<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 1996 [FEE REQUIRED]
For the Fiscal Year Ended May 31, 1996 Commission File Number 0-20548
FRITZ COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3083515
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
706 Mission Street, Suite 900, San Francisco, California 94103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 904-8360 Securities
registered pursuant to Section 12(b) of the Act:
Name on each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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.[ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (S 229.405 of this chapter) 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. [ ]
At July 31, 1996, the aggregate market value of the registrant's Common Stock
held by non-affiliates of the registrant was approximately $282 million.
At July 31, 1996, the number of shares outstanding of registrant's Common Stock
was approximately 34,984,931.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the 1996 annual meeting of
shareholders have been incorporated by reference --
Part III of the Form 10-K (Items 10, 11, 12 and 13 )
The Exhibit Index is located on page F-23 hereof.
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PART I
ITEM 1 - BUSINESS
General
Fritz Companies, Inc. (the Company) is a leader in providing global logistics
services and related information services for importers and exporters worldwide.
The Company is primarily engaged in providing logistics management,
international air and ocean freight forwarding, customs brokerage, warehousing
and distribution services. The Company also provides value-added services for
logistics information and the international and domestic movement of goods in
addition to those customarily provided by traditional freight forwarders and
customs brokers. These services are designed to provide integrated global
logistics solutions for customers in order to streamline their operations,
improve logistics information, enhance their profitability and provide them with
more efficient and effective international transportation strategies.
The Company was incorporated in Delaware in August 1988 and is a successor to a
company incorporated in California in 1933. Internationally, the Company
operates a number of subsidiaries under the names "Fritz Transportation
International", "Fritz Air Freight", "Starber Fritz", "Fritz Fliway", "Fritz
Logistics", and "Fritz Companies", among others. Unless the context otherwise
requires, references in this Form 10-K to the Company include Fritz Companies,
Inc., its subsidiaries and its predecessor companies. Although the Company's
executive office is located in the United States at 706 Mission Street, Suite
900, San Francisco, California 94103, its network is global. The Company has
offices throughout the United States, Asia, Europe and Latin America.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's Consolidated Financial Statements, including the
Notes thereto, for data related to the Company's revenue, operating profit and
identifiable assets by geographic regions.
Effective June 1, 1995, the Company approved the change from a fiscal year end
of December 31 to a fiscal year end of May 31. The period from January 1, 1995
through May 31, 1995 is referred to herein as the "Transition Period".
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The following table shows the revenue and net revenue, in thousands of dollars
and as a percentage of total revenue or net revenue, as the case may be,
attributable to the Company's principal logistics services:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED MAY 31, FIVE MONTHS YEAR ENDED DECEMBER 31,
--------------------------------------- ENDED MAY 31, -----------------------------------
1996 1995 (a) 1995 1994 1993
----------------- ----------------- ---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
---------- ----- -------- ----- -------- ----- -------- ----- -------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Customs Brokerage $ 147,848 14.2 $123,653 14.2 $ 54,252 13.6 $113,146 14.6 $ 83,141 15.1
Ocean Freight Forwarding 317,131 30.4 243,497 28.0 115,021 28.7 227,870 29.5 161,296 29.4
Airfreight Forwarding 484,912 46.4 448,043 51.4 204,294 51.0 384,385 49.7 277,453 50.6
Warehousing & Distribution 93,967 9.0 55,710 6.4 26,679 6.7 47,988 6.2 27,136 4.9
---------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total $1,043,858 100.0 $870,903 100.0 $400,246 100.0 $773,389 100.0 $549,026 100.0
========== ===== ======== ===== ======== ===== ======== ===== ======== =====
Net Revenue
Customs Brokerage $ 147,848 32.3 $123,653 33.7 $ 54,252 32.8 $113,146 34.0 $ 83,141 34.2
Ocean Freight Forwarding 102,874 22.5 82,030 22.4 38,149 23.0 77,041 23.2 54,732 22.5
Airfreight Forwarding 136,877 30.0 116,351 31.8 52,673 31.8 104,005 31.3 82,435 33.9
Warehousing & Distribution 69,969 15.2 44,453 12.1 20,608 12.4 38,391 11.5 22,734 9.4
---------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total $ 457,568 100.0 $366,487 100.0 $165,682 100.0 $332,583 100.0 $243,042 100.0
========== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
(a) The unaudited twelve months ended May 31, 1995 is provided for comparative
purposes. As discussed in Note 1 of Notes to Consolidated Financial
Statements, effective May 31, 1995 the Company changed its fiscal year end
of December 31 to a fiscal year end of May 31. The May 31, 1995 period
represents combined operating results reported for Fritz Companies, Inc.
and Intertrans Corporation (Intertrans) for the twelve months ended March
31, 1995 and April 30, 1995, respectively, accounted for as a pooling of
interests.
Recent Developments and Acquisitions
The Company's net revenue increased 25% to $457.6 million in 1996 from $366.5
million in 1995. Management attributes this growth principally to its continued
implementation of integrated logistics programs for new and existing customers
worldwide and continued expansion of the Company's global network and product
services through internal developments and strategic acquisitions.
On May 30, 1995, the Company and Intertrans completed the merger of the two
companies. In the merger, each outstanding share of Intertrans common stock was
converted into the right to receive 0.365 of a share of Fritz Companies common
stock. The Intertrans business is now operated under the name "Fritz Air
Freight".
This merger was accounted for as a pooling of interests and, accordingly, the
Company's consolidated financial statements have been restated, for all periods
prior to the merger, to include the results of operations, financial position
and cash flows of Intertrans. In addition, all information in this Form 10-K
incorporates both the Company and Intertrans.
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The Company continued to make strategic acquisitions in 1996. Among the
companies acquired were the following:
<TABLE>
<CAPTION>
Acquired Company Location
- - ---------------------------------- --------
<S> <C>
Nielsen Global Freight Corporation Europe
Robinson and Heath, Ltd. Canada
Logistics (Holdings) Ltd. Asia
Amel Express Limited Asia
Young Shipping Company Asia
Rex Air Freight Latin America
Wall Shipping Co., Inc. United States
</TABLE>
The Company's strategy continues to focus on the following elements: emphasize
integrated transportation logistics, devote resources to expanding and enhancing
the Company's global network and information systems, pursue strategic
acquisitions and focus on quality.
Narrative Description of Business
International Airfreight and Ocean Freight Forwarding: The Company believes that
it is one of the largest forwarders of international airfreight and ocean
freight in the United States.
The Company's revenue from international ocean freight forwarding is derived
from logistics services both as an indirect ocean carrier (a "Non-Vessel
Operating Common Carrier" or "NVOCC") and as an authorized agent for shippers
and importers. The Company's revenue from international airfreight forwarding is
derived from logistics services both as an indirect air carrier and as an
authorized cargo sales agent of various airlines.
The Company provides additional logistics services such as inland transportation
of freight from point of origin to distribution center or the carrier's cargo
terminal, warehousing, protective packing, cargo consolidation, document
preparation and electronic transmittal, electronic purchase order/shipment
tracking, inventory management, expedited document delivery for customs
clearance and priority notification to consignee of cargo arrival.
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The Company serves a broad range of freight forwarding customers. The Company's
principal ocean freight forwarding customers are retailers, as well as
industrial companies shipping automobiles and related parts, heavy equipment,
steel, chemicals, forest products and produce. In general, airfreight has a high
value relative to its weight and the cost of shipment is only a small portion of
its value. The principal customers for airfreight are shippers of medical
equipment and parts, drugs and pharmaceuticals, computers and high technology
equipment and parts, aircraft and automotive parts, electrical equipment,
machinery and machine parts, chemicals, high fashion apparel, measuring and
testing instruments.
As an indirect ocean carrier (NVOCC) and an indirect air carrier, the Company
procures customer shipments, consolidates shipments bound for a particular
destination, determines the routing over which the consolidated shipments will
move, selects the direct carrier or charters a ship or aircraft, and tenders
each consolidated lot as a single shipment to the direct carrier for
transportation to a distribution point. The Company's rates are based on the
shipment weight and/or volume and generally decrease as the weight or volume of
the shipment increases. The Company ordinarily charges the shipper a rate less
than the rate which the shipper would be charged by a steamship line or an
airline. As a result of its consolidation of customers' shipments, the Company
is able to obtain lower rates from steamship lines or airlines than the rates
the Company charges to its customers for individual shipments. In addition, in
certain tradelanes, due to the high volume of freight controlled by the Company,
the Company is able to obtain lower contracted rates from certain carriers or
charter operators. This rate differential is the primary source of the Company's
net ocean and airfreight forwarding revenue as an indirect carrier.
By accepting goods for ocean or air shipment as an indirect carrier, the Company
assumes the role of a carrier and becomes responsible to the shipper for the
safe delivery of the shipments subject to a legal limitation on liability of
$500 per ordinary shipping unit in the case of ocean freight and $20.00 per
kilogram in the case of airfreight. Because the Company's relationship to the
steamship line or airline is that of a shipper to a carrier, the steamship line
or airline generally assumes the same responsibility to the Company as the
Company assumes to its clients.
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As an authorized agent for shippers and importers, and as an authorized cargo
agent of various airlines, the Company arranges for the transportation of
individual shipments and receives a commission from the direct carrier for
arranging the shipments. When acting as such an agent, the Company does not
consolidate shipments or have responsibility for shipments once they have been
tendered to the direct carrier.
As part of the Company's freight forwarding activities, the Company provides
project forwarding and logistics services involving governmental and commercial
projects, including foreign military sales, power plant construction,
shipbuilding, construction of manufacturing assembly facilities, civil
infrastructures and other large scale installations. The Company's project
forwarding services provide integrated logistics for conveying heavy materials
and equipment from multiple origins to project sites. Such services include
managing the customer's transportation, customs clearance and warehousing and
distribution activities in connection with these projects. Most of such
shipments are transported by ocean carrier. The government portion of the
Company's project forwarding business requires a United States Government
security clearance of the Company's management team and employees assigned to
the project and security cleared warehouses where the cargo is received and
stored according to the forwarding schedule.
In addition to its ocean and airfreight forwarding services, the Company
provides forwarding services and cross marketing in the United States for a
number of its foreign agents. The Company is compensated by sharing in the
agents' profits on their consolidation shipments.
The Company is licensed by the Federal Maritime Commission of the United States
(the "FMC") and is a member of the International Air Transport Association.
Customs Brokerage: The Company is the largest customs broker in the United
States according to the United States Customs Service. The Company's customs
brokerage operations for air and ocean imports cover approximately 442 ports of
entry in the United States. The Company believes that its customs brokerage
operation is among the most sophisticated in the United States as a result of
its size, technology and integration with other transportation logistics
services provided to customers by the Company. In addition, the Company provides
customs brokerage services overseas - such as Australia, Canada and the United
Kingdom. Customs brokerage activities accounted for 32.3%, 32.8%, 34.0% and
34.2% of the Company's net revenue in 1996, the Transition Period, 1994, and
1993, respectively.
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As a customs broker in the United States, the Company is engaged by importers
for the purpose of preparing all documentation required for entry of merchandise
into the United States. In this capacity, the Company is responsible for
coordinating all events and communicating the status of shipments from the time
of shipment arrival through customs clearance. The Company receives commercial
and transportation documentation, reviews it for completeness and accuracy,
prepares and files all documents necessary to clear customs, obtains customs
bonds, assists the importer in obtaining the appropriate commodity
classification and arranges for payment of collect freight charges. In most
cases, the Company also deposits import duties with the United States Customs
Service on behalf of the importer. In addition, the Company provides ancillary
customs brokerage services to its customers, including placement of surety
bonds, duty reduction programs and duty-drawback (recovery of duties paid when
imported merchandise is re-exported). The Company also provides bonded warehouse
services which enable importers to defer payment of customs duties until release
of the cargo in conjunction with their production or distribution schedules. See
"Warehousing and Distribution Services".
In providing customs brokerage services, the Company has access to information
concerning a shipment's origin, destination and mode of transportation. As a
result, the Company has been able to obtain additional business by identifying
opportunities where service to a customer can be improved or expenses reduced
through greater utilization of the Company's other services, including
cost-effective cargo consolidations, routing from overseas origin to ports of
entry, cargo insurance, container unloading, inventory warehousing and arranging
for the domestic delivery of cleared cargo to its final destination.
The Company believes it has been a leader in the use of computer technology for
customs brokerage activities on behalf of its clients. The Company was one of
the first customs brokerage operations to link with the United States Customs
Service through the Automated Broker Interface information system and to develop
a comprehensive, proprietary, on-line, interactive customs brokerage system
which permits customers to monitor the status of a shipment as it passes through
the government clearance process. The Company's information systems enable the
Company to electronically prepare documents, transmit information necessary for
cargo pre-clearance through customs, expedite cargo release and provide
nationwide control of customs clearance at multiple ports of entry for its
customers. See "Information Systems".
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The Company's customs brokerage services are provided by the Company's licensed
customs brokers and support staff who have substantial knowledge of the complex
tariff and government regulations with respect to the payment of customs duties
and other fees, commodity classifications, valuation and import restrictions. In
addition, the Company has concentrated on developing substantial customs
brokerage expertise within particular client industries. The Company believes
that its focus on industry specialization is unique among its competitors and
enables the Company to provide high levels of service to customers in these
industries. The Company provides ongoing training programs, which include
preparation for the United States customs broker license examination, to
employees as well as to customers.
The following table sets forth the number of United States Customs entries filed
by the Company (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED TWELVE MONTHS
MAY 31, FIVE MONTHS ENDED DECEMBER 31,
------------------- ENDED ------------------
1996 1995 MAY 31, 1995 1994 1993
---- ---- ------------ ---- ----
<S> <C> <C> <C> <C> <C>
Number of Entries Filed 1,820 1,640 690 1,660 1,430
</TABLE>
As a customs broker operating in the United States, the Company is licensed by
the United States Department of the Treasury and regulated by the United States
Customs Service. The Company's fees for customs brokerage services are not
regulated and the Company does not have a fixed fee schedule for such services.
Instead, customs brokerage fees are based upon the complexity of the transaction
and the type of services required and are generally not related to the value of
its customer's goods. In addition to its fees, the Company bills the importer
for amounts which the Company pays on the importer's behalf, including duties,
collect freight charges and similar payments.
The Company offers its customs brokerage services to all shippers, not
exclusively to its ocean or airfreight forwarding customers. The Company's
largest customs brokerage customer in 1996, the Transition Period, 1994 and 1993
accounted for 17.0%, 15.6%, 17.6% and 22.3% of the Company's customs brokerage
revenue, respectively; and 5.5%, 2.1%, 2.6% and 3.4% of the Company's revenue in
1996, the Transition Period, 1994, and 1993, respectively. The Company's
contracts with this customer expire in September 1996 and February 1997. The
Company has been in ongoing renewal negotiations with the customer and
anticipates the contracts will be renewed (See Other Risk Factors).
No other customer accounted
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for more than 5.0% of the Company's customs brokerage revenue in 1996, the
Transition Period, 1994 and 1993.
Warehousing and Distribution Services: As part of its integrated global
logistics services, the Company provides an array of warehousing and
distribution services to its import and export customers.
Warehousing services are available for the Company's customers in certain of its
facilities, as well as in space leased from others. The Company maintains 5.9
million square feet of its own and leased warehouse space. The Company's
warehousing services include receiving, deconsolidation and decontainerization,
cargo loading and unloading, assembly of freight, customer inventory management,
protective packing and storage. For import shipments, the Company provides
bonded warehouse services to importers to enable them to defer payment of
customs duties and to coordinate cargo releases with the customers' production
or distribution schedules. The goods stored in the bonded warehouses are
supervised by customs officials until the importer is ready to withdraw or
re-export them. The Company receives storage charges for use of its warehouses
and fees for other services.
The Company provides surface transportation and domestic distribution services
involving the movement of shipments for local and long-haul delivery to and from
customers' doors. In this capacity, the Company procures shipments from its
customers, consolidates less than truckload quantities, determines the routing,
selects the carrier and tenders each shipment to such carrier for
transportation. The Company provides this service both as an indirect carrier
and as an agent. The Company also provides logistics services by coordinating
the most efficient and cost-effective mode of long-haul surface transportation
to its customers.
Information Systems: The Company believes it has been a leader in providing its
customers with integrated logistics management. The Company continues to invest
substantial management and financial resources in the development and
enhancement of its information systems. The basis for the Company's information
systems is the concept that an international freight transaction is a single
integrated unit of events rather than a series of separate, unrelated
transactions.
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The first modules of the FLEX environment, "Fritz Logistics Expediting System",
were released in late 1991 and the Company is continuing development of new
enhancements to its suite of software applications. FLEX currently permits the
Company and its customers to track the flow of particular goods from a foreign
port of origin through the transportation process and United States Customs to
its point of delivery. At any time, any customer utilizing FLEX can input an
inquiry into FLEX or receive the current status of its shipment, which
facilitates management of customer's sourcing process. FLEX is available on-line
and is currently utilized by many of the Company's major customers.
Most of the current users of FLEX are multi-national corporations which utilize
a large number of foreign suppliers. Several of these customers utilize the FLEX
System to generate special reports on supplier compliance with purchase order
requirements in order to enhance the effectiveness of their merchandising
programs. The Company's objective is to expand use of the FLEX System by its
customers. The Company believes that expanded use of FLEX is an important tool
in achieving its business strategy in the future. In certain cases, the Company
deploys its personnel with computer access in the offices of some of its on-line
customers in order to assist them in the logistics management and on-line
tracking process.
As part of its ongoing research and development program, the Company has linked
its automated customs brokerage systems and FLEX to monitor the status of
shipments as they pass through the customs clearance process. The Company's
on-line, interactive, nationwide customs brokerage system was one of the first
to link with the United States Customs Service's information systems. The
Company believes that as FLEX software modules continue to develop, many of the
Company's major customers will ultimately elect to utilize FLEX.
Marketing
An important part of the Company's business strategy is its customer-oriented
marketing approach. The Company's marketing efforts focus on senior
transportation executives, financial officers and purchasing directors of large
complex users of international transportation logistics services. In connection
with the Company's emphasis on developing and maintaining long-term
relationships with such customers, the Company has developed several special
marketing programs, including the national accounts program, the Global
Logistics Council and the Global Advisory Board.
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The national accounts program was established in 1971 in order to increase the
visibility of the Company's services to large complex users of international
transportation logistics services. The Company's Senior Director of Sales
supervises the marketing efforts of a team of national account sales executives
who are responsible for securing new business from major companies and
assisting in maintaining customer relationships with such companies.
The Shippers' Council program was formed by the Company in 1984 as a forum for
major importers and exporters, some of which are not currently customers of the
Company, to discuss their transportation logistics requirements, views of global
trade and other related topics. In 1996, the program was renamed Global
Logistics Council in order to more accurately reflect its worldwide focus.
Global Logistics Council meetings are generally held three times a year, and
representatives of approximately 40 companies participate in each meeting.
Participants in the Global Logistics Council are invited to participate on an
ongoing basis in the Company's Global Advisory Board. The Global Advisory Board
assists the Company in formulating strategies designed to better serve the needs
of the Company's customers. The Global Logistics Council and the Global Advisory
Board help the Company to maintain close contact with its customers and the
global trade community on a continuing basis.
In addition to these major marketing programs, the Company has employees working
on regional accounts and providing support to national accounts located in their
regions. The Company has regional sales teams responsible for obtaining new
business from local and regional customers in their areas. Managers at each
office are responsible for customer service and coordinate the reporting of
customers' requirements and expectations with the Chief Operating Officer and
the regional directors.
Competition and Business Conditions
The Company's principal businesses are directly related to the volume of
international trade, particularly trade between the United States and foreign
nations. The extent of such trade is influenced by many factors, including
economic and political conditions in the United States and abroad, major work
stoppages, exchange controls, currency fluctuations, wars and other armed
conflicts and United States and foreign laws relating to tariffs, trade
restrictions, foreign investments and taxation.
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The global logistics services industry is intensively competitive and is
expected to remain so for the foreseeable future. The Company encounters
competition from a large number of firms with respect to the services provided
by the Company. Much of this competition comes from local or regional firms
which have only one or a small number of offices and do not offer the breadth of
services and integrated approach offered by the Company. However, some of this
competition comes from major United States and foreign-owned firms which have
networks of offices and offer a wide variety of services. The Company believes
that quality of service, including information systems capability, global
network capacity, reliability, responsiveness, expertise and convenience, scope
of operations, customized program design and implementation and price are
important competitive factors in its industry.
As a customs broker, the Company encounters strong competition in every port in
which it does business. The Company has customs brokerage offices in most major
ports in the United States, Canada, Europe and other selected foreign ports, and
although it competes with several large United States and foreign firms, its
principal competition comes from local and regional firms. According to the
United States Customs Service, the Company is the largest customs broker in the
United States. As an ocean freight forwarder, the Company encounters strong
competition in every port in which it does business. This includes competition
from steamship companies and both large forwarders with multiple offices and
local and regional forwarders with one or a small number of offices. As an
airfreight forwarder, the Company encounters strong competition from other
airfreight forwarders in the United States and overseas. As a warehouse and
distribution service provider, the Company encounters strong competition from
local, regional, national and international providers of the same or similar
services.
Regulation
As a customs broker operating in the United States, the Company is licensed by
the United States Department of the Treasury and regulated by the United States
Customs Service. The Company's fees for acting as a customs broker are not
regulated. The Company's airfreight forwarding business is subject to
regulation, as an indirect air cargo carrier, under the Federal Aviation Act by
the Department of Transportation (the "DOT"), the successor to the Civil
Aeronautics Board, although Part 296 of the DOT's Economic Aviation Regulations
exempts airfreight forwarders from most of such act's requirements. In its
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ocean freight forwarding business, the Company is licensed as an ocean freight
forwarder by the Federal Maritime Commission (FMC). The FMC does not regulate
the Company's fees in any material respect. The Company's ocean freight NVOCC
business is subject to regulation, as an indirect ocean cargo carrier, under the
FMC tariff filing and surety bond requirements, and under the Shipping Act of
1984, particularly those terms proscribing rebating practices. The Company is
regulated as a direct and as an indirect truck cargo carrier by the Federal
Highway Administration of Motor Carriers, previously the Interstate Commerce
Commission, by which the Company is licensed as both a common carrier and a
property broker. For dispatch purposes, the Company also holds an FCC Radio
License. The Company's marine cargo insurance brokerage business is licensed by
the California Department of Insurance. Certain of the Company's offshore
operations are subject to similar regulation by the regulatory authorities of
the respective foreign jurisdictions. Certain of the Company's warehouse
operations are licensed as container freight stations, public bonded warehouses
and customs examination sites by the United States Customs Service.
Trademarks
The Company holds registered trademarks in the United States and numerous
foreign countries for "Fritz Companies" and certain related names and logo.
Employees
As of May 31, 1996, the Company had approximately 8,100 employees. The Company
considers its relationship with its employees to be satisfactory.
MANAGEMENT
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE
- - ------------------- ---
<S> <C>
Lynn C. Fritz 53 Chairman of the Board, Chief Executive Officer
Dennis L. Pelino 48 President and Chief Operating Officer
John H. Johung 52 Executive Vice President and Chief Strategist
Ronald A. Marcillac 56 Senior Vice President
Jan H. Raymond 47 Senior Vice President, Secretary and General Counsel
Ronald W. Womack 49 Vice President of Finance and Principal Accounting
Officer
</TABLE>
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Lynn C. Fritz became Chief Executive Officer of the Company in 1986 after
serving in numerous positions since joining the Company on a full-time basis in
1965. Mr. Fritz received his B.A. degree from Georgetown University and his J.D.
degree from Lincoln University School of Law. Mr. Fritz was honored with the
"Marketing Executive of the Year -- 1991" award by the National Account
Marketing Association.
Dennis L. Pelino, who joined the Company in 1986 as Director of Sales and
Marketing, became a director of the Company in 1991 and was appointed Chief
Operating Officer in October of 1993. He was promoted to Executive Vice
President in May 1995 and President in August 1996. Since 1988, Mr. Pelino has
been responsible for all Company-owned international operations, as well as the
Company's transportation services as an indirect carrier and key warehousing
distribution services. Mr. Pelino is also responsible for the Company's
independent agent network and national account marketing and sales programs.
Since his appointment as Chief Operating Officer, Mr. Pelino has also been
responsible for all operations.
John H. Johung was appointed Executive Vice President in May 1995 and served as
Senior Vice President from August 1992 to April 1995. He was appointed Chief
Strategist in August 1996. Mr. Johung was Chief Financial Officer from August
1992 until August 1996. He served as Corporate Controller -- Principal
Accounting Officer of the Company from 1970 to 1982. He left the Company in 1983
to pursue a consulting career in taxation and financial planning, and rejoined
the Company in March 1990 as Director of Financial Planning.
Ronald A. Marcillac joined the Company in 1963 and has served the Company in
numerous positions since that time, most recently as Senior Vice President since
August 1992. He became a director of the Company in 1988. Mr. Marcillac is
currently responsible for the Company's Information Systems and insurance
brokerage operations. He is a graduate of the University of San Francisco with a
B.S. degree in economics and has a customs broker's license from the Department
of the Treasury.
Jan H. Raymond has been General Counsel of the Company since 1985, Secretary
since 1991 and Senior Vice President since 1993. Prior to joining the Company,
Mr. Raymond was an associate with the law firm of Brobeck, Phleger & Harrison.
Mr. Raymond, who is a licensed customs broker, holds a B.S. degree from Cornell
University with a J.D. degree from the University of California at Berkeley's
Boalt Hall School of Law.
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Ronald W. Womack has been Vice President of Finance of the Company since August
1996. He served as Corporate Controller and Principal Accounting Officer from
May 1996 until August 1996. Previously, Mr. Womack had served as Regional
Controller and Director of Treasury Services. Prior to rejoining the Company in
1995, he was the Chief Financial Officer for HEAD Sports, Inc., a sporting
equipment distribution company and was the Director of Internal Audit with
Sanifill, Inc., a landfill and waste management company.
ITEM 2 - PROPERTIES
As of May 31, 1996, the Company operated approximately 340 offices, and
logistics centers worldwide including its headquarters in San Francisco. The
Company also operated approximately 90 warehousing and distribution centers,
which range in size from approximately 1,000 square feet to approximately
670,000 square feet. The warehousing and distribution centers totaled
approximately 5.9 million square feet as of May 31, 1996 of which the Company
owns approximately 1.2 million square feet, and leases the balance. The leases
for the Company's principal properties generally have terms of three years or
more and often include options to renew. While some of the Company's leases are
month-to-month and others expire in the near term, the Company does not believe
that the expiration of any of its leases will have a material adverse effect on
its operations. See Note 6 of Notes to Consolidated Financial Statements.
