contesting such Tax Claim
(without charge to Seller), which cooperation shall include, without limitation,
the retention and the provision to Seller of records and information which are
reasonably relevant to such Tax Claim, and making employees available to Seller
to
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provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim, provided that no
charges shall be incurred by Seller for the services of such employees. In the
event that an audit or proceeding involving a Tax Claim contested by Seller also
involves a potential adjustment for which Buyer would be liable, Buyer shall
have the right, at its expense, to control the audit or proceeding with respect
to the latter potential adjustment. With respect to any issue arising in
connection with a Tax claim for which both of the Seller and Buyer could be
liable, or which recurs for any period ending after the Closing Date (whether or
not the subject of audit at such time), each party may participate in the audit
or proceeding and the audit or proceeding shall be controlled by that party
which would bear the burden of the greater portion of the sum of the Tax Claim
and any corresponding adjustments that may reasonably be anticipated in future
Tax periods. The principle set forth in the preceding sentence shall govern also
for purposes of deciding any issue that must be decided jointly (in particular,
choice of judicial forum) in situations in which separate issues are otherwise
controlled hereunder by Buyer and Seller.
(vi) With respect to any Tax Claim not described in Section 5.8(e)(v)
hereof which might result in an indemnity payment to Seller pursuant hereto, all
proceedings shall be conducted in accordance with provisions that are parallel
to those in Section 5.8(e)(v) hereof.
(f) Miscellaneous.
(i) Seller and Buyer agree to treat all payments made by either to or for
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the benefit of the other (including any payments to the Company) under Article V
or Article IX as adjustments to the purchase price or as capital contributions
for Tax purposes and that such treatment shall govern for purposes hereto except
to the extent that the laws of a particular jurisdiction provide otherwise, in
which case such payment shall be made in an amount sufficient in indemnify the
relevant party on an after-Tax basis.
(ii) Notwithstanding any provision herein to the contrary, the obligations
of Seller to indemnify and hold harmless Buyer and the Company pursuant to this
Section 5.8 shall terminate at the close of business on the 120th day following
the expiration of the applicable statute of limitations with respect to the Tax
liabilities in question (giving effect to any waiver, mitigation or extension
thereof).
(iii) Buyer or Seller shall be entitled to recover professional fees and
related costs that it may reasonably incur to enforce the provisions of this
Section 5.8 in the event of a breach of the obligations under this Section 5.8.
Section 5.9 Supplemental Disclosure. If any event or matter arises or comes
to the attention of Seller or the Company after the date of this Agreement
which, if existing or occurring or known to Seller or the Company at the date of
this Agreement, would have been required to be set forth or described in the
Schedules or which is necessary to correct any information in the Schedules
which has been rendered inaccurate thereby in any material respect, then the
Company shall promptly supplement or amend and deliver to Buyer the Schedules
which it
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has delivered pursuant to this Agreement, and Buyer shall have the right, within
five business days of receipt by Buyer of such supplement or amendment, to
terminate the Agreement pursuant to Section 7.1(e).
Section 5.10 Guarantees. Prior to the Closing, Buyer shall use commercially
reasonable efforts (which efforts shall include, if necessary, a replacement
guaranty by Parent) to have United Parcel Service of America, Inc. ("UPS") and
its Affiliates (collectively, the "Guarantors") released as guarantor from all
off-balance sheet financing related to leased equipment utilized by the Company
and from all real property leases to which the Company is a party, provided that
if any such guarantee cannot be removed prior to Closing Buyer agrees to fully
and unconditionally indemnify the Guarantors for any costs associated with such
guarantees. If requested by Seller, Buyer shall execute and deliver at Closing a
specific indemnification instrument relating to any such continuing guarantee
obligations.
Section 5.11 Investigation by Buyer. Buyer has conducted its own
independent review and analysis of the business, operations, technology, assets,
liabilities, results of operations, financial condition and prospects of the
Company and acknowledges that Seller has provided Buyer with access to the
personnel, properties, premises and records of the Company for this purpose. In
entering into this Agreement, Buyer has relied solely upon its own investigation
and analysis, and Buyer (a) acknowledges that neither Seller, the Company nor
any of their respective directors, officers, employees, Affiliates, controlling
Persons, agents or representatives makes or has made
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any representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to Buyer or
its directors, officers, employees, Affiliates, controlling Persons, agents or
representatives, and (b) agrees, to the fullest extent permitted by law, that
neither Seller, Company nor any of their respective directors, officers,
employees, Affiliates, controlling Persons, agents or representatives shall have
any liability or responsibility whatsoever to Buyer or its directors, officers,
employees, Affiliates, controlling Persons, agents or representatives on any
basis (including, without limitation, in contract or tort, under federal or
state securities laws or otherwise) based upon any information provided or made
available, or statements made, to Buyer or its directors, officers, employees,
Affiliates, controlling Persons, agents or representatives (or any omissions
therefrom), except as and only to the extent expressly set forth herein with
respect to the representations and warranties of Seller in Article III and
subject to the limitations and restrictions contained herein. Buyer's sole
rights and remedies relative to transactions contemplated herein are limited to
those set forth herein.
Section 5.12 UPS Owned Facilities. Buyer and Seller will use their good
faith efforts to enter into an agreement with terms and conditions mutually
acceptable to both parties prior to the Closing relating to certain UPS owned
facilities that are currently utilized in the business of the Company (the "UPS
Owned Facilities"). All current agreements and arrangements between UPS or any
of its Affiliates and the Company regarding any of the UPS Owned Facilities will
be terminated simultaneously with the Closing.
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Section 5.13 Rental Fleet Sales.
(a) Following the Closing, Buyer will continue to utilize the Company's
historic depreciation schedule with respect to those vehicles in the Company's
rental fleet with model years 1996 and earlier (the "Sale Vehicles").
(b) Buyer anticipates that it will sell each Sale Vehicle following the
54-month anniversary of the date such Sale Vehicle was put in service. All such
sales will be for cash, and Buyer will use its reasonable best efforts to
maximize the sales price for each Sale Vehicle in accordance with its customary
practices for sales out of Buyer's rental fleet (including, without limitation,
obtaining at least two bona fide bids for each Sale Vehicle), and Buyer will not
give priority to sales out of its existing fleet. Buyer will consult with Seller
at Seller's request regarding the process for sale of the Sale Vehicles and will
provide Seller and its representatives with full access to all records regarding
the sale of the Sale Vehicles.
(c) Within five (5) business days following each sale of a Sale Vehicle,
Buyer will provide to Seller a detailed written calculation of the Realization
Amount (as defined below) with respect to such Sale Vehicle. The "Realization
Amount" shall equal (i) the sales price of the applicable Sale Vehicle minus
(ii) the sum of (A) the net book value of such Sale Vehicle reflected on the
Company's books as of the date of sale and (B) Buyer's standard preparation for
sale charges for such type of Sale Vehicle (which maximum charges currently
range from $250-600 per vehicle). If the Realization Amount is a positive
number, the written calculation of the Realization Amount
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shall be accompanied by payment to Seller (by wire transfer of immediately
available funds to an account designated by Buyer) in an amount equal to 75% of
the Realization Amount. If the Realization Amount is a negative number, Seller
shall pay to Buyer (by wire transfer of immediately available funds to an
account designated by Buyer) within two business days following notification of
such calculation an amount equal to the Realization Amount (expressed as a
positive number). Neither party shall have any obligation under this Section
5.13 with respect to any sale of a Sale Vehicle that occurs (i) prior to the
54-month anniversary of the date such vehicle was placed in service or (ii) more
than 24 months following the Closing Date.
(d) Seller may give notice to Buyer at any time that Seller desires to
assume responsibility for the sale of the Sale Vehicles. If Seller gives such
notice, the provisions of Section 5.13(c) above shall no longer be applicable.
Instead, following such notice, Seller will purchase each Sale Vehicle from
Buyer on the fifty-four month anniversary of the date such Sale Vehicle was
placed in service for a cash price equal to such Sale Vehicle's net book value.
Thereafter, Seller will have no further obligation to Buyer with respect to such
Sale Vehicle or any proceeds thereof.
Section 5.14 Outstanding Debt. At the Closing (or, if the Closing occurs on
January 1, 2000, on the first business day thereafter), Buyer shall repay in
full the Outstanding Debt with funds provided by Buyer.
Section 5.15 Reimbursement Program. Following the Closing, Buyer agrees to
remit to Seller within five days following receipt by Buyer any amounts received
from a governmental
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entity as reimbursement to the Company for environmental remediation activities
taken by the Company prior to the Closing and set forth on Schedule 5.15.
Section 5.16 Additional Actions. After the execution of this Agreement,
upon Buyer's request and solely at Buyer's expense, Seller will cause Deloitte &
Touche LLP to audit the balance sheets of the Company as of December 31, 1997
and 1998 and statements of income and cash flows thereof for the respective
fiscal years then ended.
Section 5.17 Off-Balance Sheet Financing. For the purpose of this
Agreement, from October 31, 1999, the Outstanding Debt will be increased solely
by capital expenditures and decreased solely by the net proceeds from asset
sales. The Company will make a good faith effort to monetize certain fleet
assets through outside financing generating $39.2 million in net proceeds
(structured on the same basis as similar transactions previously undertaken by
the Company or on such other basis as is mutually agreeable to Buyer and
Seller), which the parties anticipate will reduce the Outstanding Debt to
approximately $101 million at the Closing Date. To the extent Outstanding Debt
at Closing is more than $101 million, Buyer will pay the difference to Seller in
cash at Closing. To the extent Outstanding Debt at Closing is less than $101
million, Seller will pay the difference to Buyer in cash at Closing.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 6.1 Conditions to Each Party's Obligation. The respective
obligation of
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each party to consummate the transactions contemplated herein is subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) No statute, rule or regulation shall have been enacted, promulgated or
enforced by any court or governmental authority which prohibits or restricts the
consummation of the transactions contemplated hereby;
(b) There shall not be in effect any judgment, order, injunction or decree
of any court of competent jurisdiction enjoining the consummation of the
transactions contemplated hereby;
(c) Any waiting periods applicable to the transactions contemplated by this
Agreement under the HSR Act shall have expired or early termination shall have
been granted;
(d) All consents, authorizations, waivers and approvals of any governmental
authority or other regulatory body or from parties to contracts or other
agreements to which the Company is a party as may be required to be obtained in
connection with the performance of this Agreement, the failure to obtain which
would prevent the consummation of the transactions contemplated hereby or have a
Company Material Adverse Effect, shall have been obtained; and the transactions
contemplated by that certain Asset Purchase Agreement, dated the date hereof, by
and among Worldwide Dedicated Services, Inc., Rollins Logistics, Inc., Rollins
Dedicated Carriages, Inc. and Rollins Transportation Systems, Inc. shall have
been consummated simultaneously with the Closing.