ITEM 3 - LEGAL PROCEEDINGS
The Company is a party to routine litigation incident to its business, primarily
claims for goods lost or damaged in transit or improperly shipped. Most of the
lawsuits to which the Company is party are covered by insurance and are being
defended by the Company's insurance carriers. The Company has established
reserves which management believes are adequate to cover any other routine
litigation losses which may occur.
On July 29, 1996, a complaint was filed in the Superior Court of the State of
California, County of San Francisco, against the Company and certain of its
directors and officers under the caption "Levenson v. Lynn C. Fritz, John H.
Johung, Stephen M. Mattessich, Carsten S. Andersen and Fritz Companies, Inc.".
15
<PAGE> 16
The complaint, which purports to be brought on behalf of a class of purchasers
of the Company's stock between August 28, 1995 and July 23, 1996, alleges
various violations of California law in connection with prior disclosures made
by the Company and seeks unspecified damages. On July 31, 1996, a second
complaint containing substantially similar allegations was filed in the same
court under the caption "Hack v. Lynn C. Fritz, John H. Johung, Stephen M.
Mattessich, Carsten S. Andersen and Fritz Companies, Inc.".
On July 31, 1996, a complaint was filed in the United States District Court for
the Northern District of California, against the Company and certain of its
directors and officers under the caption "Polk v. Lynn C. Fritz, John H. Johung,
Stephen M. Mattessich, Carsten S. Andersen and Fritz Companies, Inc.". The
complaint, which purports to be brought on behalf of a class of purchasers of
the Company's stock between August 28, 1995 and July 23, 1996 alleges various
violations of federal securities law in connection with prior disclosures made
by the Company and seeks unspecified damages. On July 31, 1996, a second
complaint containing substantially similar allegations was filed in the same
court under the caption "Weiss v. Lynn C. Fritz, John H. Johung, Stephen M.
Mattessich, Carsten S. Andersen and Fritz Companies, Inc.". On August 13, 1996,
a third complaint containing substantially similar allegations was filed in the
same court under the caption "E.M. Lawrence Limited Frozen Retirement Trust
Dated September 1, 1992 v. Fritz Companies, Inc., Lynn C. Fritz, Carsten S.
Andersen, John H. Johung and Stephen M. Mattessich".
The Company is unable to estimate the ultimate outcome of the suits filed in
July and August 1996, and it is possible that such outcome could have a
significant adverse impact on the Company's consolidated results of operations.
The Company believes that the ultimate outcome of these matters will not have a
significant adverse impact on the Company's consolidated financial position
(See Other Risk Factors).
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
16
<PAGE> 17
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded on the NASDAQ national market system under
the symbol FRTZ.
The following table sets forth the high and low sales price in the NASDAQ
national market system for the Company's common stock for the period from
January 1, 1993 to May 31, 1996.
<TABLE>
<CAPTION>
Price Range
-----------
High Low
---- ---
<S> <C> <C>
Fiscal Period 1996
- - ------------------
First Quarter 35.625 23.438
Second Quarter 43.000 35.000
Third Quarter 42.750 32.000
Fourth Quarter 40.625 33.500
Transition Period 1995
- - ----------------------
First Quarter 32.750 22.875
Two Months Ended May 31 32.750 25.625
Fiscal Period 1994
- - ------------------
First Quarter 15.938 13.000
Second Quarter 15.750 14.125
Third Quarter 17.750 15.250
Fourth Quarter 23.500 17.500
Fiscal Period 1993
- - ------------------
First Quarter 13.625 11.000
Second Quarter 13.500 10.625
Third Quarter 15.125 12.875
Fourth Quarter 15.250 12.938
</TABLE>
There were approximately 560 stockholders of record as of May 31, 1996. No cash
dividends were paid to the stockholders during 1996. In October 1995, the
Company's Board of Directors declared a two-for-one stock split effected in the
form of a 100% stock dividend. The stock prices above have been adjusted to give
effect to the stock split.
The Company intends to retain its future earnings for use in its business and,
accordingly, it is anticipated that no cash dividends will be paid to holders of
shares of common stock in the foreseeable future.
17
<PAGE> 18
ITEM 6 - SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)(a)
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS
ENDED MAY 31, ENDED MAY 31, TWELVE MONTHS ENDED DECEMBER 31,
---------------------- ------------- ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- --------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $1,043,858 $870,903 $400,246 $773,389 $549,026 $455,097 $363,537
Net revenue 457,568 366,487 165,682 332,583 243,042 210,011 172,469
Merger and related costs(b) 14,555 -- 29,995 -- -- -- --
Income (loss) from operations(b) 38,659 50,645 (12,368) 46,209 33,446 28,113 21,868
Net income (loss) 25,001 32,310 (8,319) 30,133 22,714 20,866 14,671
Net income (loss) per share
- primary .70 1.00 (.25) .96 .75 -- --
Net income (loss) per share
- fully diluted .70 .99 (.25) .94 .75 -- --
Pro forma net income(c) -- -- -- -- -- 18,268 12,206
Pro forma net income per share -
primary and fully diluted(c) -- -- -- -- -- .73 .52
Total assets 733,462 576,698(d) 576,698 530,810 297,974 245,956 223,865
Long-term obligations, net of
current portion 89,505 33,567(d) 33,567 33,048 2,220 -- 17,328
Stockholders' equity(e) 230,747 174,215(d) 174,215 177,917 96,054 67,925 25,503
</TABLE>
(a) On May 30, 1995, the Company completed its merger with Intertrans,
which was accounted for as a pooling of interests. Accordingly, the
Company's financial statements have been restated, for all periods
prior to the merger, to include the results of operations, financial
position and cash flows of Intertrans. The May 31, 1995 period
represents combined operating results reported for Fritz Companies,
Inc. and Intertrans Corporation (Intertrans) for the twelve months
ended March 31, 1995 and April 30, 1995, respectively.
(b) In 1996, the Company recorded additional merger and related costs
associated with the merger with Intertrans of $14.6 million. In May
1995 the Company recorded merger and related costs in connection with
the merger with Intertrans of approximately $30.0 million. For further
discussion see Note 7 of Notes to Consolidated Financial Statements.
Excluding these merger and related costs, the income from operations
for the five months ended May 31, 1995 would have been $17.6 million.
(c) The pro forma data reflect adjustments assuming the Company had not
elected S Corporation status for income tax purposes, including the
repurchase of the minority interest in its subsidiaries sold to the
former sole stockholder to qualify for S Corporation status. The
provisions for federal and state income taxes assume effective tax
rates of 35% for 1992 and 40% for 1991. The lower effective tax rate
beginning in 1992 was primarily due to the Company's expanded
operations in foreign countries which had lower income tax rates.
(d) Figures are as of May 31, 1995.
(e) In 1994 and 1992 the Company received approximately $42.2 million and
$40.3 million, respectively, of net proceeds from public offerings of
its common stock.
(f) See Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes to Consolidated Financial Statements
for further discussion of the Company's financial condition and results
of operations.
18
<PAGE> 19
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.
GENERAL
For comparative purposes, the following table provides the results of
operations for the twelve months ended May 31, 1996 and the Transition Period
compared to the respective comparable unaudited prior periods (in thousands).
<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS ENDED MAY 31, FIVE MONTHS ENDED MAY 31,
----------------------------------- -------------------------
1996 1995(a) 1995 1994
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenue (Unaudited) (Unaudited)
Customs Brokerage $ 147,848 $123,653 $ 54,252 $ 39,864
Ocean Freight Forwarding 317,131 243,497 115,021 82,719
Airfreight Forwarding 484,912 448,043 204,294 137,178
Warehouse and Distribution 93,967 55,710 26,679 13,703
--------- -------- -------- --------
Total Revenue $1,043,858 $870,903 $400,246 $273,464
---------- -------- -------- --------
Net Revenue
Customs Brokerage $ 147,848 $123,653 $ 54,252 $ 39,864
Ocean Freight Forwarding 102,874 82,030 38,149 27,905
Airfreight Forwarding 136,877 116,351 52,673 37,552
Warehouse and Distribution 69,969 44,453 20,608 10,642
---------- -------- -------- --------
Total Net Revenue $ 457,568 $366,487 $165,682 $115,963
---------- -------- -------- --------
Operating Expenses $ 418,909 $315,842 $178,050 $103,933
---------- -------- -------- --------
Income (Loss) From Operations $ 38,659 $ 50,645 $(12,368) $ 12,030
---------- -------- -------- --------
Net Income (Loss) $ 25,001 $ 32,310 $ (8,319) $ 8,044
========== ======== ======== ========
</TABLE>
(a) Effective May 31, 1995, the Company changed its fiscal year end of
December 31 to a fiscal year end of May 31. See Note 1 of Notes to
Consolidated Financial Statements for further discussion. The May 31,
1995 period represents combined operating results reported for Fritz
Companies, Inc. and Intertrans for the twelve months ended March 31,
1995 and April 30, 1995, respectively, accounted for as a pooling of
interests.
During the period from 1993 through 1996, the Company's revenue increased 90.1%
to $1,043.9 million in 1996 from $549.0 million in 1993, and its net revenue
increased 88.3% to $457.6 million in 1996 from $243.0 million in 1993.
Management attributes this growth principally to: (1) the expansion of the
Company's global network and its product line of services through internal
development and strategic acquisitions; and, (2) the continued success of the
Company's integrated logistics programs, with which the Company added a
significant number of multinational corporations to its customer base and
broadened the range of services offered by the Company to existing customers.
19
<PAGE> 20
Effective June 1, 1995, the Company approved the change from a fiscal year end
of December 31 to a fiscal year end of May 31. The following discussion is of
the Company's financial condition and results of operations for the fiscal year
ended May 31, 1996, the five months ended May 31, 1995 (the Transition Period)
and fiscal years ended December 31, 1994 and 1993. For discussion purposes, the
fiscal year ended May 31, 1996 is compared to the unaudited fiscal year ended
May 31, 1995; and the Transition Period is compared to the unaudited period from
January 1, 1994 to May 31, 1994 (the Comparable Period). For further discussion
see Notes to Consolidated Financial Statements.
The Company completed its merger with Intertrans on May 30, 1995 which was
accounted for as a pooling of interests. Accordingly, the Company's consolidated
financial statements have been restated, for all periods prior to the merger, to
include the results of operations, financial position and cash flows of
Intertrans.
In connection with the Intertrans merger, the Company recorded approximately $30
million of merger and related costs in May 1995. At May 31, 1995 the merger
accrual balance was approximately $12.5 million. Subsequently, the Company has
determined an additional $14.6 million of merger and related costs was required.
For further discussion see Operating Expenses section below and Note 7 of Notes
to Consolidated Financial Statements.
The Company continued to make strategic acquisitions in 1996. Among the
companies acquired were the following:
<TABLE>
<CAPTION>
Acquired Company Location
- - ---------------------------------- --------
<S> <C>
Nielsen Global Freight Corporation Europe
Robinson and Heath, Ltd. Canada
Logistics (Holdings) Ltd. Asia
Amel Express Limited Asia
Young Shipping Company Asia
Rex Air Freight Latin America
Wall Shipping Co., Inc. United States
</TABLE>
20
<PAGE> 21
RESULTS OF OPERATIONS
The Company's principal services are customs brokerage, international airfreight
and ocean freight forwarding and warehousing and distribution. Revenue for
international ocean and airfreight forwarding and surface transportation
consolidation as an indirect carrier includes the consolidation and
transportation costs (i.e. ocean freight costs, etc.) of such freight. Revenue
for customs brokerage, international ocean and airfreight forwarding and surface
transportation as an agent includes only the fees and commissions related to
such shipments. The Company believes that net revenue is a better measure than
total revenue of the relative importance of the Company's principal services for
its results of operations.
The Company anticipates that during fiscal 1997, particularly the first six
months, the Company's results of operations are likely to be adversely affected
by a number of factors, including continuing price competition in its
traditional lines of business, the requirement to make substantial investments
in advance of receipt of revenue in connection with the Company's developing
global supply chain management and integrated logistics business, as well as the
possibility of a reduced pace of acquisitions and substantially increased legal
expenses in connection with securities litigation pending against the Company.
FISCAL YEAR ENDED MAY 31, 1996 COMPARED TO THE UNAUDITED FISCAL YEAR ENDED MAY
31, 1995
Revenue and Net Revenue: Revenue increased 19.9% to $ 1,043.9 million in 1996
from $870.9 million in 1995. All of the Company's principal service areas
reported revenue increases. The increase in revenue was primarily due to ocean
freight, warehouse and distribution and airfreight forwarding. The increase in
ocean freight was primarily attributable to expansion of NVOCC activities in
Europe and Asia. The warehouse and distribution revenue increase was primarily
attributable to the Company's continued expansion of domestic services from
existing integrated logistics customers on inbound shipments from Asia and
Europe to the United States and strategic acquisitions. The revenue increase in
airfreight was primarily due to the Company's continued expansion of its
operations in Latin America, Europe and Asia, as well as margin expansion from
the Company's merger with Intertrans. As a result of the increased volumes from
the merger with Intertrans, the Company was able to negotiate better rates with
carriers.
21
<PAGE> 22
Net revenue increased 24.9% to $457.6 million in 1996 from $366.5 million in
1995 reflecting increases in all of the Company's principal services. The
increase in net revenue was primarily due to warehousing and distribution,
customs brokerage and ocean freight forwarding services. The increase in
warehouse and distribution net revenue can be attributed to the Company's
continued expansion of domestic services from existing integrated logistics
customers on inbound shipments from Asia and Europe to the United States and
strategic acquisitions. The increase in customs brokerage net revenue can be
attributed to growth in the Company's existing customer base, new clients and
acquisitions. Ocean freight forwarding net revenue increase can be primarily
attributed to expansion of NVOCC activities in Europe and Asia but was partially
offset by higher ocean carrier costs.
Operating Expenses: Operating expenses increased 32.6% to $418.9 million in 1996
from $315.8 million in 1995. The increase of 32.6% includes additional merger
and related costs of approximately $14.6 million in 1996. See Note 7 of Notes to
Consolidated Financial Statements for further discussion. Operating expenses,
excluding the merger and related costs in 1996 were 88.4% and 86.2% as a
percentage of net revenue in 1996 and 1995. Salaries and related costs increased
24.3% primarily as a result of an increase in the number of employees. Salaries
and related costs as a percentage of net revenue is comparable to the prior
period. The increase in general and administrative expenses was primarily due to
expenditures to support the Company's expansion, including product development,
acquisitions, information systems development, global supply chain management
and warehouse-related expenses.
Other Income (Expense): Other expense was $196,000 compared to $1.4 million of
other expense for the prior period. The decrease was primarily due to the
increase in net foreign currency exchange gains which were offset by an increase
in interest expense.
Income Taxes: Taxes on income for 1996 were $13.5 million compared to taxes on
income of $16.9 million for 1995. The effective tax rates for 1996 and 1995 were
35% and 34.4%. The Company's effective tax rate may fluctuate due to changes in
local tax rates and regulations in the countries in which the Company operates
and the level of pre-tax profit earned in these countries.
22
<PAGE> 23
TRANSITION PERIOD ENDED MAY 31, 1995 COMPARED TO THE UNAUDITED FIVE MONTH
PERIOD ENDED MAY 31, 1994
Revenue and Net Revenue: Revenue increased 46.4% to $400.2 million in the
Transition Period from $273.5 million for the Comparable Period, and net revenue
increased 42.9% to $165.7 million in the Transition Period from $116.0 million
for the Comparable Period. All of the Company's principal service areas reported
revenue and net revenue increases, as the Company continued to focus on
integrated transportation logistics services for existing and new customers,
geographic expansion and strategic acquisitions. See Note 7 of Notes to
Consolidated Financial Statements for further discussion of acquisitions.
The increases in revenue were mostly due to increases in airfreight and ocean
freight forwarding revenue due to the Company's continued expansion of its
operations in Asia, Europe and Latin America.
Operating Expenses: Salaries and related costs increased 36.8% to $93.1 million
in the Transition Period from $68.1 million in the Comparable Period. General
and administrative expenses increased 53.2% to $55.0 million in the Transition
Period from $35.9 million in the Comparable Period. The increase in salaries and
related costs and general and administrative expenses was due primarily to
expenditures necessary to support the Company's expansion and new business.
In connection with the merger with Intertrans, the Company recorded merger and
related costs of $30.0 million in May 1995. For additional discussion, see Note
7 of Notes to Consolidated Financial Statements.
Income Before Tax Expense (Benefit): For the Transition Period, the Company's
pre-tax income, excluding merger and related costs, would have been $17.6
million, compared to $12.1 million in the Comparable Period, or an increase of
45.5%.
Including merger and related costs of $30.0 million, the loss from operations is
$(12.4) million in the Transition Period compared to $12.1 million pre-tax
income in the Comparable Period.
Income Taxes: The Company recorded a tax benefit of $4.1 million (33.2% rate)
during the Transition Period due to the loss from operations. In the Comparable
Period, the Company had a tax expense of $4.1 million (33.7% rate) on income
before taxes.
23
<PAGE> 24
TWELVE MONTHS ENDED DECEMBER 31, 1994 COMPARED TO THE TWELVE MONTHS ENDED
DECEMBER 31, 1993
Revenue and Net Revenue: Revenue increased 40.9% to $773.4 million in 1994 from
$549.0 million in 1993 and net revenue increased 36.8% to $332.6 million in 1994
from $243.0 million in 1993. The increase in revenue and net revenue was due to
airfreight forwarding, ocean freight forwarding, customs brokerage and
warehousing and distribution. Increased revenue and net revenue for all service
areas can be attributed to the Company's continued focus on integrated
transportation logistics services for existing and new customers, geographic
expansion and strategic acquisitions. The increase in airfreight forwarding can
be attributed to the Company's continued expansion of its operations in Latin
America, Europe and Asia which led to volume increases in airfreight forwarding.
The ocean freight forwarding increase was due primarily to the expansion of
NVOCC activities with Asia and Europe. The increase in customs brokerage was
primarily attributable to growth in the Company's existing customer base and
from revenues generated from acquisitions. The warehousing and distribution
increase was attributed primarily to the Company's acquisition of a
warehouse/distribution concern and increased penetration of domestic
distribution services for existing customers on inbound shipments from Asia and
Europe to the United States.
Operating Expenses: Operating expenses increased 36.6% to $286.4 million in 1994
from $209.6 million in 1993, but declined as a percentage of net revenue.
Salaries and related costs increased 34.5% and general and administrative
expenses increased 40.5%. The increase was due primarily to expenditures
necessary to support the Company's expansion and new business.
Other Income (Expense): Interest expense increased to $2.2 million in 1994
compared to $300,000 in 1993 primarily due to borrowing incurred by the Company
to finance real estate purchases in 1994 and to obligations related to
acquisitions. Other income decreased to $1.5 million in 1994 from $1.7 million
in 1993 primarily due to lower interest income.
Income Taxes: Taxes on income for 1994 were $15.4 million compared to $12.1
million for 1993. The effective tax rate for 1994 and 1993 was 33.7% and 34.7%.
The Company's effective tax rate may fluctuate due to changes in local tax rates
and regulations in the countries in which the Company operates and the level of
pre-tax profit earned in these countries.
24
<PAGE> 25
SUBSEQUENT EVENTS
In July and August 1996, litigation was commenced against the Company alleging
violation of California law and federal securities law by the Company and
certain of its officers and directors. See "Item 3 - Legal Proceedings" and
Notes 8 and 9 of Notes to Consolidated Financial Statements. The Company is
unable to estimate the ultimate outcome of these matters, and it is possible
that such outcome could have a significant adverse impact on the Company's
consolidated results of operations. The Company believes that the ultimate
outcome of these matters will not have a significant adverse impact on the
Company's consolidated financial position (See Other Risk Factors).
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents increased to $86.5 million at May 31, 1996 from $74.3
million at May 31, 1995. The increase was primarily due to cash flow from the
Company's operating and financing activities in excess of net cash used for the
Company's investing activities. The Company's financing activities included a
private placement that was completed in March 1996 for $75 million principal
amount of 6.43% Senior Notes. In December 1995, the Company also entered into an
$80 million syndicated multi-currency credit facility (the Credit Facility). The
Credit Facility replaced the Company's previous revolving line of credit of $50
million. The Company's total available borrowing capacity under the Credit
Facility as of May 31, 1996 was approximately $63 million. See Note 3 of Notes
to Consolidated Financial Statements for further discussion of long term
obligations and short term borrowings. The Company's investing activities in
1996 included capital expenditures of approximately $42.6 million which
primarily includes expenditures for furniture, computer hardware, equipment and
real property. The Company also made cash outlays of approximately $27.1 million
for interests in acquired companies in 1996. The Company currently expects to
spend approximately $40 million in 1997 for capital expenditures (See Other
Risk Factors).
The Company makes significant disbursements on behalf of its customers, such as
customs duties. The billings to customers for these disbursements, which are
several times the amount of revenue and fees derived from these transactions,
are not recorded as revenue and expenses on the Company's income statement.
25
<PAGE> 26
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 will be effective for fiscal years beginning after
December 15, 1995. As discussed in Note 1 of the Notes to Consolidated Financial
Statements, the Company plans to continue to use the intrinsic value based
method of Accounting Principles Board Opinion No. 25, as allowed under SFAS No.
123, to account for all of its stock-based compensation. Therefore, the Company
will make the required pro forma disclosures in the notes to the consolidated
financial statements for fiscal 1997. SFAS No. 123 is not expected to have a
material effect on the Company's consolidated results of operations or financial
position.
OTHER RISK FACTORS
The nature of the Company's worldwide operations involves a multitude of
currencies other than the U.S. Dollar. Accordingly the Company is exposed to the
inherent risks of international currency markets and governmental interference.
The Company seeks to compensate for currency exposures by accelerating
international payment among the Company's offices and agents.
In addition, the Company's ability to provide service to its customers is highly
dependent on good working relationships with a variety of entities such as
airlines, steamship carriers and governmental agencies. However, changes in
space allotments available from carriers, governmental deregulation efforts,
"modernization" of the regulations governing customs clearance, and/or changes
in the international trade and tariff environment could affect the Company's
business in unpredictable ways.
There are also risks and uncertainties associated with the Company's acquisition
strategy, such as a reduction in the pace and/or magnitude of future
acquisitions and the complexities of integrating systems and operations of the
acquired companies.
26
<PAGE> 27
Management believes the Company's business has not been adversely affected by
inflation in the past. The Company has generally been successful in passing cost
increases on to its customers by means of price increases. Due to the high
degree of competition presently being experienced in the marketplace, it is
possible that continued cost increases could lead to an erosion in the Company's
margin.
Additional risks and uncertainties include dependence of the Company on
international trade and worldwide economic conditions; dependence of the Company
on the continued services of key management and operating executives including
Lynn Fritz and Dennis Pelino; risks associated with the Company's continuing
aggressive acquisition strategy, including the diversion of management's
attention to the assimilation of the operations and personnel of acquired
companies, adverse short-term effects on the Company's operating results,
integration of financial reporting systems and acquired assets, and the possible
inability of the Company's information systems to keep pace with the increasing
complexity and rapid growth of the Company's business; the increasing level of
investment required by the transition of the Company to an integrated logistics
company providing a full range of international transportation and global supply
chain management services; and diversion of management's focus and resources as
a result of pending litigation; and other risks disclosed in the Company's
filings with the Securities and Exchange Commission.
The risks and uncertainties described above could cause actual results to differ
materially from those set forth in or implied by forward-looking statements
contained in this Form 10-K, i.e., those statements that are not historical
facts. The description of risks and uncertainties is intended to qualify such
forward-looking statements in order to invoke the "safe harbor" provided by the
Private Securities Litigation Reform Act of 1995.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth at the pages indicated in
Item 14(a) of this Annual Report.
27
<PAGE> 28
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
28
<PAGE> 29
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference in the
sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Proxy Statement for the Company's Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
(the "Proxy Statement"). See also Item 1 above.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference in the
sections entitled "Compensation of Executive Officers", "Options Granted to
Executive Officers and "Employment Agreements" of the Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference in the
section entitled "Ownership of Management and Principal Stockholders" of the
Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference in the
section entitled "Transactions with the Company" of the Proxy Statement.
29
<PAGE> 30
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) The following documents are filed as part of this report: Page No.
--------
<S> <C>
(1) Consolidated Financial Statements of the Company:
Consolidated Balance Sheets F-1
Consolidated Statements of Operations F-2
Consolidated Statements of Cash Flows F-3
Consolidated Statements of Stockholders' Equity F-4
Notes to Consolidated Financial Statements F-5
Independent Auditors' Report F-21
(2) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts F-22
All other schedules are omitted because of the absence of
conditions under which they are required or because the required
information is included in the consolidated financial statements
or notes thereto.
(3) Exhibits:
See attached Exhibit Index F-23
</TABLE>
(b) The Company filed the following reports on Form 8-K from March 1, 1996
through the date hereof in 1996.
(1) July 29, 1996
Item 5. Other Events
- Filed the Company's fourth quarter earnings release.
30
<PAGE> 31
(2) July 29, 1996
Item 5. Other Events
- The Company disclosed that on July 29, 1996, a complaint was
filed in the Superior Court of the State of California, County of
San Francisco, against the Company and certain of its directors
and officers. The complaint, which purports to be brought on
behalf of a class of purchasers of the Company's stock between
August 28, 1995 and July 23, 1996, alleges various violations of
California law in connection with prior disclosures made by the
Company and seeks unspecified damages.
(3) July 31, 1996
Item 5. Other Events
- The Company disclosed that on July 31, 1996, a second complaint
was filed in the Superior Court of the State of California, County
of San Francisco, against the Company and certain of its directors
and officers containing similar allegations as the first complaint
filed on July 29, 1996.
- The Company disclosed that on July 31, 1996, two complaints were
filed in the U.S. District Court for the Northern District of
California, against the Company and certain of its directors and
officers. The complaints, which purport to be brought on behalf of
a class of purchasers of the Company's stock between August 28,
1995 and July 23, 1996, allege various violations of federal
securities law in connection with prior disclosures made by the
Company and seeks unspecified damages.
(4) August 13, 1996
Item 5. Other Events
- The Company disclosed that on August 13, 1996, a complaint was
filed in the U.S. District Court for the Northern District of
California, against the Company and certain of its directors and
officers. The complaint, which purports to be brought on behalf of
a class of purchasers of the Company's stock between August 28,
1995 and July 23, 1996, alleges various violations of federal
securities law in connection with prior disclosures made by the
Company and seeks unspecified damages.
31
<PAGE> 32
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.
Date: August 29, 1996
FRITZ COMPANIES, INC.
By /s/ Lynn C. Fritz
--------------------------------
Lynn C. Fritz
Chairman of the Board
32
<PAGE> 33
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 indicated on August 29, 1996.
<TABLE>
<CAPTION>
Signature Title Date
- - ------------------------- ------------------------------------ --------------------
<S> <C> <C>
/s/ Lynn C. Fritz Chairman of the Board August 29, 1996
- - ------------------------- and Chief Executive Officer
Lynn C. Fritz (Principal Executive Officer)
/s/ Dennis L. Pelino President, Chief Operating Officer August 29, 1996
- - ------------------------- and Director
Dennis L. Pelino
/s/ Ronald W. Womack Vice President of Finance August 29, 1996
- - ------------------------- (Principal Financial and Accounting
Ronald W. Womack Officer)
/s/ Ronald A. Marcillac Senior Vice President, Director August 29, 1996
- - -------------------------
Ronald A. Marcillac
/s/ James E. Gilleran Director August 29, 1996
- - -------------------------
James E. Gilleran
/s/ Preston Martin Director August 29, 1996
- - -------------------------
Preston Martin
</TABLE>
33
<PAGE> 34
FRITZ COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MAY 31,
-------
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 86,461 $ 74,261
Accounts receivable, net of
allowance for doubtful
accounts of $6,401 in 1996
($4,512 in 1995) 397,747 323,729
Deferred income taxes 7,368 8,479
Prepaid expenses and other
current assets 28,368 14,021
-------- --------
Total current assets 519,944 420,490
-------- --------
PROPERTY AND EQUIPMENT--NET 111,399 79,245
INTANGIBLES, NET OF ACCUMULATED
AMORTIZATION OF $11,963 in 1996
($6,498 in 1995) 88,790 63,711
OTHER ASSETS 13,329 13,252
-------- --------
TOTAL ASSETS $733,462 $576,698
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and current portion
of long-term obligations $ 14,514 $ 6,335
Accounts payable 322,018 299,536
Accrued liabilities 65,149 50,213
Income tax payable 6,496 5,101
-------- --------
Total current liabilities 408,177 361,185
LONG-TERM OBLIGATIONS 89,505 33,567
DEFERRED INCOME TAXES 995 1,781
OTHER LIABILITIES 4,038 5,950
-------- --------
TOTAL LIABILITIES 502,715 402,483
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: par value $.01
per share; 60,000 shares
authorized, 34,898 shares issued in 1996
(31,858 in 1995) and 34,898 shares outstanding
in 1996 (16,558 in 1995) 349 319
Additional paid-in capital 118,485 120,066
Retained earnings 112,587 87,586
Treasury stock--at cost 15,300 shares -- (35,000)
Cumulative foreign currency translation adjustment (674) 1,244
-------- --------
Total stockholders' equity 230,747 174,215
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $733,462 $576,698
======== ========
</TABLE>
See notes to consolidated financial statements.
F-1
<PAGE> 35
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS TWELVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, --------------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE $1,043,858 $400,246 $773,389 $549,026
FREIGHT CONSOLIDATION COSTS 586,290 234,564 440,806 305,984
---------- -------- -------- --------
NET REVENUE 457,568 165,682 332,583 243,042
---------- -------- -------- --------
OPERATING EXPENSES:
Salaries and related costs 249,243 93,055 183,354 136,288
General and administrative 155,111 55,000 103,020 73,308
Merger and related costs 14,555 29,995 -- --
---------- -------- -------- --------
Total operating expenses 418,909 178,050 286,374 209,596
---------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS 38,659 (12,368) 46,209 33,446
OTHER INCOME (EXPENSE) (196) (89) (687) 1,329
---------- -------- -------- --------
INCOME (LOSS) BEFORE TAX EXPENSE
(BENEFIT) 38,463 (12,457) 45,522 34,775
INCOME TAX EXPENSE (BENEFIT) 13,462 (4,138) 15,389 12,061
---------- -------- -------- --------
NET INCOME (LOSS) $ 25,001 $ (8,319) $ 30,133 $ 22,714
========== ======== ======== ========
Net income (loss) per share-primary $ .70 $ (.25) $ .96 $ .75
========== ======== ======== ========
Weighted average shares outstanding-primary 35,747 32,876 31,552 30,090
========== ======== ======== ========
Net income (loss) per share-fully diluted $ .70 $ (.25) $ .94 $ .75
========== ======== ======== ========
Weighted average shares outstanding-fully diluted 35,796 32,876 31,948 30,170
========== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 36
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS FIVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, --------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 25,001 $ (8,319) $ 30,133 $ 22,714
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 20,162 6,545 12,514 6,585
Noncash merger costs -- 14,681 -- --
Customer deposits refunded--net (1,984) (202) (465) (653)
Deferred income taxes (114) (8,299) 459 1,552
Other 899 957 (181) 459
Effect of changes in:
Receivables (41,990) 604 (61,554) (35,985)
Prepaid expenses and other
current assets 4,183 2,802 (3,788) (1,769)
Payables and accrued liabilities 13,924 12,125 39,748 14,552
Accrued merger and related costs (10,019) 12,730 -- --
-------- -------- -------- --------
Net cash provided by operating activities 10,062 33,624 16,866 7,455
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (42,569) (13,067) (42,103) (19,335)
Investments in and advances to affiliates 886 351 (653) (392)
Acquisitions, net of cash acquired (25,564) (2,998) 2,554 (4,984)
Disposal of fixed assets 5,082 -- -- --
Other (279) 706 3,056 2,511
-------- -------- -------- --------
Net cash used by investing
activities (62,444) (15,008) (37,146) (22,200)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short term borrowings 2,000 -- -- --
Proceeds from common stock issued -- -- 42,160 --
Long-term obligations issued 81,911 1,363 18,500 2,681
Long-term obligations repaid (34,917) (3,332) (4,453) (146)
Proceeds from exercise of stock options 17,359 3,027 5,489 1,737
Dividends paid -- (1,141) (2,252) (1,345)
Repurchase of common stock -- (689) (688) --
Other 147 1,723 (790) 667
-------- -------- -------- --------
Net cash provided by financing
activities 66,500 951 57,966 3,594
-------- -------- -------- --------
Foreign currency translation gain (loss) (1,918) (9) 1,759 (924)
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 12,200 19,558 39,445 (12,075)
ADJUSTMENT DUE TO CHANGE IN YEAR
END OF INTERTRANS -- -- (3,797) --
CASH AND EQUIVALENTS AT
BEGINNING OF PERIOD 74,261 54,703 19,055 31,130
-------- -------- -------- --------
CASH AND EQUIVALENTS AT END
OF PERIOD $ 86,461 $ 74,261 $ 54,703 $ 19,055
======== ======== ======== ========
OTHER CASH FLOW INFORMATION:
Income taxes paid $ 13,282 $ 5,760 $ 11,990 $ 8,950
======== ======== ======== ========
Interest paid $ 4,892 $ 766 $ 1,740 $ 319
======== ======== ======== ========
Noncash investing and financing activities in
connection with acquisitions:
Liabilities assumed $ 36,600 $ 18,300 $ 80,966 $ 5,837
======== ======== ======== ========
Common stock issued or subscribed $ 3,150 $ 3,400 $ 3,000 $ 5,770
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 37
FRITZ COMPANIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL COMMON TREASURY STOCK CURRENCY
PAID-IN STOCK RETAINED ------------------- TRANSLATION
(IN THOUSANDS) SHARES AMOUNT CAPITAL SUBSCRIBED EARNINGS SHARES AMOUNT ADJUSTMENTS EQUITY
------- ------ --------- ----------- -------- ------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 29,735 $ 297 $ 56,268 $ 0 $ 45,941 15,300 $ (35,000) $ 418 $ 67,924
Net income 22,714 22,714
Foreign currency translation
adjustment (924) (924)
Stock issued for services
performed 1 29 29
Common stock issued in
acquisition of companies 83 1 2,436 2,437
Stock options exercised 124 1 1,736 1,737
Common stock subscribed 3,333 3,333
Valuation reserve on noncurrent
marketable equity securities 121 121
Restricted stock grants 12 28 28
Dividends (1,345) (1,345)
------- ------ --------- --------- -------- ------- --------- --------- --------
Balance, December 31, 1993 29,955 299 60,497 3,333 67,431 15,300 (35,000) (506) 96,054
Net income 30,133 30,133
Foreign currency translation
adjustment 1,759 1,759
Stock issued for services
performed 6 1 203 204
Common stock issued in public
offering 1,150 12 42,148 42,160
Common stock issued in
acquisition of companies 219 2 6,333 6,335
Stock options exercised 315 3 5,486 5,489
Repurchase of common stock (18) (688) (688)
Common stock subscribed (3,333) (3,333)
Restricted stock grants and
options 20 322 322
Dividends (2,252) (2,252)
Adjustment due to change in
year end of Intertrans 1,719 1,719
Valuation reserve on
noncurrent marketable
equity securities 15 15
------- ------ --------- --------- -------- ------- --------- --------- --------
Balance, December 31, 1994 31,647 317 114,301 0 97,046 15,300 (35,000) 1,253 177,917
Net loss (8,319) (8,319)
Foreign currency translation
adjustment (9) (9)
Stock issued for services
performed 1 29 29
Common stock issued in
acquisition of companies 58 3,400 3,400
Stock options exercised 147 2 3,025 3,027
Repurchase of common stock (19) (689) (689)
Restricted stock grants and
options 24 0
Dividends (1,141) (1,141)
------- ------ --------- --------- -------- ------- --------- --------- --------
Balance, May 31, 1995 31,858 319 120,066 0 87,586 15,300 (35,000) 1,244 174,215
Net income 25,001 25,001
Foreign currency
translation adjustment (1,918) (1,918)
Stock issued for services
performed 1 37 37
Common stock issued in
acquisition of companies 81 1 3,149 3,150
Stock split 17,220 172 (172) 0
Stock options exercised 950 10 17,349 17,359
Tax benefit from exercise
of stock options 12,903 12,903
Retirement of treasury
stock (15,300) (153) (34,847) (15,300) 35,000 0
Restricted stock grants
and options 88 0
------- ------ --------- --------- -------- ------- --------- --------- -------
Balance, May 31, 1996 34,898 $ 349 $118,485 $ 0 $112,587 0 $ 0 $ (674) $230,747
======= ====== ========= ========= ======== ======= ========= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 38
FRITZ COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The consolidated financial statements include the
accounts of Fritz Companies, Inc. and all significant domestic and international
companies in which the Company has more than a 50% equity ownership or otherwise
exercises control. All significant intercompany balances and transactions have
been eliminated.
The preparation of the consolidated financial statements requires estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and related notes in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
The Company changed its fiscal year end of December 31 to a fiscal year end of
May 31, beginning with the five-month period ended May 31, 1995 (herein referred
to as the Transition Period).
Cash and Equivalents--Cash and equivalents (at cost which approximates market
value) include demand deposits and short-term investments with maturities of
three months or less.
Property and Equipment--Property and equipment are stated at cost, and
depreciation and amortization are computed principally by the straight-line
method at rates based on the estimated useful lives of assets -- buildings 40
years; furniture and equipment 5 - 10 years; and computer hardware and software
5 years. Leasehold improvements are depreciated over their estimated useful
lives or the terms of the related lease, whichever is shorter. Incremental costs
related to internally developed software projects are capitalized and amortized
over the expected useful life on a straight-line basis not to exceed five years,
commencing when the asset is placed into service.
Intangibles--Intangibles, which include goodwill and covenants not to compete,
arose from business acquisitions and are amortized on a straight-line basis over
estimated useful lives ranging from two years through forty years. The Company
annually evaluates its carrying value and expected period of benefit of goodwill
in relation to results of operations.
F-5
<PAGE> 39
Foreign Currency Translation Adjustment--Foreign assets and liabilities are
translated using month end exchange rates, and the impact of exchange rate
changes is shown as "Cumulative Foreign Currency Translation Adjustments" in
stockholders' equity. Gains and losses from foreign exchange transactions are
included in results of operations.
Off-Balance Sheet Risk and Concentration of Credit Risk--Financial instruments
which potentially subject the Company to concentrations of credit risk consist
principally of temporary cash investments and accounts receivable. The Company
places its temporary cash investments with high credit quality financial
institutions or the U.S. Government and, thus, limits the amount of credit
exposure to any one entity. The Company's customer base is comprised of
customers in a wide range of industries which are located throughout the world.
The Company had no significant concentrations of credit risk as of May 31, 1996
and 1995. (See Notes 3 and 8 for discussion of the Company's off-balance sheet
risks.)
Revenue Recognition--Revenues and expenses related to the transportation of
freight are recognized at the time the freight departs the terminal of origin.
This method approximates recognizing revenues and expenses when the shipment is
completed. Customs brokerage revenue is recognized upon completing documents
necessary for customs entry purposes. Warehouse and distribution revenue is
recognized upon execution of the service provided.
Revenue realized by the Company as an indirect carrier includes the direct
carrier's charges to the Company for carrying the shipment. Revenue realized in
other capacities includes only the commissions and fees received. Net revenue
for air and ocean freight forwarding and the consolidation of surface
transportation as an indirect carrier is determined by deducting freight
consolidation and transaction costs from such revenue.
Net Income (Loss) Per Share--For the twelve months ended May 31, 1996, December
31, 1994 and 1993, net income per common share was based on the weighted average
number of common shares outstanding and common stock equivalents. Common stock
equivalents are a result of outstanding stock options. For the five months ended
May 31, 1995 net loss per share was based on the weighted average number of
common shares outstanding (common stock equivalents of approximately 863,000
shares were not included since their inclusion would be antidilutive).
F-6
<PAGE> 40
Income Taxes--The Company uses the liability method to account for income taxes
effective January 1, 1993, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Adoption of SFAS No.
109 did not have a significant impact on the Company's results of operations.
The Company realizes an income tax benefit from the exercise or early
disposition of certain stock options. This benefit results in a decrease in
current income taxes payable and an increase in additional paid in capital.
New Accounting Standards -- In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock Based Compensation". SFAS No.
123 will be effective for fiscal years beginning after December 15, 1995, and
will require the Company to either recognize in its consolidated financial
statements costs related to its employee stock based compensation plans, such as
stock option and stock purchase plans, or make pro forma disclosures of such
costs in a footnote to the consolidated financial statements.
The Company plans to continue to use the intrinsic value based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for stock-based compensation plans. Therefore, in its consolidated
financial statements for fiscal 1997, the Company will make the required pro
forma disclosures in a footnote to the consolidated financial statements. SFAS
No. 123 is not expected to have a material effect on the Company's consolidated
results of operations or financial position.
Reclassifications -- Prior years' amounts have been reclassified to conform to
1996 presentation.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MAY 31,
-------
1996 1995
---- ----
<S> <C> <C>
Land $ 9,677 $ 9,520
Building and leasehold improvements 48,662 37,292
Furniture and equipment 60,098 36,720
Computer hardware and software 50,089 41,738
Software development in progress 3,858 928
-------- --------
Total 172,384 126,198
Less accumulated depreciation and
amortization (60,985) (46,953)
-------- --------
Total $111,399 $ 79,245
======== ========
</TABLE>
F-7
<PAGE> 41
Software development in progress represents costs related to incomplete
internally developed software. In fiscal year 1996 and the Transition Period,
$885,000 and $648,000 of software development was completed and transferred to
computer hardware and software. The amortization expense for completed projects
was $1.2 million, $0.4 million, $1.0 million and $0.4 million in 1996, the
Transition Period, 1994 and 1993, respectively.
NOTE 3. LONG-TERM OBLIGATIONS AND BORROWINGS
Long-term obligations and borrowings consist of the following (in thousands):
<TABLE>
<CAPTION>
MAY 31,
-------
1996 1995
---- ----
<S> <C> <C>
Short Term Borrowings $ 2,000 $ --
======== =======
Long Term Obligations:
6.43% Senior Notes due on
April 15, 2003 $ 75,000 $ --
Installment obligations related
to acquisitions, non-interest bearing,
due 1996-2002 (less unamortized
discount, based on imputed interest
rates of 7% and 8.5%--1996, of
approximately $1.6 million) 18,768 16,115
Term note payable due in installments
through 2005 non-interest bearing 2,761 --
Bank obligation, bearing interest at prime rate
plus 1.5%, repayable in monthly installments
of $83,334 through November 1997 and
March 1998 1,145 1,821
Note payable from bank due in installments,
bearing interest at 6.5% through 2010 785 --
Mortgage note payable, interest rate of 9.3% to 10%
due 1997-2000 568 2,429
Mortgage note payable at bank's reference
rate (6.66%, at May 31, 1995) -- 18,500
Other obligations 2,992 1,037
-------- -------
102,019 39,902
Less long-term obligations--current portion (12,514) (6,335)
-------- -------
Total long-term obligations $ 89,505 $33,567
======== =======
</TABLE>
F-8
<PAGE> 42
At May 31, 1996, the Company's aggregate amounts of maturing long-term
obligations for the years 1997 through 2001 and thereafter are $12.5 million,
$6.3 million, $2.0 million, $2.2 million, $1.6 million, respectively and $77.4
million thereafter. The carrying value of the Company's long-term obligations
approximates their fair value.
In December 1995, the Company entered into an $80 million syndicated
multi-currency credit facility (the Credit Facility), as amended, maturing
December 1998. As of May 31, 1996, the balance outstanding under the Credit
Facility was $2 million and the floating interest rate as of that date was 3.1%.
The borrowings under the Credit Facility are unsecured. At May 31, 1996 and
1995, the Company was contingently liable for letters of credit worldwide of $34
million and $15.4 million, respectively, of which $15 million reduced the
Company's borrowing capacity under the Credit Facility.
In March 1996, the Company completed a private placement of $75 million
principal amount of 6.43% Senior Notes with interest payable semi-annually.
The Company is required to comply with certain minimum working capital,
financial ratios and net worth requirements. The Company also must comply with
other provisions including limitations on the payment of dividends, the
purchase and sale of significant assets and certain cross default provisions.
Information regarding the Company's bank lines was as follows (dollars in
thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS FIVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, ------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Maximum amount outstanding during period $60,000 $3,000 $30,250 $5,000
Average amount outstanding during period 23,282 172 10,314 82
Weighted average interest rate during period 6.1% 6.5% 5.6% 6.0%
</TABLE>
F-9
<PAGE> 43
NOTE 4. INCOME TAXES
The current and deferred components of income tax expense (benefit) were as
follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS FIVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, -------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current
Federal $ 3,442 $ 1,100 $ 8,628 $ 6,934
State 509 351 1,481 1,479
Foreign 9,625 2,710 4,821 2,096
------- ------- ------- -------
Total current 13,576 4,161 14,930 10,509
------- ------- ------- -------
Deferred
Federal 1,466 (7,387) (456) 1,130
State 313 (1,049) 113 --
Foreign (1,893) 137 802 422
------- ------- ------- -------
Total deferred (114) (8,299) 459 1,552
------- ------- ------- -------
Total $13,462 $(4,138) $15,389 $12,061
======= ======= ======= =======
</TABLE>
Sources of income (loss) before income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS FIVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, ------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Domestic $12,617 $(20,341) $24,221 $22,628
Foreign 25,846 7,884 21,301 12,147
------- -------- ------- -------
$38,463 $(12,457) $45,522 $34,775
======= ======== ======= =======
</TABLE>
The following is a reconciliation of the statutory federal income tax provision
(benefit) and rate to the effective income tax provision (benefit) and rate
(dollars in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS YEAR ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, -----------------------
1996 1995 1994 1993
-------------- -------------- ------------- -------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory federal income
tax expense (benefit) and rate $13,462 35.0 $(4,236) (34.0) $15,478 34.0 $11,824 34.0
Increases (decreases) resulted from:
Foreign taxes lower than federal rate (1,314) (3.4) (235) (1.9) (1,866) (4.2) (1,570) (4.5)
State taxes on income, net of federal
income tax effect 745 1.9 (979) (7.9) 1,048 2.3 976 2.8
Change in valuation allowance (80) (.2) 570 4.6 223 .5 -- --
Other 649 1.7 742 6.0 506 1.1 831 2.4
------- ---- ------- ----- ------- ---- ------- ----
Total $13,462 35.0 $(4,138) (33.2) $15,389 33.7 $12,061 34.7
======= ==== ======= ===== ======= ==== ======= ====
</TABLE>
F-10
<PAGE> 44
The significant components of net deferred income tax assets were as follows (in
thousands):
<TABLE>
<CAPTION>
MAY 31,
-------
1996 1995
---- ----
<S> <C> <C>
Deferred income tax assets:
Current:
Compensated absences $ 1,849 $ 1,606
Net operating loss carryforward -- 599
Foreign tax credit -- 500
Capital loss carryforward 713 793
Allowance for doubtful accounts 2,150 1,579
Elimination of duplicate
facilities and severances 1,630 2,468
Cancellation of contractual obligations 622 253
Other reserves and accruals 1,117 1,474
------- -------
Subtotal 8,081 9,272
Less valuation allowance (713) (793)
------- -------
Total current deferred income tax assets 7,368 8,479
------- -------
Noncurrent:
Deferred compensation 1,064 608
Other reserves and accruals 663 680
------- -------
Subtotal 1,727 1,288
------- -------
Total deferred income tax assets 9,095 9,767
------- -------
Deferred income tax liabilities:
Depreciation and amortization (995) (1,781)
------- -------
Net deferred income tax assets $ 8,100 $ 7,986
======= =======
</TABLE>
The valuation allowance for deferred income tax assets as of May 31, 1996 and
1995 was $713,000, and $793,000, respectively. The Company has evaluated the
deferred tax assets for which a valuation allowance has not been provided and
believes that it is more likely than not that they will be realized in the
future.
At May 31, 1996 and 1995, no provision has been made for cumulative earnings of
consolidated foreign subsidiaries designated as permanently invested. Such
earnings amounted to approximately $86.3 million and taxes that would have to
be paid on such earnings amount to approximately $15.2 million at May 31, 1996.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company leases office space from the Company's Chief Executive Officer.
Minimum future rental payments under such leases at May 31, 1996 which expire
within one year were approximately $172,000. Rental expense from these leases
was $758,000, $284,000, $550,000 and $510,000 for the twelve months ended May
31, 1996, the Transition Period and for years ended December 31, 1994, and 1993,
respectively.
In connection with the Company's U.S. customs brokerage operations, the
Company's customers are required to obtain surety bonds. The Company places such
customs bonds with Intercargo Corporation ("Intercargo") and other underwriters
of customs bonds. The Company's Chief Executive Officer owns approximately 3.49%
of the outstanding common stock of Intercargo.
F-11
<PAGE> 45
In 1996, the Company placed approximately $2.8 million of insurance business
with Intercargo and received approximately $251,000 in insurance commissions and
fees from Intercargo. The Company believes the amounts paid and received are
substantially the same as the Company would have incurred from other third
parties.
The Company had paid premiums until 1992 on life insurance policies on the
Company's Chief Executive Officer, though the Company is not the beneficiary.
Such cumulative premium payments, (which approximate surrender value) of $1.4
million at May 31, 1996 and 1995, are included in other assets, and will be
refunded by the beneficiary upon death of the insured or cancellation of the
policies, whichever comes first. The Company has no future obligation to pay
premiums on these policies.
NOTE 6. COMMITMENTS
Lease Commitments--The Company leases office and warehouse space, computer and
other office equipment from third parties, including certain operating leases
that are financed by special purpose entities, under operating leases expiring
through 2001. Minimum future rental payments under such leases (including leases
discussed above) as of May 31, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
RENTAL SUBLEASE NET RENTAL
PAYMENTS INCOME PAYMENTS
-------- ------ --------
<S> <C> <C> <C>
Year ending May 31,
1997 $ 28,684 $1,036 $ 27,648
1998 21,025 614 20,411
1999 14,335 438 13,897
2000 10,435 47 10,388
2001 and thereafter 34,530 -- 34,530
-------- ------ --------
Total $109,009 $2,135 $106,874
======== ====== ========
</TABLE>
Rental expense from these leases was as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS FIVE MONTHS YEAR ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, -----------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross rental expense $37,547 $11,548 $21,724 $16,491
Less sublease rental income (1,630) (1,014) (1,567) (1,026)
------- ------- ------- -------
Net rental expense $35,917 $10,534 $20,157 $15,465
======= ======= ======= =======
</TABLE>
F-12
<PAGE> 46
NOTE 7. ACQUISITIONS
Purchases
In 1996, the Company acquired 16 freight forwarding/customs brokerage companies,
and purchased interests in 13 companies for an aggregate purchase price of $37.1
million consisting of cash of approximately $27.1 million and net obligations
payable of approximately $10 million. Of the total acquisition price, the
Company acquired current assets of approximately $33.9 million, fixed assets of
approximately $10.9 million, noncurrent assets of approximately $4.7 million,
current liabilities of approximately $31.7 million and noncurrent liabilities of
approximately $4.9 million.
In addition to the merger with Intertrans, during the Transition Period, the
Company acquired assets and interests in freight forwarding and customs
brokerage companies for an aggregate purchase price of $15.3 million (cash of
$7.1 million and obligations payable of $5.7 million and 43,323 shares at $2.5
million market value of the Company's common stock). In addition, see Note 11
for further discussion. Of the total acquisition price, the Company acquired
current assets of $14.5 million, fixed assets of $3.9 million, noncurrent assets
of $123,000, current liabilities of $14.4 million, noncurrent liabilities of
$3.5 million and recorded minority interests of $241,000.
Certain acquisition agreements provide for future payments totaling a maximum
amount as of May 31, 1996 of approximately $34 million based on achievement of
specified net revenue or pretax income levels.
Intangible assets, including goodwill and covenants not to compete, of
approximately $24.2 million and $15.0 million were recorded in connection with
these acquisitions in 1996 and in the Transition Period, respectively.
Amortization expense for intangible assets was approximately $4.0 million, $1.4
million, $2.7 million, and $1.0 million, in 1996, the Transition Period, 1994,
and 1993, respectively.
The purchase method of accounting was used in all acquisitions, except the
merger with Intertrans as discussed below. The operations of the acquired
companies are reflected in the Company's consolidated financial statements from
the date of acquisition.