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Section 6.2 Conditions to Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) The representations and warranties of Buyer contained in Article IV of
this Agreement shall be true and correct in all material respects at the date
hereof and as of the Closing as if made at and as of such time, except for
changes permitted or contemplated hereby and except for representations and
warranties which are as of a specific date;
(b) Buyer shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof;
(c) Buyer shall have delivered to Seller or its Affiliates those items set
forth in Section 1.8 hereof;
(d) Buyer or its Affiliate shall have executed and delivered an alliance
agreement substantially in the form attached hereto as Exhibit 6.2(d) (the
"Alliance Agreement");
(e) Buyer or its Affiliate shall have executed and delivered an investor
rights agreement (the "Investor Rights Agreement") substantially in accordance
with the terms and conditions set forth on the Investor Rights Agreement Term
Sheet attached hereto as Exhibit 6.2(e) (the "Investor Rights Agreement Term
Sheet");
(f) Buyer or its Affiliate shall have executed and delivered a transition
services agreement in form and substance reasonably satisfactory to Buyer and
Seller (the "Transition
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Services Agreement") and shall have reached agreement with Seller on certain
other material transitional issues; and
(g) Buyer or its Affiliate shall have executed and delivered the Access
Agreement (as hereinafter defined).
Section 6.3 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated hereby are further subject to the
satisfaction (or waiver) at or prior to the Closing of the following conditions:
(a) The representations and warranties of Seller contained in Article III
of this Agreement shall be true and correct in all material respects at the date
hereof and as of the Closing as if made at and as of such time, except for
changes permitted or contemplated hereby and except for representations and
warranties which are as of a specific date;
(b) Seller shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof;
(c) The officers and directors of the Company shall have tendered letters
of resignation to Buyer, effective as of the Closing Date;
(d) Seller shall have delivered to Buyer those items set forth in Section
1.7 hereof;
(e) Seller or its Affiliate shall have executed and delivered the Alliance
Agreement;
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(f) Seller or its Affiliate shall have executed and delivered the Investor
Rights Agreement;
(g) Seller or its Affiliate shall have executed and delivered the
Transition Services Agreement and shall have reached agreement with Buyer on
certain other material transition issues; and
(h) Seller or its Affiliate shall have executed and delivered the Access
Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of Seller and Buyer;
(b) by either party if the transactions contemplated hereby shall have been
permanently enjoined by a court of competent jurisdiction, provided that no
party hereto who brought or is affiliated with the party who brought the action
seeking the permanent enjoinment of the transactions contemplated hereby may
seek termination of this Agreement pursuant to this Section 7.1(b);
(c) by Buyer if (i) any of the conditions set forth in Sections 6.1 and 6.3
shall have become incapable of fulfillment and shall not have been waived by
Buyer or (ii) Seller shall
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breach in any material respect any of its representations, warranties, covenants
or other obligations hereunder and, within twenty (20) days after written notice
of such breach to Seller from Buyer, such breach shall not have been cured in
all material respects or waived by Buyer, or Seller shall not have provided
reasonable assurance to Buyer that such breach will be cured in all material
respects on or before the Closing Date; or
(d) by Seller if (i) any of the conditions set forth in Sections 6.1 or 6.2
shall have become incapable of fulfillment and shall not have been waived by
Seller or (ii) Buyer shall breach in any material respect any of its
representations, warranties, covenants or other obligations hereunder and,
within twenty (20) days after written notice of such breach to Buyer from
Seller, such breach shall not have been cured in all material respects or waived
by Seller or Buyer shall not have provided reasonable assurance to Seller that
such breach will be cured in all material respects on or before the Closing
Date;
(e) by Buyer, within five (5) business days following receipt of any
supplement or amendment to the Schedules, by written notice to Seller if the
matter which gives rise to such supplement or amendment individually, or
together with any other such matters, in the aggregate has caused any of the
representations and warranties of Seller set forth in Article III (without
giving effect to such supplement or amendment) to be inaccurate in any material
respect; or
(f) by Buyer or Seller, at any time on or after February 1, 2000, if the
Closing shall not have occurred on or prior to such date; provided, however,
that the right to terminate this
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Agreement under this Section 7.1(f) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the primary
cause of, or resulted in, the failure of the Closing to have occurred on or
before such date.
Section 7.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 7.1 hereof, written notice thereof shall
forthwith be given by Seller, on the one hand, or Buyer, on the other hand, so
terminating to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
Seller, or Buyer. If this Agreement is terminated pursuant to Section 7.1
hereof:
(a) each party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same or, upon prior written notice to such party, shall destroy
all such documents, work papers and other materials and deliver notice to the
parties seeking destruction of such documents that such destruction has been
completed, and all confidential information received by any party hereto with
respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 5.2(b) hereof;
(b) all filings, applications and other submissions made pursuant hereto
shall, at the option of Seller, and to the extent practicable, be withdrawn from
the agency or other Person to which made; and
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(c) there shall be no liability or obligation hereunder on the part of
Seller, the Company or Buyer or any of their respective directors, officers,
employees, Affiliates, controlling Persons, agents or representatives, except
that Seller or Buyer, as the case may be, shall have liability to the other
party if the basis of termination is a willful, material breach by Seller or
Buyer, as the case may be, of one or more of the provisions of this Agreement,
and except that the obligations provided for in this Section, in Section 10.1
hereof, in the Confidentiality Agreement and the non-compete obligations in the
Alliance Agreement shall survive any such termination.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS
Section 8.1 Survival of Representations, Warranties and Agreements. The
representations and warranties of Seller and Buyer made in Articles III and IV
hereof, respectively, shall not survive the Closing and, except as provided in
Section 7.2(c) hereof, shall not survive any termination of this Agreement;
provided that any covenant or agreement of any party contained herein which by
its terms shall survive the Closing shall survive until fully performed, and
provided, further, that this Section 8.1 is not intended in any way to limit any
covenant or agreement of the parties which contemplates performance after the
Closing, including, without limitation, the covenants and agreements set forth
in Sections 5.7 and 5.8 hereof.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification Obligations of Seller. Subject to the
limitations set forth in this Article IX, Seller shall defend and hold harmless
Buyer and its Affiliates, each of their respective officers, directors,
employees, agents and representatives and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Buyer
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and
judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to: (i) the Indemnified Claims (as hereinafter defined); (ii) the
Orlando North VOH Plume (as hereinafter defined); (iii) the Environmental Claims
(excluding the Orlando North VOH Plume) and any other claim or enforcement
action of any governmental authority or any third party (other than the Orlando
North VOH Plume) and any remediation activities of Buyer, in each case to the
extent arising out of the generation, discharge, release, treatment,
transportation, storage or disposal by the Company of any Hazardous Materials at
any time prior to the Closing (collectively, "Environmental Liabilities") to the
extent not constituting a Prior Operations Liability (as defined below), (iv)
any Environmental Liability arising with respect to real property that was
previously owned or leased by the Company but is no longer owned or leased by
the Company as of the Closing Date (a "Prior Operations Liability"); and (v) any
accounts receivable of the Company reflected in the Closing Date Working Capital
that Buyer is unable to collect within 90 days following the Closing Date;
provided, (A) Buyer has used its reasonable best efforts to collect such
receivable, (B) in the event Buyer seeks indemnity under this Section 9.1(iv),
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Buyer shall assign such receivable and all proceeds thereof to Seller and (C)
the indemnification to which Buyer is entitled will be limited to the face
amount of any uncollected receivables.
For purposes of this Agreement, the "Indemnified Claims" shall mean those
Litigation Claims marked with an asterisk on Schedule 3.12 and any claim of the
type described below brought against the Company (or Buyer as the successor to
the Company) after the date hereof to the extent based on an occurrence in
connection with the Company's operations prior to the Closing Date: workers'
compensation, vehicle accident or other personal injury or property damage
claims normally covered under a general liability insurance policy and employee
compensation and benefits (other than employee compensation and benefits accrued
as a liability on the Final Closing Balance Sheet and reflected in the
calculation of the Closing Date Working Capital).
The claims, liabilities, obligations, losses, costs, expenses, penalties,
fines and damages of the Buyer Indemnified Parties described in this Section 9.1
as to which the Buyer Indemnified Parties are entitled to indemnification are
hereinafter collectively referred to as "Buyer Losses."
Section 9.2 Indemnification Procedure.
(a) Promptly after receipt by a Buyer Indemnified Party of notice by a
third party of threatened or filed claim or of the threatened or actual
commencement of any action or proceeding with respect to which such Buyer
Indemnified Party may be entitled to receive payment from the other party for
any Buyer Losses, such Buyer Indemnified Party shall notify Seller, within 30
days of the notice of threatening or filing of such claim or of the threatened
or actual
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commencement of such action or proceeding; provided, however, that the failure
to so notify Seller shall relieve Buyer from liability under this Agreement with
respect to such claim only if, and only to the extent that, such failure to
notify Seller results in the forfeiture by Seller of rights and defenses
otherwise available to Seller with respect to such claim. Seller shall have the
right, upon written notice delivered to the Buyer Indemnified Party within 30
days thereafter, to assume the defense of such action or proceeding, including
the employment of counsel reasonably satisfactory to the Buyer Indemnified Party
and the payment of the fees and disbursements of such counsel. In any action or
proceeding with respect to which indemnification is being sought hereunder, the
Buyer Indemnified Party or Seller, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to retain its
own counsel at such party's own expense. Seller or the Buyer Indemnified Party,
as the case may be, shall at all times use reasonable efforts to keep Seller or
the Buyer Indemnified Party, as the case may be, reasonably apprised of the
status of the defense of any action the defense of which they are maintaining
and to cooperate in good faith with each other with respect to the defense of
any such action.
(b) The Buyer Indemnified Party may not settle or compromise any claim or
consent to the entry of any judgment with respect to which indemnification is
being sought hereunder without the prior written consent of Seller. Seller may
not, without the prior written consent of the Buyer Indemnified Party, settle or
compromise any claim or consent to the entry of any judgment with respect to
which indemnification is being sought hereunder unless (i) simultaneously with
the effectiveness of such settlement, compromise or consent, Seller pays in full
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any obligation imposed on the Buyer Indemnified Party by such settlement,
compromise or consent and (ii) such settlement, compromise or consent does not
contain any equitable order, judgment or term which in any manner affects,
restrains or interferes with the business of the Buyer Indemnified Party or any
of the Buyer Indemnified Party's affiliates.