F-13
<PAGE> 47
The following unaudited consolidated pro forma information presents the results
of operations as if acquisitions occurred at the beginning of fiscal year 1995
(in millions, except per share data):
<TABLE>
<CAPTION>
(UNAUDITED)
TWELVE MONTHS
ENDED MAY 31,
-------------
1996 1995
---- ----
<S> <C> <C>
Net Revenue $480 $ 415
Net Income $ 27 $ 34
Net Income per share - primary $.76 $1.06
Net Income per share - fully diluted $.76 $1.06
</TABLE>
Information above is presented for informational purposes only and is not
necessarily indicative of operating results that would have occurred had the
acquisitions been in effect for the entire periods presented, nor are they
necessarily indicative of future operating results and do not reflect any
synergies that might be achieved from combined operations.
POOLING OF INTERESTS
On May 30, 1995, the Company merged with Intertrans, a provider of international
airfreight and ocean freight forwarding, customs brokerage, and other consulting
and transportation services. The majority of Intertrans' business related to
freight forwarding from the United States to overseas destinations. In the
merger, each outstanding share of Intertrans common stock was converted into the
right to receive 0.365 of a share of the Company's common stock. This merger was
accounted for as a pooling of interests, and accordingly, consolidated financial
statements for periods prior to the business combination have been restated to
include the results of operations, financial position and cash flows of
Intertrans.
F-14
<PAGE> 48
Results of operations for the separate companies and the combined amounts
presented in the accompanying consolidated financial statements were as follows
(in thousands):
<TABLE>
<CAPTION>
FIVE MONTHS TWELVE MONTHS
ENDED MAY 31, ENDED DECEMBER 31,
1995 1994 1994 1993
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
GROSS REVENUE:
Fritz Companies, Inc. $260,449 $166,297 $ 515,969 $ 341,758
Intertrans Corporation 139,797 192,658 452,156 376,762
Adjustments -- (85,491) (194,736) (169,494)
-------- -------- --------- ---------
Combined $400,246 $273,464 $ 773,389 $ 549,026
======== ======== ========= =========
NET REVENUE:
Fritz Companies, Inc. $124,120 $ 80,551 $ 245,448 $ 169,941
Intertrans Corporation 41,562 107,167 257,420 207,268
Adjustments -- (71,755) (170,285) (134,167)
-------- -------- --------- ---------
Combined $165,682 $115,963 $ 332,583 $ 243,042
======== ======== ========= =========
NET INCOME (LOSS):
Fritz Companies, Inc. $ (1,568) $ 4,027 $ 19,571 $ 14,024
Intertrans Corporation (6,751) 4,017 10,562 8,690
-------- -------- --------- ---------
Combined $ (8,319) $ 8,044 $ 30,133 $ 22,714
======== ======== ========= =========
</TABLE>
Prior to the merger, the Company's fiscal year ended on December 31. Intertrans'
financial statements for the five months ended May 31, 1995 and twelve months
ended October 31, 1994 and 1993 were combined with the Company's financial
statements for the five months ended May 31, 1995 and the twelve months ended
December 31, 1994 and 1993.
There were no significant transactions between the Company and Intertrans prior
to the merger which required elimination. In order to conform to accounting
policies of the Company, revenue and freight consolidation costs for Intertrans
were reduced so that pass-through amounts paid as agent for ocean freight,
foreign collect freight, customs duty, and other services were not included in
the Consolidated Statements of Operations.
Retained earnings, cash and equivalents and certain balance sheet accounts were
adjusted in the year ended December 31, 1994 to include the effect of including
Intertrans' results of operations, financial position and cash flows for the two
months ended from November 1, 1994 to December 31, 1994. Intertrans' gross
revenue, net revenue, net income before extraordinary items and net income were
$50.0 million, $14.6 million, $1.7 million and $1.7 million for the two months
ended December 31,1994, respectively.
In connection with this merger, the Company recorded merger and related costs in
May 1995 for transaction costs of $3.3 million and $26.7 million of other costs
relating to combining the operations. The transaction costs consist of fees for
investment bankers, attorneys, accountants, financial printing and other related
charges. Costs of combining the operations include elimination of duplicate
management information systems and facilities (including cancellation of
leases); severance and outplacement of approximately 180 terminated employees;
cancellation of certain contractual obligations; and other costs related to the
merger. At May 31, 1995, the balance remaining in accrued liabilities was
approximately $12.5 million.
F-15
<PAGE> 49
In 1996, the Company recorded additional merger and related costs of $14.6
million associated with the Intertrans merger including approximately $2.8
million representing additional severance payments as a result of the Company's
decision to eliminate 200 additional employees at all levels in the Company. As
of May 31, 1996, approximately $2.5 million of this amount has been paid. The
merger and related costs also included the elimination of duplicate facilities,
integration of information systems, cancellation of certain contractual
obligations and the write-off of pre-merger receivables. As of May 31, 1996,
approximately $2.7 million was included in accrued liabilities for facilities
and severances.
NOTE 8. CONTINGENCIES
The Company is party to routine litigation incident to its business, primarily
claims for goods lost or damaged in transit or improperly shipped. Most of the
lawsuits in which the Company is the defendant are covered by insurance and are
being defended by the Company's insurance carriers. See Note 9 for additional
discussion regarding legal matters.
NOTE 9. SUBSEQUENT EVENTS
In July 1996, four complaints were filed against the Company and certain of
its directors and officers (two in California state court and two in federal
court), purporting to be brought on behalf of a class of purchasers of the
Company's stock between August 28, 1995 and July 23, 1996. The complaints allege
various violations of California law and federal securities law in connection
with prior disclosures made by the Company and seek unspecified damages. In
August 1996, another complaint was filed in federal court containing
substantially similar allegations.
F-16
<PAGE> 50
The Company is unable to estimate the ultimate outcome of these matters, and it
is possible that such outcome could have a significant adverse impact on the
Company's consolidated results of operations. The Company believes that the
ultimate outcome of these matters will not have a significant adverse impact on
the Company's consolidated financial position.
NOTE 10. BUSINESS SEGMENT INFORMATION
The Company operates in the international freight forwarding industry, which
encompasses customs brokerage, air and ocean freight forwarding and
warehousing and distribution. No single customer accounted for ten percent or
more of the consolidated revenue.
Certain information regarding the Company's operations by geographic areas is
summarized below (in thousands):
<TABLE>
<CAPTION>
NORTH AMERICA FAR EAST EUROPE OTHER AREAS TOTAL WORLDWIDE
------------- -------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
- - ---------
1996 $ 613,729 $264,394 $145,440 $20,295 $1,043,858
1995(a) 269,744 63,405 60,270 6,827 400,246
1994 527,699 140,411 95,750 9,529 773,389
1993 414,956 76,878 54,662 2,530 549,026
Income (Loss) from Operations:
- - ------------------------------
1996 (b) $ 15,922 $ 11,489 $ 8,621 $ 2,627 $ 38,659
1995 (a), (b) (18,905) 3,773 2,504 260 (12,368)
1994 26,777 13,422 4,394 1,616 46,209
1993 21,178 8,961 3,084 223 33,446
Identifiable Assets:
- - --------------------
1996 $ 490,139 $ 98,431 $110,026 $34,866 $ 733,462
1995(a) 427,713 63,256 58,749 26,980 576,698
1994 410,459 54,764 22,314 43,273 530,810
1993 241,653 27,281 27,307 1,733 297,974
</TABLE>
(a) As of and for the five months ended May 31, 1995.
(b) Includes approximately $14.6 million and $30.0 million in 1996 and 1995,
respectively, of merger and related costs as discussed in Note 7.
F-17
<PAGE> 51
NOTE 11. COMMON STOCK
In October 1992, the Company established the 1992 Omnibus Equity Incentive Plan
("1992 Plan"), pursuant to which an aggregate of 1,520,000 shares of common
stock was reserved for issuance to key employees of the Company. In May 1994,
the 1992 Plan was amended to increase the number of shares available for award
by an additional 1,520,000 shares of common stock. The 1992 Plan permits awards
of non-qualified stock options, incentive stock options within the meaning of
Section 422 of the Internal Revenue Code, stock appreciation rights, restricted
stock, and performance awards entitling the recipient to receive cash or common
stock following attainment of performance goals determined by the committee
administering the 1992 Plan.
The majority of options granted under the Company's 1992 Plan are exercisable
one-third each on the day after the first, second and third anniversary of the
original grant. The majority of restricted stock vests 100% on the day after the
fifth or seventh anniversary of the original grant. Both options and restricted
stock were granted at a price equal to fair market value at date of grant except
for 240,000 shares of options which were granted at 90% of fair market value at
date of grant. Related compensation expense of approximately $917,000, $67,000
and $160,000 were recorded in 1996, the Transition Period and 1994,
respectively.
Employee Stock Option Plans--Each option assumed by the Company under the
Intertrans merger agreement will continue to have, and be subject to, the same
terms and conditions set forth in the relevant Intertrans Stock Option Plan. The
Intertrans plans required stock options granted to key employees must be at a
price not less than the stock's fair market value of the stock at grant date.
The majority of options granted are exercisable one-third after first
anniversary date of the grant, two-thirds after two years and are fully
exercisable three years from date of grant. In addition, the Intertrans plan
allowed granting nonqualified stock options at not less than fair market value
on date of grant.
F-18
<PAGE> 52
Stock option activity for 1996, the Transition Period, 1994 and 1993 was as
follows:
<TABLE>
<CAPTION>
NUMBER RESTRICTED NUMBER PRICE($)
SHARES OPTION SHARES PER SHARE(a)
----------------- ------------- ------------
<S> <C> <C> <C>
Outstanding -- December 31, 1992 1,314,006 3.08 - 7.50
Granted 13,000 294,614 13.19 - 14.50
Cancelled (1,000) (48,512) 4.28 - 11.00
Exercised (123,432) 3.08 - 4.38
------- ---------
Outstanding -- December 31, 1993 12,000 1,436,676 3.26 - 14.50
Granted 19,500 575,164 16.44 - 19.50
Cancelled (43,074) 6.85 - 15.00
Exercised (315,259) 3.26 - 13.00
------- ---------
Outstanding -- December 31, 1994 31,500 1,653,507 3.26 - 19.50
Granted 24,000 199,252 7.50 - 32.13
Cancelled (25,542) 9.93 - 23.98
Exercised (147,000) 3.26 - 18.49
------- ---------
Outstanding -- May 31, 1995 55,500 1,680,217 6.85 - 28.81
Stock Split 55,500 1,118,878 6.85 - 28.81
Granted 211,728 327,015 26.38 - 41.50
Cancelled (2,600) (64,075) 11.00 - 28.63
Exercised - (927,348) 4.28 - 28.63
------- ---------
Outstanding -- May 31, 1996 320,128 2,134,687
======= =========
Exercisable --
May 31, 1996 3,000 1,228,000
======= =========
May 31, 1995 - 945,000
======= =========
</TABLE>
(a) Price per share has been adjusted for a two-for-one stock split.
As of May 31, 1996, options available for grant were 102,225 shares.
In May 1993, the Company established the Nonemployee Director Restricted Stock
Plan, pursuant to which an aggregate of 50,000 shares of common stock was
reserved for issuance to outside directors to cover the portion of their annual
compensation payable in common stock. For fiscal year 1996, no shares have been
issued to outside directors. Separately, 1,200 restricted shares were granted in
1996 to nonemployee directors under the 1992 Omnibus Equity Incentive Plan.
In connection with acquisitions, the Company issued 81,140 and 43,323 shares
during 1996 and the Transition Period, respectively. For further discussion of
acquisitions see Note 7.
Effective July 1, 1996, the Company adopted the Employee Stock Purchase Plan
(Plan). Adoption of this plan is subject to approval of the Company's
shareholders.
F-19
<PAGE> 53
NOTE 12. TRANSITION PERIOD
During 1995, the Company changed its fiscal year end from December 31 to May 31,
beginning with the five month period ended May 31, 1995. The results of
operations for the unaudited comparable five month period ended May 31, 1994 for
revenue, net revenue, income from operations, income taxes, net income, net
income per share and weighted average shares outstanding were $273.5 million,
$116.0 million, $12.0 million, $4.1 million, $8.0 million, $0.26 earnings per
share and 30.6 million shares, respectively.
NOTE 13. RETIREMENT PLAN
The Company has a 401(k) retirement plan covering substantially all U.S.
employees. The Company has recorded matching contributions in the amount of
$540,000, $218,000, $449,000 and $429,000 in 1996, the Transition Period,
1994 and 1993, respectively.
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth selected quarterly financial data for the twelve
months ended May 31, 1996 and December 31, 1994 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
AUG. 31, NOV. 30, FEB. 29, MAY 31,
1995 1995 1996(a) 1996(b)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $266,366 $276,102 $241,096 $260,294
Net revenue 115,704 118,995 103,811 119,058
Income (loss) from operations 18,899 19,422 5,567 (5,229)
Net income (loss) 12,596 12,672 3,154 (3,421)
Net income per share - primary 0.36 0.36 0.09 (.10)
Net income per share - fully diluted 0.36 0.36 0.09 (.10)
<CAPTION>
THREE MONTHS ENDED(c)
------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1994 1994 1994 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $152,579 $182,784 $209,095 $228,931
Net revenue 66,663 77,281 90,648 97,991
Income from operations 7,195 9,992 14,564 14,458
Net income 4,927 6,590 9,201 9,415
Net income per share (d) 0.16 0.21 - -
Net income per share - primary 0.29 0.29
Net income per share - fully diluted 0.29 0.29
</TABLE>
(a) Revenue, net revenue and net income for the third quarter of 1996 are
presented net of adjustments to the previously reported figures. The
adjustments were to decrease revenue, net revenue and net income by
approximately $33.2 million, $14.9 million and $7.1 million,
respectively. Included in the adjustments were approximately
$4.6 million of additional merger and related costs. See Note 7
for additional discussion.
(b) The fourth quarter reflects additional charges relating to merger and
related costs for approximately $10 million. See Note 7 for additional
discussion.
(c) Intertrans quarterly financial data which has been included for the
pooling of interests restatement is based upon a fiscal year end of
October 31.
(d) Primary and fully diluted net income per share are not presented for
first and second quarters of 1994 as the dilutive effect is not
significant.
F-20
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Fritz Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Fritz
Companies, Inc. and subsidiaries as of May 31, 1996, and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended May 31, 1996, the five months ended May 31, 1995 and for each of
the years in the two-year period ended December 31, 1994. In connection with our
audits of the consolidated financial statements, we also audited the related
consolidated Financial Statement Schedule II as of and for the year ended
May 31, 1996, five months ended May 31, 1995 and for each of the years in the
two-year period ended December 31, 1994. These consolidated financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule 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, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fritz
Companies, Inc. and subsidiaries as of May 31, 1996 and 1995, and the results of
their operations and their cash flows for the year ended May 31, 1996, the five
months ended May 31, 1995 and for each of the years in the two-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
San Francisco, California
July 31, 1996
F-21
<PAGE> 55
FRITZ COMPANIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED MAY 31, 1996, THE FIVE MONTHS
ENDED MAY 31, 1995 AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE NET WRITE-OFFS BALANCE AT
BEGINNING CHARGES CHARGED TO RESERVES END
OF PERIOD TO INCOME AND OTHER OF PERIOD
--------- --------- ------------------- ----------
<S> <C> <C> <C> <C>
For the Year Ended May 31, 1996
Allowance for doubtful accounts $4,512 $5,583 $(3,694) $6,401
====== ====== ======= ======
For the Five Months Ended May 31, 1995
Allowance for doubtful accounts $3,674 $1,895 $(1,057) $4,512
====== ====== ======= ======
Year Ended December 31, 1994
Allowance for doubtful accounts $2,170 $2,210 $ (706) $3,674
====== ====== ======= ======
Year Ended December 31, 1993
Allowance for doubtful accounts $2,069 $1,094 $ (993) $2,170
====== ====== ======= ======
</TABLE>
F-22
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
2.1 Agreement and Plan of Reorganization entered by and among the
Registrant, Fritz Air Freight and Intertrans Corporation and Amendment
No. 1 thereto dated as of April 12, 1995. (Incorporated by reference to
Exhibit 2.1 to Form 8-K dated February 14, 1995 filed on or about
February 21, 1995 and to Appendix A to the Joint Proxy
Statement/Prospectus filed on or about April 13, 1995, respectively.)
3.1 Registrant's Restated Certificate of Incorporation. (Incorporated by
reference to Exhibit 3.1 to Registration Statement No. 33-50808, filed
on August 17, 1992.)
3.2 Registrant's Bylaws, as heretofore amended. (Incorporated by reference
to Exhibit 3.2 to Registration Statement No. 33-50808, filed on August
17, 1992.)
3.2.1 Amendment to Article II, Section 1 (b) of Registrant's By-Laws F-26
4.1 Specimen certificate of Registrant's Common Stock. (Incorporated by
reference to Exhibit 4.1 to Registration Statement No. 33-50808, filed
on August 17, 1992.)
10.1 Multicurrency Credit Agreement among the Registrant, several financial
Institutions which are from time to time parties to this Agreement
(collectively, the "Banks"; individually, a "bank"), and Bank of
America National Trust and Savings Association, as letter of credit
issuing bank, swingline bank, and agent for the Banks dated as of
December 15, 1995 (Incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-Q for the Quarter Ended February 29, 1996).
10.1.1 First Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association
dated as of September 23, 1994. (Incorporated by reference to Exhibit
10.1.1 to Form 10-Q for the quarter ended September 30, 1994.)
10.1.2 Third Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association
dated as of August 30, 1995. (Incorporated by reference to Exhibit
10.1.2 to Form 10-Q for the quarter ended August 31, 1995.)
10.1.3 Fourth Amendment to First Amended and Restated Credit Agreement between
Registrant and Bank of America National Trust and Savings Association
dated as of September 14, 1995. (Incorporated by reference to Exhibit
10.1.3 to Form 10-Q for the quarter ended August 31, 1995.)
10.2 Credit Agreement between Registrant and Bank of America National Trust
and Savings Association dated as of December 15, 1995. (Incorporated by
reference to Exhibit 10.1 to Registrant's Form 10-Q for the Quarter
Ended February 29, 1996.)
10.3 First Amendment to Credit Agreement between Registrant and Bank of
America National Trust and Savings Association dated as of February 28,
1996 (Incorporated by reference to Exhibit 10.1 to Registrant's Form
10-Q for the Quarter Ended February 29, 1996.)
10.4 Service Agreement dated February 25, 1992 between Federal Express
Corporation and the Registrant. (Incorporated by reference to Exhibit
10.4 to Registration Statement No. 33-50808, filed on August 17, 1992.)
10.5 Customs Brokerage Service Agreement dated February 28, 1992 between
Federal Express Corporation and the Registrant. (Incorporated by
reference to Exhibit 10.5 to Registration Statement No. 33-70674, filed
October 22, 1993.)*
10.6 Subchapter S Termination Agreement between Registrant and Lynn C.
Fritz. (Incorporated by reference to Exhibit 10.6 to Registration
Statement No. 33-50808, filed on August 17, 1992.)
10.7 Form of Indemnification Agreement between Registrant and Lynn C. Fritz.
(Incorporated by reference to Exhibit 10.7 to Registration Statement
No. 33-50808, filed on August 17, 1992.)
</TABLE>
F-23
<PAGE> 57
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10.8 Fritz Companies, Inc. Salary Investment and Retirement Plan, and
amendments thereto. (Incorporated by reference to Exhibit 10.8 to
Registration Statement No. 33-50808, filed on August 17, 1992.)*
10.9 1992 Omnibus Equity Incentive Plan, as amended. (Incorporated by
reference to Exhibit 10.9 to Registration Statement No. 33-50808, filed
on August 17, 1992.)*
10.10 Contract of Sale between the Registrant and Sanjaylyn Company dated as
of March 1, 1985. (Incorporated by reference to Exhibit 10.10 to
Registration Statement No. 33-50808, filed on August 17, 1992.)
10.11 Employment and Deferred Compensation Agreement between the Registrant
and Arthur J. Fritz, Sr. dated as of January 1, 1983, and amendment
thereto dated as of July 31, 1989. (Incorporated by reference to
Exhibit 10.11 to Registration Statement No. 33-50808, filed on August
17, 1992.)
10.12 Lease Agreement between the Registrant and Sanjaylyn Company, dated
June 14, 1991, and Addendum to Lease Agreement dated December 1, 1991.
(Incorporated by reference to Exhibit 10.12 to Registration Statement
No. 33-50808, filed August 17, 1992.)
10.13 Lease Agreement between the Registrant and Sanjaylyn Company, dated
July 2, 1991. (Incorporated by reference to Exhibit 10.13 to
Registration Statement No. 33-50808, filed on August 17, 1992.)
10.14 Memorandum Lease between Registrant and Sanjaylyn Company, effective
April 1, 1979, and Addendum to Lease Agreement, dated February 14,
1990. (Incorporated by reference to Exhibit 10.14 to Registration
Statement No. 33-50808, filed on August 17, 1992.)
10.15 Lease Agreement between Registrant and Sanjaylyn Company, dated
February 22, 1991. (Incorporated by reference to Exhibit 10.15 to
Registration Statement No. 33-50808, filed on August 17, 1992.)
10.16 Nonemployee Director Restricted Stock Plan. (Incorporated by reference
to Exhibit A to the definitive proxy materials of Registrant, filed on
or about April 10, 1993.)*
10.17 Lease Agreement between Registrant and Lynn C. Fritz, dated September
1, 1993. (Incorporated by reference to Exhibit 10.17 to Registration
Statement No. 33-70674, filed on October 22, 1993.)
10.18 Lease Agreement between Registrant and Lynn C. Fritz, dated October 4,
1993. (Incorporated by reference to Exhibit 10.18 to Form 10-K for the
year ended December 31, 1993.)
10.19 Withdrawal Agreement between Arthur J. Fritz, Jr. and Sandra F. Davis,
Lynn C. Fritz and Sanjaylyn Company, dated March 31, 1993.
(Incorporated by reference to Exhibit 10.18 to Registration Statement
No. 33-70674, filed on October 22, 1993.)
10.20 Customs Service Agreement dated February 28, 1994 between Federal
Express Corporation and the Registrant. (Incorporated by reference to
Exhibit 10.20 for Form 10-K for the year ended December 31, 1993.)
10.21 Employment Agreement between Registrant and Dennis Pelino dated June 1,
1995. (Incorporated by reference to Exhibit 10.21 to Form 10-Q for the
quarter ended August 31, 1995.)
10.22 Purchase Agreement between Registrant and Gestion J.L.G., Inc. dated as
of April 29, 1994. (Incorporated by reference to Exhibit 1.2 to Form
8-K dated May 2, 1994 filed on or about May 16, 1994.)
10.23 Addendum to the purchase agreements between the Registrant and Gestion
J.L.G., Inc. dated as of April 26, 1994. (Incorporated by reference to
Exhibit 10.23 to Form 10-Q for the quarter ended September 30, 1994.)
</TABLE>
F-24
<PAGE> 58
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10.24 Note Purchase Agreement between the Registrant and various other
parties dated April 15, 1996 for $75,000,000 of 6.43% notes due
April 15, 2003. F-27
10.25 First Amendment dated as of July 3, 1996 among the Registrant, the
several financial institutions (collectively, the "Banks";
individually, a "Bank") party to the Multicurrency Credit Agreement,
dated as of December 15, 1995, among the Registrant, the Banks, and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for
the Banks. F-86
10.26 Second Amendment Agreement, dated as of May 31, 1996 among the
Registrant, the several financial institutions (collectively, the
"Banks"; individually, a "Bank") party to the Multicurrency Credit
Agreement, dated as of December 15, 1995, as amended, among the
Registrant, the Banks, and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for the Banks. F-87
10.27 Fritz Companies, Inc. Employee Stock Purchase Plan. (Incorporated
by Reference to Exhibit 10.26 to the Registration Statement on
Form S-8 No. 333-07639) filed on July 3, 1996.
11.1 Statement regarding computation of per share earnings. F-88
22.1 Subsidiaries of the Registrant. F-89
23.1 Consent of KPMG Peat Marwick LLP on Form S-8 Registration Statement No.
33-57238, 33-78482, 33-93070 and 333-07639. F-95
27.1 Financial Data Schedule. F-96
</TABLE>
- - ---------------------
* Indicates, as required by Item 14(a)(3), a management contract of
compensatory plan required to be filed as an exhibit to this Form 10-K.
F-25
<PAGE> 1
EXHIBIT 3.2.1
(b) Annual Meeting. The annual meeting of the
stockholders shall be held at 11:00 A.M. on the third Tuesday
in October or on such other date and at such other time as may
be designated by the Board of Directors, for the election of
directors and the transaction of such other business properly
brought before such annual meeting of the stockholders and
within the powers of the stockholders.
F-26
<PAGE> 1
Exhibit 10.24
[CONFORMED COPY WITH SUBSTANTIALLY
ALL EXHIBITS CONFORMED AS EXECUTED]
THIS AGREEMENT CONTAINS "CONFIDENTIAL INFORMATION"
AND IS SUBJECT TO SECTION 20 HEREIN
FRITZ COMPANIES, INC.