(c) In the event the Buyer Indemnified Party shall claim a right to payment
pursuant to this Agreement not involving a third party claim covered by Section
9.2(a), the Buyer Indemnified Party shall send written notice of such claim to
Seller. Such notice shall specify the basis for such claim. As promptly as
possible after the Buyer Indemnified Party has given such notice, such Buyer
Indemnified Party and Seller shall establish the merits and amount of such claim
(by mutual agreement, litigation, arbitration or otherwise) and, within five
business days of the final determination of the merits and amount of such claim,
Seller shall pay to the Buyer Indemnified Party immediately available funds in
an amount equal to such claim as determined hereunder.
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Section 9.3 Orlando North VOH Plume Indemnification.
(a) Seller has retained an environmental consultant (the "Consultant"), who
is assessing the extent of the dissolved volatile organic hydrocarbon plume as
identified in the Groundwater Quality Monitoring Report dated September 1999
prepared by Blasand, Bouck & Lee, Inc. ("Orlando North VOH Plume"). Seller is
currently negotiating with the Florida Department of Environmental Protection
("FDEP") to formalize any assessment, remediation, monitoring, risk evaluation
and reporting (as hereinafter referred to as "Corrective Action") that is
required by FDEP. Pursuant to its Section 9.1 indemnification obligation, Seller
shall undertake the Corrective Action agreed to with FDEP (which could include
either long-term groundwater monitoring or risk-based corrective action or
remediation) until the earlier of: (A) FDEP issues a letter indicating that the
Company (or Buyer as the successor to the Company) is not required to perform
any further action with respect to the Orlando North VOH Plume; or (B) the
Consultant has issued a letter or report to FDEP indicating that the Corrective
Action (as approved by FDEP) has been satisfactorily performed, and FDEP has not
objected to the letter or report.
(b) Seller shall manage and control the Corrective Action of the Orlando
North VOH Plume, including, without limitation, the right to retain consultants
and counsel, to manage any investigations, clean-up, response, remediation and
associated activities, and to negotiate, litigate, otherwise contest or settle
any claim relating thereto.
(c) Buyer agrees to reasonably cooperate with Seller to ensure that the
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obligations and commitments with respect to the Orlando North VOH Plume are
carried out. Buyer agrees to provide to Seller such information as may be
reasonably requested regarding the Orlando North VOH Plume and to provide Seller
reasonable access to Buyer's employees on a mutually convenient basis. Buyer
also agrees to provide access to the Orlando North property for the purpose of
allowing Seller to perform activities to fulfill Seller's obligations hereunder
in accordance with the terms of an access agreement to be mutually agreed upon
by the parties hereto ("Access Agreement"); provided that Seller shall conduct
such activities so as to not unreasonably interfere with Buyer's operations.
(d) Buyer shall operate after the Closing Date so as not to compound or
exacerbate the Orlando North VOH Plume. Seller shall not be required to
indemnify Buyer with respect to any compounding or exacerbation of the Orlando
North VOH Plume arising from post-Closing operations of Buyer.
Section 9.4 Liability Limits. Notwithstanding anything to the contrary set
forth herein, Buyer Indemnified Parties shall not make a claim against Seller
for indemnification under Section 9.1(iii) for Buyer Losses unless and until the
aggregate amount of such Buyer Losses exceeds $1,000,000 (the "Buyer Basket"),
in which event the Buyer Indemnified Parties may claim indemnification only for
fifty percent of the Buyer Losses that exceed the Buyer Basket and that arise
under or pursuant to Section 9.1(iii). Seller's indemnification obligations
under Section 9.1(iii) shall not exceed in the aggregate an amount equal to
$10,000,000 (the "Cap Amount").
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Section 9.5 Claims Period. For purposes of this Agreement, a "Claims
Period" is the period during which a Buyer Indemnified Party may initiate a
claim for indemnification pursuant to Section 9.1. The Claims Period under this
Agreement shall commence on the Closing Date and shall terminate as follows:
(a) with respect to Buyer Losses arising under Section 9.1(ii), the Claims
Period shall terminate on the fifth anniversary of the earlier to occur of the
actions (or lack of actions) by FDEP described in the last sentence of Section
9.3(a).
(b) with respect to Buyer Losses arising under Section 9.1(iii), the Claims
Period shall terminate on the fifth anniversary of the Closing Date; and
(c) with respect to Buyer Losses arising under Sections 9.1(i),(iv) and
(v), the Claims Period shall continue indefinitely, except as limited by law
(including by applicable statutes of limitations).
Section 9.6 Exclusive Remedies. Following the Closing, neither Buyer nor
Seller shall make any claim nor have any remedy against the other party arising
out of or relating to the transactions contemplated hereby other than any claim
arising out of or related to (a) indemnification pursuant to Section 5.7(b),
5.8(d) or 9.1 or (b) a breach of any covenant set forth in this Agreement or any
agreement contemplated hereby required to be performed after the Closing.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Except as set forth in this Section 10.1,
whether or not the transactions contemplated herein are consummated pursuant
hereto, each of Seller and Buyer shall pay all fees and expenses incurred by, or
on behalf of, Seller or Buyer, respectively, in connection with, or in
anticipation of, this Agreement and the consummation of the transactions
contemplated hereby.
Section 10.2 Further Assurances. From time to time after the Closing Date,
at the reasonable request of the other party hereto and at the expense of the
party so requesting, each of the parties hereto shall execute and deliver to
such requesting party such documents and take such other action as such
requesting party may reasonably request in order to consummate more effectively
the transactions contemplated hereby.
Section 10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery; (b) facsimile transmission; (c) registered or certified mail, postage
prepaid, return receipt requested; or (d) UPS next day air or document exchange.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
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If to Buyer or Parent, to:
Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Fax No. (302) 426-3815
Attention: Patrick J. Bagley
with a copy to:
Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Fax No. (302) 426-3555
Attention: Klaus M. Belohoubek
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If to Seller or the Company, to:
United Parcel Service, Inc.
55 Glenlake Parkway
Atlanta, GA 30328
Fax No. (404) 828-6440
Attention: Legal Department
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Fax No. (404) 572-5145
Attention: Michael J. Egan III
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmissions, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
Section 10.4 Severability. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which remaining provisions shall remain in full force and effect and the
application of such invalid or unenforceable provision to Persons or
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circumstances other than those as to which it is held invalid or unenforceable
shall be valid and enforced to the fullest extent permitted by law.
Section 10.5 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned, directly or indirectly, including, without limitation, by operation
of law, by any party hereto without the prior written consent of the other
parties hereto.
Section 10.6 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Seller, and its successors and permitted assigns, with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer, and its
respective successors and permitted assigns, with respect to the obligations of
Seller, under this Agreement, and this Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
Section 10.7 Interpretation.
(a) The Article and Section headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement.
(b) As used in this Agreement, the term "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
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(c) As used in this Agreement, the term "Affiliate" shall mean a person
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with the person specified.
Section 10.8 Jurisdiction and Consent to Service. Without limiting the
jurisdiction or venue of any other court, each of Seller and Buyer (a) agrees
that any suit, action or proceeding arising out of or relating to this Agreement
may be brought solely in the state or federal courts of Georgia; (b) consents to
the exclusive jurisdiction of each such court in any suit, action or proceeding
relating to or arising out of this Agreement; (c) waives any objection which it
may have to the laying of venue in any such suit, action or proceeding in any
such court; and (d) agrees that service of any court paper may be made in such
manner as may be provided under applicable laws or court rules governing service
of process.
Section 10.9 Entire Agreement. This Agreement, the Confidentiality
Agreement, the Schedules and other documents referred to herein or delivered
pursuant hereto which form a part hereof constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia (regardless of the
laws that might otherwise
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govern under applicable principles of conflicts of laws thereof) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
Section 10.11 Specific Performance. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
Section 10.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
Section 10.13 Amendment, Modification and Waiver. This Agreement may be
amended, modified or supplemented at any time by written agreement of Seller and
Buyer. Any failure of Seller or Buyer to comply with any term or provision of
this Agreement may be waived, with respect to Buyer, by Seller and, with respect
to Seller, by Buyer, by an instrument in writing signed by or on behalf of the
appropriate party, but such waiver or failure to insist upon strict compliance
with such term or provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply.
Section 10.14 Knowledge. "To the Knowledge of Seller" or any similar phrase
contained in this Agreement shall mean the actual knowledge of the officers of
Seller and the
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Company. "To the knowledge of Buyer" or any similar phrase contained in this
Agreement shall mean the actual knowledge of the officers of Buyer and Parent.
Solely for the purposes of this Section 10.14, the officers of Buyer, Parent,
Seller and the Company shall be deemed to have actual knowledge of any written
notice previously delivered to Buyer, Parent, Seller, or the Company,
respectively.
Section 10.15 Schedules and Exhibits. The Schedules and all exhibits hereto
are hereby incorporated into this Agreement and are hereby made a party hereof
as if set out in full in this Agreement.
Section 10.16 Arbitration.
(a) Any controversy, claim or question or interpretation arising out of or
relating to this Agreement or the breach thereof shall be finally settled by
arbitration in the State of Georgia under the then-effective Commercial
Arbitration Rules of the American Arbitration Association as modified by this
Agreement, and judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction. The award rendered by the arbitrators shall be
final and binding on the parties and not subject to further appeal. Such
arbitration can be initiated by written notice by either party to the other
party, which notice shall identify the claimant's selected arbitrator. The party
receiving such notice shall identify its arbitrator within five (5) business
days following its receipt of such notice. The arbitrator selected by the
claimant and the arbitrator selected by the respondent shall, within five (5)
business days of their appointment, select a third neutral arbitrator.
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In the event that they are unable to do so, either party may request the
American Arbitration Association to appoint the third neutral arbitrator. The
arbitrators shall have the authority to award any remedy or relief that a court
in Georgia could order or grant, including, without limitation, specific
performance of any obligation created under this agreement, the awarding of
punitive damages, the issuance of injunctive or other provisional relief, or the
imposition of sanctions for abuse or frustration of the arbitration process. The
arbitration awards will be in writing and specify the factual and legal basis
for the award.
(b) It is the intent of the parties that any arbitration shall be concluded
as quickly as practicable (but, barring extraordinary circumstances, in any
event not more than twenty (20) days after the date the third arbitrator is
selected). Unless the parties otherwise agree, once commenced, the hearing on
the disputed matters shall be held four days a week until concluded with each
hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrators
shall use their best efforts to issue the final award or awards within a period
of five (5) business days after closure of the proceedings. Failure of the
arbitrators to meet the time limits of this Section 10.16 shall not be a basis
for challenging the award.
(c) The arbitrators shall instruct the non-prevailing party to pay all
costs of the proceedings, including the fees and expenses of the arbitrators and
the reasonable attorneys' fees and expenses of the prevailing party. If the
arbitrators determine that there is not a prevailing party, each party shall be
instructed to bear its own costs and to pay one-half of the fees and expenses of
the arbitrators.
(d) Notwithstanding the foregoing, nothing contained herein shall prevent
either party from seeking injunctive relief in any court.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
UPS LOGISTICS GROUP, INC.
By: /s/ Daniel P. DiMaggio
--------------------------------------------
Name: Daniel P. DiMaggio
Title: Chief Executive Officer and President
UPS TRUCK LEASING, INC.
By: /s/ Daniel P. DiMaggio
--------------------------------------------
Name: Daniel P. DiMaggio
Title: Chief Executive Officer and President
ROLLINS TRUCK LEASING CORP.
By: /s/ Patrick J. Bagley
--------------------------------------------
Name: Patrick J. Bagley
Title: Vice President Finance and Treasurer
ROLLINS LEASING CORP.
By: /s/ I. Larry Brown
--------------------------------------------
Name: I. Larry Brown
Title: Chief Executive Officer and President
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Exhibit 99.4(p)
STRATEGIC ALLIANCE AGREEMENT
THIS STRATEGIC ALLIANCE AGREEMENT, is made and entered into this _____ day
of January, 2000 (the "Alliance Agreement"), by and between WORLDWIDE DEDICATED
SERVICES, INC., a Delaware corporation ("WDS"), UPS LOGISTICS GROUP, INC., a
Delaware corporation ("Logistics"), which is a wholly owned subsidiary of United
Parcel Service of America, Inc. ("United Parcel") which is a wholly owned
subsidiary of United Parcel Service, Inc., a Delaware corporation ("UPS"),
ROLLINS LEASING CORP., a Delaware corporation ("Rollins"), and ROLLINS TRUCK
LEASING CORP., a Delaware corporation ("RTL", and together with WDS, Logistics
and Rollins sometimes referred to herein individually as a "Party" and
collectively as the "Parties").
W I T N E S S E T H:
WHEREAS, WDS is engaged in the business of providing vehicles, drivers,
dispatch services and route planning for customers;
WHEREAS, prior to the execution and delivery of this Alliance Agreement,
UPS Truck Leasing, Inc. ("UPS Truck Leasing"), a wholly owned subsidiary of
Logistics, had supplied WDS with vehicles and certain maintenance services used
in connection with its business;
WHEREAS, simultaneously with the execution and delivery of this Alliance
Agreement, Rollins and UPS have consummated the transactions under a Stock
Purchase Agreement (the "Stock Purchase Agreement"), pursuant to which UPS Truck
Leasing has been transferred to Rollins;
WHEREAS, prior to the execution and delivery of this Alliance Agreement,
Rollins had been engaged in a logistics management and dedicated logistics
business through Rollins Logistics, Inc. ("Rollins Logistics");
WHEREAS, simultaneously with the execution and delivery of this Alliance
Agreement, certain Affiliates of Rollins and Logistics have consummated an Asset
Purchase Agreement (the "Logistics Agreement"), pursuant to which an Affiliate
of Logistics has purchased substantially all of the assets of Rollins Logistics;
WHEREAS, WDS and Rollins have agreed to form a strategic alliance (the
"Alliance") that, based on the terms of this Alliance Agreement, will promote
the Logistics Group as the preferred provider of logistics management and
dedicated logistics services to customers of Rollins' truck leasing services and
will promote Rollins as the preferred provider of truck leasing and related
services to customers of WDS's dedicated logistics services; and
WHEREAS, WDS and Rollins are entering into this Alliance Agreement in order
to provide a flexible and effective framework to govern the Alliance, and
Logistics and RTL are
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entering into this Agreement for the purpose of extending the brand licenses
referred to in Sections 4.5 and 4.6.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following defined terms used in this Alliance
Agreement will have the meanings specified below.
"Affiliate" shall mean, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any officer, director, general partner, managing member or trustee
of such Person, or (iii) any Person who is an officer, director, general
partner, managing member or trustee of any Person described in clauses (i) or
(ii) of this sentence. For purposes of this definition, the term "control,"
(including, with correlative meanings, the terms "controlling," "controlled by"
or "under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding any implication to the contrary contained in this
definition, for purposes of this Agreement, the following entities will not be
deemed to be Affiliates of Rollins: Matlack Systems, Inc.; Dover Downs
Entertainment, Inc.; Rollins, Inc.; and RPC, Inc.
"Alliance" shall have the meaning set forth in the recitals to this
Alliance Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks are authorized to be closed under the laws of the State of Georgia.
"Business Plan" shall mean the annual initial Business Plan and each
subsequent business plan, substantially in the form of Exhibit A hereto, as
revised from time to time during the Term in accordance with Article 4.
"Change in Control" shall mean (a) the consolidation or merger of the
subject corporation with or into any organization (other than a consolidation or
merger in which the subject corporation is the surviving corporation in such
consolidation or merger unless such consolidation or merger has the effect of an
acquisition of ownership referred to in (c) hereof), (b) the direct or indirect
sale, transfer or other disposition of all or substantially all of the subject
corporation's assets, in a single transaction or a series of related
transactions, (c) the direct or indirect acquisition by an entity, or group of
entities acting in concert, of beneficial ownership of more than 25% of the
outstanding voting securities of the subject corporation in a single
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transaction or a series of related transactions, excluding acquisitions by
Rollins family members, existing officers or directors of Rollins, or trusts
established by any of them.
"Committee Member" shall have the meaning set forth in Section 3.1 hereof.
"Joint Planning Committee" shall have the meaning set forth in Section 3.1
hereof.
"Logistics Group" shall mean Logistics and any directly or indirectly held
wholly-owned subsidiary of Logistics that provides Logistics Services as of the
date hereof.
"Logistics Services" shall mean and include the following services:
(i) Warehousing, building and/or leasing facilities, labeling,
receiving, inspection, sorting, parts kitting, order, returns and repairs
management, service parts management, supply chain engineering, inventory
management, and billing and receivables management;
(ii) Domestic and international intermodal or multimodal surface, air,
and sea transport management, pick-up and delivery of consignments, track and
trace inventory systems management, and export/import customs clearance; and
(iii) Software systems planning, development, management, application,
maintenance, upgrade, systems integration, and systems procedure related to
warehousing and transportation.
"Person" shall mean an individual, partnership, association, limited
liability company, corporation, joint venture, sole proprietorship, trust or
other entity.
"Rollins Group" shall mean Rollins and any directly or indirectly held
wholly-owned subsidiary of Rollins that provides Truck Leasing Services as of
the date hereof.
"Term" shall have the meaning set forth in Section 5.1 hereof.
"Territory" shall mean North America.
"Truck Leasing Services" shall mean and include long and short term vehicle
leasing, vehicle rental, vehicle maintenance, washing, emergency road services,
and ancillary services such as permitting, licensing and may include fueling and
fuel tax reporting (based on mutual agreement of the Parties), but shall not
include the provision of drivers for the vehicles.
ARTICLE 2
ALLIANCE SERVICES
2.1 Purpose. WDS and Rollins desire to enter into and create the Alliance
in order to achieve the following goals:
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(a) To provide Rollins with a stream of revenues from the provision of
Truck Leasing Services to WDS and its customers of Logistics Services.
(b) To promote the Logistics Group as the preferred provider of
Logistics Services to the Rollins Group and their respective customers of
Truck Leasing Services.
(c) To promote Rollins as the preferred provider of Truck Leasing
Services to customers of WDS's dedicated Logistics Services.
(d) To work together to achieve growth in the Logistics Group's
Logistics Services business and Rollins' Truck Leasing Services business.
(e) To provide the customers of each of WDS and Rollins with the best
services and solutions to meet their truck leasing and logistics needs at
competitive rates.
1.2 Provision of the Truck Leasing Services.
(a) During the Term, Rollins will be the preferred provider of Truck
Leasing Services to WDS, and to the customers of WDS to whom WDS provides
Logistics Services, to the extent necessary to meet their respective
requirements for Truck Leasing Services. In connection with the foregoing,
and except as provided in Section 2.2(b) below, WDS will cause the members
of the Logistics Group to refer to Rollins all inquiries they receive from
logistics customers seeking Truck Leasing Services. Whenever reasonably
practicable, WDS shall promote the Alliance by referring to its "alliance"
or "partnership" with Rollins as the "preferred provider of Truck Leasing
Services" to the customers of WDS. Without limiting the generality of the
foregoing, unless otherwise agreed upon by the Rollins Committee Member,
proposals by WDS to customers seeking Logistics Services will include
references to Rollins as the preferred provider of Truck Leasing Services.
(b) Notwithstanding the provisions of Section 2.2(a) above, WDS shall
not be obligated under Section 2.2(a):
(i) to the extent a WDS customer has an existing obligation to a
provider of Truck Leasing Services other than Rollins that it is
unwilling to cancel or the cancellation of which would not be cost
effective;
(ii) where a provider of Truck Leasing Services other than
Rollins brings the customer to WDS;
(iii) where Rollins (or other member of the Rollins Group) is
unable or unwilling to provide the Truck Leasing Services;
(iv) where a significant benefit may be derived by a customer of
WDS from an alternative truck leasing solution, and Rollins has chosen
not to (or is unable to) deliver the customer's desired solution; or
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(v) where a WDS customer insists on an alternative truck leasing
solution, whether prior to or following discussions with Rollins.