NOTE PURCHASE AGREEMENT
DATED AS OF APRIL 15, 1996
$75,000,000 6.43% SENIOR NOTES DUE APRIL 15, 2003
F-27
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . 1
2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . 1
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 1
4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 2
4.1 Representations and Warranties . . . . . . . . . . 2
4.2 Performance; No Default . . . . . . . . . . . . . 2
4.3 Compliance Certificates . . . . . . . . . . . . . 2
4.4 Opinions of Counsel . . . . . . . . . . . . . . . 3
4.5 Purchase Permitted By Applicable Law, etc. . . . . 3
4.6 Payment of Special Counsel Fees . . . . . . . . . 3
4.7 Private Placement Number . . . . . . . . . . . . . 3
4.8 Changes in Corporate Structure . . . . . . . . . . 3
4.9 Subsidiary Guaranties . . . . . . . . . . . . . . 4
4.10 Proceedings and Documents . . . . . . . . . . . . 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 4
5.1 Organization; Power and Authority . . . . . . . . 4
5.2 Authorization, etc . . . . . . . . . . . . . . . . 4
5.3 Disclosure . . . . . . . . . . . . . . . . . . . . 4
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates . . . . . . . . . . . . . . . . . . 5
5.5 Financial Statements . . . . . . . . . . . . . . . 6
5.6 Compliance with Laws, Other Instruments, etc . . . 6
5.7 Governmental Authorizations, etc . . . . . . . . . 6
5.8 Litigation; Observance of Agreements, Statutes and
Orders . . . . . . . . . . . . . . . . . . . . 6
5.9 Taxes . . . . . . . . . . . . . . . . . . . . . . 7
5.10 Title to Property; Leases . . . . . . . . . . . . 7
5.11 Licenses, Permits, etc . . . . . . . . . . . . . . 7
5.12 Compliance with ERISA . . . . . . . . . . . . . . 8
5.13 Private Offering by the Company . . . . . . . . . 9
5.14 Use of Proceeds; Margin Regulations . . . . . . . 9
5.15 Existing Debt; Future Liens . . . . . . . . . . . 9
5.16 Foreign Assets Control Regulations, etc. . . . . . 10
5.17 Status under Certain Statutes . . . . . . . . . . 10
5.18 Environmental Matters . . . . . . . . . . . . . . 10
6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . 11
6.1 Purchase for Investment . . . . . . . . . . . . . 11
6.2 Source of Funds . . . . . . . . . . . . . . . . . 11
7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . 12
7.1 Financial and Business Information . . . . . . . . 12
</TABLE>
FRITZ COMPANIES, INC. F-28 NOTE PURCHASE AGREEMENT
<PAGE> 3
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
7.2 Officer's Certificate . . . . . . . . . . . . . . 14
7.3 Inspection . . . . . . . . . . . . . . . . . . . . 15
8. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . 15
8.1 Required Repayment . . . . . . . . . . . . . . . . 15
8.2 Optional Prepayments with Make-Whole Amount . . . 15
8.3 Allocation of Partial Prepayments . . . . . . . . 16
8.4 Surrender . . . . . . . . . . . . . . . . . . . . 16
8.5 Purchase of Notes . . . . . . . . . . . . . . . . 16
8.6 Make-Whole Amount . . . . . . . . . . . . . . . . 16
9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 18
9.1 Compliance with Law . . . . . . . . . . . . . . . 18
9.2 Insurance . . . . . . . . . . . . . . . . . . . . 18
9.3 Maintenance of Properties . . . . . . . . . . . . 18
9.4 Payment of Taxes and Claims . . . . . . . . . . . 18
9.5 Corporate Existence, etc . . . . . . . . . . . . . 19
9.6 Provision of Guaranties . . . . . . . . . . . . . 19
9.7 Pari Passu Ranking . . . . . . . . . . . . . . . . 19
10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 19
10.1 Consolidated Adjusted Net Worth . . . . . . . . . 19
10.3 Clean Down of Current Debt . . . . . . . . . . . . 20
10.4 Restricted Subsidiary Debt . . . . . . . . . . . . 20
10.5 Liens . . . . . . . . . . . . . . . . . . . . . . 21
10.6 Sale of Assets, Etc. . . . . . . . . . . . . . . . 24
10.7 Mergers and Consolidations . . . . . . . . . . . . 25
11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 27
12. REMEDIES ON DEFAULT, ETC . . . . . . . . . . . . . . . . . 29
12.1 Acceleration . . . . . . . . . . . . . . . . . . . 29
12.2 Other Remedies . . . . . . . . . . . . . . . . . . 30
12.3 Rescission . . . . . . . . . . . . . . . . . . . . 30
12.4 No Waivers or Election of Remedies, Expenses, etc. 30
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . 31
13.1 Registration of Notes . . . . . . . . . . . . . . 31
13.2 Transfer and Exchange of Notes . . . . . . . . . . 31
13.3 Replacement of Notes . . . . . . . . . . . . . . . 31
14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . 32
14.1 Place of Payment . . . . . . . . . . . . . . . . . 32
14.2 Home Office Payment . . . . . . . . . . . . . . . 32
</TABLE>
FRITZ COMPANIES, INC. F-29 NOTE PURCHASE AGREEMENT
<PAGE> 4
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
15. EXPENSES,ETC . . . . . . . . . . . . . . . . . . . . . . . 32
15.1 Transaction Expenses . . . . . . . . . . . . . . . 32
15.2 Survival . . . . . . . . . . . . . . . . . . . . . 33
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 33
17. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . 33
17.1 Requirements . . . . . . . . . . . . . . . . . . . 33
17.2 Solicitation of Holders of Notes . . . . . . . . . 34
17.3 Binding Effect, etc. . . . . . . . . . . . . . . . 34
17.4 Notes held by Company, etc . . . . . . . . . . . . 34
15. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 34
19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . 35
20. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . 35
21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . 37
22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 37
22.1 Successors and Assigns . . . . . . . . . . . . . . 37
22.2 Payments Due on Non-Business Days . . . . . . . . . 37
22.3 Severability . . . . . . . . . . . . . . . . . . . 37
22.4 Construction . . . . . . . . . . . . . . . . . . . 38
22.5 Counterparts . . . . . . . . . . . . . . . . . . . 38
22.6 Governing Law . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<TABLE>
<S> <C> <C>
Annex I -- INFORMATION RELATING TO PURCHASERS
Annex II -- DEFINED TERMS
SCHEDULE 3 -- Information as to Company
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership
of Subsidiary Stock; Affiliates; Restrictive Agreements;
Designation of Restricted Subsidiaries
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Debt; Liens
SCHEDULE 10.1 -- Investments
SCHEDULE 10.4 -- Existing Subsidiary Debt
</TABLE>
FRITZ COMPANIES, INC. F-30 NOTE PURCHASE AGREEMENT
<PAGE> 5
<TABLE>
<S> <C> <C>
EXHIBIT A -- Form of 6.43% Senior Note due April 15, 2003
EXHIBIT B -- Form of Company Officer's Certificate
EXHIBIT C -- Form of Company Secretary's Certificate
EXHIBIT D1 -- Form of Opinion of General Counsel for the Company
EXHIBIT D2 -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT E -- Form of Subsidiary Guaranty
EXHIBIT F -- Form of Joinder Agreement
EXHIBIT G -- Form of Subsidiary Secretary's Certificate
</TABLE>
FRITZ COMPANIES, INC. F-31 NOTE PURCHASE AGREEMENT
<PAGE> 6
FRITZ COMPANIES, INC.
706 Mission Street
San Francisco, CA 94103
6.43% SENIOR NOTES DUE APRIL 15, 2003
Dated as of April 15, 1996
To Each of the Purchasers Listed
On Annex I Attached Hereto
Ladies and Gentlemen:
Fritz Companies, Inc., a Delaware corporation (the "COMPANY"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $75,000,000 aggregate
principal amount of its 6.43% Senior Notes due April 15, 2003 (the "NOTES",
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement). The Notes shall be substantially in the form
set out in Exhibit A, with such changes therefrom, if any, as may be approved
by you and the Company. Certain capitalized terms used in this Agreement are
defined in Annex II; references to an "Annex," a "Schedule" or an "Exhibit"
are, unless otherwise specified, to an Annex, a Schedule or an Exhibit attached
to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
below your name in Annex I at the purchase price of 100% of the principal
amount thereof. Your obligations hereunder are several and not joint
obligations and you shall have no liability to any Person for the performance
or nonperformance by any other purchaser hereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you shall occur
at the offices of Hebb & Gitlin, One State Street, Hartford, Connecticut 06103,
at 9:00 a.m., local time, at a closing (the "CLOSING") on April 18, 1996. At
the Closing the Company will deliver to you the Notes to be purchased by you in
the form of a single Note (or such greater number of Notes in denominations of
at least $250,000 as you may request) dated the date of the Closing and
registered in your name (or in the name of your nominee), against delivery by
you to the Company or its order of immediately available funds in the amount of
the purchase price therefor by wire transfer of immediately available funds for
the account of the Company as set forth
FRITZ COMPANIES, INC. F-32 NOTE PURCHASE AGREEMENT
<PAGE> 7
on Schedule 3. If at the Closing the Company shall fail to tender such Notes to
you as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at
your election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights you may have by reason of such failure or
such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2 PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Section 10.2 through Section 10.5, inclusive, or Section 10.10 hereof had such
Sections applied since such date.
4.3 COMPLIANCE CERTIFICATES.
(A) OFFICER'S CERTIFICATE. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing and in the form set out
in Exhibit B, certifying that the conditions specified in Sections 4.1, 4.2 and
4.8 have been fulfilled.
(B) SECRETARY'S CERTIFICATE. The Company shall have delivered to
you a certificate, in the form set out in Exhibit C, certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.
(C) SUBSIDIARY SECRETARY'S CERTIFICATE. Each Guarantor shall have
delivered to you a certificate, in the form set out in Exhibit G, certifying as
to the resolutions attached thereto and other corporate proceedings relating to
the authorization, execution and delivery of the Subsidiary Guaranty.
FRITZ COMPANIES, INC. F-33 NOTE PURCHASE AGREEMENT
<PAGE> 8
4.4 OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing
(a) from Jan H. Raymond, Esq., general counsel for the
Company, covering the matters set forth in Exhibit D1 and covering
such other matters incident to the transactions contemplated hereby as
you or your counsel may reasonably request (and the Company hereby
instructs its counsel to deliver such opinion to you), and
(b) from Hebb & Gitlin, your special counsel in
connection with such transactions, substantially in the form set forth
in Exhibit D2 and covering such other matters incident to such
transactions as you may reasonably request.
4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (c) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6 PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least three Business Days
prior to the Closing.
4.7 PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.8 CHANGES IN CORPORATE STRUCTURE.
Except for mergers of certain Subsidiaries into the Company, with the
Company being the Successor Corporation, the Company shall not have changed its
jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent
financial statements referred to in Schedule 5.5.
FRITZ COMPANIES, INC. F-34 NOTE PURCHASE AGREEMENT
<PAGE> 9
4.9 SUBSIDIARY GUARANTIES.
Each Material Subsidiary in existence on the Closing shall have
executed and delivered to each of you the guaranty agreement (as amended,
restated or otherwise modified from time to time, the "SUBSIDIARY GUARANTY") in
the form of Exhibit E, and the Subsidiary Guaranty shall be in full force and
effect.
4.10 PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
5.2 AUTHORIZATION, ETC.
This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 DISCLOSURE.
The Company, through its agent, Bank of America NT & SA, has delivered
to you a copy of a Memorandum, dated February 1996 (the "MEMORANDUM"), relating
to the transactions contemplated hereby. The Memorandum fairly describes, in
all material respects, the general nature of the business and principal
properties of the Company and its Subsidiaries. Except as
FRITZ COMPANIES, INC. F-35 NOTE PURCHASE AGREEMENT
<PAGE> 10
disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents,
certificates or other writings delivered to you by or on behalf of the Company
in connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Except as disclosed in the Memorandum or as expressly
described in Schedule 5.3, or in one of the documents, certificates or other
writings identified therein, or in the financial statements listed in Schedule
5.5, since May 31, 1995, there has been no change in the financial condition,
operations, business or properties of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. There is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not
been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to you by or on behalf of the Company
specifically for use in connection with the transactions contemplated hereby.
5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES;
AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein)
complete and correct lists (i) of the Company's Subsidiaries, showing,
as to each Subsidiary, the correct name thereof, the jurisdiction of
its organization, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding beneficially
owned by the Company and each other Subsidiary, (ii) of the Company's
Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule 5.4 as
being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable and are owned by the Company
or another Subsidiary free and clear of any Lien (except as otherwise
disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or
other power and authority to own or hold under lease the properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise
subject to any legal restriction or any agreement (other than this
Agreement, the agreements listed on Schedule 5.4 and customary
limitations imposed by corporate law statutes) restricting the ability
of such Restricted Subsidiary to pay dividends out of profits or make
any other similar distributions of profits to the Company or any of
its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Restricted Subsidiary.
FRITZ COMPANIES, INC. F-36 NOTE PURCHASE AGREEMENT
<PAGE> 11
5.5 FINANCIAL STATEMENTS.
The Company has delivered to each of you copies of the financial
statements of the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved
except as set forth in the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments).
5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any
property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to
which the Company or any Subsidiary is bound or by which the Company
or any Subsidiary or any of their respective properties may be bound
or affected,
(b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary, or
(c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary
or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
under any term of any agreement or instrument to which it is a party
or by which it is bound, or any order, judgment, decree or ruling of
any court, arbitrator or Governmental Authority or is in
FRITZ COMPANIES, INC. F-37 NOTE PURCHASE AGREEMENT
<PAGE> 12
violation of any applicable law, ordinance, rule or regulation
(including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
5.9 TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of federal, state or other taxes for all fiscal periods are adequate.
The federal income tax liabilities of the Company and its Subsidiaries have
been determined by the Internal Revenue Service and paid for all fiscal years
up to and including the fiscal year ended May 31, 1995.
5.10 TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Section 5.5 or purported to have been acquired by the
Company or any Subsidiary after said date (except as sold or otherwise disposed
of in the ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that individually or in the aggregate
are Material are valid and subsisting and are in full force and effect in all
material respects.
5.11 LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict
with the rights of others;
(b) to the best knowledge of the Company, no product of
the Company infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any of
its Subsidiaries with respect to any
FRITZ COMPANIES, INC. F-38 NOTE PURCHASE AGREEMENT
<PAGE> 13
patent, copyright, service mark, trademark, trade name or other right
owned or used by the Company or any of its Subsidiaries.
5.12 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and
could not reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any ERISA Affiliate has incurred any
liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans (as
defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in
the incurrence of any such liability by the Company or any ERISA
Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise
tax provisions or to Section 401(a)(29) or 412 of the Code, other
than such liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit
liabilities under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year
on the basis of the actuarial assumptions specified for funding
purposes in such Plan's most recent actuarial valuation report, did
not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms
"CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not
incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in respect
of Multiemployer Plans that individually or in the aggregate are
Material.
(d) The expected postretirement benefit obligation
(determined as of the last day of the Company's most recently ended
fiscal year in accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code) of the
Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of
ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the Code. The representation by the
Company in the first sentence of this Section 5.12(e) is made in
reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase
price of the Notes to be purchased by you.
FRITZ COMPANIES, INC. F-39 NOTE PURCHASE AGREEMENT
<PAGE> 14
5.13 PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than each of you and not more than fifty (50) other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14 USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The Company and its Subsidiaries do not own any margin stock and
the Company does not have any present intention that margin stock will
constitute more than five percent (5%) of the value of Consolidated Total
Assets, As used in this Section, the terms "margin stock" and "purpose of
buying or carrying" shall have the meanings assigned to them in said Regulation
G.
5.15 EXISTING DEBT, FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct list
of all outstanding Debt equal to or greater than $2,000,000 of the
Company and its Subsidiaries as of the date of Closing. As of
February 29, 1996, the aggregate amount of Debt of the Company and the
Subsidiaries not included in such list does not exceed $5,000,000.
Since February 29, 1996, the Company and its Subsidiaries have not
incurred more than an aggregate amount of $5,000,000 of Debt, which
remains outstanding as of the date of Closing. Neither the Company
nor any Subsidiary is in default and no waiver of default is currently
in effect, in the payment of any principal or interest on any Debt of
the Company or such Subsidiary and no event or condition exists with
respect to any Debt of the Company or any Subsidiary that would permit
(or that with notice or the lapse of time, or both, would permit) one
or more Persons to cause such Debt to become due and payable before
its stated maturity or before its regularly scheduled dates of
payment.
(b) Schedule 10.4 sets forth a complete and correct list
of all outstanding Debt equal to or greater than $2,000,000 of the
Restricted Subsidiaries as of the date of Closing. As of February 29,
1996, the aggregate amount of Debt of the Restricted Subsidiaries not
included in such list does not exceed $3,000,000. Since February 29,
1996, the Restricted Subsidiaries have not incurred more than an
aggregate amount of $5,000,000 of Debt, which remains outstanding as
of the date of Closing.
FRITZ COMPANIES, INC. F-40 NOTE PURCHASE AGREEMENT
<PAGE> 15
(c) Except as disclosed in Schedule 5.15, neither the
Company nor any Subsidiary has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any
of its property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by Section 10.5.
5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts, as amended, or the
Federal Power Act, as amended.
5.18 ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of
their respective real properties now or formerly owned, leased or operated by
any of them or other assets, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge
of any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets
or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and
(c) all buildings on all real properties now owned,
leased or operated by the Company or any of its Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material
Adverse Effect.
FRITZ COMPANIES, INC. F-41 NOTE PURCHASE AGREEMENT
<PAGE> 16
6. REPRESENTATIONS OF THE PURCHASER.
6.1 PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of
one or more pension or trust funds and not with a view to the distribution
thereof, provided that the disposition of your or their property shall at all
times be within your or their control. You understand that the Notes have not
been registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2 SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you are an insurance company, the Source is your
general account, and, in reliance upon the Company's representations
set forth in paragraph 5.12, the amount of the reserves and
liabilities for the general account contracts (as defined by the
annual statement for life insurance companies approved by the National
Association of Insurance Commissioners (the "NAIC Annual Statement"))
held by or on behalf of any Plan together with the amount of the
reserves and liabilities for the general account contracts held by or
on behalf of any other Plans maintained by the same employer (or
affiliate thereof, as such term is defined in section V of DOL
Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995))
or by the same employee organization (as defined in ERISA) in the
general account do not exceed 10% of the total reserves and
liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with the state of domicile of the insurance company; for
purposes of the percentage limitation in this clause (a), the amount
of reserves and liabilities for the general account contracts held by
or on behalf of a Plan shall be determined before reduction for
credits on account of any reinsurance ceded on a coinsurance basis; or
(b) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in
which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely in
connection with your fixed contractual obligations under which the
amounts payable, or credited, to such plan and to any participant or
beneficiary of such plan (including any annuitant) are not affected in
any manner by the investment performance of the separate account; or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction
Exemption ("PTE") 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the
Company in writing
FRITZ COMPANIES, INC. F-42 NOTE PURCHASE AGREEMENT
<PAGE> 17
pursuant to this paragraph (c), no employee benefit plan or group of
plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained
by the same employer or by an affiliate (within the meaning of Section
V(c)(1) of the QPAM Exemption) of such employer or by the same
employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of Part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor
a person controlling or controlled by the QPAM (applying the
definition of "control" in Section V(e) of the QPAM Exemption) owns
a 5% or more interest in the Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed to the
Company in writing pursuant to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or
a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS - within sixty (60) days after
the end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each such
fiscal year), duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarter, and
FRITZ COMPANIES, INC. F-43 NOTE PURCHASE AGREEMENT
<PAGE> 18
(ii) consolidated statements of income and cash
flows of the Company and its Subsidiaries, for such quarter and (in the
case of the second and third quarters) for the portion of the fiscal
year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the companies being reported
on and their results of operations and cash flows, subject to changes resulting
from year-end adjustments, provided that delivery within the time period
specified above of copies of the Company's Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of clauses (i) and (ii) of this Section 7.1 (a);
(b) ANNUAL STATEMENTS - within one hundred (100) days after the
end of each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that they
have reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event that
then constitutes a Default or an Event of Default, and, if they are
aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood that
such accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit),
FRITZ COMPANIES, INC. F-44 NOTE PURCHASE AGREEMENT
<PAGE> 19
provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year
(together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the
Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed to satisfy
the requirements of this Section 7.1(b);
(c) SEC AND OTHER REPORTS -- within fifteen (15) days of
their being filed or otherwise made available, one copy of (i) each
financial statement, report, notice or proxy statement sent by the
Company or any Subsidiary to public securities holders generally, and
(ii) each regular or periodic report, each registration statement
(without exhibits except as expressly requested by such holder), and
each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all
press releases that are Material and other statements made available
by the Company to the public concerning developments that are
Material; and
(d) REQUESTED INFORMATION -- with reasonable promptness,
such other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any such holder of Notes.
7.2 OFFICERS CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.1
through Section 10.6 hereof, inclusive, during the quarterly or annual
period covered by the statements then being furnished (including with
respect to each such Section, where applicable, the calculations of
the maximum or minimum amount, ratio or percentage, as the case may
be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of
the Company or any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action
the Company shall have taken or proposes to take with respect thereto.
FRITZ COMPANIES, INC. F-45 NOTE PURCHASE AGREEMENT
<PAGE> 20
7.3 INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT - if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the
Company, to discuss the affairs, finances and accounts of the Company
and its Restricted Subsidiaries with the Company's officers, and (with
the consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of
the Company, which consent will not be unreasonably withheld) to visit
the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) DEFAULT - if a Default or Event of Default then
exists, at the expense of the Company to visit and inspect any of the
offices or properties of the Company or any Subsidiary, to examine all
their respective books of account, records, reports and other papers,
to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and
as often as may be requested.
The Company shall be given advance notice of, and shall have the right to be
present at, discussions between its independent public accountants and any
holder of Notes, provided that no such discussion shall be required to be
postponed if the Company is unable to be present thereat at the scheduled time
therefor.
8. PREPAYMENT OF THE NOTES.
8.1 REQUIRED REPAYMENT.
On April 15, 2003 the Company will pay in full the outstanding
principal amount of the Notes.
8.2 OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
at any time all, or from time to time any part of, the Notes, at 100% of the
principal amount so prepaid, together with interest on such principal amount
accrued to such date and the applicable Make Whole Amount, if any. The Company
will give each holder of Notes written notice of each optional prepayment under
this Section 8.2 not less than fifteen (15) days and not more than sixty (60)
days prior to the date fixed for such prepayment. Each such notice shall
specify such date, the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer
FRITZ COMPANIES, INC. F-46 NOTE PURCHASE AGREEMENT
<PAGE> 21
as to the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation (it being understood that such
computation shall not be binding on any holder of the Notes). Two Business
Days prior to such prepayment, the Company shall deliver to each holder of
Notes a certificate of a Senior Financial Officer specifying the calculation of
such Make-Whole Amount as of the specified prepayment date.
8.3 ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
8.4 SURRENDER.
Any Note paid or prepaid in full shall be surrendered to the Company
and cancelled and shall not be reissued, and no Note shall be issued in lieu of
any prepaid principal amount of any Note.
8.5 PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.6 MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2
or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that
on which interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
FRITZ COMPANIES, INC. F-47 NOTE PURCHASE AGREEMENT
<PAGE> 22
"REINVESTMENT YIELD" means, with respect to the Called
Principal of any Note, fifty one-hundredths percent (.50%) over the
yield to maturity implied by (i) the yields reported, as of 10:00
A.M. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as "Page 678" on the Telerate Access Service (or such other
display as may replace Page 678 on the Telerate Access Service) for
actively traded U.S. Treasury securities having a maturity equal to
the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such
time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day
for which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1)
the actively traded U.S. Treasury security with the duration closest
to and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the duration closest to and less
than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if
such Settlement Date is not a date on which interest payments are due
to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
FRITZ COMPANIES, INC. F-48 NOTE PURCHASE AGREEMENT
<PAGE> 23
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1 COMPLIANCE WITH LAW.
The Company will, and will cause each of its Restricted Subsidiaries
to, comply with all laws, ordinances or governmental rules or regulations to
which each of them is subject, including, without limitation, Environmental
Laws, and will obtain and maintain in effect all licenses, certificates,
permits, franchises and other governmental authorizations necessary to the
ownership of their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
9.2 INSURANCE.
The Company will, and will cause each of its Restricted Subsidiaries
to, maintain, with financially sound and reputable insurers, insurance with
respect to their respective properties and businesses against such casualties
and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3 MAINTENANCE OF PROPERTIES.
The Company will, and will cause each of its Restricted Subsidiaries
to, maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each of its Restricted Subsidiaries
to, file all tax returns required to be filed in any jurisdiction and to pay
and discharge all taxes shown to be due and payable on such returns and all
other taxes, assessments, governmental charges, or levies imposed on them or
any of their properties, assets, income or franchises, to the extent such taxes
and assessments have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company or any Restricted
Subsidiary, provided that neither the Company nor any Restricted Subsidiary
need pay any such tax or assessment or claims if (i) the amount, applicability
or validity thereof is contested by the Company or such Restricted Subsidiary
on a timely basis in good faith and in appropriate proceedings, and the
FRITZ COMPANIES, INC. F-49 NOTE PURCHASE AGREEMENT
<PAGE> 24
Company or a Restricted Subsidiary has established adequate reserves therefor
in accordance with GAAP on the books of the Company or such Restricted
Subsidiary or (ii) the nonpayment of all such taxes and assessments in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
9.5 CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Section 10.6 through Section 10.8,
inclusive, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Restricted Subsidiaries (unless
merged into the Company or a Restricted Subsidiary) and all rights, franchises,
licenses and permits necessary for the conduct of the business of the Company
and its Restricted Subsidiaries.
9.6 PROVISION OF GUARANTIES.
Each Person that becomes a Material Subsidiary after the Closing will
execute and deliver to each of the holders of the Notes, immediately upon
becoming a Material Subsidiary, a duly authorized Joinder Agreement in the form
of Exhibit F, a Secretary's Certificate substantially in the form of Exhibit G,
and an opinion of counsel to the Material Subsidiary regarding the
authorization, execution and delivery of such Joinder Agreement, and its
enforceability, which opinion shall be satisfactory in all respects to the
Required Holders, provided, however, that upon the release by all other holders
of Debt of the Company and its Subsidiaries, of all of the subsidiary
guaranties held by such holders in a manner and pursuant to documentation
which, in the reasonable opinion of the holders of all of the Notes fully
releases such subsidiary guaranties, each of the holders of the Notes shall
release the Guarantors from their obligation under the Subsidiary Guaranty.
9.7 PARI PASSU RANKING.
The Notes shall at all times rank pari passu, without preference or
priority, with all other outstanding, unsecured, unsubordinated obligations of
the Company, present and future, that have not been accorded by law
preferential rights. The Subsidiary Guaranty shall at all times rank pari
passu, without preference or priority, with all other outstanding, unsecured,
unsubordinated obligations of the Guarantors, present and future, that have not
been accorded by law preferential rights.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1 CONSOLIDATED ADJUSTED NET WORTH.
The Company will not, at any time, permit Consolidated Adjusted Net
Worth to be less than the sum of
(a) One Hundred Fifty Million Dollars ($150,000,000), plus
FRITZ COMPANIES, INC. F-50 NOTE PURCHASE AGREEMENT
<PAGE> 25
(b) the greater of
(i) Zero Dollars ($0) and
(ii) twenty-five percent (25%) of Consolidated Net
Income for the period beginning on December 1, 1995 and ending
on the last day of the fiscal quarter of the Company most
recently ended at such time.