With regard to Section 2.2(b)(iii) above, whether Rollins has an
existing facility in close enough proximity to properly service a WDS
customer at the time negotiations begin with such customer shall not be
determinative with respect to Rollins' ability to provide Truck Leasing
Services. If WDS offers a new business opportunity to Rollins (whether in
an area where Rollins does not have a facility in close enough proximity to
properly service the customer (as determined by WDS and Rollins or the
relevant customer) or otherwise), Rollins shall have seven Business Days to
(x) if applicable, determine whether it will commit to providing the
necessary facilities, and (y) notify WDS in writing of its determination to
provide such additional facilities and/or pursue negotiations with such
customer (it being understood that any failure of Rollins to so deliver
such written notice shall be deemed a decision by Rollins not to provide
Truck Leasing Services to such customer). Failure of Rollins to respond
within such seven Business Day period shall excuse WDS from its preferred
provider obligations with respect to such opportunity. For purposes of the
foregoing, the seven Business Day period shall begin once Rollins has been
given (or otherwise obtained) the following information concerning the
scope of the business opportunity in question: (A) the term of the relevant
commitment, (B) the number and type of vehicles involved, (C) the type of
cargo involved, (D) the frequency and duration of trips required to service
the business, (E) the expected mileage per vehicle and (F) if applicable,
notification that Rollins' existing facilities are not adequate.
(c) The Truck Leasing Services will be provided by Rollins to WDS and
its customers substantially in accordance with the terms of the contract
attached hereto as Exhibit B, with such changes as the Parties (or Rollins
and the customer, if applicable) shall mutually agree upon prior to the
execution of each contract to provide the Truck Leasing Services during the
Term. If the relevant parties cannot agree on changes requested by either
party with respect to a particular arrangement, the contract set forth as
Exhibit B shall govern the arrangement in question. All such contracts
shall be with WDS, and not with the customer, unless otherwise requested by
the relevant customer.
(d) The pricing for the provision of the Truck Leasing Services by
Rollins to WDS for the initial year of the Term shall be in accordance with
the pricing schedule attached hereto as Exhibit C. Following the initial
year, the Joint Planning Committee will oversee annual negotiation to
determine any adjustments to the pricing schedule for the subsequent years
during the Term, which adjustments will be based on changes in individual
cost components in accordance with the methodology set forth on Exhibit D
attached hereto. Notwithstanding the foregoing, in no event will the price
charged to WDS for Truck Leasing Services exceed the most favorable price
that Rollins charges to any third party for similar services. WDS and
Rollins will consider in good faith and discuss with each other from time
to time alternative pricing for Truck Leasing Services and Logistics
Services for the Parties to be competitive in bidding for certain projects.
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2.3 Dedicated Logistics.
(a) During the Term, WDS (directly or through its Affiliates) will be
the preferred provider of Logistics Services to members of the Rollins
Group, and to customers of the Rollins Group to whom members of the Rollins
Group provide Truck Leasing Services, to the extent necessary to meet their
respective requirements for Logistics Services. In connection with the
foregoing, and except as provided in Section 2.3(b) below, Rollins will
cause the members of the Rollins Group to refer to WDS all inquiries it
receives from its customers seeking Logistics Services. Whenever reasonably
practicable, members of the Rollins Group shall promote the Alliance by
referring to its "alliance" or "partnership" with the Logistics Group as
the "preferred provider of Logistics Services" to customers of the Rollins
Group.
(b) Notwithstanding the provisions of Section 2.3(a), no member of the
Rollins Group shall be obligated to comply with Section 2.3(a):
(i) to the extent the customer has an existing obligation to a
provider of Logistics Services other than WDS that it is unwilling to
cancel or the cancellation of which would not be cost effective;
(ii) where a provider of Logistics Services other than WDS brings
the customer to the Rollins Group;
(iii) where WDS (or other member of the Logistics Group) is
unable or unwilling to provide the Logistics Services;
(iv) where a significant benefit may be derived by a Rollins
Group customer from an alternative logistics solution, and WDS has
chosen not to (or is unable to) deliver the customer's desired
solution; or
(v) where a Rollins Group customer insists on an alternative
logistics solution (whether prior to or following discussions with
WDS).
When Rollins offers a new business opportunity to WDS, WDS shall have
seven Business Days to (x) determine whether it wishes to pursue
negotiations with the customer, (y) notify Rollins in writing of such
determination (it being understood that any failure of WDS to so notify
Rollins shall be deemed a determination not to pursue such negotiations,
and (z) if requested by the relevant customer, make appropriate personnel
available to begin negotiations). Failure of WDS to respond within such
seven Business Day period shall excuse Rollins from its preferred provider
obligations with respect to such opportunity. For purposes of this Section
2.3(b), the seven Business Day period shall begin once WDS has been given
(or otherwise obtained) reasonably sufficient information concerning the
scope of the business opportunity in question.
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ARTICLE 3
ORGANIZATION
3.1. Joint Planning Committee.
(a) WDS and Rollins hereby establish a committee to oversee the
Alliance (the "Joint Planning Committee"), the initial members of which
(the "Committee Members") shall be the individuals identified on Exhibit E
hereto. The Joint Planning Committee will at all times be composed of four
designees from WDS and four designees from Rollins. WDS shall designate one
WDS Committee Member to act as chairman of the Joint Planning Committee
(the "Chairman"). Any vacancy in the Joint Planning Committee created by a
Committee Member designated by WDS shall be filled as soon as is reasonably
practicable by WDS, and any vacancy created by a Committee Member
designated by Rollins shall be filled as soon as is reasonably practicable
by Rollins. Either such Party may change its representatives on the Joint
Planning Committee upon 30 days prior written notice to the other Party.
(b) Initially, the Joint Planning Committee will meet monthly to:
(i) discuss and resolve any issues relating to the provision of
Truck Leasing Services by Rollins to WDS and its customers;
(ii) discuss and resolve any issues relating to the provision of
Logistics Services by WDS to the Rollins Group and its customers;
(iii) develop and implement a Business Plan and approve any
changes thereto;
(iv) discuss and monitor the performance of WDS and Rollins
against the Business Plan;
(v) evaluate and plan joint marketing activities between WDS and
Rollins; and
(vi) design a cross-selling incentive plan and review revenues
generated by each such Party against the targets set forth in the
Business Plan.
(c) Initially, the Joint Planning Committee shall meet at least
monthly, or more frequently as WDS and Rollins agree, to review the status
of the Alliance's operations and strategies (as described above). Such
meetings are to be held alternately at WDS's principal place of business,
and at Rollins' principal place of business, or at such other place as the
Joint Planning Committee may establish. Meetings may be held by telephone
conference call or similar equipment if all Committee Members participating
in the meeting can hear each other, and be heard by each other, at the same
time. The Chairman shall be responsible for giving written notices of such
regular meetings (including descriptions of the matters to be considered at
such meetings) to all Committee
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Members at least seven days before each meeting. Any Committee Member may
call a special meeting of the Joint Planning Committee at any time by
giving at least seven days prior written notice of the meeting to all other
Committee Members. Such notice of meeting shall describe the matters to be
considered by the Joint Planning Committee in reasonable detail. A
Committee Member may waive the right to receive notice of a particular
meeting at any time before, during or after that meeting. No meeting of the
Joint Planning Committee will be effective to conduct business or to take
any action unless (i) there is present at least one WDS Committee Member
and one Rollins Committee Member, and (ii) a majority of the Committee
Members are present. The Chairman (or in his absence, his designee) shall
chair all meetings of the Joint Planning Committee. The Joint Planning
Committee may adopt such procedural rules as they deem appropriate for the
conduct of the Joint Planning Committee's business.
(d) Unless otherwise required or permitted by this Alliance Agreement,
the Joint Planning Committee shall act by resolutions passed unanimously by
the Committee Members present and voting at duly constituted meetings of
the Joint Planning Committee at which at least a majority of all Committee
Members are present and at which at least one WDS Committee Member and one
Rollins Committee Member are present. Rollins shall cause each Rollins
Committee Member to grant a revocable proxy to each other Rollins Committee
Member to vote at any meeting of the Joint Planning Committee at which such
Rollins Committee Member is not present or is present but cannot vote with
respect to such matter. WDS shall cause each WDS Committee Member to grant
a revocable proxy to each other WDS Committee Member to vote at any meeting
of the Joint Planning Committee at which such WDS Committee Member is not
present or is present but cannot vote with respect to such matter.
3.2 Access to Books and Records. Each of Rollins and WDS will create and
maintain accurate books and records regarding the provision of Truck Leasing
Services and Logistics Services, respectively, and of its respective obligations
under this Alliance Agreement. For purposes of ensuring compliance with this
Alliance Agreement, and for such other reasonable purposes in connection with
the consummation of the transactions contemplated by this Alliance Agreement,
WDS and Rollins shall each have the right, upon reasonable notice and during
normal business hours, to inspect, examine, and take extracts from or make
copies of such books and records maintained by the other Party. WDS and Rollins
shall each permit representatives of the other access to its place of business
upon reasonable notice and during normal business hours for the purpose of such
examinations.
ARTICLE 4
JOINT BUSINESS PLANNING
4.1. Purpose of Business Plan. The Business Plan will serve as a blueprint
for the business, activities and development of the Alliance and the targeted
financial impact of such business, activities and development on WDS and
Rollins. The Business Plan will focus on developing a joint marketing plan
driven by customers and market research to promote cross-selling of Rollins' and
the Logistics Group's services and will outline quarterly projections for
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revenue generated by cross-sales. In addition, it will outline a training
program by each of WDS and Rollins for the other Party's sales personnel. WDS
and Rollins agree that the Business Plan is not intended to be, nor will it be
construed as, an enforceable contract or legal agreement between the Parties,
except as provided in Section 5.2(a).
4.2. Business Plan Review. The Joint Planning Committee will have the
primary responsibility for formulating a mutually agreeable Business Plan each
year and then implementing it. Each Business Plan will encompass a one year
period.
4.3. Marketing Materials. The Joint Planning Committee (or a relevant
subcommittee formed thereby) will develop joint marketing materials to promote
the Alliance and the services of Rollins and the Logistics Group (including (a)
promotional and sales materials, brochures and advertising materials and (b)
press releases, speeches and other publicity attempts) to customers. Drafts of
any such materials may also be submitted by WDS or Rollins to the Joint Planning
Committee for its consideration and review. Copies of all such materials will be
approved by the Joint Planning Committee in advance of the distribution thereof
or of publication activities conducted or made with respect thereto.
4.4 Cross Selling. WDS and Rollins will design a cross-selling incentive
plan in which their respective sales forces will participate. Sales personnel of
each such Party will receive training from the other Party and will be
encouraged to promote the Truck Leasing Services provided by Rollins and the
Logistics Services provided by WDS, as applicable. To that end, each of WDS and
Rollins will provide the other Party with direct access to its customers for the
purpose of promoting their Logistics Services and Truck Leasing Services,
respectively; provided, however, that all inquiries to Rollins from its
customers regarding Logistics Services will be directed to WDS, and all inquires
to WDS (or members of the Logistics Group) from its customers regarding stand
alone Truck Leasing Services will be directed to Rollins.