10.2 FUNDED DEBT.
(a) INCURRENCE OF FUNDED DEBT. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly,
incur or become liable with respect to any Funded Debt other than the
Notes and the Subsidiary Guaranties, except that:
(i) any Restricted Subsidiary may incur or become
liable with respect to Funded Debt of such Restricted
Subsidiary owing to the Company or another Restricted
Subsidiary; and
(ii) the Company or any Restricted Subsidiary may
incur or become liable with respect to Funded Debt if, on the
date the Company or such Restricted Subsidiary incurs or
becomes liable with respect to such Funded Debt and
immediately after giving effect thereto and the concurrent
retirement of any other Funded Debt,
(A) Consolidated Funded Debt does not
exceed fifty-five percent (55%) of Consolidated
Adjusted Capitalization (the portion of Consolidated
Adjusted Capitalization consisting of Consolidated
Adjusted Net Worth being determined as of the end of
the then most recently ended fiscal quarter of the
Company), and
(B) no Default or Event of Default
exists.
10.3 CLEAN DOWN OF CURRENT DEBT.
The Company will not, and will not permit any Restricted Subsidiary
to, have any Consolidated Current Debt outstanding at any time unless there
shall have been during the immediately preceding fifteen (15) complete calendar
months a period of at least thirty (30) consecutive days on each of which there
shall have been no Consolidated Current Debt outstanding in excess of the
amount of additional Funded Debt that the Company would have been permitted to
(but did not) incur on such day under Section 10.2.
10.4 RESTRICTED SUBSIDIARY DEBT.
The Company will not at any time permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume, guarantee, have outstanding, or
otherwise become or remain directly or indirectly liable with respect to, any
Debt other than:
FRITZ COMPANIES, INC. F-51 NOTE PURCHASE AGREEMENT
<PAGE> 26
(a) Debt of (i) a Restricted Subsidiary outstanding on
the date of Closing and disclosed in Schedule 10.4, provided that such
Debt may not be extended, renewed or refunded except as otherwise
permitted by this Agreement, and (ii) up to an aggregate amount not to
exceed Canadian $25,000,000 pursuant to the agreement disclosed in
Schedule 10.4;
(b) Debt of a Restricted Subsidiary owed to the Company or
a Wholly-Owned Restricted Subsidiary;
(c) Debt of a Restricted Subsidiary outstanding at the
time such Restricted Subsidiary becomes a Restricted Subsidiary,
provided that
(i) such Debt shall not have been incurred in
contemplation of such Restricted Subsidiary becoming a
Restricted Subsidiary and
(ii) immediately after such Restricted Subsidiary
becomes a Restricted Subsidiary no Default or Event of Default
shall exist,
and provided further that such Debt may not be extended, renewed or
refunded except as otherwise permitted by this Agreement;
(d) Debt of a Restricted Subsidiary secured by a Lien
permitted to be incurred pursuant to Section 10.5(a)(vii) of this
Agreement; and
(e) Debt of a Restricted Subsidiary not otherwise
permitted by the foregoing provisions of this Section 10.4, provided
that on the date the Restricted Subsidiary incurs or otherwise becomes
liable with respect to any such additional Debt and immediately after
giving effect thereto and the concurrent retirement of any other Debt,
(i) no Default or Event of Default exists, and
(ii) the sum of
(A) the total amount of all Debt of
Restricted Subsidiaries incurred pursuant to this
subparagraph (e), plus
(B) the aggregate amount of all Debt of
the Company and the Restricted Subsidiaries
outstanding at such time which is secured by Liens
permitted by clause (viii) of Section 10.5(a),
does not exceed fifteen percent (11 5%) of Consolidated
Adjusted Net Worth, determined as of the end of the most recent
fiscal quarter.
10.5 LIENS.
(a) NEGATIVE PLEDGE. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly create, incur,
assume or permit to exist (upon the happening of a contingency or otherwise),
any Lien on or with respect to any
FRITZ COMPANIES, INC. F-52 NOTE PURCHASE AGREEMENT
<PAGE> 27
property or asset (including, without limitation, any document or instrument in
respect of goods or accounts receivable) of the Company or any such Restricted
Subsidiary, whether now owned or held or hereafter acquired, or any income or
profits therefrom (whether or not provision is made for the equal and ratable
securing of the Notes in accordance with Section 10.5(b)), or assign or
otherwise convey any right to receive income or profits, except:
(i) ORDINARY COURSE BUSINESS LIENS --
(A) TAXES, ETC. -- Liens for taxes, assessments
or other governmental charges which are not yet due and
payable or the payment of which is not at the time required by
Section 9.4, or the statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other
similar Liens, in each case, incurred in the ordinary course
of business for sums not yet due and payable or the payment of
which is not at the time required by Section 9.4;
(B) BUSINESS -- Liens (other than any Lien
imposed by ERISA) incurred or deposits made in the ordinary
course of business
(I) in connection with workers'
compensation, unemployment insurance and other types
of social security or retirement benefits, and
(II) to secure (or to obtain letters of
credit that secure) the performance of tenders,
statutory obligations, surety bonds, appeal bonds,
bids, leases (other than Capital Leases), performance
bonds, purchase, construction or sales contracts and
other similar obligations, in each case not incurred
or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of
the deferred purchase price of property; and
(C) REAL ESTATE -- Liens in the nature of leases
or subleases granted to others, easements, rights-of-way,
restrictions and other similar charges or encumbrances
affecting real property, in each case incidental to, and not
interfering with, the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries, provided that
such Liens do not, in the aggregate, materially detract from
the value of such property;
(ii) JUDICIAL LIENS -- any attachment or judgment Lien,
provided that the execution or other enforcement of such Lien is
effectively stayed, the claims secured thereby are being actively
contested in good faith and by appropriate proceedings, and adequate
book reserves shall have been established and maintained and shall
exist with respect to any such claim in excess of One Million Dollars
($1,000,000) at such time;
FRITZ COMPANIES, INC. F-53 NOTE PURCHASE AGREEMENT
<PAGE> 28
(iii) INTERGROUP LIENS -- Liens on property or assets of
any of the Restricted Subsidiaries of the Company securing Debt of a
Restricted Subsidiary owing to the Company;
(iv) CLOSING DATE LIENS -- Liens existing on the date of
this Agreement and securing the Debt of the Company and its Restricted
Subsidiaries referred to in Schedule 5.15;
(v) RENEWALS AND EXTENSIONS -- any Lien renewing,
extending or refunding any Lien permitted by clauses (iv), (vi), (vii)
of this Section 10.5(a), provided that
(A) the principal amount of Debt secured by such
Lien immediately prior to such extension, renewal or refunding
is not increased or the maturity thereof shortened (or if such
principal amount is increased, the amount of such increase
shall be permitted to be incurred pursuant to Section
10.5(a)(viii)),
(B) such Lien is not extended to any other
property, and
(C) immediately after such extension, renewal or
refunding no Default or Event of Default would exist;
(vi) ACQUIRED PROPERTY -- any Lien existing on property of
a Person immediately prior to its being consolidated with or merged
into the Company or a Restricted Subsidiary or its becoming a
Restricted Subsidiary, or any Lien existing on any property acquired
by the Company or any Restricted Subsidiary at the time such property
is so acquired (whether or not the Debt secured thereby shall have
been assumed), provided that
(A) such Lien shall not have been created or
assumed in contemplation of such consolidation or merger or
such Person's becoming a Restricted Subsidiary or such
acquisition of property, and
(B) each such Lien shall extend solely to the
item or items of property so acquired and, if required by the
terms of the instrument originally creating such Lien, other
property which is an improvement to or is acquired for
specific use in connection with such acquired property;
(VII) PURCHASE MONEY LIENS -- any Lien created to secure
all or any part of the purchase price, or to secure Debt incurred or
assumed to pay all or any part of the purchase price or cost of
construction, of tangible property (or any improvement thereon)
acquired or constructed by the Company or a Restricted Subsidiary
after the date of the Closing, provided that
(A) any such Lien shall extend solely to the item
or items of such property (or improvement thereon) so acquired
or constructed and, if required by the terms of the instrument
originally creating such Lien, other
FRITZ COMPANIES, INC. F-54 NOTE PURCHASE AGREEMENT
<PAGE> 29
property (or improvement thereon) which is an improvement to
or is acquired for specific use in connection with such
acquired or constructed property (or improvement thereon) or
which is real property being improved by such acquired or
constructed property (or improvement thereon),
(B) the principal amount of the Debt secured by
any such Lien shall at no time exceed the cost to the Company
or such Restricted Subsidiary of the property (or improvement
thereon) so acquired or constructed, and
(C) any such Lien shall be created
contemporaneously with, or within one hundred twenty (1 20)
days after, the acquisition or construction of such property;
and
(viii) BASKET LIENS - Liens securing Debt other than those
Liens permitted by clauses (I) through (vii) of this Section 10.5(a)
(except for Debt referred to in the parenthetical expression in
Section 10.5(a)(v)(A), which shall be deemed to have been incurred
pursuant to this clause (viii)), provided that the sum of
(A) all such Debt secured by such Liens, plus
(B) the aggregate amount of all Debt of
Restricted Subsidiaries outstanding at such time which is
permitted by paragraph (e) of Section 10.4,
shall not at any time exceed fifteen percent (15%) of Consolidated
Adjusted Net Worth, determined as of the end of the most recent fiscal
quarter.
(b) EQUITABLE LIEN. If, notwithstanding the prohibition
contained herein, the Company shall, or shall permit any of its
Restricted Subsidiaries to, directly or indirectly create,
incur, assume or permit to exist any Lien, other than those
Liens permitted by the provisions of clauses (i) through (viii)
of Section 10.5(a), it will make or cause to be made effective
provision whereby the Notes will be secured equally and ratably
with any and all other obligations thereby secured, such
security to be pursuant to agreements reasonably satisfactory
to the holders of the Notes, and, in any such case, the Notes
shall have the benefit, to the fullest extent that, and with
such priority as, the holders of the Notes may be entitled
under applicable law, of an equitable Lien on such property.
Such violation of this Section 10.5 will constitute an Event of
Default, whether or not provision is made for an equal and
ratable Lien pursuant to this Section 10.5(b).
10.6 SALE OF ASSETS, ETC.
(a) SALE OF ASSETS. Except as permitted under Section 10.7
and Section 10.10, the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any Asset
Disposition unless:
FRITZ COMPANIES, INC. F-55 NOTE PURCHASE AGREEMENT
<PAGE> 30
(i) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market
Value at least equal to that of the property exchanged and is in the
best interest of the Company or such Restricted Subsidiary;
(ii) immediately after giving effect to the Asset
Disposition, no Default or Event of Default would exist; and
(iii) immediately after giving effect to the Asset
Disposition, the Disposition Value of all property that was the
subject of any Asset Disposition occurring in the then current fiscal
year of the Company would not exceed fifteen percent (15%) of
Consolidated Total Assets determined as of the end of the then most
recently ended fiscal year of the Company.
(b) DEBT PREPAYMENT APPLICATION AND PROPERTY REINVESTMENT
APPLICATION. Notwithstanding the provisions of paragraph (a) of this Section
10.6, the determination of whether a Transfer shall be deemed to be an Asset
Disposition, only for the purpose of determining compliance with subsection
(a)(iii) of this Section 10.6, shall be made by deducting from the Disposition
Value of the property subject to such Transfer the same proportion of the
Disposition Value attributable to such property as shall be equal to the
proportion of the Net Proceeds Amount to be applied to either:
(i) the prepayment of the Notes and other Debt of the
Company or its Restricted Subsidiaries (a "DEBT PREPAYMENT"), within
one hundred eighty (180) days before or after the consummation of such
Transfer, or
(ii) the acquisition, within one hundred eighty (180) days
before or after the consummation of such Transfer, of property to be
utilized in the business of the Company or any Restricted Subsidiary.
Any prepayment of the Notes made in connection with a Debt Prepayment
shall be made pursuant to Section 8.2 hereof.
10.7 MERGERS AND CONSOLIDATIONS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consolidate with or merge with any other corporation or
convey, transfer or LEASE substantially all of its assets in a single
transaction or series of transactions to any Person (except that a Restricted
Subsidiary may (x) consolidate with or merge with, or convey, transfer or lease
substantially all of Its assets in a single transaction or series of
transactions to, the Company or another Wholly-Owned Restricted Subsidiary and
(y) convey, transfer or lease ALL of its assets in compliance with the
provisions of Section 10.6), provided that the foregoing restriction does not
apply to the consolidation or merger of the Company with, or the conveyance,
transfer or lease of substantially all of the assets of the Company in a single
transaction or series of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the survivor of
such merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets
FRITZ COMPANIES, INC. F-56 NOTE PURCHASE AGREEMENT
<PAGE> 31
of the Company as an entirety, as the case may be (the "SUCCESSOR
CORPORATION"), shall be a solvent corporation organized and existing
under the laws of the United States of America, any state thereof or
the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and the Notes pursuant
to documents in form and substance satisfactory to the holders of all
of the Notes, together with an opinion, reasonably acceptable to such
holders, of nationally recognized independent counsel regarding the
enforceability of such assumption against such Successor Corporation
and such other matters as such holders may reasonably request; and
(c) immediately after giving effect to such transaction:
(i) no Default or Event of Default would exist,
and
(ii) the Successor Corporation would be permitted
by the provisions of Section 10.2 hereof to incur at least One
Dollar ($1.00) of additional Funded Debt.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement or the Notes.
10.8 DISPOSAL OF OWNERSHIP OF A SUBSIDIARY.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, sell or otherwise dispose of any shares of Subsidiary Stock,
nor will the Company permit any such Restricted Subsidiary to issue, sell or
otherwise dispose of any shares of its own Subsidiary Stock, provided that the
foregoing restrictions do not apply to:
(a) any such Transfer of Subsidiary Stock constituting a
Transfer described inclause (a) of the definition of "Asset
Disposition"; and
(b) the Transfer of Subsidiary Stock of a Restricted
Subsidiary if such Transfer satisfies the requirements of Section
10.6(a)(iii) hereof.
10.9 LINE OF BUSINESS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business if, as a result, the general nature of
the business in which the Company and its Restricted Subsidiaries, taken as a
whole, would then be engaged would be substantially changed from the general
nature of the business in which the Company and the Restricted Subsidiaries,
taken as a whole, are engaged on the date of this Agreement as described in the
Memorandum.
FRITZ COMPANIES, INC. F-57 NOTE PURCHASE AGREEMENT
<PAGE> 32
10.10 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into directly or indirectly any Material transaction or
Material group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering of
any service) with any Affiliate, except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate (it being understood
that the overall benefit to the Company or such Restricted Subsidiary arising
from any relationship with any such Affiliate may be taken into account in
determining whether the requirements of this Section 10.10 have been
satisfied).
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
or Make-Whole Amount, if any, on any Note when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or
by declaration or otherwise; or
(b) the Company defaults in the payment of any interest
on any Note for more than five (5) Business Days after the same
becomes due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in Section 10 hereof; or
(d) the Company defaults in the performance-of or
compliance with any term contained herein (other than those referred
to in paragraphs (a), (b) and (c) of this Section 11) and such default
is not remedied within thirty (30) days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and
(ii) the Company receiving written notice of such default from any
holder of a Note (any such written notice to be identified as a
"notice of default" and to refer specifically to this paragraph (d) of
Section 11); or
(e) any representation or warranty made in writing by or
on behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made; or
(f) the Company or any Restricted Subsidiary is in
default in the performance of or compliance with any term of any
evidence of any Debt in an aggregate outstanding principal amount of
at least Five Million Dollars ($5,000,000) or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt
has become, or has been declared (or one or more Persons are entitled
to declare such Debt to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or
FRITZ COMPANIES, INC. F-58 NOTE PURCHASE AGREEMENT
<PAGE> 33
(g) the Company or any Restricted Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes a general assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company or any of its Restricted Subsidiaries, a custodian, receiver,
trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any of its Restricted Subsidiaries, or any such
petition shall be filed against the Company or any of its Restricted
Subsidiaries and such petition shall not be dismissed within sixty
(60) days; or
(i) a final judgment or judgments for the payment of
money aggregating in excess of Five Million Dollars ($5,000,000), are
rendered against one or more of the Company and its Restricted
Subsidiaries and which judgments are not, within sixty (60) days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within sixty (60) days after the expiration of such stay;
or
(j) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or
part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under section 412 of
the Code,
(ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the
PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings,
(iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV
of ERISA, shall exceed Five Million Dollars ($5,000,000),
(iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability
pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans,
FRITZ COMPANIES, INC. F-59 NOTE PURCHASE AGREEMENT
<PAGE> 34
(v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-
employment welfare benefits in a manner that would increase
the liability of the Company or any Subsidiary thereunder;
and any such event or events described in clauses (i) through (vi)
above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse
Effect.
As used in this Section 11 Q), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company
described in paragraph (g) or (h) of Section 11 (other than an Event
of Default described in clause (i) of paragraph (g) or described in
clause (vi) of paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Notes
then outstanding shall automatically become immediately due and
payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than thirty-four percent
(34%) in principal amount of the Notes at the time outstanding may at
any time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or
(b) of Section 11 has occurred and is continuing, any holder or
holders of Notes at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of
FRITZ COMPANIES, INC. F-60 NOTE PURCHASE AGREEMENT
<PAGE> 35
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3 RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clauses (c) through (f), inclusive, clause (i) or clause (j) of
Section 11, the holders of not less than sixty-seven percent (67%) in principal
amount of the Notes then outstanding, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the Company
has paid all overdue interest on the Notes, all principal of and Make-Whole
Amount, if any, on any Notes that are due and payable and are unpaid other than
by reason of such declaration, and all interest on such overdue principal and
Make-Whole Amount, if any, and (to the extent permitted by applicable law) any
overdue interest in respect of the Notes, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of
Default or Default or impair any right consequent thereon.
12.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section
15, the Company will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements,
FRITZ COMPANIES, INC. F-61 NOTE PURCHASE AGREEMENT
<PAGE> 36
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give,
to any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes, and the holders of the Notes hereby consent to
such disclosure.
13.2 TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof]), the Company
shall execute and deliver, at the Company's expense (except as provided below),
one or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable to such Person as
such holder may request and shall be substantially in the form of Exhibit A.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than Two Hundred Fifty Thousand Dollars
($250,000), provided that, if necessary to enable the registration of transfer
by a holder of its entire holding of Notes, one Note may be in a denomination
of less than Two Hundred Fifty Thousand Dollars ($250,000). Any transferee, by
its acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representation set forth in Section 6.2.
13.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if the holder
of such Note is an Institutional Investor, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
FRITZ COMPANIES, INC. F-62 NOTE PURCHASE AGREEMENT
<PAGE> 37
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest shall have
been paid thereon.
14. PAYMENTS ON NOTES.
14.1 PLACE OF PAYMENT
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made in San
Francisco, California at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment shall
be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Annex 1, or by such other
method or at such other address as you shall have from time to time specified
to the Company in writing for such purpose, without the presentation or
surrender of such Note or the making of any notation thereon, except that upon
written request of the Company made concurrently with or reasonably promptly
after payment or prepayment in full of any Note, you shall surrender such Note
for cancellation, reasonably promptly after any such request, to the Company at
its principal executive office or at the place of payment most recently
designated by the Company pursuant to Section 14.1. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at your election,
either endorse thereon the amount of principal paid thereon and the last date
to which interest has been paid thereon or surrender such Note to the Company
in exchange for a now Note or Notes pursuant to Section 13.2. The Company will
afford the benefits of this Section 14.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by you under this
Agreement.
15. EXPENSES, ETC.
15.1 TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of one special counsel and, if reasonably required, local or other
counsel) incurred by you and each holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under
or in respect of this Agreement or the Notes (whether or not such amendment,
waiver or consent becomes effective), including, without limitation: (a) the
costs and expenses incurred in enforcing or defending (or determining whether
or how to enforce or defend) any
FRITZ COMPANIES, INC. F-63 NOTE PURCHASE AGREEMENT
<PAGE> 38
rights, under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the Notes, or by reason of being a holder of any Note, and
l(b) the costs and expenses, including fees of one financial advisor, incurred
in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2 SURVIVAL
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this
Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of you or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between you and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (i)
subject to the provisions of Section 12 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage
of the principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of Sections 8,
11(a), 11(b), 12 or 17.
FRITZ COMPANIES, INC. F-64 NOTE PURCHASE AGREEMENT
<PAGE> 39
17.2 SOLICITATION OF HOLDERS OF NOTES.
(A) SOLICITATION. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a
decision is required, to enable such holder to make an informed and
considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies of each
amendment, waiver or consent effected pursuant to the provisions of
this Section 17 to each holder of outstanding Notes promptly following
the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(B) PAYMENT. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes of any waiver
or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or
amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment
or waiver will extend to or affect any obligation, covenant, agreement, Default
or Event of Default not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Company and the holder of
any Note nor any delay in exercising any rights hereunder or under any Note
shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented,
17.4 NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail
FRITZ COMPANIES, INC. F-65 NOTE PURCHASE AGREEMENT
<PAGE> 40
with return receipt requested (postage prepaid), or (C) by a recognized
overnight delivery service (with charges prepaid). Any such notice must be
sent:
(i) if to you or your nominee, to you or it at the
address specified for such communications in Annex 1, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Jan H. Raymond,
Esq., or at such other address as the Company shall have specified to
the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary
in connection with the transactions contemplated by or otherwise pursuant to
this Agreement (including, without limitation, information required to be
delivered in connection with Section 7.3 of this Agreement) that is proprietary
in nature and that was clearly marked or labeled or otherwise adequately
identified when received by you as being confidential information of the
Company or such Subsidiary, provided that such term does not include
information that
(a) was publicly known or otherwise known to you prior to
the time of such disclosure,
(b) subsequently becomes publicly known through no act or
omission by you or any Person acting on your behalf,
FRITZ COMPANIES, INC. F-66 NOTE PURCHASE AGREEMENT
<PAGE> 41
(c) otherwise becomes known to you other than through (a)
disclosure by the Company or any Subsidiary or (b) your receipt of
such confidential information from a Person who you actually knew to
have breached a fiduciary duty to the Company or any Subsidiary by
disclosing such information to you, or
(d) constitutes financial statements delivered to you
under Section 7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information
in accordance with procedures adopted by you in good faith to protect
confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to
(i) your directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment
represented by your Notes),
(ii) your financial advisors and other
professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the
terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell
or offer to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase
any Security of the Company (if such Person has agreed in
writing prior to its receipt of such Confidential Information
to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority
having jurisdiction over you,
(vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information
about your investment portfolio or
(viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable
to you, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which you
are a party or (z) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies
under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any
FRITZ COMPANIES, INC. F-67 NOTE PURCHASE AGREEMENT
<PAGE> 42
holder of a Note of information required to be delivered to such holder under
this Agreement or requested by such holder (other than a holder that is a party
to this Agreement or its nominee), such holder will enter into an agreement
with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than
in this Section 21), such word shall be deemed to refer to such Affiliate in
lieu of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest
on any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days elapsed
in the computation of the interest payable on such next succeeding Business
Day.
22.3 SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
FRITZ COMPANIES, INC. F-68 NOTE PURCHASE AGREEMENT
<PAGE> 43
22.4 CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW
YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature page.]
FRITZ COMPANIES, INC. F-69 NOTE PURCHASE AGREEMENT
<PAGE> 44
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
FRITZ COMPANIES, INC.
By /s/ Jan H. Raymond
---------------------
Name: Jan H. Raymond
Title: Senior Vice President
The foregoing is hereby
agreed to as of the
date thereof,
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
BY: LINCOLN INVESTMENT MANAGEMENT, INC.,
ITS ATTORNEY-IN-FACT
By /s/ David C. Patch
----------------------------
Name: David C. Patch
Title: Vice President
AMERICAN STATES LIFE INSURANCE COMPANY
BY: LINCOLN INVESTMENT MANAGEMENT, INC.,
ITS ATTORNEY-IN-FACT
By /s/ David C. Patch
----------------------------
Name: David C. Patch
Title: Vice President
FRITZ COMPANIES, INC. F-70 NOTE PURCHASE AGREEMENT
<PAGE> 45
ALLIED LIFE INSURANCE COMPANY
BY: LINCOLN INVESTMENT MANAGEMENT, INC.,
ITS ATTORNEY-IN-FACT
By /s/ David C. Patch
----------------------------
Name: David C. Patch
Title: Vice President
LINCOLN NATIONAL REASSURANCE COMPANY
BY: LINCOLN INVESTMENT MANAGEMENT, INC.,
ITS ATTORNEY-IN-FACT
By /s/ David C. Patch
----------------------------
Name: David C. Patch
Title: Vice President
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By /s/ Ina Lane
----------------------------
Name: Ina Lane
Title: Investment Officer
THE EQUITABLE OF COLORADO, INC.
By /s/ Ina Lane
----------------------------
Name: Ina Lane
Title: Investment Officer
FRITZ COMPANIES, INC. F-71 NOTE PURCHASE AGREEMENT
<PAGE> 46
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By /s/ E. A. Marr
----------------------------
Name: E. A. Marr
Title: Assistant Vice President
Private Placement Investments
By /s/ James G. Lowery
----------------------------
Name: James G. Lowery
Title: Assistant Vice President
Private Placement Investments
AID ASSOCIATION FOR LUTHERANS
By /s/ R. Jerry Scheel
----------------------------
Name: R. Jerry Scheel
Title: Second Vice President - Securities
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Michael D. Groseclose
----------------------------
Name: Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-income Securities
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
By /s/ Michael D. Groseclose
----------------------------
Name: Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
FRITZ COMPANIES, INC. F-72 NOTE PURCHASE AGREEMENT
<PAGE> 47
WEST COAST LIFE INSURANCE COMPANY
By /s/ Michael D. Groseclose
----------------------------
Name: Michael D. Groseclose
Title: Attorney-In-Fact
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY
By /s/ John M. Casparian
----------------------------
Name: John M. Casparian
Title: Investment Officer
THE CATHOLIC AID ASSOCIATION
BY: MIMLIC ASSET MANAGEMENT COMPANY
By /s/ Loren Haugland
----------------------------
Name: Loren Haugland
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
BY: MIMLIC ASSET MANAGEMENT COMPANY
By /s/ Loren Haugland
----------------------------
Name: Loren Haugland
Title: Vice President
GREAT WESTERN INSURANCE COMPANY
BY: MIMLIC ASSET MANAGEMENT COMPANY
By /s/ Loren Haugland
----------------------------
Name: Loren Haugland
Title: Vice President
FRITZ COMPANIES, INC. F-73 NOTE PURCHASE AGREEMENT
<PAGE> 48
MINNESOTA FIRE & CASUALTY COMPANY
BY: MIMLIC ASSET MANAGEMENT COMPANY
By /s/ Loren Haugland
----------------------------
Name: Loren Haugland
Title: Vice President
BERKSHIRE LIFE INSURANCE COMPANY
By /s/ James W. Zilinski
----------------------------
Name: James W. Zilinski
Title: President & CEO
FRITZ COMPANIES, INC. F-74 NOTE PURCHASE AGREEMENT
<PAGE> 49
ANNEX 11
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
AFFILIATE -- means, at any time, and with respect to any Person, any
other Person (other than a Restricted Subsidiary)
(a) that at such time directly or indirectly through one
or more intermediaries Controls, or is Controlled by, or is under
common Control with, such first Person,
(b) that beneficially owns or holds, directly or
indirectly, 10% or more of any class of voting or equity interests of
such first Person,
(c) of which such first Person beneficially owns or
holds, in the aggregate, directly or indirectly, 1 0% or more of any
class of voting or equity interests, or
(d) that is an officer or director of such first Person.