4.5. Use of the Logistics Group Marks.
(a) Logistics hereby grants to Rollins a non-exclusive, royalty free,
nontransferable license to use the Logistics Group Marks described on
Exhibit F hereto (the "UPS Marks") in the Territory (directly or through a
sublicense to the members of the Rollins Group, as necessary) during the
Term for the purpose of marketing, promoting and selling the Alliance and
the Logistics Services promoted to the customers of the Rollins Group in
accordance with the terms of this Alliance Agreement. Rollins shall cause
each member of the Rollins Group to properly display and use the UPS Marks
in accordance with this Alliance Agreement.
(b) (i) Logistics has the right, at all reasonable times, to inspect
the Rollins Group's relevant facilities and review the manner in which the
Rollins Group uses the UPS Marks so that Logistics may satisfy itself that
the UPS Marks are used in accordance with this Alliance Agreement;
provided, however, that Logistics will not exercise such right in a manner
which unreasonably interferes with the Rollins Group's normal business
operations.
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(ii) The Rollins Group shall adhere to the trademark usage
guidelines furnished by Logistics for the depiction of the UPS Marks
("Trademark Usage Guidelines") and any reasonable modifications or
amendments thereto. The guidelines set forth on Exhibit G hereto will
function as the current version of the Trademark Usage Guidelines. The
Rollins Group shall also adhere to the marketing communications
guidelines furnished by Logistics and any reasonable modifications or
amendments thereto (the "Marketing Communications Guidelines"), the
current version of which is attached hereto as Exhibit H. In the event
of a conflict between this Alliance Agreement on the one part and
either of the Trademark Usage Guidelines or Marketing Communications
Guidelines on the other part, this Alliance Agreement shall govern.
(iii) The Rollins Group shall include on all advertising and
promotional materials, packaging and labels bearing the UPS Marks the
following notice:
"[UPS Marks] is a registered trademark of United Parcel Service,
Inc. and its subsidiaries. Used under license."
[With respect to electronic presentations of the UPS Marks, this
notice may be contained on Rollins' web-site under "Legal Information"
or, if software, in the "About" box or where the Rollins' own
proprietary notices appear.]
(iv) Prior to any first use of the UPS Marks on advertising or
promotional materials by the Rollins Group, Rollins agrees to furnish
Logistics with samples of such advertising and promotional materials,
packaging and labels bearing any of the UPS Marks for trademark usage
approval (which approval shall not be unreasonably withheld).
The Rollins Group shall amend the future use of the UPS Marks in any
such advertising and promotional materials, packaging and labels if
the use of the UPS Marks are not approved by Logistics. Logistics will
have ten Business Days from the date of receipt to approve or object
to materials submitted for trademark usage approval. If no objection
is received by Rollins within such ten Business Days, such materials
will be deemed approved. Use of the UPS Marks by the Rollins Group
that is substantially identical to uses of the UPS Marks that have
previously been approved or that is being used for the same program
(with substantially similar presentation of the UPS Marks) as has
previously been approved do not require submission for approval.
(v) The Rollins Group must immediately cease using any previously
approved material from which Logistics withdraws its approval.
Logistics will not unreasonably rescind approval of any materials
previously approved.
(c) (i) The Rollins Group acquires and will acquire no rights, title
or interest in the UPS Marks or the goodwill associated with them, other
than the right to
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use the UPS Marks in accordance with this Alliance Agreement. In accepting
this Alliance Agreement, Rollins acknowledges (on behalf of the Rollins
Group) UPS's ownership of the UPS Marks, its validity and the goodwill
connected with it. The Rollins Group will not attack the UPS Marks, nor
assist anyone in attacking it. Rollins further agrees that the Rollins
Group will not make any application to register the UPS Marks, nor will
they use any confusingly similar trademark, service mark, trade name, or
derivation, during the term of this Alliance Agreement or thereafter. This
paragraph will survive the termination of this Agreement.
(ii) At the request and sole expense of Logistics, Rollins will
execute and will cause any relevant member of the Rollins Group to
execute, any papers or documents reasonably necessary to protect the
rights of UPS in the UPS Marks and execute and deliver such other
documents as may be reasonably requested by Logistics.
(iii) Logistics represents and warrants that as of the date
hereof the UPS Marks do not infringe upon any trademarks and are not
involved in any opposition, invalidation, cancellation or litigation
that would threaten the Rollins Group's use of the UPS Marks in
connection with the transactions contemplated by this Alliance
Agreement and, to Logistics' knowledge, no such action is threatened
with respect to the UPS Marks. In the event that such action occurs,
Logistics will cause UPS to vigorously protect the UPS Marks.
(d) Rollins shall promptly notify Logistics of any unauthorized use of
the UPS Marks that comes to the Rollins Group's attention. Logistics in its
reasonable discretion may take such action as may be required to prosecute
the infringement. In the event that Logistics decides that action should be
taken against such third parties, Logistics may take such action either in
its own name (or in the name of UPS or any subsidiary thereof), or
alternatively, Logistics may authorize Rollins to initiate such action in
Rollins' name but Rollins shall have no obligation to do so. In either
event, Rollins agrees and agrees to cause the relevant members of the
Rollins Group to cooperate fully with Logistics (or UPS or relevant
subsidiary thereof), at Logistics' expense, to whatever extent it is
necessary to prosecute such action, all expenses being borne by Logistics
and all damages that may be recovered being solely for the account of
Logistics.
(e) In the event the Rollins Group violates the UPS Trademark Usage
Guidelines or the UPS Marketing Communications Guidelines and continues to
do so for a continuous 45 day period or for three periods of 30 days each
during a calendar year following written notice from Logistics, such
violation shall constitute a material breach of this Agreement and
Logistics may terminate this Agreement in accordance with Section 5.2
hereof.
(f) The Parties agree that a breach of this Section 4.5 may give rise
to irreparable injury to the non-breaching Party and its Group that cannot
be compensated for adequately by damages. Consequently, the Parties agree
that each Party shall be entitled, in addition to all other remedies
available, to injunctive and other equitable relief
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to prevent a breach of this Section 4.5 and to secure the enforcement of
the provisions of this Section 4.5 in any court of competent jurisdiction
in the United States or any state thereof (and the Parties agree to waive
any requirement for the posting of bond in connection with such remedy).
4.6. Use of the RTL Marks.
(a) RTL hereby grants to WDS a non-exclusive, royalty free,
nontransferable license to use the RTL Marks described on Exhibit I hereto
(the "RTL Marks") in the Territory (directly or through a sublicense to the
other members of the Logistics Group, as necessary) during the Term for the
purpose of marketing, promoting and selling the Alliance and the Truck
Leasing Services to the customers of WDS in accordance with the terms of
this Alliance Agreement. WDS shall properly display and use the RTL Marks
in accordance with this Alliance Agreement.
(b) (i) RTL has the right, at all reasonable times, to inspect WDS's
relevant facilities and review the manner in which WDS uses the RTL Marks
so that RTL may satisfy itself that the RTL Marks are used in accordance
with this Alliance Agreement; provided, however, that RTL will not exercise
such right in a manner which unreasonably interferes with WDS's normal
business operations.
(ii) WDS shall adhere to the trademark usage guidelines furnished
by RTL for the depiction of the RTL Marks ("Trademark Usage
Guidelines") and any reasonable modifications or amendments thereto.
The guidelines set forth on Exhibit J hereto will function as the
current version of the Trademark Usage Guidelines. WDS shall also
adhere to the marketing communications guidelines furnished by RTL and
any reasonable modifications or amendments thereto (the "Marketing
Communications Guidelines"), the current version of which is attached
hereto as Exhibit K. In the event of a conflict between this Alliance
Agreement on the one part and either of the Trademark Usage Guidelines
or Marketing Communications Guidelines on the other part, this
Alliance Agreement shall govern.
(iii) WDS shall include on all advertising and promotional
materials, packaging and labels bearing the RTL Marks the following
notice:
"[RTL Marks] is a registered trademark of Rollins Truck Leasing
Corp. Used under license."
[With respect to electronic presentations of the RTL Marks, this
notice may be contained on WDS' web-site under "Legal Information" or,
if software, in the "About" box or where WDS's own proprietary notices
appear.]
(iv) Prior to any first use of the RTL Marks on advertising or
promotional materials by WDS, WDS agrees to furnish RTL with samples
of such advertising and promotional materials, packaging and labels
bearing any of the
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RTL Marks for trademark usage approval (which approval shall not be
unreasonably withheld).
WDS shall amend the future use of the RTL Marks in any such
advertising and promotional materials, packaging and labels if the use
of the RTL Marks are not approved by RTL. RTL will have ten Business
Days from the date of receipt to approve or object to materials
submitted for trademark usage approval. If no objection is received by
WDS within such ten Business Days, such materials will be deemed
approved. Use of the RTL Marks by WDS that is substantially identical
to uses of the RTL Marks that have previously been approved or that is
being used for the same program (with substantially similar
presentation of the RTL Marks) as has previously been approved do not
require submission for approval.
(v) WDS must immediately cease using any previously approved
material from which RTL withdraws its approval. RTL will not
unreasonably rescind approval of any materials previously approved.
(c) (i) WDS acquires and will acquire no rights, title or interest in
the RTL Marks or the goodwill associated with them, other than the right to
use the RTL Marks in accordance with this Alliance Agreement. In accepting
this Alliance Agreement, WDS acknowledges RTL' ownership of the RTL Marks,
its validity and the goodwill connected with it. WDS will not attack the
RTL Marks, nor assist anyone in attacking it. WDS further agrees that WDS
will not make any application to register the RTL Marks, nor will they use
any confusingly similar trademark, service mark, trade name, or derivation,
during the term of this Alliance Agreement or thereafter. This paragraph
will survive the termination of this Agreement.
(ii) At the request and sole expense of RTL, WDS will execute any
papers or documents reasonably necessary to protect the rights of RTL
in the RTL Marks and execute and deliver such other documents as may
be reasonably requested by RTL.
(iii) RTL represents and warrants that as of the date hereof the
RTL Marks do not infringe upon any trademarks and are not involved in
any opposition, invalidation, cancellation or litigation that would
threaten WDS's use of the RTL Marks in connection with the
transactions contemplated by this Alliance Agreement and, to RTL'
knowledge, no such action is threatened with respect to the RTL Marks.