As used in this definition, "Control" means the possession, directly or
indirectly, 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. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
AGREEMENT, THIS -- means this Note Purchase Agreement, as it may be
amended and restated from time to time.
ASSET DISPOSITION -- means any Transfer except:
(a) any Transfer from a Restricted Subsidiary to the
Company or another Restricted Subsidiary, so long as immediately
before and immediately after the consummation of any such Transfer and
after giving effect thereto, no Default or Event of Default exists;
(b) any Transfer made in the ordinary course of business
and involving only property that is either (i) inventory held for sale
or (ii) equipment, fixtures, supplies or materials no longer required
in the operation of the business of the Company or any of its
Restricted Subsidiaries or that are obsolete; and
(c) any Sale-and-Leaseback Transaction, so long as
immediately before and immediately after the consummation of any such
Transfer and after giving effect thereto, no Default or Event of
Default exists.
BUSINESS DAY -- means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City or the state of California are
required or authorized to be closed.
FRITZ COMPANIES, INC. F-75 DEFINED TERMS
<PAGE> 50
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
CAPITAL LEASE OBLIGATIONS -- means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.
CLOSING -- is defined in Section 3.
CODE -- means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to
time.
COMPANY -- means Fritz Companies, Inc., a Delaware corporation.
CONFIDENTIAL INFORMATION -- is defined in Section 20.
CONSOLIDATED ADJUSTED CAPITALIZATION -- means, at any time, the sum of
Consolidated Funded Debt and Consolidated Adjusted Net Worth, in each case
determined at such time.
CONSOLIDATED ADJUSTED NET WORTH - means, at any time,
(a) the total shareholders' equity of the Company and its
Restricted Subsidiaries, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus
of Restricted Subsidiaries, minus
(b) the book value of all Restricted Investments made
after the Closing in excess of seven and fifty one-hundredths percent
(7.5%) of the total shareholders' equity of the Company and its
Restricted Subsidiaries, in each case, as would be reflected on the
consolidated financial statements of the Company and its Restricted
Subsidiaries at such time prepared in accordance with GAAP.
CONSOLIDATED CURRENT DEBT -- means, as of any date of determination,
the total of all Current Debt of the Company and its Restricted Subsidiaries
outstanding on such date, after eliminating all offsetting debits and credits
between the Company and its Restricted Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Restricted Subsidiaries in
accordance with GAAP.
CONSOLIDATED FUNDED DEBT -- means, as of any date of determination,
the total of all Funded Debt of the Company and its Restricted Subsidiaries
outstanding on such date, after eliminating all offsetting debits and credits
between the Company and its Restricted Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Restricted Subsidiaries in
accordance with GAAP.
FRITZ COMPANIES, INC. F-76 DEFINED TERMS
<PAGE> 51
CONSOLIDATED NET INCOME -- means, with reference to any period, the
net income (or loss) after income taxes of the Company and its Restricted
Subsidiaries, as determined on a consolidated basis in accordance with GAAP,
but excluding:
(a) the earnings during such period of any Person (other
than a Restricted Subsidiary) in which the Company has an ownership
interest, except to the extent that any such earnings have been
actually received by the Company in the form of dividends or similar
distributions;
(b) the earnings during such period of any Person accrued
prior to the date it became a Restricted Subsidiary or was merged into
or consolidated with the Company or a Restricted Subsidiary;
(c) any gain or net loss during such period arising from
the sale, exchange or other disposition of capital assets (such term
to include, without limitation, all fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of
fixed assets, and all Securities), other than in the ordinary course
of business;
(d) any extraordinary gain or loss during such period;
(e) any gain during such period arising from the write-up
of any asset;
(f) any portion of the net earnings during such period of
any Restricted Subsidiary which for any reason is contractually or
legally unavailable for payment of dividends to the Company;
(g) any earnings or gains during such period resulting
from the receipt of any proceeds of any insurance policy; and
(h) any restoration during such period to income of any
contingency reserve, except to the extent that provision for such
reserve was made during such period out of income accrued during such
period.
CONSOLIDATED TOTAL ASSETS -- means, at any time, the total assets of
the Company and its Restricted Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
such time prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus
of Subsidiaries.
CURRENT DEBT -- means, with respect to any Person, without
duplication, Debt that is not Funded Debt.
CURRENT MATURITIES OF FUNDED DEBT -- means, at any time and with
respect to any item of Funded Debt, the portion of such Funded Debt outstanding
at such time which by the terms of such Funded Debt or the terms of any
instrument or agreement relating thereto is due on demand or within one year
from such time (whether by sinking fund, other required prepayment or final
payment at maturity) and is not directly or indirectly renewable, extendible or
refundable
FRITZ COMPANIES, INC. F-77 DEFINED TERMS
<PAGE> 52
at the option of the obligor under an agreement or firm commitment in effect at
such time to a date one year or more from such time.
DEBT -- means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its Capital Lease Obligations;
(c) all indebtedness secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or
otherwise become liable for such indebtedness); and
(d) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (c)
hereof.
Debt of any Person shall include all obligations of such Person of the
character described in clauses (a) through (d) to the extent such Person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
DEBT PREPAYMENT -- is defined in Section 10.5(b)(i).
DEFAULT -- means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DISPOSITION VALUE -- means, at any time, with respect to any Transfer,
the book value of the property subject to such Transfer; provided that, in
connection with any Transfer of Subsidiary Stock, the book value thereof shall
be deemed to be equal to the book value of the assets of the issuer thereof (or
such portion of the book value of such assets as shall correspond to the
portion of Subsidiary Stock subject to such transfer).
ENVIRONMENTAL LAWS -- means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
ERISA AFFILIATE -- means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
EVENT OF DEFAULT -- is defined in Section 11.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended.
FRITZ COMPANIES, INC. F-78 DEFINED TERMS
<PAGE> 53
FAIR MARKET VALUE -- means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
FUNDED DEBT -- means, with respect to any Person, all Debt of such
Person which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, one year or
more from, or is directly or indirectly renewable or extendible at the option
of the obligor in respect thereof to a date one year or more (including,
without limitation, an option of such obligor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more and that is required by GAAP to be shown as a
long-term liability on the balance sheet of such Person) from, the date of the
creation thereof, provided that Funded Debt shall include, as at any date of
determination, Current Maturities of Funded Debt.
GAAP -- means accounting principles as promulgated from time to time
in statements, opinions and pronouncements by the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board and
in such statements, opinions and pronouncements of such other entities with
respect to financial accounting of for-profit entities as shall be accepted by
a substantial segment of the accounting profession in the United States.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or any state or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
GUARANTOR -- means any Material Subsidiary that has executed a
Subsidiary Guaranty.
GUARANTY means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet
FRITZ COMPANIES, INC. F-79 DEFINED TERMS
<PAGE> 54
condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
HAZARDOUS MATERIAL -- means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
INSTITUTIONAL INVESTOR -- means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than five percent (5%) of the aggregate
principal amount of the Notes then outstanding, and (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form, in each case having a minimum net worth of $50,000,000.
INVESTMENT -- means any investment, made in cash or by delivery of
property, by the Company or any of its Restricted Subsidiaries (i) in any
Person, whether by acquisition of stock, indebtedness or other obligation or
Security, or by loan, Guaranty, advance, capital contribution or otherwise, or
(ii) in any property.
LIEN -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).
MAKE-WHOLE AMOUNT -- is defined in Section 8.6.
MATERIAL -- means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Restricted Subsidiaries taken as a whole.
FRITZ COMPANIES, INC. F-80 DEFINED TERMS
<PAGE> 55
MATERIAL ADVERSE EFFECT -- means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes, or (d) the
ability of any Guarantor to perform its obligations under the Subsidiary
Guaranty.
MATERIAL SUBSIDIARY -- means, at any time, Fritz Transportation
International (H.K.) Ltd., a Hong Kong corporation; FCI Holdings International
B.V., a Netherlands corporation; Fritz Companies Canada Inc., a New Brunswick
corporation; and Fritz Air Freight, Inc., a Texas corporation; and any other
Restricted Subsidiary having at such time either (i) total net revenues for the
period of four consecutive fiscal quarters of the Company then most recently
ended equal to or greater than ten percent (10%) of the Company's consolidated
total net revenues for such period or (ii) total assets, as of the last day of
the then most recently ended fiscal quarter of the Company, equal to or greater
than ten percent (10%) of the Company's Consolidated Total Assets on such day,
in each case, based upon the Company's then most recent annual or quarterly
financial statements.
MEMORANDUM -- is defined in Section 5.3.
MULTIEMPLOYER PLAN -- means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001 (a) (3) of ERISA).
NAIC ANNUAL STATEMENT -- is defined in Section 6.2(a).
NET PROCEEDS AMOUNT -- means, with respect to any Transfer of any
property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at
the Fair Market Value of such consideration at the time of the
consummation of such Transfer) received by such Person in respect of
such Transfer, minus
(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Transfer.
NOTES -- is defined in Section 1.
OFFICER'S Certificate -- means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
PBGC -- means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
PERSON -- means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
FRITZ COMPANIES, INC. F-81 DEFINED TERMS
<PAGE> 56
PLAN -- means an "employee benefit plan" (as defined in section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
PROPERTY OR PROPERTIES -- means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
QPAM -- is defined in Section 6.2(c).
QPAM EXEMPTION -- means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
REQUIRED HOLDERS -- means, at any time, the holders of at least
fifty-one percent (51%) in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by the Company or any of its
Subsidiaries or Affiliates).
RESPONSIBLE OFFICER -- means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
RESTRICTED INVESTMENTS -- means at any time all Investments except the
following:
(a) property to be used in the ordinary course of
business of the Company and its Subsidiaries;
(b) Investments in one or more Restricted Subsidiaries or
any Person that concurrently with such Investment becomes a Restricted
Subsidiary;
(c) Investments in United States Governmental Securities,
provided that such obligations mature within three (3) years from the
date of acquisition thereof;
(d) Investments in tax-exempt obligations of any state of
the United States of America, or any municipality of any such state,
in each case given either of the two (2) highest ratings by a credit
rating agency of recognized national standing, provided that such
obligations mature within three (3) years from the date of acquisition
thereof;
(e) Investments in certificates of deposit or banker's
acceptances issued by an Acceptable Bank;
(f) Investments in commercial paper given either of the
two (2) highest ratings by a credit rating agency of recognized
national standing and maturing not more than two hundred seventy (270)
days from the date of creation thereof;
(g) Investments in money market mutual funds that invest
solely in so-called "money market" instruments which are classified as
current assets in accordance with GAAP; and
FRITZ COMPANIES, INC. F-82 DEFINED TERMS
<PAGE> 57
(h) Investments existing on the date of the Closing and
disclosed in Schedule 10.1.
As of any date of determination, each Restricted Investment shall be valued at
the greater of:
(x) the amount at which such Restricted Investment is
shown on the books of the Company or any of its Subsidiaries (or zero
if such Restricted Investment is not shown on any such books); and
(y) either
(i) in the case of any Guaranty of the
obligation of any Person, the amount which the
Company or any of its Subsidiaries has paid on
account of such obligation less any recoupment by the
Company or such Subsidiary of any such payments, or
(ii) in the case of any other Restricted
Investment, the excess of (x) the greater of (A) the
amount originally entered on the books of the Company
or any of its Subsidiaries with respect thereto and
(B) the cost thereof to the Company or its Subsidiary
over (y) any return of capital (after income taxes
applicable thereto) upon such Restricted Investment
through the sale or other liquidation thereof or part
thereof or otherwise.
As used in this definition of "Restricted Investments":
"Acceptable Bank" means (i) ABN Amro Bank N.V. or Standard
Chartered Bank, or any bank or trust company which is organized under
the laws of the United States of America or any state thereof, and
(ii) so long as the long-term unsecured debt obligations thereof (or
the long-term unsecured debt obligations of the bank holding company
owning all of the capital stock of such bank or trust company) shall
have been given either of the two (2) highest ratings by a credit
rating agency of recognized national standing.
"United States Governmental Security" means any direct
obligation of, or obligation guaranteed by, the United States of
America, or any agency controlled or supervised by or acting as an
instrumentality of the United States of America pursuant to authority
granted by the Congress of the United States of America, so long as
such obligation or guarantee shall have the benefit of the full faith
and credit of the United States of America which shall have been
pledged pursuant to authority granted by the Congress of the United
States of America.
RESTRICTED SUBSIDIARY - means any Subsidiary designated as such on
Schedule 5.4 and any other Subsidiary which the Company has designated a
Restricted Subsidiary by notice in writing given to the holders of the Notes.
SALE-AND-LEASEBACK TRANSACTION -- means a transaction or series of
transactions pursuant to which the Company or any Restricted Subsidiary shall
sell or transfer to any Person (other than the Company or a Restricted
Subsidiary) any property within any period of one
FRITZ COMPANIES, INC. F-83 DEFINED TERMS
<PAGE> 58
hundred eighty (180) days following the acquisition or substantial completion
of construction of such property, and, within such period, shall rent or lease
as lessee (other than pursuant to a Capital Lease), or similarly acquire the
right to possession or use of, such property or one or more properties which it
intends to use for the same purpose or purposes as such property.
SECURITY -- has the meaning set forth in Section 2(l) of the
Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as amended from
time to time.
SENIOR FINANCIAL OFFICER -- means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
SOURCE -- is defined in Section 6.2.
SUBSIDIARY -- at any time means a corporation of which the Company
owns, directly or indirectly, more than fifty percent (50%) of the Voting Stock
at such time.
SUBSIDIARY GUARANTY -- is defined in Section 4.9.
SUBSIDIARY STOCK -- means, with respect to any Person, the stock (or
any options or warrants to purchase stock or other Securities exchangeable for
or convertible into stock) of any Restricted Subsidiary of such Person.
SUCCESSOR CORPORATION -- is defined in Section 10.7(a).
TRANSFER - means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers or leases (as lessor) any of Its
property, including, without limitation, Subsidiary Stock.
VOTING STOCK -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
WHOLLY-OWNED RESTRICTED SUBSIDIARY -- means, at any time, any
Restricted Subsidiary one hundred percent (100%) of all of the equity interests
(except directors' qualifying shares) and voting interests of which are owned
by any one or more of the Company and the Company's other Wholly-Owned
Restricted Subsidiaries at such time.
FRITZ COMPANIES, INC. F-84 DEFINED TERMS
<PAGE> 59
Annexes and Exhibits intentionally omitted.
FRITZ COMPANIES, INC. F-85 NOTE PURCHASE AGREEMENT
<PAGE> 1
FIRST AMENDMENT AGREEMENT
-------------------------
This FIRST AMENDMENT AGREEMENT, dated as of July 3, 1996 (this
"Agreement"), is among FRITZ COMPANIES, INC., a Delaware corporation (the
"Company"), the several financial institutions (collectively, the "Banks",
individually, a "Bank") party to the Multicurrency Credit Agreement, dated as
of December 15, 1995 (the "Credit Agreement"), among the Company, the Banks,
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the
Banks (in such capacity, the "Agent").
The parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement, as
amended hereby, are used herein with the same meanings unless otherwise
specifically defined herein.
Section 2. Amendments to the Credit Agreement. The Credit Agreement
is hereby amended:
(a) To add certain defined terms to Section 1.01 thereof as follows:
"Finnish Letters of Credit" means (a) BofA letter of credit
number LASB-227930 in favor of Henry Nielsen AB for the account of the
Company in the amount of 29,400,000 Finnish marks and (b) BofA letter of
credit number LASB-227919 in favor of Henry Nielsen AB for the account
of the Company in the amount of 13,002,050.70 Finnish marks.
"First Amendment Agreement" means the First Amendment Agreement,
dated as of July 3, 1996, among the Company, the Banks, and the Agent.
"First Amendment Effective Date" means the date on which the
First Amendment Agreement became effective in accordance with its terms.
(b) To amend and restate in their entirety certain definitions set
forth in Section 1.01 thereof as follows:
"Issue" means, with respect to any Letter of Credit, to
incorporate the Existing BofA Letters of Credit and the Finnish Letters
of Credit into this Agreement, or to issue or to extend the expiry of,
or to renew or increase the amount of, such Letter of
F-86
<PAGE> 2
Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit (including the Existing BofA Letters of Credit and the
Finnish Letters of Credit) from time to time Issued or outstanding under
Article III, in an aggregate amount not to exceed on any date the amount
of $40,000,000, as the same shall be reduced as a result of a reduction
in the L/C Commitment pursuant to Section 2.06; provided that the L/C
Commitment is a part of the combined Commitments, rather than a
separate, independent commitment.
"Letters of Credit" means the Existing BofA Letters of Credit,
the Finnish Letters of Credit, and any letters of credit (whether
standby letters of credit or commercial documentary letters of credit)
Issued by the Issuing Bank pursuant to Article III.
"Offshore Currency (Local)" means the lawful currency of
Australia, Canada (i.e., Canadian Dollars), Singapore, Finland (but only
in the case of the Finnish Letters of Credit and any L/C Borrowings made
in connection therewith), and any other currency notified to the Company
by the Agent and the Banks as an Offshore Currency (Local) hereunder.
(c) To amend and restate in its entirety Subsection 3.03(a) thereof
as follows:
(a) On and after the Closing Date, the Existing BofA Letters of
Credit shall be, and on and after the First Amendment Effective Date,
the Finnish Letters of Credit shall be, deemed for all purposes,
including for purposes of the fees to be collected pursuant to
subsections 3.08(a) and 3.08(b), and reimbursement of costs and expenses
to the extent provided herein, Letters of Credit outstanding under this
Agreement and entitled to the benefits of this Agreement and the other
Loan Documents, and shall be governed by the applications and agreements
pertaining
F-86a
<PAGE> 3
thereto and by this Agreement. Each Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing
Bank on the Closing Date a participation in each Existing BofA Letter of
Credit and on the First Amendment Effective Date a participation in each
Finnish Letter of Credit, and each drawing under any such Letter of
Credit in an amount equal to the product of (i) such Bank's Pro Rata
Share times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For
purposes of Section 2.01 and subsection 2.12(b), the existing BofA
Letters of Credit and Finnish Letters of Credit shall be deemed to
utilize pro rata the Commitment of each Bank. With respect to any
Existing BofA Letter of Credit issued for the account of any Subsidiary
of the Company (and whether or not such Subsidiary is or becomes a
Subsidiary Co-Borrower hereunder), the Company agrees that from and
after the Closing Date, the Company hereby assumes, and shall be jointly
and severally liable with respect to, all obligations of the account
party under such Existing BofA Letter of Credit, as the case may be, and
that such obligations shall be part of the Obligations hereunder and
shall be subject to the provisions hereof.
(d) To amend and restate in its entirety Subsection 3.08(a)
thereof as follows:
(a) The Company shall pay to the Agent a letter of credit
fee at the rate of 0.325% per annum on the aggregate maximum amount
available for drawings under each Letter of Credit from time to time,
and such fee shall (i) commence to accrue (A) on the date of Issuance as
to any Letter of Credit other than Existing BofA Letters of Credit or
Finnish Letters of Credit, (B) on the Closing Date as to Existing BofA
Letters of Credit, and (C) on the First Amendment Effective Date in the
case of Finnish Letters of Credit, (ii) be payable for the account of
each of the Banks ratably in proportion to its Pro Rata Share, and (iii)
by payable (A) as to each Letter of Credit other than Existing
F-86b
<PAGE> 4
BofA Letters of Credit or Finnish Letters of Credit, in advance
on the date of Issuance of such Letter of Credit, with respect
to the period from the Issuance Date to the first Quarterly Date
thereafter, and Quarterly in advance on each Quarterly Date
after the Issuance Date so long as such Letter of Credit is
outstanding, (B) as to each Existing BofA Letter of Credit, in
advance on the Closing Date, with respect to the period from the
Closing Date to the first Quarterly Date thereafter, and
quarterly in advance on each Quarterly Date after the Closing
Date so long as such Existing BofA Letter of Credit is
outstanding, and (C) as to each Finnish Letter of Credit, in
advance on the First Amendment Effective Date, with respect to
the period from the First Amendment Effective Date to the first
Quarterly Date thereafter, and quarterly in advance on each
Quarterly Date after the First Amendment Effective Date so long
as such Finnish Letter of Credit is outstanding; provided that
the minimum fee in respect of any standby Letter of Credit shall
be $400. For any period in respect of which the letter of
credit fee is being calculated in advance as to any Letter of
Credit, the calculation shall be based on the stated amount of
the Letter of Credit, prorated as necessary if such Letter of
Credit will expire during such period (e.g., if the Letter of
Credit has a stated amount of $100,000 and the Quarterly period
is 91 days during which the Letter of Credit will not expire,
the letter of credit fee payable in advance would equal:
$100,000 x 0.00325 x 91/365; if, on the other hand, the Letter
of Credit will expire on the 60th day of such period, the fee
would equal: $100,000 x 0.00325 x 59/365). With respect to
Existing BofA Letters of Credit, BofA shall refund to the
Company any prepaid fees allocable to the period on and after
the Closing Date, and with respect to Finnish Letters of Credit
BofA shall refund to the Company any prepaid fees allocable to
the period on and after the First Amendment Effective Date.
Section 3. Effect. Except as specifically set forth herein, this
Agreement does not limit, modify, amend, waive, grant any consent with respect
to, or otherwise affect (a) any
F-86c
<PAGE> 5
right, power or remedy of the Agent or any Bank under the Credit Agreement or
any other Loan Document, (b) any provision of the Credit Agreement or any other
Loan Documents all of which shall remain in full force and effect and are hereby
ratified and confirmed. This Agreement does not entitle, or imply any consent or
agreement to, any further or future modification of, amendment to, waiver of, or
consent with respect to any provision of the Credit Agreement or any other Loan
Document.
Section 4. Conditions of Effectiveness. This Agreement shall
become effective as of the date hereof when the Agent has received counterparts
hereof signed by the Company and the Banks. Promptly upon timely receipt of such
counterparts, the Agent shall notify Company and Banks of the effectiveness of
this Agreement, and such notice shall be conclusive and binding as to the
occurrence thereof on all parties hereto.
Section 5. Representations and Warranties. The Company represents
and warrants to the Agent and each Bank that:
(a) The execution, delivery and performance by the Company
of this Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and require no action by or in
respect of, or filing with, any governmental body, agency or official, and the
execution, delivery and performance by the Company of this Agreement do not
contravene, or constitute a default under, any provision of applicable law or
regulations or of the certificate or articles of incorporation or the by-laws of
the Company or any of its Subsidiaries, or any other material agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or any of its Subsidiaries or any assets of the Company or any of its
Subsidiaries.
(b) This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, except as enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors' rights, and to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
(c) After giving effect to this Agreement, no Event of
Default or Default has occurred and is continuing, and after giving effect to
this Agreement, the representations and warranties of the Company contained in
the Credit Agreement and the other Loan Documents delivered pursuant thereto
are true and correct in all material respects as of the date hereof as if made
on the date hereof (except to the extent such representations and
F-86d
<PAGE> 6
warranties expressly refer to an earlier date, in which case they shall be true
and correct as of such earlier date).'
Section 6. Counterparts; Facsimile Signatures. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original with the same effect as if all the signatures were on
the same instrument. Delivery of an executed counterpart of the signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement. Any party delivering an executed
counterpart of the signature page to this Agreement by telecopier shall
thereafter promptly deliver a manually executed counterpart of this Agreement,
but the failure to deliver such manually executed counterpart shall not affect
the validity, enforceability, and binding effect of this Agreement.
Section 7. Governing Law and Jurisdiction; Waiver of Jury Trial.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA AND IS SUBJECT TO THE PROVISIONS OF
SECTIONS 11.16 AND 11.17 OF THE CREDIT AGREEMENT, RELATING TO GOVERNING LAW AND
JURISDICTION AND WAIVER OF JURY TRIAL, THE PROVISIONS OF WHICH ARE BY THIS
REFERENCE HEREBY INCORPORATED HEREIN IN FULL.
F-86e
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in San Francisco, California, by their proper and
duly authorized officers as of the day and year first above written.
COMPANY: FRITZ COMPANIES, INC.
By /s/ FRANK BROWN
---------------------------------
Title: Director of Treasury Services
------------------------------
By /s/ RONALD W. WOMACK
---------------------------------
Title: Vice President
------------------------------
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By /s/ IVO BAKOVIC
---------------------------------
Title: Vice-President
------------------------------
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By /s/ JOHN HOLMES
---------------------------------
Title: Vice-President
------------------------------
ABN AMRO BANK N.V.
By /s/ GINA BRUSATORI
---------------------------------
Title: Vice President & Director
------------------------------
By /s/ DAVID P. TYLER
---------------------------------
Title: Assistant Vice President
------------------------------
STANDARD CHARTERED BANK
By /s/ MARY MACHADO-SCHAMMER
---------------------------------
Title: Vice President
------------------------------
By /s/ MARGUERITE J. FELSERFELD
---------------------------------
Title: Administrative Assistant
------------------------------
F-86f
<PAGE> 1
SECOND AMENDMENT AGREEMENT
This SECOND AMENDMENT AGREEMENT, dated as of
May 31, 1996 (this "Agreement"), is among FRITZ COMPANIES, INC., a Delaware
corporation (the "Company"), the several financial institutions (collectively,
the "Banks"; individually, a "Bank") party to the Multicurrency Credit
Agreement, dated as of December 15, 1995, as amended (the "Credit Agreement"),
among the Company, the Banks, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent for the Banks (in such capacity, the "Agent").
The parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit
Agreement, as amended hereby, are used herein with the same meanings unless
otherwise specifically defined herein.