In the event that such action occurs, RTL will vigorously protect the
RTL Marks.
(d) WDS shall promptly notify RTL of any unauthorized use of the RTL
Marks that comes to WDS's attention. RTL in its reasonable discretion may
take such action as may be required to prosecute the infringement. In the
event that RTL decides that action should be taken against such third
parties, RTL may take such action either in its own name, or alternatively,
RTL may authorize WDS to initiate such action in WDS'
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name but WDS shall have no obligation to do so. In either event, WDS agrees
to cooperate fully with RTL, at RTL' expense, to whatever extent it is
necessary to prosecute such action, all expenses being borne by RTL and all
damages that may be recovered being solely for the account of RTL.
(e) In the event WDS violates the RTL Trademark Usage Guidelines or
the RTL Marketing Communications Guidelines and continues to do so for a
continuous 45 day period or for three periods of 30 days each during a
calendar year following written notice from RTL, such violation shall
constitute a material breach of this Agreement and RTL may terminate this
Agreement in accordance with Section 5.2 hereof.
(f) The Parties agree that a breach of this Section 4.6 may give rise
to irreparable injury to the non-breaching Party and its Group that cannot
be compensated for adequately by damages. Consequently, the Parties agree
that each Party shall be entitled, in addition to all other remedies
available, to injunctive and other equitable relief to prevent a breach of
this Section 4.6 and to secure the enforcement of the provisions of this
Section 4.6 in any court of competent jurisdiction in the United States or
any state thereof (and the Parties agree to waive any requirement for the
posting of bond in connection with such remedy).
(g) WDS shall have the right to extend the rights to use the RTL Marks
under this Section 4.6 to any members of the Logistics Group, in which
event WDS will assure compliance by such members with the terms of this
Section.
ARTICLE 5
TERM AND TERMINATION; REMEDIES
5.1 Term. This Alliance Agreement will commence on the date hereof and
shall remain in full force and effect for a period of five years (such period
together with any extensions as provided herein, the "Term"), unless terminated
earlier pursuant to Section 5.2 below. This Alliance Agreement will renew for
such additional terms as will be agreed upon by WDS and Rollins.
5.2 Termination. This Alliance Agreement may be terminated at any time
during the Term:
(a) by either WDS or Rollins in the event of a material breach by the
other Party of the terms of this Alliance Agreement or the Staffing
Services Agreement that is not cured within 30 days following written
notice of such breach (or as otherwise provided under Sections 4.5 and 4.6
hereof);
(b) by either WDS or Rollins in the event of a Change of Control of
the other Party;
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(c) by either WDS or Rollins in the event of the bankruptcy of the
other Party;
(d) by either WDS or Rollins if any of the performance goals set forth
on Exhibit L hereto are not met; or
(e) by either WDS or Rollins by notice to the other Party given within
30 days following the first anniversary of this Agreement, which
termination shall be effective 90 days following the giving of such notice
(but not earlier than 90 days following the first anniversary).
Termination under this Section 5.2 will not be deemed a waiver of any right
or remedy either Party may have for breach hereunder.
5.3 Specific Performance. In the event of a breach of this Alliance
Agreement, the aggrieved Party shall be entitled to seek specific performance or
other equitable relief in addition to any other remedies that may be available
to such Party.
ARTICLE 6
CONFIDENTIALITY/NON-COMPETITION
6.1 Confidential Information. In the performance of their respective
obligations under this Alliance Agreement, WDS, other members of the Logistics
Group and Rollins may disclose to each other certain confidential and
proprietary information relating to their respective businesses ("Confidential
Information"). All information exchanged by the Parties (including, for purposes
of this Article 6, any member of the Logistics Group that is not a Party hereto)
under this Alliance Agreement shall be considered Confidential Information
unless it is subject to any of the exceptions in Section 6.3.
6.2 Non-Disclosure. Each recipient of Confidential Information agrees that
it shall (and shall cause its respective officers, directors, employees, agents
and Affiliates to):
(a) make no use of any Confidential Information belonging to the other
Party except as necessary for the performance of its obligations under this
Alliance Agreement;
(b) not disclose to third parties any of the Confidential Information
belonging to the other Party without the prior written consent of such
Party;
(c) take such precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure of
Confidential Information to third parties, and
(d) upon the expiration of the Term or earlier termination of this
Alliance Agreement, promptly return any Confidential Information and all
copies thereof (in
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whatever format) in its possession to the other Party (or, upon the written
request of the other Party, to destroy all such materials).
6.3 Exceptions. Notwithstanding any of the foregoing, the obligations under
Section 6.2 shall not apply to:
(a) any information which at the time of disclosure is publicly
available or public knowledge;
(b) any information which the receiving Party possesses at the time of
disclosure of the Confidential Information and which was not acquired,
directly or indirectly from the other Party;
(c) any information required by applicable law or court order to be
disclosed, but then only (i) to the extent such disclosure is so required;
and (ii) following written notice of such obligation to the affected Party;
and
(d) any information acquired from a third party who has a right to
disclose such information.
6.4 Non-Competition.
(a) Except as permitted in Section 6.4(c) below, during the Term and
for a period of two years following the end of the Term, (i) none of the
members of the Logistics Group and none of their respective Affiliates will
engage in the provision of Truck Leasing Services to any third party that
is not an Affiliate of such member in the Territory and (ii) none of the
members of the Rollins Group and none of their respective Affiliates will
engage in the provision of Logistics Services in the Territory to any third
party that not an Affiliate of such member.
(b) If either Party or its Affiliate (the "Bidding Party") anticipates
making an offer to a potential seller to acquire a business that has a
division or subsidiary, or certain customer contracts, the ownership of
which would violate Section 6.4(a) (a "Prohibited Business"), the Bidding
Party shall notify the other Party (the "Non-Bidding Party") sufficiently
in advance of the making of such offer to permit the Parties to discuss in
good faith a joint offer pursuant to which the Non-Bidding Party would
acquire the Prohibited Business. The Bidding Party will share with the
Non-Bidding Party all information in its possession regarding the
Prohibited Business, and the Bidding Party will assure that any
confidentiality agreement entered into by it in connection with such
transaction permits such sharing of information.
(c) In the event either Party or its Affiliate acquires a Prohibited
Business following the consultation required by Section 6.4(b) above, such
Party (the "Selling Party") agrees (i) to notify the other Party (the
"Non-Selling Party") in writing of such acquisition, including a reasonable
description of the Prohibited Business, (ii) to make the personnel,
facilities and books and records of the Prohibited Business fully available
to
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the Non-Selling Party and its representatives to the extent requested by
the Non-Selling Party, and (iii) to use commercially reasonable efforts to
sell or otherwise dispose of the Prohibited Business within one year from
the date of acquisition. Within 30 days of the delivery of the notice
described in clause (i) above, the Non-Selling Party shall have the right
to provide a written offer (the "Offer") to purchase the Prohibited
Business. For a period of 30 days following the delivery of the Offer, the
Selling Party will negotiate in good faith with the Non-Selling Party
regarding the Offer, and shall make such modifications to the Offer as are
agreed upon in such negotiations. If the Selling Party declines to accept
the Offer (as so modified), the Selling Party shall be free to sell the
Prohibited Business to any Person that is not an Affiliate of the Selling
Party (a "Bona Fide Purchaser"), subject to the remaining provisions of
this Section 6.4(c). Thereafter, the Selling Party shall promptly notify
the Non-Selling Party in writing (the "Third Party Notice") if the Selling
Party receives an offer to purchase the Prohibited Business that it wishes
to accept from any Bona Fide Purchaser (a "Third Party Offer"), which such
Third Party Notice shall include a reasonable description of the terms of
the Third Party Offer. If the purchase price (taking into account timing of
payment and form of consideration) under the terms of the Third Party Offer
is less than the purchase price under the terms of the Offer (as modified),
then, for a period of 20 days after receipt of the Third Party Notice by
the Non-Selling Party, the Non-Selling Party shall have the right to accept
the Third Party Offer. Thereafter, the Parties shall work as promptly as is
reasonably practicable to complete the acquisition of the Prohibited
Business on the terms and conditions of the Third Party Offer.
Notwithstanding the foregoing provisions of this Section 6.4, no sale or
disposition of a Prohibited Business shall be required if (x) the annual
revenues from such the Prohibited Business do not exceed $5,000,000, or (b)
the Selling Party is not able to obtain an acceptable Third Party Offer
using commercially reasonable efforts, in which event the Selling Party may
operate the Prohibited Business through the normal termination dates
contained in any relevant contracts, without extensions or renewals and
without soliciting new business that would violate the terms of Section
6.4(a).
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Each Party hereby represents and warrants that it has all necessary
corporate power and authority to execute and deliver this Alliance Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by such Party of
this Alliance Agreement, and the consummation by such Party of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action, and no other corporate proceedings on the part of such Party are
necessary to authorize this Alliance Agreement or to consummate the transactions
contemplated hereby. This Alliance Agreement has been duly executed and
delivered by such Party and, assuming the due authorization, execution and
delivery by the other Party, constitutes a legal, valid and binding obligation
of such Party enforceable against it in accordance with its terms.
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ARTICLE 8
INDEMNIFICATION
8.1 Indemnification. Each Party hereto agrees to indemnify, defend and hold
harmless the other Party and their respective Affiliates, subsidiaries,
officers, directors, employees and agents (any such Person, an "Indemnitee")
from and against any and all claims, losses, damages, fines, penalties, costs
and expenses (including reasonable legal and accounting fees) (collectively,
"Losses") which may be imposed upon or incurred by or asserted against the
Indemnitee as a result of or arising out of (a) the breach by such Party (the
"Indemnifying Party") of any representation or warranty contained in this
Alliance Agreement, (b) the failure of the Indemnifying Party to perform any
covenant or agreement required to be performed by such Party under the terms of
this Alliance Agreement, or (c) caused by the gross negligence or willful
misconduct of the Indemnifying Party, any members of its Group, or the agents or
employees of any thereof.
8.2 Procedures.
(a) Subject to Section 8.2(b) below, if an Indemnified Party shall
claim a right to payment pursuant to this Article 8, such Indemnified Party
shall send written notice of such claim to the Indemnifying Party. Such
notice shall specify the basis for such claim. As promptly as possible
after the Indemnified Party has given such notice, such Indemnified Party
and the Indemnifying Party shall establish the merits and amount of such
claim (by mutual agreement, litigation, arbitration or otherwise) and,
within five business days of the final determination of the merits and
amount of such claim, the Indemnifying Party shall pay to the Indemnified
Party immediately available funds in an amount equal to such claim as
determined hereunder.