Section 2. Amendments to the Credit Agreement. The
Credit Agreement is hereby amended:
(a) To add certain defined terms to Section
1.01 thereof as follows:
"Adjusted Funded Debt" means at any
time for the Company and its Subsidiaries on
a consolidated basis, the sum, without
duplication, of long term debt and the
current portion of long term debt determined
in accordance with GAAP.
"Cash Flow Leverage Ratio" means for
any four fiscal quarter period for the
Company and its Subsidiaries on a
consolidated basis, the ratio of Adjusted
Funded Debt as at the end of such period to
EBITDA for such period.
"Contingent Acquisition Payments" means
for any period the total payments made during
such period by the Company or its
Subsidiaries in respect of Indebtedness
incurred by the Company or any of its
Subsidiaries in connection with Acquisitions,
where the amount of such payments have not
been theretofore accrued on the consolidated
financial statements of the Company and its
Subsidiaries.
"EBITDA" means for any period, the
Company's and its Subsidiaries' consolidated
income (loss) from continuing operations
before provision for income taxes plus, to
the extent deducted in determining such
income, interest expense and depreciation and
F-87
<PAGE> 2
amortization with respect to such period.
"Level I Period" means a period
commencing five days after the Agent has
received a Compliance Certificate pursuant to
Section 7.02(a) which shows a Cash Flow
Leverage Ratio of less than 1.50 to 1.00 and
continuing until the earlier of (A) five days
after the next such Compliance Certificate is
received by the Agent and (B) five days after
the next such Compliance Certificate and
accompanying financial statements are
required to be delivered to the Agent under
Sections 7.01(a) or (b) (as applicable) and
7.02(a).
"Level II Period" means a period (i)
commencing five days after the Agent has
received a Compliance Certificate pursuant to
Section 7.02(a) which shows a Cash Flow
Leverage Ratio of less than 2.00 to 1.00 and
continuing until the earlier of (A) five days
after the next such Compliance Certificate is
received by the Agent and (B) five days after
the next such Compliance Certificate and
accompanying financial statements are
required to be delivered to the Agent under
Sections 7.01(a) or (b) (as applicable) and
7.02(a) and (ii) which is not a Level I
Period.
"Level III Period" means a period (i)
commencing five days after the Agent has
received a Compliance Certificate pursuant to
Section 7.02(a) which shows a Cash Flow
Leverage Ratio of less than 2.50 to 1.00 and
continuing until the earlier of (A) five days
after the next such Compliance Certificate is
received by the Agent and (B) five days after
the next such Compliance Certificate and
accompanying financial statements are
required to be delivered to the Agent under
Sections 7.01(a) or (b) (as applicable) and
7.02(a) and (ii) which is not a Level I
Period or a Level II Period.
"Level IV Period" means a period which
is not a Level I Period, a Level II Period,
or a Level III Period.
"Second Amendment Agreement" means the
Second Amendment Agreement, dated as of May
F-87a
<PAGE> 3
31, 1996, among the Company, the Banks, and
the Agent.
"Second Amendment Effective Date" means
the date on which the Second Amendment
Agreement became effective in accordance with
its terms.
(b) To amend and restate in their entirety
certain definitions set forth in Section 1.01 thereof as follows:
"Applicable Margin" means
(a) with respect to Base Rate
Loans, 0%;
(b) with respect to Offshore Rate
Loans other than Canadian BA Rate Loans:
(x) 0.325% for the period from the
date of this Agreement to the earlier of (A)
five days after the Compliance Certificate
required under Section 7.02(a) with respect
to the financial statements for the Company's
1996 fiscal year is received by the Agent and
(B) five days after the next such Compliance
Certificate and accompanying financial
statements are required to be delivered to
the Agent under Sections 7.01(a) and 7.02(a),
and
(y) for any other period: (i)
0.375% during any Level I Period, (ii)
0.500% during any Level II Period, (iii)
0.625% during any Level III Period, and (iv)
0.750% during any Level IV period; and
(c) with respect to Canadian BA Rate
Loans, 0.750%.
"Fixed Charge Coverage Ratio" means for
any four fiscal quarter period, on a
consolidated basis for the Company and its
Subsidiaries, the ratio of (a) EBITDA plus
total rental expense for operating leases
minus Contingent Acquisition Payments, plus
with respect to any four fiscal quarter
period which includes the third fiscal
quarter of the 1996 fiscal year, the
approximately $11,000,000 in pretax special
charges taken in such fiscal quarter, plus
with respect to any four fiscal quarter
period which includes the fourth fiscal
F-87b
<PAGE> 4
quarter of the 1996 fiscal year, the
approximately $11,500,000 in pretax special
charges taken in such fiscal quarter, to (b)
the sum of (i) cash taxes, (ii) cash interest
expense, (iii) total rental expense for
operating leases, (iv) current portion of
long term debt (as of the end of such period
and determined in accordance with GAAP), (v)
with respect to any four fiscal quarter
period which includes the third fiscal
quarter of the 1996 fiscal year, the
approximately $3,850,000 in related tax
effects in connection with the above
referenced special charges taken in such
fiscal quarter, and (vi) with respect to any
four fiscal quarter period which includes the
fourth fiscal quarter of the 1996 fiscal
year, the approximately $4,025,000 in related
tax effects in connection with the above
referenced special charges taken in such
fiscal quarter.
(c) To amend the definition of
"Indebtedness" set forth in Section 1.01 thereof by adding the following at the
end of such definition:
The amount of any Indebtedness shall be
deemed equal to the stated or determinable
amount thereof or, if not stated or if
indeterminable, the maximum reasonably
possible liability in respect thereof.
(d) To amend clause (b) of the
definition of "Offshore Rate" set forth in Section 1.01 thereof to insert the
reference "Page 3750" after the words "Telerate System."
(e) To amend and restate in its entirety the
first sentence of subsection (b) of Section 2.12 thereof as follows:
The Company shall pay to the Agent for the
account of each Bank a commitment fee on the
average daily unused portion of such Bank's
Commitment equal to (x) 0.110% for the period
from the date of this Agreement to the
earlier of (A) five days after the Compliance
Certificate required under Section 7.02(a)
with respect to the financial statements for
the Company's 1996 fiscal year is received by
the Agent and (B) five days after the next
such Compliance Certificate and accompanying
financial statements are required to be
delivered to the Agent under Sections 7.01(a)
F-87c
<PAGE> 5
and 7.02(a) and (y) for any other period: (i)
0.125% during any Level I Period, (ii) 0.175%
during any Level II Period, (iii) 0.200%
during any Level III Period, and (iv) 0.250%
during any Level IV period.
(f) To amend and restate in its entirety the
first sentence of subsection (b) of Section 3.08 thereof as follows:
The Company shall pay to the Agent a letter
of credit fee at the rate per annum equal to
the Applicable Margin for Offshore Rate Loans
(other than Canadian BA Rate Loans) on the
aggregate maximum amount available for
drawings under each Letter of Credit from
time to time, and such fee shall (i) commence
to accrue on the date of Issuance as to any
Letter of Credit other than Existing BofA
Letters of Credit and on the Closing Date as
to Existing BofA Letters of Credit, (ii) be
payable for the account of each of the Banks
ratably in proportion to its Pro Rata Share,
and (iii) be payable (A) as to each Letter of
Credit other than Existing BofA Letters of
Credit, in advance on the date of Issuance of
such Letter of Credit, with respect to the
period from the Issuance Date to the first
Quarterly Date thereafter, and quarterly in
advance on each Quarterly Date after the
Issuance Date so long as such Letter of
Credit is outstanding, and (B) as to each
Existing BofA Letter of Credit, in advance on
the Closing Date, with respect to the period
from the Closing Date to the first Quarterly
Date thereafter, and quarterly in advance on
each Quarterly Date after the Closing Date so
long as such Existing BofA Letter of Credit
is outstanding; provided that the minimum fee
in respect of any standby Letter of Credit
shall be $400.
(g) To amend and restate in its entirety
clause (e) of Section 8.05 thereof as follows:
(e) Indebtedness secured by Liens
permitted by subsection 8.01(i), (j), or (k)
in an aggregate amount outstanding not to
exceed for (i) any Material Subsidiary, 15%
of such Material Subsidiaries' total assets
on subconsolidated basis for such Material
Subsidiary and its Subsidiaries, (ii) the
Company on an unconsolidated basis, 15% of
F-87d
<PAGE> 6
the Company's unconsolidated total assets,
and (iii) the Company and its Subsidiaries on
a consolidated basis, 10% of consolidated
total assets;
(h) To amend and restate in its entirety
clause (g) of Section 8.05 thereof as follows:
(g) Indebtedness not exceeding 15%
of the total assets of Subsidiaries of the
Company which are not incorporated under the
laws of the United States or any political
subdivision thereof.
(i) To amend and restate in its entirety
Section 8.16 thereof as follows:
8.16 Leverage Ratio. The Company shall
not permit its Leverage Ratio to be greater
than 1.00 to 1.00 as at the end of any fiscal
quarter before February 28, 1998 or to be
greater than 0.85 to 1.00 as at the end of
any fiscal quarter ending on or after
February 28, 1998.
(j) To amend and restate in its entirety
Section 8.17 thereof as follows:
8.17 Fixed Charge Coverage Ratio. The
Company shall not permit its Fixed Charge
Coverage Ratio to be less than 1.20 to 1.00.
(k) To add a new Section 8.18 thereto as
follows:
8.18 Cash Flow Leverage Ratio. The
Company shall not permit its Cash Flow
Leverage Ratio to be greater than 3.00 to
1.00 as at the end of any fiscal quarter.
(l) To amend and restate in its entirety
schedule 2 to Exhibit C, the form of the Compliance Certificate, to be in the
form attached hereto.
Section 3. Effect. Except as specifically set forth
herein, this Agreement does not limit, modify, amend, waive, grant any consent
with respect to, or otherwise affect (a) any right, power or remedy of the
Agent or any Bank under the Credit Agreement or any other Loan Document, (b)
any provision of the Credit Agreement or any other Loan Documents all of which
shall remain in full force and effect and are hereby ratified and confirmed.
This Agreement does not entitle, or imply any consent or agreement to, any
further or future modification of, amendment
F-87e
<PAGE> 7
to, waiver of, or consent with respect to any provision of the Credit Agreement
or any other Loan Document.
Section 4. Limited Waiver. Banks hereby waive any
Events of Default under Sections 8.05(e) or 8.16 of the Credit Agreement
existing on the date of this Agreement resulting from Borrower's failure to
comply with such sections of the Credit Agreement only to the extent that such
Events of Default will not exist after giving effect to the amendments set
forth in Section 2 of this Agreement.
Section 5. Amendment Fees. Contemporaneously upon
the execution of this Agreement, the Company shall pay to the Agent for the
account of each Bank, an amendment fee (collectively, the "Amendment Fees")
equal to 0.125% of such Bank's Commitment. The fees payable pursuant to this
Section are fully earned and non-refundable when paid, without regard to
whether this Agreement becomes otherwise effective.
Section 6. Costs. The Company shall pay all fees,
costs, and expenses of any kind (including the reasonable fees and
disbursements of counsel and allocated costs for in-house legal services)
incurred by the Agent in connection with the negotiation, preparation, and
execution of this Agreement and the other documents contemplated hereby.
Section 7. Conditions of Effectiveness. This
Agreement shall become effective as of the date hereof when all of the
conditions set forth below are satisfied (or waived in accordance with the
provisions of this Credit Agreement), and the Agent gives notice of such
effectiveness as below provided:
(a) Counterparts of this Agreement. Receipt by the Agent
of counterparts hereof signed by the Company and the Majority Banks;
(b) Amendment Fee. Receipt by the Agent for the account
of the Banks of the Amendment Fees;
(c) Payment of Certain Amounts. Payment of all fees,
costs, and expenses specified in Section 6 of this Agreement (including the
fees, costs, and expenses of counsel to the Agent) incurred in connection with
the preparation, negotiation, and execution of this Agreement and the other
documents contemplated hereby;
(d) Officer's Certificate. Receipt by the Agent of a
certificate executed by a Responsible Officer confirming the accuracy of the
representations and warranties of Section 8 hereof; and
F-87f
<PAGE> 8
(e) Authorization Documents. Receipt by the Agent of a
resolution of the Company's Board of Directors authorizing the execution,
delivery, and performance of this Agreement, together with a certificate of the
Secretary or Assistant Secretary of the Company to the effect that such
resolution was duly adopted and remains in full force and effect, all in form
and substance satisfactory to the Agent;
provided that this Agreement shall not become effective or be binding on any
party hereto unless the foregoing conditions are satisfied or waived as above
provided no later than September 15, 1996. Promptly upon the occurrence
thereof, the Agent shall notify the Company and the Banks of the effectiveness
of this Agreement, and such notice shall be conclusive and binding as to the
occurrence thereof on all parties hereto.
Section 8. Representations and Warranties. The Company represents and
warrants to the Agent and each Bank that:
(a) The execution, delivery and performance by the Company
of this Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and require no action by or in
respect of, or filing with, any governmental body, agency or official, and the
execution, delivery and performance by the Company of this Agreement do not
contravene, or constitute a default under, any provision of applicable law or
regulations or of the certificate or articles of incorporation or the by-laws
of the Company or any of its Subsidiaries, or any other material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Company or any of its Subsidiaries or any assets of the Company or any of its
Subsidiaries.
(b) This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its respective terms, except as enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors' rights, and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(c) After giving effect to this Agreement, no Event of
Default or Default has occurred and is continuing, and after giving effect to
this Agreement, the representations and warranties of the Company contained
in the Credit Agreement and the other Loan Documents delivered pursuant thereto
are true and correct in all material respects as of the date hereof as if made
on the date hereof (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date).
F-87g
<PAGE> 9
Section 9. Counterparts; Facsimile Signatures. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original with the same effect as if all the signatures were on
the same instrument. Delivery of an executed counterpart of the signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of the signature page to this Agreement by telecopier
shall thereafter promptly deliver a manually executed counterpart of this
Agreement, but the failure to deliver such manually executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.
Section 10. Governing Law and Jurisdiction; Waiver of Jury Trial.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA AND IS SUBJECT TO THE PROVISIONS
OF SECTIONS 11.16 AND 11.17 OF THE CREDIT AGREEMENT, RELATING TO
GOVERNING LAW AND JURISDICTION AND WAIVER OF JURY TRIAL, THE PROVISIONS OF
WHICH ARE BY THIS REFERENCE HEREBY INCORPORATED HEREIN IN FULL.
F-87h
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered in San Francisco,
California, by their proper and duly authorized officers as of the day and year
first above written.
COMPANY: FRITZ COMPANIES, INC.
By /s/ Lynn C. Fritz
---------------------
Title: Chairman & C.E.O.
-----------------
By /s/ Frank M. Brown
----------------------
Title: Director of Treasury Services
-----------------------------
AGENT: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By /s/ Christine Cordi
-------------------
Title: Vice President
--------------
BANKS: BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By /s/ John S. Holmes
------------------
Title: Vice President
--------------
ABN AMRO BANK N.V.
SAN FRANCISCO INTERNATIONAL BRANCH
By ABN AMRO NORTH AMERICA, INC.
By /s/ Gina M. Brusatori
---------------------
Title: Vice President
--------------
By /s/ Dianne D. Waggoner
----------------------
Title: Group Vice President
--------------------
STANDARD CHARTERED BANK
By /s/ Mary Machado-Schammel
-------------------------
Title: Vice President
--------------
F-87i
<PAGE> 1
EXHIBIT 11.1
FRITZ COMPANIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
TWELVE MONTHS
TWELVE MONTHS FIVE MONTHS ENDED DECEMBER 31,
ENDED MAY 31, ENDED MAY 31, ------------------
1996 1995(a) 1994 1993
------------- ------------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY
Average common shares outstanding 34,239 32,876 30,392 29,026
Net effect of dilutive stock options
- based on the treasury stock method
using the average market price 1,508 0 1,160 1,064
------- ------- ------- -------
Total 35,747 32,876 31,552 30,090
======= ======= ======= =======
Net earnings (loss) $25,001 ($8,319) $30,133 $22,714
======= ======= ======= =======
Net earnings (loss) per common share $0.70 ($0.25) $0.96 $0.75
======= ======= ======= =======
FULLY DILUTED
Average common shares outstanding 34,239 32,876 30,392 29,026
Net effect of dilutive stock options
- based on the treasury stock method
using the year-end market price,
if higher than average market price 1,557 0 1,556 1,144
------- ------- ------- -------
Total 35,796 32,876 31,948 30,170
======= ======= ======= =======
Net earnings (loss) $25,001 ($8,319) $30,133 $22,714
======= ======= ======= =======
Net earnings (loss) per common share $0.70 ($0.25) $0.94 $0.75
======= ======= ======= =======
</TABLE>
(a) Stock options for five months ended May 31, 1995 are anti-dilutive.
F-88
<PAGE> 1
Exhibit 22.1
List of Principal
Subsidiaries
Domestic State of Incorporation
- - -------- ----------------------
FAF Domestic Air Freight Services California
FNC International, Inc. California
Fritz International Insurance Broker California
Fritz Transportation International California
Frontier Container Line, Inc. California
Arthur J. Fritz & Co. Delaware
Fritz Companies, Inc. Delaware
Frontier Freight Forwarders, Inc. Florida
Rex Air and Ocean Freight, Inc. Florida
Unlimited National, Inc. Illinois
Unlimited Warehousing, Inc. Illinois
Logistics Service (U.S.A.) Co. Inc. New Jersey
M.D.S. (Atlantic), Inc. New Jersey
Wall Shipping Co., Inc. New Jersey
Trans-Shoes Worldwide, Inc. New York
FCI Logistics, Inc. Oklahoma
Global Crating, Inc. Oklahoma
Air Compak International, Inc. Pennsylvania
Commerce Transport International, Inc. Texas
Fritz Air Freight, Inc. Texas
Fritz Export Packing, Inc. Texas
Intertrans Trading, Inc. Texas
TG International, Inc. Texas
Trucat International, Ltd. Texas
F-89
<PAGE> 2
<TABLE>
<CAPTION>
Europe Country of Incorporation
- - ------ ------------------------
<S> <C>
A. Freyman & Van Loo N.V. Belgium
Fritz Companies Belgium N.V. Belgium
IGS N.V. Belgium
Oy Nielsen Global Freight AB Finland
Air Compak International (France) S.A.R.L. France
Fritz Companies France S.A. France
Trace S.A. France
Fritz Companies (Deutschland) GMBH Germany
Fritz Companies (Ireland) Limited Ireland
Fritz Companies C.B. Ltd. Israel
Fritz Companies Israel T. Ltd. Israel
Fritz Companies (Italy) S.R.L. Italy
Globe Financial S.A. Luxembourg
Air Compak International (Netherlands) C.V. Netherlands
Airtex International B.V. Netherlands
Canne & Balwe B.V. Netherlands
FCI Holdings International B.V. Netherlands
Fritz Companies Nederlands B.V. Netherlands
Texcan International B.V. Netherlands
Fritz Companies (C.I.S.) Russia
Wal-Rus, Ltd. Russia
Intertrans Sweden AB Sweden
Jet Air AB Sweden
Jet Air Travel Service AB Sweden
Fritz Companies (Switzerland) AG Switzerland
Fritz International Transport Trade Ltd. Turkey
Fritz Companies Ukraina Ukraine
Air Compak International (U.K.) Ltd. United Kingdom
Forwardair, Ltd. United Kingdom
Freight Intertrans (U.K.) Ltd. United Kingdom
Fritz Companies (UK) Limited United Kingdom
</TABLE>
F-90
<PAGE> 3
Latin America and Canada Country of Incorporation
- - ------------------------- ------------------------
Fritz De Argentina S.A. Argentina
Laugus Cargo S.A. Argentina
Fritz Do Brasil Transportes Internacionais Ltda. Brazil
Fritz Trans-Shoes Agenciamento De Transportes
Nacionais E Internacionais, Ltda. Brazil
Rodo Export Transportes Nacionais E
Internacionais Ltda. Brazil
Air Compak International (Canada) Inc. Canada
Amstel Inc. Canada (Federal)
Denpha Customs Brokers Inc. Canada (Federal)
Fritz Companies Canada Inc. Canada (N.B.)
Starber Fritz Inc. Canada (Ontario)
Secomat Inc. Canada (Quebec)
Fritz Chile S.A. Chile
Fritz Internacional S.A. Costa Rica
Fritz De Santo Domingo S.A. Dominican Rep.
Transportadora Maritima De Carga S.A. Dominican Rep.
Fritz El Salvador S.A. de C.V. El Salvador
Fritz Guatemala S.A. Guatemala
FCI Companies De Mexico S.A. de C.V. Mexico
Fritz Companies de Mexico S.A. de C.V. Mexico
Trade and Service I.D.M. S.A. de C.V. Mexico
Fritz Companies (Panama) Inc. Panama
FTI Container Line Inc. Panama
Mirabel International Transport S.A. Panama
Fritz del Peru S.A. Peru
Fritz Companies Peru S.A. Peru
Fritz Companies Puerto Rico, Inc. Puerto Rico
Fritz Almacenes Generales C.A. Venezuela
Fritz Customs Brokers S.A. Venezuela
Fritz Venezuela S.A. Venezuela
F-91
<PAGE> 4
<TABLE>
<CAPTION>
ASIA COUNTRY OF INCORPORATION
- - ---- ------------------------
<S> <C>
Fritz Air Freight (Bangladesh) Ltd. Bangladesh
Fritz Ocean Freight (Bangladesh) Ltd. Bangladesh
Fritz Transportation International Ltd. Bangladesh
Amel Express Limited Hong Kong
Fritz Air Freight Beijing (H.K.) Limited Hong Kong
Fritz Air Freight (H.K.) Limited Hong Kong
Fritz Air Freight Shanghai (H.K.) Limited Hong Kong
Fritz China Services (H.K.) Limited Hong Kong
Fritz Companies India (H.K.) Ltd. Hong Kong
Fritz Transportation International (H.K.) Limited Hong Kong
Fritz Transportation International Xiamen (H.K.) Limited Hong Kong
Intertrans Cargo Services (H.K.) Ltd. Hong Kong
Intertrans Consulting Services Ltd. Hong Kong
J.F.T. Sea-Air Consolidation, Ltd. Hong Kong
Logistics Air Service Ltd. Hong Kong
Logistics Euro-Freight Ltd. Hong Kong
Logistics Far East Co. Ltd. Hong Kong
Logistics (Holdings) Ltd. Hong Kong
Logistics Services (H.K.) Co. Ltd. Hong Kong
Logistics Terminal Limited Hong Kong
United Great Shipping Ltd. Hong Kong
Fritz Freight Forwarding India Private Ltd. India
P.T. Fritz Ritra International Transportation Services Indonesia
Fritz Air Freight (Korea) Co. Ltd. Korea
Fritz Transportation International (Korea) Co. Ltd. Korea
FAF Forwarding SDN. BHD. Malaysia
FIT Forwarding SDN. BHD. Malaysia
FIT Logistics SDN. BHD. Malaysia
Fritz Logistics SDN. BHD. Malaysia
Fritz Transportation International (Malaysia) SDN. BHD. Malaysia
Fritz Air Freight Nepal (Private) Limited Nepal
Logistics Service (Tianjin) Co. Ltd. PRC
Shanghai Outer GAO QIAO Fritz Co., Ltd. PRC
FAF Airfreight Phils., Inc. Philippines
</TABLE>
F-92
<PAGE> 5
FTI (Philippines) Inc. Philippines
Philippine Logistics Services, Inc. Philippines
FAF-Fritz PTE Ltd. Singapore
Fritz Logistics (s) Pte. Ltd. Singapore
FTI-Fritz PTE Ltd. Singapore
Logistics Transport (s) Pte. Ltd. Singapore
Masters Airfreight Pte. Ltd. Singapore
Fritz Air Freight (Private) Limited Sri Lanka
Fritz Transportation International
(Private) Limited Sri Lanka
Union Transport (Private) Limited Sri Lanka
Fong Ching Airfreight Co. Ltd./
Fritz Air Freight (Taiwan) Co., Ltd. Taiwan
Fritz Transportation International (Taiwan) Co., Ltd. Taiwan
Logistics Service (Taiwan) Co. Ltd. Taiwan
FAF-Fritz (Thailand) Limited Thailand
Fritz Transportation International
(Thailand) Limited Thailand
F-93
<PAGE> 6
Other Country of Incorporation
- - ----- ------------------------
Air Compak International
(Australia) Pty. Ltd. Australia
AFA AirFreight Pty. Ltd. Australia
Arthur J. Fritz & Co. Pty. Ltd. Australia
Expediters Pty. Ltd. Australia
Fritz/Archer Joint Venture (unincorp.) Australia
Fritz-Fliway Pty. Ltd. Australia
Global Sky Express (Aust.) Pty. Ltd. Australia
Hargrave Edwards, Co. Pty. Ltd. Australia
Intertrans Australia Pty. Ltd. Australia
Mavin (Aust.) Pty. Ltd. Australia
QAFCO Pty. Ltd. Australia
Trade Management Australia Pty. Ltd. Australia
Fritz Companies South Africa
(Proprietary) Ltd. South Africa
F-94
<PAGE> 1
Exhibit 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and Stockholders
Fritz Companies, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-78482), (No. 33-57238), (No. 33-93070) and (No. 333-07639) on Forms S-8 of
Fritz Companies, Inc. of our report dated July 31, 1996, relating to the
consolidated balance sheets of Fritz Companies, Inc. and subsidiaries as of May
31, 1996 and 1995 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year ended May 31, 1996 and five
months ended May 31, 1995, and each of the years in the two-year period ended
December 31, 1994, and the related schedule, which report appears in the May 31,
1996 annual report on Form 10-K of Fritz Companies, Inc.
/s/ KPMG Peat Marwick LLP
- - -------------------------
San Francisco, California
August 26, 1996
F-95
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 86,461
<SECURITIES> 0
<RECEIVABLES> 404,148
<ALLOWANCES> 6,401
<INVENTORY> 0
<CURRENT-ASSETS> 519,944
<PP&E> 172,384
<DEPRECIATION> 60,985
<TOTAL-ASSETS> 733,462
<CURRENT-LIABILITIES> 408,177
<BONDS> 0
0
0
<COMMON> 349
<OTHER-SE> 230,398
<TOTAL-LIABILITY-AND-EQUITY> 733,462
<SALES> 0
<TOTAL-REVENUES> 1,043,858
<CGS> 0
<TOTAL-COSTS> 586,290
<OTHER-EXPENSES> 14,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,691
<INCOME-PRETAX> 38,463
<INCOME-TAX> 13,462
<INCOME-CONTINUING> 25,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,001
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