(b) Promptly after receipt by an Indemnified Party of notice by a
third party of any complaint or the commencement of any action or
proceeding with respect to which such Indemnified Party may be entitled to
receive payment from the other party for any Losses, such Indemnified Party
shall notify the Indemnifying Party within 20 days of such complaint or of
the commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall relieve the Indemnifying
Party from liability under this Alliance Agreement with respect to such
claim only if, and only to the extent that, such failure results in the
forfeiture by the Indemnifying Party of rights and defenses otherwise
available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice delivered to
the Indemnified Party within 30 days thereafter (which written notice must
include a binding acknowledgment of the Indemnifying Party that such claim
constitutes an indemnifiable Loss hereunder), to assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of the fees and disbursements of such
counsel. If the Indemnifying Party declines to assume the defense of the
action within such 30-day period, then such Indemnified Party may employ
counsel to represent or defend it in any such action and the Indemnifying
Party shall pay the reasonable fees and disbursements of such counsel as
incurred; provided, however, that the Indemnifying Party shall not be
required to pay
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the fees and disbursements of more than one counsel for all Indemnified
Parties in any jurisdiction in any single action or proceeding. In any
action with respect to which indemnification is being sought hereunder, the
Indemnified Party or the Indemnifying Party, whichever is not assuming the
defense of such action, shall have the right to participate in such
litigation and to retain its own counsel at such party's own expense. The
Indemnifying Party or the Indemnified Party, as the case may be, shall at
all times use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status of
the defense of any action the defense of which they are maintaining and to
cooperate in good faith with each other with respect to the defense of any
such action.
ARTICLE 9
MISCELLANEOUS
9.1 No Individual Authority. Neither Party shall, without the express,
prior written consent of the other Party, take any action for or on behalf of or
in the name of the other Party, assume, undertake or enter into any commitment,
debt, duty or obligation binding upon any other Party, except for actions
expressly provided for in this Alliance Agreement or pursuant to agreements
entered into between the Parties.
9.2 Force Majeure. No Party shall be responsible or liable to the others
for failure or delay in its performance of this Alliance Agreement due to war,
fire, accident or other casualty, or any labor disturbance or act of God or the
public enemy, or any other contingency beyond such Party's reasonable control
("Force Majeure Event"). In addition, in the event of the applicability of this
Section 9.2, the Party affected by such Force Majeure Event shall use all
commercially reasonable efforts to eliminate, cure and overcome any of such
causes and resume performance of its obligations.
9.3 Governing Law. This Alliance Agreement shall be construed in accordance
with, and governed by, the laws of the State of New York.
9.4 Severability. Should any part of this Alliance Agreement or any of the
provisions hereof for any reason be declared to be invalid, such decision or
determination shall not in any way affect the validity of the remaining portions
of this Alliance Agreement, all of which shall remain in full force and effect
as if the portion declared to be invalid had not been contained herein at the
time of the execution of this Alliance Agreement.
9.5 Headings; Number. The subject headings of this Alliance Agreement are
included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions. Whenever the context so requires,
the singular shall include the plural and the plural shall include the singular.
9.6 Assignment. This Alliance Agreement shall be binding on, and shall
inure to the benefit of, each of the Parties and their respective successors and
permitted assigns. No Party shall be permitted to assign its rights or
obligations under this Alliance Agreement (whether by
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merger, operation of law or otherwise) without the express written consent of
the other Parties, except that (a) Rollins may assign its interest to a
wholly-owned subsidiary of Rollins and (b) WDS may assign its interest to UPS or
any wholly-owned subsidiary of UPS, so long as in the case of any such
assignment under clause (a) or (b), the assignee agrees in writing to be bound
by the terms of this Alliance Agreement, the assignee retains its wholly-owned
status during the Term and the assignor remains primarily liable for all
obligations hereunder.
9.7 Entire Agreement. This Alliance Agreement constitutes the entire
agreement among the Parties regarding the subject matter hereof, and supersedes
all prior agreements, negotiations or understandings between them concerning the
subject matter hereof.
9.8 Amendments. This Alliance Agreement may not be amended, supplemented or
modified except in a writing signed by the Parties hereto.
9.9 Waiver. No waiver of any default hereunder by either Party or any
failure to enforce any rights hereunder shall be deemed to constitute a waiver
of any subsequent default with respect to the same or any other provisions
hereof.
9.10 Notices. Any notice required or permitted to be given hereunder shall
be made in writing and shall be given to the Party to receive such notice by (i)
hand delivery, (ii) first-class registered or certified mail, postage prepaid,
return receipt requested, (iii) overnight courier service, postage prepaid or
(iv) telecopy with evidence of confirmation of transmission, in each case at the
address or telecopy number set forth below:
To WDS or Logistics: UPS Logistics Group, Inc.
990 Hammond Drive
Atlanta, Georgia 30328
Attention: Legal Manager
Telefax No.: (770) 206-4444
With copies to: UPS Legal Department
55 Glenlake Parkway
Atlanta, Georgia 30328
Attention: Chief Legal Counsel
Telefax No.: (404) 828-6440
and to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Michael J. Egan III
Telefax No.: (404) 572-5100
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To Rollins or RTL: Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Attention: Patrick J. Bagley
Telefax No.: (302) 426-3815
With a copy to: Rollins Leasing Corp.
2200 Concord Pike
One Rollins Plaza
Wilmington, DE 19803
Attention: Klaus M. Belohoubek
Telefax No.: (302) 426-3555
Either Party may change the information specified herein for the receipt of
notices by giving written notice to the other Party in accordance with the
provisions of this Section 9.10.
9.11 Counterparts. This Alliance Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which taken
together will constitute one and the same instrument.
9.12 Third Party Beneficiaries. This Alliance Agreement is for the sole
benefit of the Parties hereto and no third party may claim any right, or enforce
any obligation of the Parties, hereunder.
9.13 Relationship. The Parties intend to create an independent contractor
relationship and nothing contained in this Alliance Agreement will be construed
to make either (i) WDS or any member of the Logistics Group, or any Affiliates
of any of the foregoing, on the one hand, or (ii) Rollins or any Affiliates of
Rollins on the other hand, partners, principals, agents or employees of the
other. Neither WDS and Logistics nor Rollins and RTL will have any right, power
or authority, express or implied, to bind the other.
9.14 Dispute Resolution. Any controversy, claim or question of
interpretation arising out of or relating to this Alliance Agreement (including
without limitation a claimed breach of any of the provisions hereof) that is not
resolved by the Parties (a "Dispute"), shall be resolved in accordance with the
provisions of this Section 9.14:
(a) Initially, any such Dispute may be submitted by either Party to
the Joint Planning Committee for resolution, by delivering written notice
of such Dispute, including a brief description thereof, to the Chairman of
the Joint Planning Committee, with a copy to the other Party. The Joint
Planning Committee shall work in good faith to resolve such Dispute
(including by calling a meeting or meetings of the Joint Planning
Committee, as reasonably necessary); provided, however, that if the Joint
Planning Committee cannot resolve such Dispute within 30 days of its
receipt of the notice described in this subsection (a), such Dispute shall
be resolved in accordance with subsection (b) below.
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(b) If the Dispute is not resolved in accordance with subsection (a)
above, the Chief Financial Officer of Rollins (the "Rollins CFO") and the
Chief Financial Officer of the Transportation Management Group of Logistics
(the "Logistics CFO") shall meet in good faith to resolve such Dispute. If
the Rollins CFO and the Logistics CFO are unable to resolve such Dispute
within 60 days following the notice described in subsection (a) above, such
Dispute may be submitted by either Party to binding arbitration in
accordance with the remaining provisions of this Section 9.14.
(c) If the Dispute is not resolved in accordance with subsection (b)
above, the Dispute shall be finally settled by arbitration in the City of
Washington, D.C. under the then-effective Commercial Arbitration Rules of
the American Arbitration Association as modified by this Alliance
Agreement, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction. The award rendered by the
arbitrators shall be final and binding on the Parties and not subject to
further appeal. Such arbitration can be initiated by written notice by
either Party (after compliance with the escalation provisions of
subsections (a) and (b) above) to the other Party, which notice shall
identify the claimant's selected arbitrator. The Party receiving such
notice shall identify its arbitrator within five Business Days following
its receipt of such notice. The arbitrator selected by the claimant and the
arbitrator selected by the respondent shall, within five Business Days of
their appointment, select a third neutral arbitrator. In the event that
they are unable to do so, either Party may request the American Arbitration
Association to appoint the third neutral arbitrator. The arbitrators shall
have the authority to award any remedy or relief that a court in New York
could order or grant, including, without limitation, specific performance
of any obligation created under this Alliance Agreement, the awarding of
punitive damages, the issuance of injunctive or other provisional relief,
or the imposition of sanctions for abuse or frustration of the arbitration
process. The arbitration awards will be in writing and specify the factual
and legal basis for the award.
(d) It is the intent of the Parties that any arbitration shall be
concluded as quickly as practicable (but, barring extraordinary
circumstances, in any event not more than 20 days after the date the third
arbitrator is selected). Unless the Parties otherwise agree, once
commenced, the hearing on the disputed matters shall be held four days a
week until concluded with each hearing date to begin at 9:00 a.m. and to
conclude at 5:00 p.m. The arbitrators shall use their best efforts to issue
the final award or awards within a period of five Business Days after
closure of the proceedings. Failure of the arbitrators to meet the time
limits of this Section 9.14 shall not be a basis for challenging the award.
(e) The arbitrators shall instruct the non-prevailing party to pay all
costs of the proceedings, including the fees and expenses of the
arbitrators and the reasonable attorneys' fees and expenses of the
prevailing party. If the arbitrators determine that there is not a
prevailing party, each party shall be instructed to bear its own costs and
to pay one-half of the fees and expenses of the arbitrators.
(f) Notwithstanding the foregoing, nothing contained herein shall
prevent either Party from seeking injunctive relief in any court.
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IN WITNESS WHEREOF, the Parties have caused this Alliance Agreement to be
signed as of the date first above written.
WORLDWIDE DEDICATED SERVICES, INC.
By:
-------------------------------
Name:
Title:
UPS LOGISTICS GROUP, INC.
By:
-------------------------------
Name:
Title:
ROLLINS LEASING CORP.
By:
-------------------------------
Name:
Title:
ROLLINS TRUCK LEASING CORP.
By:
-------------------------------
Name:
Title:
