PAGE 1
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 Commission file number 1-6798
December 31, 1993
Transamerica Finance Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-1077235
--------- -----------
(State or other jurisdication (I.R.S. Employer
of incorporation or organization) Identifcation No.)
1150 South Olive Street
Los Angeles, California 90015
------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 742-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------- -----------------------
8-1/2% Notes Maturing at Holder's Option
Annually on July 1 and due July 1, 2001 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YES__X__ NO__
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( ) Not Applicable
All of the outstanding shares of the registrant's capital stock
are owned by Transamerica Finance Group, Inc., which is wholly owned by
Transamerica Corporation.
Number of shares of common stock, $10 par value, outstanding as of
close of business on March 14, 1994: 1,464,285.
The registrant meets the conditions set forth in General
Instruction J(1)(a) and (b) of Form 10-K and is therefore filing this
form with the reduced disclosure format.
PAGE 2
(THIS PAGE INTENTIONALLY LEFT BLANK)
PAGE 3
PART I
ITEM 1. BUSINESS
THE COMPANY
Transamerica Finance Corporation, a wholly owned subsidiary of
Transamerica Finance Group, Inc. ("TFG") which is a wholly owned
subsidiary of Transamerica Corporation, is principally engaged in
consumer lending, commercial lending and leasing operations. Unless
the context indicates otherwise, the terms "Company" and "Registrant"
as used herein refer to Transamerica Finance Corporation and its
subsidiaries.
Transamerica Corporation (Transamerica) is a financial services
organization which engages through its subsidiaries in consumer
lending, commercial lending, leasing, real estate services, life
insurance and asset management. Transamerica was incorporated in
Delaware in 1928.
The Company was incorporated in Delaware in 1931 under the name
Pacific Finance Corporation, as successor to a California corporation
of the same name organized in 1920. In 1961, the Company became a
wholly owned subsidiary of Transamerica Corporation, which in 1990
formed TFG to own all the Company's outstanding capital stock.
On July 17, 1990, the Company acquired FIFSI, Inc. (dba NOVA
Financial Services), a consumer lending subsidiary of First Interstate
Bancorp, for $117,455,000 in cash and the assumption of $445,400,000 of
liabilities. The transaction was accounted for as a purchase and the
operations of NOVA Financial Services have been included in the
Consolidated Statement of Operations from the date of acquisition.
The Company provides funding for its subsidiaries' consumer lending,
commercial lending and leasing operations and for the operations of
certain wholly owned subsidiaries of TFG. Capital is allocated among
the operations based on their capital needs. The operations are
required to maintain prudent financial ratios consistent with other
companies in their respective industries. The Company's total notes
and loans payable were $7,031,503,000 at December 31, 1993 and
$6,589,576,000 at December 31, 1992. Variable rate debt was
$3,970,484,000 at December 31, 1993 and $3,492,842,000 at
December 31, 1992. The ratio of debt to debt plus equity was 83% at
December 31, 1993 and 82% at December 31, 1992.
Transamerica Finance Corporation offers publicly, from time to time,
senior or subordinated debt securities. Public debt issued totaled
approximately $407,000,000 in 1993, $538,700,000 in 1992 and
$1,107,800,000 in 1991. Under a shelf registration filed with the
Securities and Exchange Commission in 1991 to offer publicly up to
$1,500,000,000 of senior or subordinated debt securities with varying
terms, debt securities totaling $1,400,000,000 had been sold through
December 31, 1993. In addition, under a registration statement filed
in July 1993, the Company may offer up to $2,000,000,000 of senior or
subordinated debt securities (which may include medium-term notes,)
with varying terms, of which $1,853,000,000 remained unsold as of
December 31, 1993.
Liquidity is a characteristic of the Company's operations since the
majority of the assets consist of finance receivables. Principal cash
collections of finance receivables totaled $11,535,766,000 during 1993,
$9,415,231,000 during 1992 and $8,375,018,000 during 1991.
PAGE 4
CONSUMER LENDING
GENERAL
The Company's consumer lending services are provided by Transamerica
Financial Services, headquartered in Los Angeles, California, which has
561 branch lending offices. Branch offices are located in the United
States (548 in 41 states), Canada (11) and United Kingdom (2).
Transamerica Financial Services makes both real estate secured and
unsecured loans to individuals. The company's customers typically
borrow to consolidate debt, finance home remodeling, pay for their
children's college educations, make major purchases, take vacations,
and for other personal uses.
Transamerica Financial Services offers three principal loan products:
fixed rate real estate secured loans, revolving real estate secured
lines of credit and personal loans. The company's primary business is
making fixed rate, home equity loans that generally range up to
$200,000. Approximately 83% of the net finance receivables outstanding
at December 31, 1993 are secured by residential properties. Of
the Company's real estate portfolio, 50% is secured by first mortgages.
Since 1991, the company has continued to broaden its receivable
portfolio by expanding its revolving real estate secured lines of
credit, its unsecured personal loan business and its purchase of retail
finance contracts from dealers (i.e., appliances, furniture and
services).
When permitted by law, the consumer lending services offer to arrange
credit life and disability insurance in connection with consumer
instalment loans and generally require that property securing consumer
loans be insured. The consumer lending operation receives a fee if it
arranges such insurance. Credit life insurance satisfies the
obligation of the borrower in the event of death, while credit
disability insurance satisfies the borrower's obligation to pay
instalments during a period of disability. Property insurance insures
the collateral against damage or loss. Beginning in April 1991,
substantially all such insurance arranged for by the consumer lending
operation was underwritten by subsidiaries of the Company's commercial
lending operation.
<TABLE>
Consumer Finance Receivables
The following tables set forth the volume of consumer finance
receivables acquired during the years indicated and the amount of
consumer finance receivables outstanding at the end of each such year:
<CAPTION>
VOLUME OF CONSUMER FINANCE RECEIVABLES ACQUIRED
Years Ended December 31,
-------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Consumer instalment loans:
(1)(2)
Real estate secured(3) $1,039,39 $1,120,54 $1,308,94 $1,800,20 $1,283,53
4 9 1 4 8
65% 72% 81% 87% 86%
Other(4) 524,241 436,521 310,607 276,240 194,126
33% 28% 19% 13% 13%
--------- --------- --------- --------- ---------
1,563,635 1,557,070 1,619,548 2,076,444 1,477,664
98% 100% 100% 100% 99%
Other finance receivables(5) 29,181 4,843 5,310 5,773 7,694
2% 1%
--------- --------- --------- --------- ---------
Total $1,592,81 $1,561,91 $1,624,85 $2,082,21 $1,485,35
6 3 8 7 8
100% 100% 100% 100% 100%
========= ========= ========= ========= =========
<FN>
- -----------------
(1)Includes balances refinanced.
(2)Includes $491,236,000 in 1990 related to the purchase of NOVA Financial
Services (NOVA) on July 17, 1990 (real estate secured -$458,650,000; other
instalment loans - $32,586,000).
(3)Includes only loans which at inception were at least 50% secured by
residential real estate and which had an original advance over $10,000
($6,000 prior to July 1, 1992). The 1993 and 1992 decreases were mainly due
to sluggishness in the domestic economy and a weak real estate market,
particularly in California.
(4)The increase in 1990 includes unsecured loans to executives and
professionals related to the purchase of NOVA. Increases since 1990
reflect general expansion in the company's program of non-real estate
secured loans.
</TABLE>
PAGE 5
<TABLE>
(5)The increase in 1993 resulted from expansion into the retail finance
contract business, purchasing principally contracts on appliances,
furniture and services. The amounts for 1989 through 1992 principally
represented automobiles leased to affiliated companies.
----------------------
<CAPTION>
CONSUMER FINANCE RECEIVABLES OUTSTANDING
As of December 31,
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Consumer instalment loans:
Real Estate secured(1) $3,214,468 $3,267,479 $3,268,918 $2,962,674 $2,836,152
84% 87% 91% 91% 92%
Other(2) 595,284 482,819 334,304 291,248 229,218
15% 13% 9% 9% 8%
3,809,752 3,750,298 3,603,222 3,253,922 3,065,370
99% 100% 100% 100% 100%
Other finance receivables(3) 22,276 6,355 7,503 9,193 10,230
1%
3,832,028 3,756,653 3,610,725 3,263,115 3,075,600
100% 100% 100% 100% 100%
Less unearned finance charges
and insurance premiums 181,505 177,310 165,295 150,229 150,214
Total net finance receivables(4) $3,650,523 $3,579,343 $3,445,430 $3,112,886 $2,925,386
<FN>
- ------------
(1) See footnote 3 on preceding table.
(2) See footnote 4 on preceding table.
(3) See footnote 5 on preceding table.
(4) Outstandings shown above excludes accounts in foreclosure and assets held for sale.
Earned finance charges as a percentage of the average amount of net
finance receivables outstanding during each of the years 1989 through
1993 were 18.3%, 18.2%, 18.0%, 17.9% and 17.5%.
A summary of consumer instalment loan activity for the years
indicated is as follows:
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Volume by source:
New borrowers 45.5% 46.0% 38.4% 32.8% 32.2%
Former borrowers 15.6 10.5 8.2 8.4 9.0
Renewals:
Balances refinanced 19.6 21.9 27.4 29.1 27.2
Additions to renewed
balances 19.3 21.6 26.0 29.7 31.6
------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
Average size of loan made $11,561 $13,489 $16,756 $17,989 $18,582
including renewals
Outstanding at end of year:
Amount (in thousands) $3,809,752 $3,750,298 $3,603,222 $3,253,922 $3,065,370
Number 251,457 219,911 195,377 183,825 174,768
Average balance $ 15,151 $ 17,054 $ 18,442 $ 17,701 $ 17,540
</TABLE>
PAGE 6
<TABLE>
Delinquent Receivables
The following table shows the ratio of consumer finance receivables
which are contractually past due 60 days or more and 90 days or more to
finance receivables outstanding for each category and in total as of
the end of each of the years indicated:
<CAPTION>
As of December 31,
---------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Consumer instalment loans:
Real estate secured:(1)
60 days and over 1.86% 1.84% 1.73% 1.49% 1.21%
90 days and over 1.20 1.10 0.94 0.81 0.62
Other consumer instalment loans:
60 days and over 2.71 2.00 2.19 2.09 2.70
90 days and over 2.22 0.26 1.49 1.49 2.05
----- ----- ----- ----- -----
Total consumer instalment loan
60 days and over 1.99 1.86 1.77 1.54 1.32
90 days and over 1.36 0.99 0.99 0.87 0.72
----- ----- ----- ----- -----
Other finance receivables:
60 days and over 3.96 0.09 0.14
90 days and over 2.30 0.05 0.07
----- ----- ----- ----- -----
Total finance receivables:(2)(3)
60 days and over 2.00% 1.86% 1.76% 1.54% 1.32%
90 days and over 1.36% 0.99% 0.99% 0.87% 0.72%
===== ===== ===== ===== =====
<FN>
- ------------
(1) Includes only loans which at inception were at least 50% secured by residential
real estate and which had an original advance over $10,000 ($6,000 prior to July
1, 1992).
(2) The increasing delinquency through 1993 was principally due to the sluggishness
in the domestic economy and, in particular, the weakening in the California real
estate market.
(3) Delinquency statistics shown above exclude accounts in foreclosure and assets
held for sale.
</TABLE>
Nonearning Receivables
Nonearning consumer finance receivables, which are defined as those
past due more than 29 days, amounted to $156,542,000 and $140,763,000
at December 31, 1993 and 1992. Payments received on nonearning
receivables are applied to principal and interest according to the terms
of the loan; however, accrued interest receivable and amortization of
other finance charges are recognized in income only on accounts past due
less than 30 days. During 1993, the gross amount of interest income that
would have been recorded on receivables classified as nonearning at year
end was $25,496,000 and the amount of interest on those loans that was
recognized in income was $15,234,000.
Accounts in Foreclosure and Assets Held for Sale
Generally, by the time an account secured by residential real estate
becomes past due 90 days, foreclosure proceedings have begun, at which
time the account is moved from finance receivables to other assets and
is written down to the estimated realizable value of the collateral if
less than the account balance. After foreclosure, repossessed assets
are carried at the lower of cost or fair value less estimated selling
costs and are reclassified to assets held for sale. Accounts in
foreclosure and repossessed assets held for sale totaled $214,665,000
at December 31, 1993 compared to $176,054,000 at December 31, 1992.
The increase primarily reflects increased repossessions in California
and longer disposal times due to its weak real estate market.
PAGE 7
<TABLE>
Credit Loss Experience
Certain information regarding credit losses on finance receivables
for the consumer lending operation during the years indicated is set
forth in the following table:
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Provision for credit losses charged
to income $62,349 $47,985 $42,214 $35,617 $32,820
Credit losses (net of recoveries)(1) $60,653 $42,961 $32,986 $25,757 $25,214
Ratio to average net finance
receivables outstanding:
Consumer instalment loans:(2)
Real estate secured 1.35% 0.85% 0.78% 0.68% 0.74%
Other 3.43 4.25 3.12 2.22 2.68
----- ----- ----- ----- -----
Total consumer instalment
loans 1.67 1.22 1.00 0.80 0.91
Other finance receivables 0.35 0.11 0.25 (0.01) (0.13)
----- ----- ----- ----- -----
Total(2) 1.67% 1.22% 1.00% 0.79% 0.91%
===== ===== ===== ===== =====
Allowance for losses at end of
year(3)(4) $103,313 $101,195 $98,185 $88,535 $79,379
Ratio to net finance receivables
outstanding(5) 2.83% 2.83% 2.85% 2.85% 2.71%
<FN>
- -------------
(1) Credit losses increased $17,692,000 (41%) in 1993 due to increased losses on real
estate secured instalment loans of $14,915,000 (56%) and on non-real estate secured
receivables of $2,777,000 (17%). Credit losses increased $9,975,000 (30%) in 1992
due to increased losses on real estate secured instalment loans of $3,221,000 (14%)
and on non-real estate secured receivables of $6,754,000 (70%). Credit losses
increased $7,229,000 (28%) in 1991 due to increased losses on real estate secured
instalment loans of $3,201,000 (16%) and on non-real estate secured receivables of
$4,028,000 (71%). The increases since 1990 in credit losses on real estate secured
loans resulted mainly from the continuing weakening of the California real estate
market. The 1993, 1992 and 1991 increases in credit losses on non-real estate
secured loans was caused by growth in the related outstandings and sluggishness in
the domestic economy. With the adoption in the fourth quarter of 1992 of a required
new accounting rule, losses on the disposal of repossessed assets were classified as
operating expenses rather than as credit losses. Data for periods prior to the
fourth quarter of 1992 have not been reclassified.
(2) In the case of real estate secured loans, includes only loans which at inception were
at least 50% secured by residential real estate and which had an original advance
over $10,000 ($6,000 prior to July 1, 1992). The changes in ratios were due to
corresponding fluctuations in credit losses (see note 1 above).
(3) In connection with the acquisition of NOVA in 1990, the company established an
allowance for losses of $13,138,000 as of the date of purchase.
(4) In connection with the nonrecourse sale of receivables described in Note M of Notes
to Financial Statements, Item 8, $13,842,000 was transferred to Transamerica
Financial Services Finance Co. in 1990.
(5) The allowance for losses as a percentage of receivables outstanding at
December 31, 1990 was increased in response to the economic uncertainties due to the
decline in the U.S. economy and the resulting slowdown in the residential housing
market.
</TABLE>
PAGE 8
Offices and Employees
The number of offices and employees of the Company in connection with
its consumer lending operation as of the dates indicated were as
follows:
As of December 31,
-------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Offices 561 509 464 448 428
Employees 2,381 2,256 2,148 2,093 1,861
The following table sets forth the geographical distribution of the
Company's consumer lending offices at December 31, 1993:
No. of No. of
Offices Offices
------- -------
United States: United States:
Alabama 15 New Jersey 5
Arizona 20 New Mexico 6
California 174 New York 26
Colorado 9 North Carolina 12
Connecticut 2 Ohio 21
Delaware 2 Oklahoma 6
Florida 21 Oregon 10
Georgia 14 Pennsylvania 23
Hawaii 4 Rhode Island 1
Idaho 4 South Carolina 7
Illinois 29 Tennessee 7
Indiana 12 Texas 5
Iowa 6 Utah 4
Kansas 2 Virginia 10
Kentucky 8 Washington 22
Louisiana 8 Wisconsin 10
Maryland 9 Wyoming 1
Massachusetts 3 ---
Michigan 8
Minnesota 5 Canada 548
Mississippi 1 United Kingdom 11
Missouri 11 2
Nebraska 2 ---
Nevada 3
Total 561
===
Competition
The Company's consumer lending subsidiaries operate in a highly
competitive industry, in many cases competing with companies and
financial institutions with long established operating histories and
substantial financial resources.
Regulation
The Company's consumer lending operation is subject to various state
and federal laws. Depending upon the type of lending, these laws may
require licensing and certain disclosures and may limit the amounts,
terms and interest rates that may be offered.
PAGE 9
COMMERCIAL LENDING
General
The Company's commercial lending services are provided by
Transamerica Commercial Finance Corporation ("Transamerica Commercial
Finance"). Transamerica Commercial Finance operates from its executive
office in Chicago, Illinois, as well as from 72 branch lending offices.
Branch offices are located in the United States (47), Puerto Rico (15),
Canada (6) and Europe (4).
Transamerica Commercial Finance made a decision late in the fourth
quarter of 1991 to exit the rent-to-own finance business, reduce
lending to certain asset based lending lines, accelerate disposal of
repossessed assets and liquidate receivables remaining from previously
sold businesses. As a result of this action the commercial lending
operation recognized a special after tax charge of $130,000,000.
In conjunction with the decisions discussed above, Transamerica
Commercial Finance's operations were reorganized into two core business
units: inventory finance and business credit. The lending activities of
these core businesses are discussed below.
Inventory Finance
Inventory finance (also known as wholesale financing or floor plan
financing) consists principally of financing dealers' purchases from
distributors or manufacturers of goods for inventory. The products
financed primarily include boats and other recreational equipment,
television and stereo equipment, major appliances such as
refrigerators, washers, dryers and air conditioners, and manufactured
housing. Loan terms typically provide for repayment within 30 days
following sale of the inventory by the borrower. After initial review
of a borrower's credit worthiness, the ongoing management of credit
risk in this area may include various monitoring techniques, such as
periodic physical inventory checks and review of the borrower's sales,
as well as maintenance of repurchase agreements with manufacturers
which provides a degree of security in the event of slow moving or
obsolete inventory.
Business Credit
Business credit consists of secured loans, primarily revolving, to
manufacturers, distributors and selected service businesses, including
financial service companies. The loans are fully collateralized, with
credit lines typically from $5,000,000 to $25,000,000 and terms ranging
from three to five years. Actual borrowings are limited to specified
percentages of the borrower's inventory, receivables and other eligible
collateral which are regularly monitored to ascertain that outstandings
are within approved limits and that the borrower is otherwise in
compliance with the terms of the arrangement. The loans to financial
service companies are secured by their respective finance receivable
portfolios. The company manages its credit risk in this area by
monitoring the quality of the borrower's loan portfolio and compliance
with financial covenants.
Other
The "Other" category of receivables includes furniture and appliance
retail and finance operations in Puerto Rico and the liquidating
portfolios of businesses the company has exited. Transamerica
Commercial Finance also offers credit life and credit disability
insurance in connection with the financing activities of both the
consumer and commercial lending operations and to unrelated third party
lenders. The unrelated insurance accounted for substantially all of
the insurance subsidiaries' total premium volume in 1990, 64% in 1991,
45% in 1992 and 7% in 1993.
PAGE 10
Interest Rate Sensitivity
As a result of the relatively short-term nature of its financings,
Transamerica Commercial Finance is able to adjust its finance charges
rather quickly in response to competitive factors and changes in its
costs. However, the interest rates at which Transamerica Commercial
Finance borrows funds for its businesses generally move more quickly
than the rates at which it lends to customers. As a result, in rising
interest rate environments, margins are normally compressed until
interest rates restabilize. Conversely, in declining interest rate
environments, margins are generally enhanced.
Acquisitions and Divestitures
In March 1992, the commercial lending operation purchased for cash a
business credit portfolio consisting of twelve manufacturer/distributor
accounts with a net outstanding balance of $134,000,000. In September
1991, an inventory finance portfolio was purchased for cash, which
comprised lending arrangements with over 700 manufactured housing and
recreational product dealers with a net balance outstanding of
$290,604,000. These transactions were funded with short-term debt.
The commercial lending operation sold its automobile fleet leasing
operation in 1990 and its commercial leasing and wholesale automobile
financing operations in 1989. Finance receivables included in the
assets sold totaled $45,478,000 in 1990 and $534,734,000 in 1989. Also
in 1990, the insurance finance operations were dividended to TFG.
Commercial Finance Receivables
The following tables set forth the volume of commercial finance
receivables acquired during the years indicated and the amount of
commercial finance receivables outstanding at the end of each such
year:
<TABLE>
<CAPTION>
VOLUME OF COMMERCIAL FINANCE RECEIVABLES ACQUIRED
Years Ended December 31,
---------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Inventory $6,773,720 $6,225,899 $5,570,486 $6,029,587 $6,835,938
finance(1)
64% 72% 73% 64% 61%
Insurance 714,918 1,402,434
finance(2)
8% 12%
Business credit(3) 3,696,180 2,023,010 2,000,434 2,407,304 2,130,292
34% 23% 26% 26% 19%
----------- ----------- ----------- ----------- -----------
Core businesses 10,469,900 8,248,909 7,570,920 9,151,809 10,368,664
98% 95% 99% 98% 92%
Other(4) 170,705 427,909 84,139 194,338 907,468
2% 5% 1% 2% 8%
----------- ----------- ----------- ----------- -----------
Total $10,640,605 $8,676,818 $7,655,059 $9,346,147 $11,276,132
100% 100% 100% 100% 100%
=========== ========== ========== ========== ===========
Domestic $9,296,240 $7,177,063 $5,589,008 $6,852,181 $8,638,213
87% 83% 73% 73% 77%
Foreign(5) 1,344,365 1,499,755 2,066,051 2,493,966 2,637,919
13% 17% 27% 27% 23%
----------- ----------- ----------- ----------- -----------
Total $10,640,605 $8,676,818 $7,655,059 $9,346,147 $11,276,132
100% 100% 100% 100% 100%
=========== ========== ========== ========== ===========
<FN>
- -------------
(1) The 1993 increase reflects the overall improvement in the economy and increased sales
and marketing programs in the core business groups. The 1992 increase is due to
improved economic conditions. The decreases in 1991 and 1990 reflected the overall
weak economy and decline in consumer spending which supports the businesses for which
the company provides inventory financing. Includes $290,604,000 in 1991 related to the
purchase of lending arrangements with manufactured housing and recreational product
dealers.
</TABLE>
PAGE 11
<TABLE>
(2) 1990 includes amounts through July 2, 1990, the date the insurance finance
subsidiaries were dividended to TFG.
(3) The 1993 increase reflects the overall improvement in the economy and increased sales
and marketing programs in the core business groups. The volume increase in 1993 also
reflects a shift in focue from participating in loans to directly originating loans.
As a result, advances and collections have increased. 1992 includes $134,000,000
related to the purchase of a portfolio of manufacturer/distributor business credit
arrangements. The 1991 decrease is primarily attributable to the worsened economic
conditions that began in 1990 and which particularly affected the company's working
capital loan program for Canadian personal computer retail dealers. The company made a
decision late in the fourth quarter of 1991 to reduce lending to that class of
customers as part of its effort to focus on its core businesses.
(4) The 1992 increase mainly reflects additional borrowings by customers in certain asset
based lending lines, which were reclassified to the "other" category in 1991 (see note
3 on table below), prior to implementation or completion of work-out or liquidation
arrangements. The 1993 decrease is due to reduced receivable levels in liquidating
portfolios. The declines in 1991 and 1990 were due to the sale of the automobile fleet
leasing operation in 1990 and the sale of the commercial leasing and wholesale
automobile financing operations in 1989.
(5) The decrease in 1992 resulted primarily from the company's decision late in the fourth
quarter of 1991 to reduce lending to Canadian personal computer retail dealers.
<CAPTION>
COMMERCIAL FINANCE RECEIVABLES OUTSTANDING
As of December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Inventory finance(1) $1,959,757 $1,873,895 $1,928,670 $1,872,191 $2,240,453
74% 70% 71% 58% 52%
Insurance finance(2) 560,728
13%
Business credit(3)(4) 553,859 575,984 288,776 968,216 897,128
21% 22% 11% 30% 21%
----------- ----------- ----------- ----------- -----------
Core businesses 2,513,616 2,449,879 2,217,446 2,840,407 3,698,309
95% 92% 82% 88% 86%
Other(5) 127,687 208,866 481,272 403,647 613,152
5% 8% 18% 12% 14%
----------- ----------- ----------- ----------- -----------
2,641,303 2,658,745 2,698,718 3,244,054 4,311,461
100% 100% 100% 100% 100%
Less unearned finance
charges 40,856 55,212 67,737 87,075 146,006
----------- ----------- ----------- ----------- -----------
Total net finance
receivables(6) $2,600,447 $2,603,533 $2,630,981 $3,156,979 $4,165,455
========== ========== ========== ========== ==========
Domestic $2,247,851 $2,219,520 $2,095,642 $2,452,985 $3,372,280
86% 85% 80% 78% 81%
Foreign 352,596 384,013 535,339 703,994 793,175
14% 15% 20% 22% 19%
----------- ----------- ----------- ----------- -----------
Total net finance
receivables(6) $2,600,447 $2,603,533 $2,630,981 $3,156,979 $4,165,455
100% 100% 100% 100% 100%
========== ========== ========== ========== ==========
<FN>
- ---------------
(1) The 1993 increase was due to the increased volume, primarily in home and recreational
products. The 1992 decrease was mainly due to faster paying customers resulting from
implementation of stronger portfolio management procedures and efforts by certain
borrowers to decrease the time they hold inventory by using "just in time" delivery
arrangements.
(2) On July 2, 1990, the insurance finance operations were dividended to TFG.
(3) The company's decision to exit the rent-to-own finance business and reduce lending to
certain asset based lending lines (formerly included in business credit) resulted in
the reclassification at December 31, 1991 of net rent-to-own finance receivables
totaling $221,247,000 to assets held for sale, and the transfer of other receivables
totaling $206,931,000 from business credit to the "other" category set forth under
finance receivables outstanding. Prior year data has not been restated.
(4) The 1992 increase includes the purchase of a $134,000,000 manufacturer/distributor
business credit portfolio. The 1991 decrease was due principally to the reduction in
rent-to-own finance receivables resulting from the de-emphasis during the year,
repossession of rent-to-own stores, and the eventual decision to exit the business and
the decision to reduce lending to certain asset based lending lines (see note 3 above
regarding reclassification of receivables outstanding at December 31, 1991). The 1990
increase was due to increased financing of small consumer finance companies and
domestic personal computer retail stores.
(5) The 1993 and 1992 decreases primarily reflect the liquidation of receivables from
businesses being exited, including $18,403,000 and $87,406,000 of write offs. The
1991 increase was due to the reclassification of receivables to be liquidated
resulting from the company's decision to reduce lending to certain asset based lending
lines (see notes 3 and 4 above). The 1990 decline was due to the liquidation and sale
of receivables from businesses being exited (see note 4 on preceding table).
(6) Outstandings shown above exclude assets held for sale (see discussion on page 13).
</TABLE>
PAGE 12
Earned finance charges as a percentage of the average amount of net
finance receivables outstanding during each of the years 1989 through
1993 were 14.9%, 14.7%, 13.3%, 12.1% and 11.3%.
Delinquent Receivables
Effective in 1993, the policy used for determining delinquent
receivables was revised to provide greater consistency among the
company's receivable portfolios. It is management's view that the new
methodology provides a better and more meaningful assessment of the
condition of the portfolio. Delinquent receivables are now defined as
the instalment balance for inventory finance and business credit
receivables and the receivable balance for all other receivables over
60 days past due. Previously, delinquent receivables were generally
defined as financed inventory sold but unpaid 30 days or more, the
portion of business credit loans in excess of the approved lending
limit and all other receivable balances contractually past due 60 days
or more.
The following table shows the ratio of deliquent commercial finance
receivables to finance receivables outstanding for each category and in
total as of the end of each of the years indicated. Delinquency ratios
for 1992 and prior years have not been restated for the change in
policy outlined above.
As of December 31,
----------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ -----
Inventory finance(1) 0.13% 0.82% 1.31% 3.42% 2.95%
Insurance finance(2) 1.78
Business credit(1)(3) 0.21 0.88 10.34 2.35
------ ------ ------ ------ -----
Core businesses 0.10 0.68 1.25 5.78 2.63
Other(4) 19.14 22.42 25.84 12.79 9.54
------ ------ ------ ------ -----
Total(5) 1.02% 2.38% 5.64% 6.65% 3.61%
====== ====== ====== ====== ======
- ---------------
(1)The decreases in 1992 and 1991 reflect write offs of delinquent
accounts (and accounting reclassifications - see note 3 on
preceding table), implementation of stronger portfolio management
procedures and general improvement in the economy. Increased
delinquency in 1990 reflected the overall weak economy. This trend
began in 1989 when consumer spending, which supports these
businesses, began to decline. Particularly affected were the
marine industry (inventory finance), and the appliance and
furniture rental and Canadian computer markets (business credit).
(2)See note 2 on preceding table.
(3)The decline in 1991 was due principally to rent-to-own finance
receivables being reclassified to assets held for sale, and certain
finance receivables being reclassified to the "other" category.
These reclassifications resulted from the company's decision to
exit the rent-to-own finance business and reduce its lending to
certain asset based lending lines. Prior year data has not been
restated.
(4)Represents finance receivables retained from businesses sold or
exited which are being liquidated and receivables reclassified in
1991 due to the company's decision to reduce lending to certain
asset based lending lines (see note 3 on preceding table).
(5)Delinquency statistics exclude assets held for sale (see
discussion on page 13).
--------------------
Nonearning Receivables
Effective in 1993, the policy used for determining nonearning
receivables was revised to provide greater consistency among the
company's receivable portfolios. It is management's view that the new
methodology provides a better and more meaningful assessment of the
condition of the portfolio. Nonearning receivables are now defined as
balances from borrowers that are over 90 days delinquent or at such
earlier time as full collectibility becomes doubtful. Previously,
nonearning receivables were defined as balances from borrowers in
bankruptcy or litigation and other accounts for which full
collectibility was doubtful. Accrual of finance charges is suspended
on nonearning receivables until such time as past due amounts are
collected.
Nonearning receivables were $31,763,000 (1.20% of receivables
outstanding) and $90,919,000 (3.42% of receivables outstanding) at
December 31, 1993 and 1992; the 1992 data has not been restated. Those
amounts exclude nonearning rent-to-own finance receivables which have
been reclassified to assets held for sale (see page 13). During 1993,
the gross amount of interest income that would have been recorded on
receivables classified as nonearning at year end was $4,649,000 and the
amount of interest on those loans that was recognized in income was
$2,423,000.
PAGE 13
Assets Held for Sale
Assets held for sale at December 31, 1993 totaled $90,114,000, net of
a $156,985,000 valuation allowance and consisted of rent-to-own finance
receivables of $120,469,000, repossessed rent-to-own stores of
$107,227,000 and other repossessed assets of $19,403,000. Assets held
for sale at December 31, 1992 totaled $191,515,000, net of a
$121,549,000 valuation allowance, and comprised rent-to-own finance
receivables of $179,013,000, repossessed rent-to-own stores of
$103,418,000 and other repossessed assets of $30,633,000. At December
31, 1993, $27,489,000 of the rent-to-own finance receivables were
classified as both delinquent and nonearning. At December 31, 1992,
delinquent rent-to-own finance receivables were $15,397,000 and
nonearning rent-to-own finance receivables were $32,615,000.
Delinquent and nonearning receivables as of December 31, 1992 have not
be restated for the change in policies effective in 1993 as outlined
above.
Credit Loss Experience
Certain information regarding credit losses on finance receivables
for the commercial lending operation during the years indicated is set
forth in the following table:
[CAPTION]
<TABLE>
Years Ended December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
------- ------- ------- ------- -------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Provision for credit losses
charged to income(1) $31,793 $36,830 $245,190 $131,244 $51,078
Credit losses (net of
recoveries)(2) $42,710 $117,052 $172,614 $95,514 $69,917
Ratio to average net finance
receivables outstanding:
Inventory finance(3) 1.30% 1.56% 2.86% 2.64% 0.99%
Insurance finance(4) 0.71 0.22
Business credit(3) (0.02) 0.23 13.46 1.79 1.63
------- ------- ------- ------- -------
Core businesses 0.99 1.30 6.17 2.22 1.02
Other(5) 12.93 28.98 6.39 5.55 3.65
------- ------- ------- ------- -------
Total 1.64% 4.53% 6.19% 2.61% 1.55%
====== ====== ======= ====== ======
Allowance for losses at end
of year(1) $76,079 $87,169 $169,529 $99,402 $70,870
Ratio to outstandings less
unearned finance charges(6) 2.93% 3.35% 6.44% 3.15% 1.70%
====== ====== ======= ====== ======
<FN>
- ----------------
(1) The 1991 provision and allowance for losses at December 31, 1991
included $62,816,000 taken as part of the special charge
recognized from the company's decision to reduce lending to
certain asset based lending lines and to liquidate receivables
remaining from previously sold businesses. The increased
provision in 1991, excluding the special charge, and in 1990 were
in response to increased credit losses and higher than normal
delinquencies and nonearning receivables associated with the weak
U.S. and Canadian economies.
(2) In 1993 and 1992, charges to the allowance for losses on finance
receivables due to credit losses sustained decreased $74,342,000
(64%) and $55,562,000 (32%). These decreases were caused mainly
by decreases in delinquent and nonearning receivables resulting
from improved economic conditions, the reclassification of certain
receivables to assets held for sale and in 1992, implementation of
stronger portfolio management procedures. In 1991 and 1990,
credit losses increased $77,100,000 (81%) and $25,597,000 (37%)
principally as a result of the depressed appliance and furniture
rental and Canadian computer markets associated with the general
downturn in the U.S. and Canadian economies.
(3) The changes in ratios were due to corresponding fluctuations in
credit losses (see note 2 above).
(4) See note 2 on page 11.
(5) The increase in 1992 resulted mainly from the write-off of
delinquent and nonearning receivables that were reclassified to
the "other" category in 1991.
(6) The 1993 and 1992 reductions in the allowance for losses as a
percentage of receivables outstanding primarily was attributable
to the write off of delinquent and nonearning receivables in 1993
and 1992 and lower levels of delinquent and nonearning accounts in
the remaining portfolio at December 31, 1993 and 1992. In 1991,
the percentage was increased principally due to the company's
decision to reduce lending to certain asset based lending lines
and to liquidate receivables remaining from previously sold
businesses (see note 1 above). The 1990 increase was in response
to the weak U.S. and Canadian economies resulting in higher than
normal delinquencies and nonearning receivables.
</TABLE>
PAGE 14
Offices and Employees
The number of offices and employees of the Company in connection with
its commercial lending operation as of the dates indicated were as
follows:
As of December 31,
---------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Offices 72 108 130 152 231
Employees 1,899 1,993 2,114 2,292 3,011
The following table sets forth the geographical distribution of the
Company's commercial lending offices at December 31, 1993:
No. of No. of
Offices Offices
------- -------
United States: United States:
Alabama 1 South Dakota 1
California 3 Tennessee 2
Colorado 1 Texas 4
Florida 1 Virginia 1
Georgia 2 Wisconsin 2
Hawaii 1 ---
Illinois 10 47
Indiana 1 ---
Iowa 1 Puerto Rico 15
Kansas 1 ---
Minnesota 2 Canada:
Mississippi 1 Alberta 1
Missouri 1 British Columbia 1
New Hampshire 1 Ontario 3
New Jersey 2 Quebec 1
New York 3 ---
North Carolina 2 6
Ohio 1 ---
Oregon 1 Europe:
Pennsylvania 1 France 1
Netherlands 1
United Kingdom 2
---
4
---
Total 7
2
===
Competition
The Company's commercial lending subsidiaries operate in a highly
competitive industry, in many cases competing with companies with long
established operating histories and substantial financial resources.
Regulation
The Company's commercial lending operation is subject to various state
and federal laws. Depending upon the type of lending, these laws may
require licensing and certain disclosures and may limit the amounts,
terms and interest rates that may be offered.
PAGE 15
LEASING OPERATION
General
Transamerica Leasing Inc. ("Transamerica Leasing") leases, services and
manages containers, chassis and trailers around the world. The company
is based in Purchase, New York and maintains 386 offices, depots and
other facilities in 44 countries. The company specializes in intermodal
transportation equipment, which allows goods to travel by road, rail or
ship. The company's customers include railroads, steamship lines and
motor carriers.
At December 31, 1993, Transamerica Leasing's fleet consisted of
standard containers, refrigerated containers, domestic containers, tank
containers and chassis totaling 316,000 units which are owned or
managed, and leased from 347 depots worldwide, 36,500 rail trailers
leased to all major United States railroads and to roll on/roll off
steamship operators, shippers, shippers' agents and regional truckers,
and 3,800 over-the-road trailers in Europe. Transamerica Leasing began
leasing tank containers for carrying bulk liquids in 1990 and had 1,900
tank containers in its fleet at December 31, 1993.
In November 1992, the company sold its domestic over-the-road trailer
business. Proceeds from the sale totaled $191,000,000 and resulted in
no gain or loss.
Approximately 49% of the standard container, refrigerated container,
domestic container, tank container and chassis fleet is on term lease or
service contract minimum lease for periods of one to five years. Also,
34% of the rail trailer fleet is on term lease or service contract
minimum lease for periods of one to five years.
The following table sets forth Transamerica Leasing's fleet size in
units as of the end of each of the years indicated:
As of December 31,
---------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Containers and 316,000 280,000 255,100 244,400 235,900
chassis
Rail trailers 36,500 34,400 36,800 40,500 43,300
European trailers 3,800 2,900 1,700 800
The following table sets forth Transamerica Leasing's fleet utilization
for the years indicated:
Years Ended December 31,
--------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Containers and chassis 83% 85% 89% 90% 93%
Rail trailers 91% 84% 75% 79% 83%
European trailers 89% 84% 83% 81%
The 1993 container and chassis utilization decline was due to slow
economic growth in key European economies and Japan; the 1992 decline
was due to higher than expected industry-wide supply of equipment. The
1991 and 1990 reductions resulted from a small decline in the rate of
growth of world trade and a less favorable geographic balance of
business. The rail trailer utilization increased in 1993 and 1992 due
to a smaller industry fleet, higher domestic economic activity and
because many shippers are moving from trucks to rail transport for long-
haul shipments; the 1991 and 1990 declines were due to reduced domestic
economic activity.
Revenues of the domestic leasing operation derived from foreign
customers were $210,301,000 in 1993, $176,172,000 in 1992 and
$137,127,000 in 1991, of which European customers accounted for 41%, 42%
and 40%. Revenues of foreign-domiciled leasing operations were less
than 10% of the consolidated total in each of the three years in the
period ended December 31, 1993.
PAGE 16
Offices and Employees
The number of offices, depots and other facilities, and employees of
the Company in connection with its leasing operation as of the dates
indicated were as follows:
As of December 31,
------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Offices, depots and
other facilities 386 386 301 306 322
Employees 765 796 946 1,026 1,055
Competition
Transamerica Leasing operates in a highly competitive industry, in many
cases competing with companies with long established operating histories
and substantial financial resources.
Subsequent Event
On March 15, 1994, the Company completed the purchase of substantially
all of the assets of the container rental division of Tiphook plc for
approximately $1,100,000,000 in cash.
BORROWING OPERATIONS
Funds employed in the Company's operations are obtained from invested
capital, retained earnings and the sale of short and long-term debt.
Capitalization of the Company as of the dates indicated was as follows:
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Debt:
Unsubordinated debt:
Commercial paper and
other short-term debt $1,164,893 $14,766 $14,079
14%
Long-term notes and 5,170,485 $6,032,531 $5,920,108 5,535,239 5,952,933
debentures
61% 75% 75% 73% 73%
---------- ---------- ---------- ---------- ----------
6,335,378 6,032,531 5,920,108 5,550,005 5,967,012
75% 75% 75% 73% 73%
Subordinated debt 696,125 557,045 627,698 687,092 673,880
8% 7% 8% 9% 8%
---------- ---------- ---------- ---------- ----------
Total debt 7,031,503 6,589,576 6,547,806 6,237,097 6,640,892
83% 82% 83% 82% 81%
Total equity 1,449,621 1,428,936 1,360,051 1,382,872 1,493,056
17% 18% 17% 18% 19%
---------- ---------- ---------- ---------- ----------
Total $8,481,124 $8,018,512 $7,907,857 $7,619,969 $8,133,948
100% 100% 100% 100% 100%
========== ========== ========== ========== ==========
</TABLE>
Short-term borrowings before reclassification to long-term debt (see
Note G of Notes to Financial Statements, Item 8) are primarily in the
form of commercial paper notes issued by the Company. Such commercial
paper is continuously offered, with maturities not exceeding 270 days in
the U.S. and 365 days in Canada, at prevailing rates for major finance
companies. Bank loans are an additional source of short-term
borrowings. At December 31, 1993, $721,814,000 of bank credit lines were
available to the Company, $75,000,000 of which were also available to
Transamerica Corporation. At December 31, 1993, all borrowings under
these lines were made by the Company and amounted to $240,927,000. The
cost of short-term borrowings is directly related to prevailing rates of
interest in the money market; such rates are subject to fluctuation.
PAGE 17
Interest rates on borrowings during the years indicated were as
follows:
Years Ended December 31,
-----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Weighted average annual
interest rate during
year:(1)
Short-term borrowings 3.41% 3.93% 6.47% 8.23% 9.26%
Long-term borrowings 8.24% 8.71% 9.77% 9.23% 9.69%
Total borrowings 6.00% 6.87% 8.28% 9.22% 9.68%
(1) Excludes the cost of maintaining credit lines and the effect of
interest rates on borrowings denominated in foreign currencies.
Return on Assets and Equity
Certain information regarding the Company's consolidated return on
assets and equity, and certain other ratios, are set forth below:
Years Ended December 31,
----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Return on assets(1) 1.1% 1.9% (1.2)% 1.4% 2.1%
Return on equity(2) 6.9% 11.7% (7.6)% 8.2% 12.3%
Dividend payout ratio(3) 75.2% 55.7% N.A. 136.3% 64.8%
Equity to assets ratio(4) 16.2% 16.2% 16.2 % 16.7% 16.8%
(1) Net income divided by simple average total assets.
(2) Net income divided by simple average equity.
(3) Cash dividends declared (excluding cash dividends in connection
with corporate restructuring in 1990) divided by net income.
(4) Simple average equity divided by simple average total assets.
Ratio of Earnings to Fixed Charges
The following table sets forth the consolidated ratios of earnings to
fixed charges for the years indicated. The ratios are computed by
dividing income from continuing operations before income taxes,
extraordinary loss on early extinguishment of debt and cumulative effect
of change in accounting, and before fixed charges, by the fixed charges.
Fixed charges consist of interest and debt expense, and one-third of
rent expense (which approximates the interest factor).
Years Ended December 31,
--------------------------------------------
1993 1992 1991 1990 1989
Ratio of earnings 1.50 1.59 0.77 1.28 1.42
to fixed charges
Excluding the effect of the previously discussed special charge
($130,000,000 after tax) reported by the commercial lending operation,
the ratio of earnings to fixed charges would have been 1.14 for 1991.
ITEM 2. PROPERTIES
Transamerica Finance Corporation leases its principal executive offices
at 1150 South Olive Street, Los Angeles, California, from an affiliated
company under a lease expiring in November 1994 at an annual rental of
approximately $2,000,000. The Company and its subsidiaries have
noncancelable lease agreements expiring mainly through 1998. These
agreements are principally operating leases for facilities used in the
Company's operations.
PAGE 18
ITEM 3. LEGAL PROCEEDINGS
Various pending or threatened legal proceedings by or against the
Company or one or more of its subsidiaries involve tax matters, alleged
breaches of contract, torts, employment discrimination, violations of
antitrust laws and miscellaneous other causes of action arising in the
course of their businesses. Some of these proceedings involve claims
for punitive or treble damages in addition to other specific relief.
Based upon information presently available, and in light of legal and
other defenses and insurance coverage available to the Company and its
subsidiaries, contingent liabilities arising from threatened and pending
litigation, income taxes and other matters are not considered material
in relation to the consolidated financial position of the Company and
its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted in accordance with General Instruction J.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Not applicable. All of the outstanding shares of the Registrant's
capital stock are owned by Transamerica Finance Group, Inc., which is
wholly owned by Transamerica Corporation.
ITEM 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction J.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Omitted in accordance with General Instruction J. See "Management's
Discussion and Analysis of the Results of Operations" following the
Notes to Financial Statements (Item 8).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted as a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction J.
ITEM 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction J.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted in accordance with General Instruction J.
PAGE 19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction J.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) (1) and (2) The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) List of Exhibits:
EX-2 Assets Purchase Agreement dated as of February 13, 1994 between
Transamerica Container Acquisition Corporation and Tiphook plc and
certain of its affiliated companies.
EX-2.1 Amendment and Supplement to Asset Purchase Agreement dated as of
March 15, 1994 between Transamerica Container Acquisition Corporation
and the Container Rental Division of Tiphook plc.
EX-3(i).1 Transamerica Finance Corporation Restated Certificate of
Incorporation as filed with the Secretary of State of Delaware on
December 12, 1988 (incorporated by reference to Exhibit 3.1 to
Registrant's Form 10-K Annual Report (File No. 1-6798) for the
year ended December 31, 1988).
EX-3(i).2 Transamerica Finance Corporation Certificate of Amendment of
Certificate of Incorporation as filed with the Secretary of State
of Delaware on February 19, 1991 (incorporated by reference to
Exhibit 3.1a to Registrant's Form 10-K Annual Report (File No. 1-
6798) for the year ended December 31, 1990).
EX-3(ii) Transamerica Finance Corporation By-Laws, as amended, last
amendment - December 12, 1988 (incorporated by reference to
Exhibit 3.2 to Registrant's Form 10-K Annual Report (File No. 1-
6798) for the year ended December 31, 1988).
EX 4 Indenture dated as of November 1, 1987 between Registrant
and Harris Trust and Savings Bank, as Trustee (incorporated by
reference to Exhibit 4.2 to Registrant's Form 10-K Annual Report
(File No. 1-6798) for the year ended December 31, 1988).
EX-10.1 Lease dated October 31, 1984 between Transamerica Occidental
Life Insurance Company, as lessor, and Registrant, as lessee, and
Addendums thereto dated November 14, 1984 and November 7, 1989
(incorporated by reference to Exhibit 10.1 to Registrant's Form
10-K Annual Report (File No. 1-6798) for the year ended December
31, 1989).
EX-10.2 Loan Sales Agreement dated as of November 1, 1990 between
Transamerica Financial Services and Transamerica Financial
Services Finance Co. (incorporated by reference to Exhibit 10.2
to Registrant's Form 10-K Annual Report (File No. 1-6798) for the
year ended December 31, 1990).
EX-10.3.a Corporate Separateness Agreement dated as of December 17,
1990 between Transamerica Financial Services and Transamerica
Financial Services Finance Co. (incorporated by reference to
Exhibit 10.3.a to Registrant's Form 10-K Annual Report (File No.
1-6798) for the year ended December 31, 1990).
EX-10.3.b Corporate Separateness Agreement dated as of December 17,
1990 between Transamerica Finance Group, Inc. [subsequently
renamed Transamerica Finance Corporation] and Transamerica
Financial Services Finance Co. (incorporated by reference to
Exhibit 10.3.b. to Registrant's Form 10-K Annual Report (File No.
1-6798) for the year ended December 31, 1990).
PAGE 20
EX-10.4 Pooling and Servicing Agreement dated as of November 1, 1990
among Transamerica Financial Services, as servicer, Transamerica
Financial Services Finance Co., as seller, and The First National
Bank of Chicago, as Trustee (incorporated by reference to Exhibit
2 to Form 8-A Registration Statement re: TFG Home Loan Trust 1990-
1 dated March 26, 1991 - Registration No. 33-36431-01).
EX-10.5 Investment Agreement dated December 17, 1990 among
Transamerica Finance Group, Inc. [subsequently renamed
Transamerica Finance Corporation], Transamerica Financial
Services Finance Co., as seller, and The First National Bank of
Chicago, as Trustee (incorporated by reference to Exhibit 2 to
Form 8-A Registration Statement re: TFG Home Loan Trust 1990-1
dated March 26, 1991 - Registration No. 33-36431-01).
EX-10.6 Guaranty dated July 31, 1990 by Transamerica Finance Group,
Inc. [subsequently renamed Transamerica Finance Corporation], in
favor of Corporate Asset Funding Company, Inc. et. al. re:
certain obligations of Transamerica Insurance Finance
Corporation, California (incorporated by reference to Exhibit
10.6 to Registrant's Form 10-K Annual Report (File No. 1-6798)
for the year ended December 31, 1990).
EX-10.7 Guaranty dated July 31, 1990 by Transamerica Finance Group,
Inc. [subsequently renamed Transamerica Finance Corporation], in
favor of Corporate Asset Funding Company, Inc. et. al. re:
certain obligations of Transamerica Insurance Finance Corporation
(incorporated by reference to Exhibit 10.7 to Registrant's Form
10-K Annual Report (File No. 1-6798) for the year ended December
31, 1990).
EX-12 Computation of Ratio of Earnings to Fixed Charges.
EX-23 Consent of Ernst & Young to the incorporation by reference of
their report dated February 16, 1994 in the Registrant's
Registration Statements on Form S-3, File Nos. 33-40236 and 33-
49763.
Pursuant to the instructions as to exhibits, the registrant is not
filing certain instruments with respect to long-term debt since the
total amount of securities currently authorized under each of such
instruments does not exceed 10% of the total assets of the registrant
and its subsidiaries on a consolidated basis. The registrant hereby
agrees to furnish a copy of any such instrument to the Commission upon
request.
(b) Reports on Form 8-K filed in the fourth quarter of 1993:
A report on Form 8-K was filed on November 19, 1993 relating to the
proposed acquisition by the Registrant or one of its subsidiaries
of Tiphook plc, a London-based container, trailer, and rail
equipment lessor.
(c) Exhibits:
The response to this portion of Item 14 is submitted as a separate
section of this report.
(d) Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a separate
section of this report.
PAGE 21
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.
TRANSAMERICA FINANCE CORPORATION
(Registrant)
By RAYMOND A. GOLAN
(Raymond A. Golan,
Vice President and Controller)
Date: March 15, 1994
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 March 15, 1994.
Signature Title
Principal Executive Officer and Director:
RICHARD H. FINN Chief Executive Officer and Director
- ----------------------------
(Richard H. Finn)
Principal Financial Officer and Director:
Senior Vice President, Treasurer and
DAVID H. HAWKINS Director
- ----------------------------
(David H. Hawkins)
Principal Accounting Officer:
RAYMOND A. GOLAN
- ----------------------------
(Raymond A. Golan) Vice President and Controller
Directors:
- ----------------------------
(David R. Carpenter) Director
KENT L. COLWELL
- ----------------------------
(Kent L. Colwell) Director
EDGAR H. GRUBB
- ----------------------------
(Edgar H. Grubb) Director
FRANK C. HERRINGER
- ----------------------------
(Frank C. Herringer) Director
ROBERT R. LINDBERG
- ----------------------------
(Robert R. Lindberg) Director
ALLEN C. MIECH
- ----------------------------
(Allen C. Miech) Director
CHARLES E. TINGLEY
- ----------------------------
(Charles E. Tingley) Director
PAGE 22
(THIS PAGE INTENTIONALLY LEFT BLANK)
PAGE 23
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
Year Ended December 31, 1993
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
LOS ANGELES, CALIFORNIA
PAGE 24
(THIS PAGE INTENTIONALLY LEFT BLANK)
PAGE 25
FORM 10-K - ITEM 8, ITEM 14(a)(1) and (2)
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of Transamerica Finance
Corporation and subsidiaries, together with the report of the
independent auditors, are included in Item 8:
Report of Independent Auditors
Consolidated Balance Sheet -- December 31, 1993 and 1992
Consolidated Statement of Operations -- Years ended December 31,
1993, 1992 and 1991
Consolidated Statement of Cash Flows -- Years ended December 31,
1993, 1992 and 1991
Consolidated Statement of Shareholder's Equity -- Years ended
December 31, 1993, 1992 and 1991
Notes to Financial Statements
Management's Discussion and Analysis of the Results of Operations
-- Year ended December 31, 1993
Supplementary Financial Information -- Years ended December 31,
1993 and 1992
The following consolidated financial statement schedules of
Transamerica Finance Corporation and subsidiaries are included in
Item 14(d):
VIII - Valuation and Qualifying Accounts -- Years ended December
31, 1993, 1992 and 1991
IX - Short-Term Borrowings -- Years ended December 31, 1993,
1992 and 1991
X - Supplementary Income Statement Information -- Years ended
December 31, 1993, 1992 and 1991
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
PAGE 26
REPORT OF INDEPENDENT AUDITORS
Shareholder and
Board of Directors
Transamerica Finance Corporation
We have audited the accompanying consolidated balance sheet of
Transamerica Finance Corporation and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of operations,
cash flows, and shareholder's equity for each of the three years in
the period ended December 31, 1993. Our audits also included the
financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Transamerica Finance Corporation and subsidiaries at
December 31, 1993 and 1992, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note J to the consolidated financial statements,
effective January 1, 1991 the Company adopted Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
ERNST & YOUNG
Los Angeles, California
February 16, 1994, except for Note N, as to which the date
is March 15, 1994
PAGE 27
<TABLE>
<CAPTION>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except for share data)
December 31 1993 1992
---------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ $29,321 $ 60,495
Investments 110,078 97,702
Finance receivables, net of unearned finance
charges and insurance premiums:
Consumer lending 3,650,523 3,579,343
Commercial lending 2,600,447 2,603,533
---------- ----------
Net finance receivables 6,250,970 6,182,876
Less allowance for losses 179,392 188,364
---------- ----------
6,071,578 5,994,512
Property and equipment - less accumulated
depreciation of $605,548 in 1993 and
$570,015 in 1992:
Land, buildings and equipment 43,784 41,326
Equipment held for lease 1,306,458 1,062,116
Investments in and advances to affiliates 371,012 290,240
Goodwill, less accumulated amortization of
$98,252 in 1993 and $88,102 in 1992 372,368 384,598
Assets held for sale 386,300 405,256
Less valuation allowance 159,532 123,755
---------- ----------
226,768 281,501
Other assets 500,003 476,404
---------- ----------
$9,031,370 $8,688,894
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Debt:
Unsubordinated $6,335,378 $6,032,531
Subordinated 696,125 557,045
---------- ----------
Total debt 7,031,503 6,589,576
Accounts payable and other liabilities 483,939 585,328
Income taxes payable, of which $168,132 in
1993 and $140,489 in 1992 is deferred 66,307 85,054
Shareholder's equity:
Preferred stock - authorized, 250,000
shares without par value; none issued
Common stock - authorized, 2,500,000 shares
of $10 par value;issued and outstanding, 14,643 14,643
1,464,285 shares
Additional paid-in capital 1,356,533 1,352,618
Retained earnings 87,105 62,308
Net unrealized gain on marketable equity
securities 54
Foreign currency translation adjustments (8,660) (687)
---------- ----------
Total shareholder's equity 1,449,621 1,428,936
---------- ----------
$9,031,370 $8,688,894
========== ==========
See notes to financial statements.
</TABLE>
PAGE 28
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
Years Ended December 31 1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Finance charges $ 929,464 $ 946,687 $ 963,186
Leasing revenues 388,327 402,230 381,375
Servicing fees 942 1,795 3,203
Income from affiliates 18,021 21,248 29,524
Other 55,372 58,923 25,129
Total revenues 1,392,126 1,430,883 1,402,417
---------- ---------- ----------
EXPENSES
Interest and debt expense 414,556 459,518 514,230
Depreciation on equipment held for lease 102,538 98,789 91,138
Salaries and other operating expenses 512,652 504,037 492,019
Provision for losses on receivables 94,142 84,815 287,404
Provision for losses on assets held for sale 50,000 141,225
---------- ---------- ----------
Total expenses 1,173,888 1,147,159 1,526,016
---------- ---------- ----------
Income (loss) before income taxes,
extraordinary item and cumulative effect
of accounting change 218,238 283,724 (123,599)
Income taxes (benefit) 95,357 121,052 (30,088)
---------- ---------- ----------
Income (loss) before extraordinary item and
cumulative effect of accounting change 122,881 162,672 (93,511)
Extraordinary loss on early extinguishment
of debt, net of applicable income tax
benefit of $11,447 (23,084)
Cumulative effect of change in accounting
for post employment benefits other than (10,875)
pensions, net of applicable income tax
benefit of $5,602
---------- ---------- ----------
Net income (loss) $ 99,797 $ 162,672 $(104,386)
========== ========== ==========
See notes to financial statements.
</TABLE>
PAGE 29
<TABLE>
<CAPTION>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Years Ended December 31 1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $99,797 $162,672 $ (104,386)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization of goodwill 126,513 124,680 117,536
Provision for losses on receivables 94,142 84,815 287,404
Provision for losses on assets held for sale 50,000 141,225
Amortization of discount on long-term debt 30,419 49,681 51,317
Change in accounts payable and other (88,175)
liabilities (75,151) 20,292
Change in income taxes payable (18,747) 48,143 (52,721)
Extraordinary loss on early extinguishment
of debt 23,084
Cumulative effect of change in accounting for
post employment benefits other than pensions 10,875
Other 138,676 (139,953) (84,218)
----------- ----------- -----------
Net cash provided by operating activities 468,733 350,330 278,857
----------- ----------- -----------
INVESTING ACTIVITIES
Finance receivables originated or purchased (11,756,552) (9,714,701) (8,634,075)
Finance receivables collected or sold 11,535,766 9,415,231 8,375,018
Purchase of property and equipment (424,187) (349,305) (211,297)
Sales of property and equipment 55,760 44,708 25,589
Purchase of investments (35,953) (28,713) (116,329)
Sales or maturities of investments 23,523 25,766 131,253
Decrease (increase) in investments in and
advances to affiliates (80,772) 19,847 (77,768)
Sale of domestic over-the-road trailer business 191,000
Other (109,831) (1,238) 221
----------- ----------- ----------
Net cash used by investing activities (792,246) (397,405) (507,388)
----------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from debt financing 5,500,571 4,100,077 4,494,435
Payments of debt (5,112,147) (4,107,988) (4,235,043)
Capital contributions from parent company 3,915 103,955 5,251
Cash dividends paid (100,000) (74,600) (18,150)
----------- ----------- ----------
Net cash provided by financing activities 292,339 21,444 246,493
----------- ----------- ----------
Increase (decrease) in cash and cash (31,174) (25,631) 17,962
equivalents
Cash and cash equivalents at beginning of year 60,495 86,126 68,164
----------- ----------- ----------
Cash and cash equivalents at end of year $ 29,321 $ 60,495 $ 86,126
=========== =========== ==========
See notes to financial statements.
</TABLE>
PAGE 30
<TABLE>
<CAPTION>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(in thousands)
Net
Unrealized
Gain (Loss)
on Foreign
Additional Retained Marketable Currency
Capital Paid- Earnings Equity Translation
Stock In Capital (Deficit) Securities Adjustments
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 $ 14,643 $1,264,862 $ 94,622 $ 11 $ 8,734
Net loss (104,386)
Capital contribution from
parent company 105,251
Cash dividends declared. (21,450)
Other changes 417 (2,653)
--------- ---------- ---------- ---------- ----------
Balance at December 31, 1991 14,643 1,348,663 (9,764) 428 6,081
Net income 162,672
Capital contribution from
parent company 3,955
Cash dividends declared (90,600)
Other changes (374) (6,768)
Balance at December 31, 1992 14,643 1,352,618 62,308 54 (687)
Net income 99,797
Capital contribution from
parent company 3,915
Cash dividends declared (75,000)
Other changes (54) (7,973)
--------- ---------- ---------- ---------- ----------
Balance at December 31, 1993 $ 14,643 $1,356,533 $ 87,105 $ $ (8,660)
======== ========== ======== ========= =========
</TABLE>
See notes to financial statements.
PAGE 31
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(dollar amounts in thousands)
Note A - Significant Accounting Policies
Transamerica Finance Corporation (together with its consolidated
subsidiaries, the "Company") is principally engaged in consumer
lending, commercial lending and leasing operations. The Company is a
wholly owned subsidiary of Transamerica Finance Group, Inc., which is
a wholly owned subsidiary of Transamerica Corporation.
Certain amounts for prior years have been reclassified to conform
with the 1993 presentation.
The significant accounting policies followed by the Company and its
subsidiaries are:
Consolidation - The consolidated financial statements include the
accounts of Transamerica Finance Corporation and all its majority
owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. The Company's
nonvoting preferred stock ownership interest in the distributable
earnings of Transamerica Financial Services Finance Co. ("TFSFC"),
which is the Company's only significant non-majority owned investee,
is accounted for by the equity method after elimination of
intercompany transactions (see Note M.)
Cash and Cash Equivalents - Cash and cash equivalents include all
highly liquid investments with original maturities of three months or
less except for such securities held by the Company's credit
insurance subsidiaries which are included in investments.
Depreciation and Amortization - Property and equipment, which are
stated on the basis of cost, are depreciated by use of the straight-
line method over their estimated useful lives, which range from eight
to 15 years (with residual values of 10% to 20%) for equipment held
for lease, three to 10 years for administrative and service
equipment, and 20 years for buildings. Other intangible assets,
principally renewal, referral and other rights incident to businesses
acquired, are amortized over estimated future benefit periods ranging
from five to 25 years in proportion to estimated revenues. Goodwill
is amortized over 40 years.
Foreign Currency Translation - The net assets and operations of
foreign subsidiaries included in the consolidated financial
statements are attributable to Canadian and European operations. The
accounts of these subsidiaries have been converted at rates of
exchange in effect at year end as to balance sheet accounts and at
average rates for the year as to operations. The effect of changes in
exchange rates in translating foreign subsidiaries' financial
statements is accumulated in a separate component of shareholder's
equity. The effect of transaction gains and losses on the
Consolidated Statement of Operations is insignificant for all years
presented.
Transactions with Affiliates - In the normal course of operations,
the Company has various transactions with Transamerica Corporation
and certain of its other subsidiaries. In addition to the filing of
consolidated income tax returns and the transactions discussed in
Notes J and M, these transactions include computer and other
specialized services, various types of insurance coverage and pension
administration, the effects of which are insignificant for all years
presented.
PAGE 32
Finance Charges - Finance charges, including loan origination fees,
offset by direct loan origination costs, are generally recognized as
earned on an accrual basis under an effective yield method, except
that accrual of finance charges is suspended on accounts that become
past due in excess of 29 days in the case of consumer loans or 60
days for commercial loans. At December 31, 1993 and 1992, finance
receivables for which the accrual of finance charges was suspended
approximated $188,300 and $231,700. Charges collected in advance,
including renewal charges, on inventory finance receivables are taken
into income on a straight-line basis over the periods to which the
charges relate.
Allowance for Losses - The allowance for losses is maintained in an
amount sufficient to cover estimated uncollectible receivables. Such
estimates are based on percentages of net finance receivables
outstanding developed from historical credit loss experience and, if
appropriate, provision for deviation from historical averages,
supplemented in the case of commercial loans by specific reserves for
accounts known to be impaired. The allowance is provided through
charges against current income. Accounts are charged against the
allowance when they are deemed to be uncollectible. When foreclosure
proceedings are begun in the case of a real estate secured consumer
loan, the account is written down to the estimated realizable value
of the collateral if less than the account balance. After
foreclosure, repossessed assets are carried at the lower cost or fair
value less estimated selling costs and are reclassified to assets
held for sale. Additionally, accounts are generally charged against
the allowance when no payment has been received for six months for
consumer lending and when all avenues for repayment have been
exhausted for commercial lending.
Leasing Revenues - Leasing revenues include income from operating,
finance and sales-type leases. Operating lease income is recognized
on the straight-line method over the lease term. Finance lease
income, represented by the excess of the total lease receivable
(reduced by the amount attributable to contract maintenance) over the
net cost of the related equipment, is deferred and amortized over the
noncancelable term of the lease using an accelerated method which
provides a level rate of return on the outstanding lease contract
receivable. Dealer profit on sales-type leases, represented by the
excess of the total fair market value of the equipment over its cost
or carrying value, is recognized at the inception of the lease.
Unearned income is amortized over the term of the lease in the same
manner described above. Contract maintenance revenues are credited to
income on a straight-line basis over the term of the related leases.
Income Taxes - Taxable results of the Company's operations are
included in the consolidated federal and certain state income tax
returns filed by Transamerica Corporation, which by the terms of a
tax sharing agreement generally requires the Company to accrue and
settle income tax obligations as if it filed separate returns with
the applicable taxing authorities. The Company provides deferred
income taxes based on enacted rates in effect on the dates temporary
differences between the book and tax bases of assets and liabilities
reverse. In 1988, the Company adopted the liability method of
accounting for income taxes and the adoption of Financial Accounting
Standard No. 109, Accounting for Income Taxes, in 1992 had no effect
on the financial statements.
New Accounting Standards - In May 1993, the Financial Accounting
Standards Board issued a new standard on accounting for impairment of
loans which the Company must adopt by the first quarter of 1995. The
new standard requires that impaired loans be measured based on either
the fair value of the loan, if discernible, the present value of
expected cash flows discounted at the loan's effective interest rate
or the fair value of the collateral if the loan is collateral
dependent. When adopted, the new standard is not expected to have a
material effect on the consolidated financial statements of the
Company.
Also in May 1993, the Financial Accounting Standards Board issued a
new standard on accounting for certain investments in debt and equity
securities which the Company will adopt in the first quarter of 1994.
Under the new standard the Company will report at fair value its
investments in debt securities for which the Company does not have
the positive intent and ability to hold to maturity. Unrealized
gains and losses will be reported on an after tax basis in a separate
component of shareholder's equity.
PAGE 33
When adopted, the new standard is not expected to have a material
effect on the consolidated financial statements of the Company.
Note B - Investments
Investments are summarized as:
1993 1992
---- ----
Fixed maturities, at amortized cost (market
value: $103,035 $ 92,004
$111,621 in 1993 and $97,903 in1992)
Equity securities, at market value 765
(cost: $683 in 1992)
Short-term investments 7,043 4,933
-------- --------
Total $110,078 $ 97,702
Investments totaling $4,175 at December 31, 1993 and 1992 were on
deposit with various states to meet requirements of state insurance
and financial codes. In addition, various state insurance codes
require that the Company's credit insurance subsidiaries hold an
amount equal to their statutory unearned premium reserve ($36,069 and
$42,442 at December 31, 1993 and 1992) as cash or in suitable
investments for the protection of policyholders. Such assets are not
available for distribution until all liabilities on insurance
policies have been discharged.
There were no unrealized gains or losses on marketable equity
securities at December 31, 1993.
Note C - Concentration of Risk
During the normal conduct of its operations, the Company engages in
the extension of credit to homeowners, electronics and appliance
dealers, retail recreational product and computer stores, appliance
and furniture rental operations and others. The risk associated with
that credit is subject to economic, competitive and other influences.
While a substantial portion of the risk is diversified, certain
operations are concentrated in one industry or geographic area.
The Company's finance receivables at December 31, 1993 included
$3,046,579, net of unearned finance charges and insurance premiums,
of real estate secured loans, principally first and second mortgages
secured by residential properties, of which approximately 49% are
located in California. The commercial finance receivables portfolio
represents lending arrangements with over 120,000 customers. At
December 31, 1993, the portfolio included 11 customers with
individual balances in excess of $15,000. These accounts represented
9% of commercial gross finance receivables outstanding at
December 31, 1993.
PAGE 34
Note D - Finance Receivables
The carrying amounts and estimated fair values of the finance
receivable portfolio at December 31, 1993 and 1992 are as follows:
1993 1992
------------------------ ------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
--------- ----------- --------- --------
Fixed rate
receivables:
Consumer $3,547,210 $4,307,048 $3,478,148 $4,216,770
Commercial 134,040 132,662 144,881 143,927
Variable
rate receivables:
Commercial 2,390,328 2,390,328 2,371,483 2,371,483
---------- ---------- ---------- ----------
$6,071,578 $6,830,038 $5,994,512 $6,732,180
========== ========== ========== ==========
The estimated fair values of consumer finance receivables,
substantially all of which are fixed rate instalment loans
collateralized by residential real estate, and the fixed rate
commercial finance loans are based on the discounted value of the
future cash flows expected to be received using available secondary
market prices for securities backed by similar loans after adjustment
for differences in loan characteristics. In the absence of readily
available market prices, the expected future cash flows are
discounted at effective rates currently offered by the Company for
similar loans. For variable rate commercial loans, which comprise the
majority of the commercial loan portfolio, the carrying amount
represents a reasonable estimate of fair value.
Additional information pertaining to finance receivables outstanding
follows:
<TABLE>
<CAPTION>
Maximum
Original Term
Receivables (in months)
----------------- ------------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Consumer:
Consumer instalment loans:
Real estate secured $3,214,468 $3,267,479 180 180
Other 595,284 482,819 60 60
Other finance receivables 22,276 6,355 36 36
---------- ----------
3,832,028 3,756,653
Less unearned finance charges and 181,505 177,310
insurance premiums
---------- ----------
Net finance receivables 3,650,523 3,579,343
---------- ----------
Commercial:
Inventory finance 1,959,757 1,873,895 12 12
Business credit 553,859 575,984 60 60
---------- ----------
Core businesses 2,513,616 2,449,879
Other 127,687 208,866 180 180
---------- ----------
2,641,303 2,658,745
Less unearned finance charges 40,856 55,212
---------- ----------
Net finance receivables 2,600,447 2,603,533
---------- ----------
Total net finance receivables $6,250,970 $6,182,876
========== ==========
</TABLE>
PAGE 35
Contractual maturities of finance receivables outstanding, before
deduction of unearned finance charges and insurance premiums, at
December 31, 1993 are:
<TABLE>
<CAPTION>
Consumer % Commercial % Total %
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
1994 $ 562,579 14.7 $2,103,444 79.7 $2,666,023 41.2
1995 424,003 11.1 247,800 9.4 671,803 10.4
1996 384,416 10.0 217,930 8.3 602,346 9.3
1997 297,727 7.8 26,605 1.0 324,332 5.0
1998 237,582 6.2 43,183 1.6 280,765 4.3
Thereafter 1,925,721 50.2 2,341 1,928,062 29.8
---------- ------ ---------- ------ ---------- ------
Total $3,832,028 100.0 $2,641,303 100.0 $6,473,331 100.0
========== ===== ========== ===== ========== =====
</TABLE>
Experience of the Company has shown that a substantial majority of
the consumer finance receivables will be renewed or prepaid many
months prior to contractual maturity dates. Accordingly, the above
schedule is not to be regarded as a forecast of future cash
collections. For 1993 and 1992, the ratio for consumer finance
receivables of principal cash collections (excluding balances
refinanced) to average net finance receivables was 29% and 26%.
The commercial lending operation's business credit unit provides
revolving lines of credit, letters of credit and standby letters of
credit. At December 31, 1993 and 1992, borrowers' unused credit
availability under such arrangements totaled $533,781 and $416,200,
and the estimated amount the Company would have to pay another
financial institution to assume the possible future obligation to
fund them was $1,591 and $,2080.
Note E - Allowance for Losses
Changes in the allowance for losses on finance receivables are:
Consumer Commercial Total
--------- ----------- --------
Balance at January 1, 1991 $ 88,535 $ 99,402 $ 187,937
Provision charged to income 42,214 245,190 287,404
Receivables charged off (34,920) (177,083) (212,003)
Recoveries 1,934 4,469 6,403
Other 422 (2,449) (2,027)
--------- ---------- ----------
Balance at December 31, 1991 98,185 169,529 267,714
Provision charged to income 47,985 36,830 84,815
Receivables charged off (44,448) (122,974) (167,422)
Recoveries 1,487 5,922 7,409
Other (2,014) (2,138) (4,152)
--------- ---------- ----------
Balance at December 31, 1992 101,195 87,169 188,364
Provision charged to income 62,349 31,793 94,142
Receivables charged off (62,524) (51,832) (114,356)
Recoveries 1,871 9,122 10,993
Other 422 (173) 249
--------- ---------- ----------
Balance at December 31, 1993 $ 103,313 $ 76,079 $ 179,392
========= ========== ==========
PAGE 36
Note F - Commercial Lending Special Charges and Assets Held for Sale
The commercial lending operation made a decision late in the fourth
quarter of 1991 to exit the rent-to-own finance business, reduce
lending to certain asset based lending lines, accelerate disposal of
repossessed assets and liquidate receivables remaining from
previously sold businesses. As a result of this action, the
commercial lending operation recognized a special pretax charge of
$200,220 ($130,000 after tax). The $200,220 special charge comprised
$137,404 included in the provision for losses on assets held for sale
and $62,816 included in the provision for losses on receivables. The
$137,404 provision consisted of $117,304 for anticipated losses on
disposition of the assets, generally comprising rent-to-own finance
receivables and repossessed collateral, including rent-to-own stores,
and $20,100 for implementation costs. The 1991 provision for losses
on assets held for sale of $141,225 comprises the $137,404 portion of
the special charge referred to above plus an additional provision of
$3,821.
In 1993, an additional provision of $50,000,000 ($35,960 after tax)
was made to reduce the net carrying value of repossessed rent-to-own
stores to their estimated realizable value.
Assets held for sale are:
1993 1992
---- ----
Consumer:
Repossessed residential properties $137,455 $ 89,405
Other repossessed assets 1,746 2,787
-------- --------
139,201 92,192
Less valuation allowance 2,547 2,206
-------- --------
136,654 89,986
-------- --------
Commercial:
Rent-to-own finance receivables 120,469 179,013
Repossessed rent-to-own stores 107,227 103,418
Other repossessed assets 19,403 30,633
-------- --------
247,099 313,064
Less valuation allowance 156,985 121,549
-------- --------
90,114 191,515
-------- --------
Total $226,768 $281,501
======== ========
PAGE 37
Note G - Debt
Debt consists of:
1993 1992
----- -----
Unsubordinated
Short-term debt:
Commercial paper $3,585,249 $2,748,766
Other 84,644 64,342
---------- ----------
3,669,893 2,813,108
Less classified as long-term debt 2,505,000 2,813,108
---------- ----------
Total unsubordinated short-term debt 1,164,893 --
---------- ----------
Long-term debt:
Short-term debt supported by noncancelable
credit agreements 2,505,000 2,813,108
4.48% to 9.10% notes and debentures
due 1994 to 2002 2,323,110 2,673,847
Loans due to Transamerica Corporation and its
subsidiaries, at various interest rates,
maturing through 1994 67,491 101,376
Zero to 6.50% notes and debentures due 1994 to
2012 issued at a discount to yield 13.80% to
13.88%; with benefit from deferred taxes,
effective cost of 8.79% to 12.35%; maturity
value of $722,760 274,884 444,200
---------- ----------
Total unsubordinated long-term debt 5,170,485 6,032,531
---------- ----------
Total unsubordinated debt 6,335,378 6,032,531
---------- ----------
Subordinated
6.75% to 12.75% notes due 1994 to 2003 696,125 557,045
---------- ----------
Total debt $7,031,503 $6,589,576
========== ==========
The estimated fair value of debt, using rates currently available for
debt with similar terms and maturities, at December 31, 1993 and 1992
was $7,407,000 and $6,805,000.
In 1993, the Company redeemed $125,000 of deep discount long-term
debt with a book value of $90,710, which resulted in a $23,084
extraordinary loss, after related taxes of $11,447.
Commercial paper notes are issued for maturities up to 270 days in
the U.S. and 365 days in Canada. At December 31, 1993, $200,000 of
the outstanding commercial paper, which matured January 24, 1994, was
held by Transamerica Corporation. In support of its commercial paper
operations, bank credit lines aggregating $721,814 at December 31,
1993 were available to the Company, $75,000 of which were also
available to Transamerica Corporation. At December 31, 1993, all
borrowings under these lines were made by the Company and amounted to
$240,927, of which $156,283 is long-term.
In support of the short-term debt classified as long-term debt at
December 31, 1993, the Company has unsubordinated noncancelable
credit agreements totaling $3,433,000 with 55 banks, of which
$2,505,000 matures after one year. Fees are paid on the average
unused commitment.
The Company uses interest rate exchange agreements to hedge the
interest rate sensitivity of its outstanding indebtedness. Certain
of these agreements call for the payment of fixed rate interest by
the Company in return for the assumption by other contracting parties
of the variable rate cost. At December 31, 1993, such agreements
covering the notional amount of $214,400 at a weighted average fixed
interest rate of 8.25% expiring through 1999 and $840,000 of one year
agreements expiring in 1994 with an average interest rate of 3.78%
were outstanding. Additionally at December 31, 1993, exchange
agreements covering the notional amount of $216,000 expiring through
1997 were outstanding, in which the Company receives interest from
other contracting parties at a weighted average fixed interest rate
of 6.98% and pays interest at variable rates to those parties. While
the Company is exposed to credit risk in the event of nonperformance
by the other party, nonperformance is not anticipated due to the
credit rating of the counter parties. At December 31, 1993, the
interest rate exchange agreements are with banks rated A or better by
one or more of the major credit rating agencies.
PAGE 38
The estimated fair value of the interest rate exchange agreements,
determined on a net present value basis, at December 31, 1993 and
1992 was a negative $5,320 and $9,067. The fair value represents the
estimated amount that the Company would be required to pay to
terminate the exchange agreements, taking into account current
interest rates.
Long-term debt outstanding at December 31, 1993, other than the
$2,505,000 supported by noncancelable credit agreements, matures as
follows:
Unsubordinated Subordinated Total
-------------- ------------- ------------
1994 $ 900,056 $113,350 $1,013,406
1995 703,414 40,000 743,414
1996 469,813 79,195 549,008
1997 198,900 87,100 286,000
1998 196,005 235,480 431,485
Thereafter 197,297 141,000 338,297
---------- -------- -----------
$2,665,485 $696,125 $3,361,610*
========== ======== ===========
*Includes the accreted values at December 31, 1993 on original issue
discount debt and not the amount due at maturity.
Interest payments, net of amounts received from interest rate
exchange agreements, totaled $513,541 in 1993, $558,997 in 1992 and
$481,200 in 1991.
Note H - Dividend and Other Restrictions
Consolidated equity is restricted by the provisions of debt
agreements. At December 31, 1993, $180,127 was available for
dividends and other stock payments. Under certain circumstances, the
provisions of loan agreements and statutory requirements place
limitations on the amount of funds which can be remitted to the
Company by its consolidated subsidiaries. Of the net assets of the
Company's consolidated subsidiaries, as adjusted for intercompany
account balances, at December 31, 1993, $51,985 is so restricted.
Note I - Income Taxes
The provision for income taxes comprises:
1993 1992 1991
Current taxes:
Federal $41,544 $ 95,239 $ 13,606
State 15,427 18,391 20,368
Foreign 88 (14,637) 12,722
------- -------- --------
57,059 98,993 46,696
------- -------- --------
Deferred taxes
Federal 32,461 588 (53,963)
State 5,034 6,533 (8,443)
Foreign 803 14,938 (14,378)
------- -------- --------
38,298 22,059 (76,784)
------- -------- --------
Total income taxes (benefit) $95,357 $121,052 $(30,088)
======= ======== =========
PAGE 39
The difference between federal income taxes computed at the statutory
rate and the total provision for income taxes is:
1993 1992 1991
--------- -------- -------
Federal income taxes (benefit) at
statutory rate $76,967 $96,467 $(42,024)
State income taxes, net of federal
income tax benefit 13,986 16,449 7,953
Book and tax basis difference of
assets acquired 2,999 5,026 6,341
Settlement of disputed items (4,224)
Dividends from affiliates (663) (2,109)
Other 5,629 3,773 (249)
-------- -------- ---------
Total income taxes (benefit) $95,357 $121,052 $ (30,088)
======= ======== =========
Deferred tax liabilities (assets) are comprised of the following at
December 31:
1993 1992
---- ----
Depreciation $197,196 $190,462
Amortization of bond discount and interest 66,071 65,380
Direct finance and sales type leases 7,865 34,134
Insurance reserves and acquisition costs 9,698 7,785
Other 35,475 10,410
-------- --------
Gross deferred tax liabilities 316,305 308,171
-------- --------
Allowances for losses on finance
receivables and other assets (113,331) (104,221)
Post employment benefits other than pensions (8,166) (8,343)
Net operating loss and foreign tax
credit carryforwards (10,683) (33,263)
Other (15,993) (21,855)
-------- --------
Gross deferred tax assets (148,173) (167,682)
-------- --------
Net deferred tax liability $168,132 $140,489
======== ========
Pretax income (loss) from foreign operations totaled $4,236 in 1993,
$4,332 in 1992 and $(25,960) in 1991. Income tax payments totaled
$77,089 in 1993, $92,190 in 1992 and $27,802 in 1991.
Note J- Pension and Stock Savings Plans and Other Post Employment
Benefits
The Company participates in the Retirement Plan for Salaried
Employees of Transamerica Corporation and Affiliates (the pension
plan). The pension plan is a noncontributory defined benefit plan
covering substantially all employees. Pension benefits are based on
the employee's compensation during the highest paid 60 consecutive
months during the 120 months before retirement. Pension costs are
allocated to the Company based on the number of participants. The
Company also participates in the Transamerica Corporation Employee
Stock Savings Plan (the 401(k) plan). The 401(k) plan is a
contributory defined contribution plan covering eligible employees
who elect to participate. Currently, the Company matches 75 cents
for every dollar contributed up to six percent of eligible
compensation. The Company matching portion is always invested in
Transamerica Corporation common stock. Employees are 25% vested in
the matching contributions after three years, 50% vested after four
years and 100% vested after five years of service. The Company's
total costs for both the pension plan and the 401(k) plan were $9,163
in 1993, $7,913 in 1992 and $9,045 in 1991.
The Company also participates in various programs sponsored by
Transamerica Corporation that provide medical and certain other
benefits to eligible retirees. Effective January 1, 1991,
Transamerica Corporation and its subsidiaries elected early adoption
of FASB Statement No. 106 on accounting for post employment benefits
other than pensions. Adoption of the statement increased the
Company's loss before the cumulative effect of the accounting change
and net loss for the year ended December 31, 1991 by $377 and
$11,252.
PAGE 40
Note K - Commitments and Contingencies
The Company and its subsidiaries have noncancelable lease agreements
expiring mainly through 1998. These agreements are principally
operating leases for facilities used in the Company's operations.
Total rental expense amounted to $54,799 in 1993, $60,286 in 1992 and
$62,899 in 1991.
Contingent liabilities arising from litigation, income taxes and
other matters are not considered material in relation to the
consolidated financial position of the Company and its subsidiaries.
Note L - Business Segment Information
Business segment information is:
<TABLE>
<CAPTION>
Revenues Operating Profit (Loss)
-------------------------------- ----------------------------------
1993 1992 1991 1993 1992 1991
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consumer lending $651,218 $654,078 $621,998 $ 172,593 $ 181,676 $ 164,401
Commercial lending 333,297 356,275 384,902 (31,074) 25,536 (346,484)
Leasing 407,774 420,512 396,418 91,470 92,073 74,025
Other operations (163) 18 (901) 407 (1,370) (1,692)
---------- ---------- ---------- ---------- ---------- ----------
$1,392,126 $1,430,883 $1,402,417 233,396 297,915 (109,750)
========== ========== ==========
Corporate expense (15,158) (14,191) (13,849)
Income taxes (95,357) (121,052) 30,088
--------- --------- ----------
Income (loss) before extraordinary item and
cumulative effect of accounting change $ 122,881 $ 162,672 $ (93,511)
========= ========= ==========
<CAPTION>
Assets Liabilities
---------------------------------- ----------------------------------
1993 1992 1991 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consumer lending $3,985,720 $3,846,327 $3,639,346 $3,511,823 $3,402,670 $3,208,252
Commercial lending 3,461,316 3,513,760 3,647,369 2,836,763 2,882,617 3,004,206
Leasing 1,696,983 1,339,751 1,257,976 1,417,965 1,094,730 1,002,994
Other operations 143,321 110,386 65,964 67,731 1,271 5,399
Consolidation
adjustments (255,970) (121,330) (91,398) (252,533) (121,330) (61,645)
---------- ---------- ---------- ---------- ---------- ----------
Total $9,031,370 $8,688,894 $8,519,257 $7,581,749 $7,259,958 $7,159,206
========== ========= ========== ========== ========== ==========
<CAPTION>
Additions, at Cost,
to Property & Equipment Depreciation Expense
---------------------------------- -------------------------------
1993 1992 1991 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consumer lending $ 6,169 $ 5,316 $ 2,684 $ 3,525 $ 2,607 $ 2,296
Commercial lending 6,992 6,938 10,971 5,396 7,538 8,754
Leasing 411,026 337,051 197,642 105,852 102,805 93,965
Other operations 82 74 65
---------- ---------- ---------- ---------- ---------- ----------
Total $424,187 $349,305 $211,297 $114,855 $113,024 $105,080
========== ========= ========== ========== ========== ==========
</TABLE>
PAGE 41
Note M - Transactions With Affiliates
On November 1, 1990, the Company sold without recourse a pool of real
estate secured receivables to TFSFC for cash of $547,655 plus
interest of $9,661 to the closing date of December 17, 1990. The
purchase price, which represented the fair value of the receivables
sold, was based on an independent appraisal. For financial reporting
purposes, the intercompany gain on this sale has been deferred and is
being amortized to income as a component of the Company's equity in
the distributable earnings of TFSFC. TFSFC subsequently securitized
and sold to outside investors a $430,000 participation interest in
the receivable pool. The Company continues to service these
receivables for a fee. The Company has entered into an agreement
whereby it directs the investment of excess funds in the pool pending
their distribution and guarantees that such funds will be invested at
a certain minimum rate, currently 9.25%.
Investments in and advances to affiliates consist of the following at
December 31:
1993 1992
---- ----
Preferred stock of TFSFC $ 72,946 $ 82,665
Unamortized deferred gain on sale of (18,729) (31,571)
receivables to TFSFC
Unsecured receivable from BWAC Twelve, 308,858 238,595
Inc.
Unsecured receivable from Transamerica
HomeFirst, Inc. 7,937 551
-------- --------
$371,012 $290,240
======== ========
The receivables from BWAC Twelve, Inc. and Transamerica HomeFirst,
Inc. are payable on demand and bear interest at a rate that varies
based on the Company's average cost of borrowings. The weighted
average interest rate was 4.21% in 1993, 4.04% in 1992 and 7.18% in
1991. Under the terms of certain debt agreements, the Company may
maintain investments in and advances to affiliates up to $649,621 at
December 31, 1993.
Income from affiliates comprises the following for the years ended
December 31:
1993 1992 1991
---- ---- ----
Interest income $11,572 $13,486 $14,299
Servicing fees 833 861 866
Amortization of deferred gain and
equity in earnings of TFSFC 5,616 6,901 14,359
------- ------- -------
$18,021 $21,248 $29,524
======= ======= =======
Note N - Subsequent Event
On March 15, 1994, the Company completed the purchase of
substantially all of the assets of the container rental division
of Tiphook plc for approximately $1,100,000 in cash.
PAGE 42
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS
The following table sets forth revenues and income by line of
business for the periods indicated (in thousands):
Income (Loss) Before
Revenues Extraordinary Item
------------------ ---------------------
1993 1992 1993 1992
------- -------- ------- -------
Consumer lending $651,218 $654,078 $91,742 $99,210
Commercial lending 333,297 356,275 (12,775) 17,938
Leasing 407,774 420,512 53,641 58,068
Other operations (163) 18 1,931 (888)
Amortization of goodwill (11,658) (11,656)
---------- ---------- --------- ---------
Total $1,392,126 $1,430,883 $122,881 $162,672
========== ========== ======== ========
The following discussion should be read in conjunction with the
information presented under Item 1, Business.
Consumer Lending
Consumer lending income, before the amortization of goodwill,
in 1993 decreased $7,468,000 (8%) from 1992. The decrease was
principally due to increased operating expenses, an increased
provision for losses on receivables and lower revenues that more
than offset lower interest expense and a $5,269,000 benefit
included in operating expenses from a reversal of reserves
related to a 1990 sales of receivables to Transamerica Financial
Services Finance Co. which subsequently were securitized.
Revenues in 1993 decreased $2,860,000 (%) from 1992 principally
because of lower income from affiliates and servicing fees
related to the run off of the receivables that Transamerica
Financial Services Finance Co. securitized in 1990 and lower fees
due to reduced volume of real estate secured loans. Operating
expenses increased in 1993 mainly due to investments in new
branches and losses on the disposal of repossessed assets. With
the adoption in the fourth quarter of 1992 of a required new
accounting rule, losses on the disposal of repossessed assets,
which were $5,952,000 for 1993 and $3,021,000 in the fourth
quarter of 1992, were classified as operating expenses rather
than as credit losses. Data for periods prior to the fourth
quarter of 1992 have not been reclassified.
The provision for losses on receivables increased $14,364,000
(30%) in 1993 over 1992 due to increased credit losses. Credit
losses, net of recoveries, as a percentage of average consumer
finance receivables outstanding, net of unearned finance charges
and insurance premiums, were 1.67% in 1993 compared to 1.22% in
1992. Credit losses increased partly due to continued
sluggishness in the domestic economy and a weak California real
estate market.
Interest expense declined $24,449,000 (9%) in 1993 from 1992
due to a lower average interest rate which more than offset the
effect of higher borrowings due to increased average receivables
outstanding. Net consumer finance receivables outstanding
increased $71,180,000 (2%) in 1993.
Net consumer finance receivables at December 31, 1993 included
$3,046,579 of real estate secured loans, principally first and
second mortgages secured by residential properties, of which
approximately 49% are located in California. Company policy
generally limits the amount of cash advanced on any one loan,
plus any existing mortgage, to between 70% and 80% (depending on
location) of the appraised value of the mortgaged property, as
determined by qualified independent appraisers at the time of
PAGE 43
loan origination. Delinquent real estate secured loans, which
are defined as loans contractually past due 60 days or more,
totaled $59,767 (1.86% of total real estate secured loans
outstanding) at December 31, 1993 compared to $60,211,000 (1.84%
of total real estate secured loans outstanding) at December 31,
1992.
Management has established an allowance for losses equal to
2.83% of net consumer finance receivables outstanding at December
31, 1993 and 1992.
Generally, by the time an account secured by residential real
estate becomes past due 90 days, foreclosure proceedings have
begun, at which time the account is moved from finance
receivables to other assets and is written down to the estimated
realizable value of the collateral if less than the account
balance. After foreclosure, repossessed assets are carried at
the lower of cost or fair value less estimated selling costs and
are reclassified to assets held for sale. Accounts in
foreclosure and repossessed assets held for sale totaled
$214,665,000 at December 31, 1993 compared to $176,054,000 at
December 31, 1992. The increase primarily reflects increased
repossessions in California and longer disposal times due to its
weak real estate market.
Commercial Lending
Commercial lending results, before the amortization of goodwill
and a $23,084,000 after tax extraordinary loss on the early
extinguishment of $125,000,000 deep discount long-term debt in
1993, were a a loss of $12,775,000 for 1993 compared to income in
1992 of $17,938,000. The 1993 loss was due primarily to the
inclusion of a $50,000,000 ($35,960,000 after tax) provision to
reduce the net carrying value of repossessed rent-to-own stores
to their estimated realizable value. Information received during
the year from prospective buyers of the repossessed rent-to-own
stores held for sale indicated that the realizable value of the
business had declined below its carrying value.
The 1993 results also included an $8,799,000 after tax charge
for the restructuring of the commercial lending unit's
infrastructure, a $4,224,000 after tax provision for anticipated
legal and other costs associated with the runoff of the
liquidating portfolios and a $4,224,000 tax benefit from the
resolution of prior years' tax matters. Excluding the
aforementioned items, commercial lending income, before the
amortization of goodwill and the extraordinary loss on the early
extinguishment of debt, increased $14,046,000 (78%) in 1993 over
1992. This improvement was primarily due to lower operating
expenses, a lower provision for losses on receivables and
stronger margins brought about by the declining interest rate
environment. The interest rates at which commercial lending
borrows funds for its businesses have moved more quickly than the
rates at which it lends to its customers. As a result, margins
have been enhanced by the declining interest rate environment.
Revenues in 1993 decreased $22,978,000 (6%) from 1992 primarily
as a result of reduced yields attributable to the current low
interest rate environment.
Interest expense declined $25,459,000 (19%) in 1993 from 1992
as a result of lower average interest rates. Operating expenses
increased $14,127,000 (9%) during 1993 over 1992 due to the
restructuring charge and provision for anticipated legal and
other costs associated with the runoff of the liquidating
portfolios described above, aggregating $21,500,000, partially
offset by cost reduction efforts in the inventory finance and
business credit core businesses. The provision for losses on
receivables in 1993 was $5,037,000 (14%) less than in 1992
primarily due to lower credit losses. Credit losses, net of
recoveries, as a percentage of average commerical finance
receivables outstanding, net of unearned finance charges, were
1.64% in 1993 compared to 4.53% in 1992. Credit losses declined
in 1993 primarily due to lower losses in the liquidating
portfolios.
In March 1992, the commercial lending operation purchased for
cash a business credit portfolio consisting of twelve
manufacturer/distributor accounts with a net outstanding balance
of $134,000,000.
PAGE 44
Net commercial finance receivables outstanding decreased
$3,086,000 (%) from December 31, 1992. Growth in the inventory
finance portfolio was more than offset by a decline in the
liquidating and business credit portfolios. Management has
established an allowance for credit losses equal to 2.93% of net
commercial finance receivables outstanding as of December 31,
1993 compared to 3.35% at December 31, 1992.
Effective in 1993, the policies used for the determination of
delinquent and nonearning receivables have been revised to
provide greater consistency among the company's receivable
portfolios. It is management's view that the new methodology
provides a better and more meaningful assessment of the condition
of the portfolio. Delinquent receivables, which were generally
defined as financed inventory sold but unpaid 30 days or more,
the portion of business credit loans in excess of the approved
lending limit and all other receivable balances contractually
past due 60 days or more, are now defined as the instalment
balance for inventory finance and business credit receivables and
the receivable balance for all other receivables over 60 days
past due. Nonearning receivables, which were defined as
receivables from borrowers in bankruptcy or litigation and other
accounts for which full collectibility was doubtful, are now
defined as receivables from borrowers that are over 90 days
delinquent or at such earlier time as full collectibility becomes
doubtful. At December 31, 1993, delinquent receivables were
$26,940,000 (1.02% of receivables outstanding) and nonearning
receivables were $31,763,000 (1.20% of receivables outstanding).
At December 31, 1992, delinquent receivables were $63,384,000
(2.38% of receivables outstanding) and nonearning receivables
were $90,919,000 (3.42% of receivables outstanding). Delinquency
and nonearning data as of December 31, 1992 has not been
restated.
Assets held for sale as of December 31, 1993 totaled
$90,114,000, net of a $156,985,000 valuation allowance, and
consisted of rent-to-own finance receivables of $120,469,000,
repossessed rent-to-own stores of $107,227,000 and other
repossessed assets of $19,403,000. Assets held for sale at
December 31, 1992 totaled $191,515,000, net of a $121,549,000
valuation allowance, and comprised rent-to-own finance
receivables of $179,013,000, repossessed rent-to-own stores of
$103,418,000 and other repossessed assets of $30,633,000. At
December 31, 1993, $27,489,000 of the rent-to-own finance
receivables were classified as both delinquent and nonearning.
At December 31, 1992, delinquent rent-to-own finance receivables
were $15,397,000 and nonearning rent-to-own finance receivables
were $32,615,000. Delinquency and nonearning data as of December
31, 1992 has not been restated.
Leasing
Leasing income, before the amortization of goodwill, decreased
$4,427,000 (8%) in 1993 due primarily to an additional tax
provision of $4,300,000 caused by the revaluation of deferred
income tax liability for the 1993 federal tax rate increase.
Excluding the additional tax provision, results for 1993 were
comparable to 1992 as higher fleet utilization and per diem rates
in the rail trailer business, a larger finance lease portfolio
and a larger fleet of refrigerated containers were offset by a
decline in standard container utilization.
In November 1992, the company sold its domestic over-the-road
trailer business. Proceeds from the sale totaled $191,000,000
and resulted in no gain or loss.
Revenues for 1993 decreased $12,738,000 (3%) from 1992. The
decline was mainly due to the sale of the domestic over-the-road
trailer business in November 1992 and a decline in standard
container utilization. The decrease was partially offset by
higher fleet utilization and per diem rates in the rail trailer
business, an increased finance lease portfolio, and a larger
fleet of standard containers, refrigerated containers and
European trailers.
PAGE 45
Expenses decreased $12,135,000 (4%) in 1993 from 1992 due to
the sale of the domestic over-the-road trailer business. The
decrease was partially offset by higher ownership cost due to a
larger fleet.
The combined utilization of standard containers, refrigerated
containers, domestic containers, tank containers and chassis
averaged 83% in 1993 compared to 85% in 1992. Rail trailer
utilization was 91% in 1993 compared to 84% in 1992. European
trailer utilization was 89% in 1993 compared to 84% in 1992.
The company's standard container, refrigerated container,
domestic container, tank container and chassis fleet of 316,000
units increased by 36,000 units (13%) in 1993. The rail trailer
fleet of 36,500 units increased by 2,100 units (6%) in 1993. At
December 31, 1993, the company also operated a fleet of 3,800
over-the-road trailers in Europe.
Other Operations
The other operations represent principally unallocated interest
expense and certain financing activities of Transamerica
Equipment Leasing Company, Inc. which are not related to the
leasing operations of Transamerica Leasing Inc. and are therefore
not combined with such operations.
PAGE 46
<TABLE>
<CAPTION>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY FINANCIAL INFORMATION
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands)
Year Ended
Three Months Ended December 31,
3/31/93 6/30/93 9/30/93 12/31/93 1993
------- ------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $339,347 $344,252 $350,187 $358,340 $1,392,126
======== ======== ======== ======== ==========
Income (loss) before
extraordinary item $40,053 $41,233 $(2,347) $43,942 $122,881
Extraordinary loss
on early (23,084) (23,084)
extinguishment of ------- ------- ------- ------- -------
debt
Net income (loss) $40,053 $41,233 $(2,347) $20,858 $99,797
======= ======= ======= ======== =======
Year Ended
Three Months Ended December 31,
3/31/92 6/30/92 9/30/92 12/31/92 1992
------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $346,905 $361,458 $357,698 $364,822 $1,430,883
======== ======== ======== ======== =========
Net income $34,813 $39,337 $42,689 $45,833 $162,672
======= ======= ======= ======= ========
<FN>
Note A. Certain amounts for the first three quarters of 1992
have been reclassified to conform with the presentation followed
in the fourth quarter of 1992.
Note B. The loss for the three months ended September 30, 1993
resulted primarily from after tax charges by the commerical
lending operation of $35,960,000 to reduce the net carrying value
of repossessed rent-to-own stores held for sale to their
estimated realizable value and $8,799,000 for the restructuring
of the unit's infrastructure.
</TABLE>
PAGE 47
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
Financial Statement Schedules
PAGE 48
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
COL A. COL. B COL C. COL D. COL E.
- ---------------------------------------------------------------------------------------------------
ADDITIONS
(1) (2)
Charged
Balance at Charged to to Other Balance at
Beginning of Costs and Accounts - Deductions- End
DESCRIPTION Period Expenses Describe Describe of Period
- ------------------------ ------------ ---------- --------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993:
Deducted from assets:
Allowance for losses:
Consumer:
Finance receivables $101,195 $62,349 $422 (B) $ 60,653 (C) $103,313
Assets held for sale 2,206 5,952 (A) 5,611 (D) 2,547
Commercial:
Finance receivables 87,169 31,793 (173) (E) 42,710 (C) 76,079
Assets held for sale 121,549 50,000 365 (F) 14,929 (D) 156,985
Year Ended December 31,
1992:
Deducted from assets:
Allowance for losses:
Consumer:
Finance receivables $98,185 $47,985 $(2,014) (E) $42,961 (C) $101,195
Assets held for sale 3,021 (A) 1,200 (G) 2,015 (D) 2,206
Commercial:
Finance receivables 169,529 36,830 (2,138) (E) 117,052 (C) 87,169
Assets held for sale 142,062 2,030 (F) 22,543 (D) 121,549
Year Ended December 31,
1991:
Deducted from assets:
Allowance for losses:
Consumer finance $88,535 $42,214 $422 (B) $32,986 (C) $98,185
receivables
Commercial:
Finance receivables 99,402 245,190 (2,449) (E) 172,614 (C) 169,529
Assets held for sale 121,125 (H) 20,937 (F) 142,062
<FN>
- --------------
(A)Provision charged to operating expenses for losses on disposal of repossessed assets.
(B)Increase in connection with purchase of receivables and other adjustments.
(C)Charges for net credit losses.
(D)Charges for losses on disposal of assets held for sale.
(E)Decrease in 1993 and 1992 was due to foreign exchange and other adjustments. The decrease
in 1991 was due to reclassification of valuation allowance on receivables reclassified to
assets held for sale of $(4,221,000); increase in connection with purchase of receivables
and foreign exchange and other adjustments of $1,772,000.
(F)Increase in 1993 and 1992 was due to recoveries on assets held for sale, and in 1991 the
increase was due to reclassification of valuation allowance on assets held for sale from
repossessed assets of $16,716,000 and from the allowance for losses on finance receivables
of $4,221,000.
(G)Reclassification of allowance for losses on accounts in process of foreclosure.
(H)Includes special charge of $117,304,000 plus an additional provision of $3,821,000 for
valuation allowance on assets held for sale.
</TABLE>
PAGE 49
<TABLE>
<CAPTION>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
COL A. COL. B COL. C COL. D COL. E COL. F
- -------------------------------------------------------------------------------------------------------
Maximum Average
Weighted Amount Amount Weighted
Balance at Average Outstanding Outstanding Average Interest
CATEGORY OF AGGREGATE End of Interest Rate During the During the Rate During the
SHORT-TERM BORROWINGS Period (D)(E) Period (F) Period (G) Period (D)(H)
- -------------------------- ---------- ------------ ----------- ----------- --------------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1993:
Commercial paper(A) $1,080,249 3.17% $1,080,249 $493,264 3.41%
Bank loans(B)(C) 84,644 84,644 57,598 3.56%
Year Ended December 31,
1992:
Commercial paper (A) $853 $79 4.21%
Bank loans (B)
Year Ended December 31,
1991:
Commercial paper (A) $38,560 $3,213 6.34%
Bank loans (B) 93,797 7,967
<FN>
- ------------------
(A) Commercial paper notes are issued for maturities up to 270 days in the United
States and 365 days in Canada. Commercial paper balances have been reclassified to
long-term debt to the extent of available noncancelable long-term lines of credit.
(B) Bank loans have been reclassified to long-term debt to the extent of available
noncancelable long-term lines of credit.
(C) All short-term bank loans outstanding were denominated in foreign currencies.
(D) Excludes interest rates on short-term borrowings denominated in foreign
currencies.
(E) Computed by dividing the annualized interest expense on the debt outstanding at
year end by the amount outstanding at year end.
(F) The maximum outstanding during 1993, 1992 and 1991 for combined commercial paper
and bank loans was $1,164,893,000, $853,000 and $132,357,000.
(G) Computed by dividing the total of the month-end balances outstanding by the number
of months in the year.
(H) Computed by dividing the actual interest expense by the average debt outstanding.
</TABLE>
PAGE 50
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
<CAPTION>
COL. A COL. B
- -------------------------------------------- -------------------------------------------
Charged to Costs and Expenses
ITEM Years Ended December 31,
----------------------------------------
1993 1992 1991
------- -------- -------
(in thousands)
<S> <C> <C> <C>
Amortization of intangible assets:
Amortization of goodwill $11,658 $11,656 $12,456
Amortization of other intangible assets 9,659 7,225 3,987
------- ------- -------
Total $21,317 $18,881 $16,443
======= ======= =======
Advertising costs $20,246 $17,768 $16,502
======= ======= =======
Maintenance and repairs $34,220 $49,193 $44,348
======= ======= =======
</TABLE>
EXHIBIT EX-2
Conformed copy of the
agreement signed in Brussels
ASSET PURCHASE AGREEMENT
among
Tiphook plc
Tiphook Container Rental Company Limited
TFS Equipment Leasing Limited
TFS Leasing Limited
Tiphook Financial Services Limited
Tiphook Container Rental Inc.
Tiphook Container Rental (Australasia) Ltd.
Tiphook Container Rental (South America) Ltda.
Tiphook Container Rental (Hong Kong) Ltd.
Tiphook Container Rental S.R.L.
Tiphook Container Rental (Singapore) pte. Ltd.
as Sellers,
and
Transamerica Container Acquisition Corporation,
as Purchaser,
dated as of
February 13, 1994
TABLE OF CONTENTS
Recitals...............................................
ARTICLE I PURCHASE AND SALE OF ASSETS AND
RELATED TRANSACTIONS...................
1.1. Definitions..............................
1.2. Purchase and Sale of Sale Assets.........
1.3. Assumption of Assumed Liabilities........
1.4. Consideration............................
1.5. Allocation of Consideration..............
1.6. Closing..................................
1.7. Tiphook Trademarks and Trade Names.......
1.8. Maintenance and Repair; DPP; Commission,
Storage and Handling Charges...........
1.9. Sellers' Receivables.....................
1.10. Impaired Containers......................
1.11. Title....................................
1.12. Further Assurances.......................
ARTICLE II RELATED MATTERS..........................
2.1. Full Access to Books and Records.........
2.2. Amendment of Exclusivity Letter..........
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE SELLERS............................
3.1. Corporate Organization, Etc..............
3.2. Authorization, Etc.......................
3.3. No Violation.............................
3.4. Interim Operations.......................
3.5. Title to Properties,
Encumbrances, Etc......................
3.6. Contracts and Leases; Commercial
Disputes...............................
3.7. Litigation...............................
3.8. Consents and Approvals of Government
Authorities............................
3.9. Consents.................................
3.10. Compliance with Law......................
3.11. Good Title Conveyed......................
3.12. Permits, Licenses, Etc...................
3.13. Collections..............................
3.14. Affiliate Transaction....................
3.15. Operating Leases.........................
3.16. Brokers and Finders......................
3.17. Insurance................................
3.18. Financial Information....................
3.19. Intellectual Property....................
3.20. Employees................................
3.21. Taxes....................................
3.22. Condition and Sufficiency of Sale
Assets.................................
3.23. Customer Relationships...................
3.24. Environmental Matters....................
3.25. Shareholder Circular.....................
3.26. Disclosure...............................
3.27. Statutory Restrictions...................
3.28. Operations Manuals.......................
3.29. Depot Agreements.........................
3.30. Sellers' Receivables.....................
3.31. Affiliate Transactions...................
3.32. Disposal Containers......................
3.33. Spacewise Units and Lessees..............
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER..........................
4.1. Corporate Organization...................
4.2. Authorization, Etc.......................
4.3. No Violation.............................
4.4. Consents and Approvals of Governmental
Authorities............................
4.5. Litigation...............................
4.6. Consents.................................
4.7. Sufficient Funds.........................
4.8. Brokers and Finders......................
ARTICLE V COVENANTS OF THE SELLERS.................
5.1. Full Access..............................
5.2 Consents.................................
5.3. Supplements to Sellers' Disclosure
Letter.................................
5.4. Covenant to Satisfy Conditions...........
5.5. Certificates.............................
5.6. HSR Act and Other Filings................
5.7. Shareholder Circular.....................
5.8. Shareholder Approval.....................
5.9. Mail Payments............................
5.10. Sellers' Receivables.....................
5.11. DPP Coverage.............................
5.12. Bondholder Consents......................
5.13. Certain Employee Matters.................
5.14. Contingency Insurance Policy.............
5.15. PAYE ....................................
5.16. Waiver of Certain Rights Among the.......
Sellers................................
5.17. Bank Agreement...........................
ARTICLE VI COVENANTS OF THE PURCHASER...............
6.1. Covenant to Satisfy Conditions...........
6.2. Certificates.............................
6.3. HSR Act Filings..........................
6.4. Consents.................................
6.5. Post-Closing Tax and Accounting
Matters................................
6.6. Employees................................
6.7. Capital Allowances.......................
6.8. Claims in Respect of Available Units.....
6.9. Overseas Properties......................
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF
THE SELLERS............................
7.1. Representations and Warranties True......
7.2. Performance..............................
7.3. No Injunction, Etc.......................
7.4. Certificates.............................
7.5. Opinion of the Purchaser's Counsel.......
7.6. Consents Obtained........................
7.7. Other Agreements.........................
7.8. Payment..................................
7.9. Shareholder Approval.....................
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF
THE PURCHASER..........................
8.1. Representations and Warranties True......
8.2. Performance..............................
8.3. No Governmental Proceeding or
Litigation.............................
8.4. No Injunction, Etc.......................
8.5. Certificates.............................
8.6. Material Change..........................
8.7. Opinion of the Sellers' Counsel..........
8.8. Consents Obtained........................
8.9. Other Instruments and Agreements.........
8.10. Shareholder Approval.....................
8.11. Litigation...............................
8.12. DPP Coverage.............................
8.13. Advisors' Letter.........................
ARTICLE IX CONDUCT OF THE BUSINESS PENDING THE
CLOSING................................
9.1. Regular Course of Business...............
9.2. Organization.............................
9.3. Clear Title..............................
9.4. Employees................................
9.5. Collection of Debts......................
ARTICLE X POST-CLOSING TRANSITION..................
10.1. Transitional Services Agreement..........
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION............
11.1. Survival of Representations and
Warranties.............................
11.2. Statements as to Representations.........
11.3. Agreement to Indemnify by the
Sellers................................
11.4. Notification Procedure...................
11.5. Indemnification Procedure................
11.6. Agreement to Indemnify by the
Purchaser..............................
11.7. Treatment of Indemnity Payments..........
11.8. Limitation on Recovery in Respect of
Shareholder Circular and Offer.........
11.9. Limitation on Recovery in Respect
of Location of Containers or Chassis ..
ARTICLE XII TERMINATION AND ABANDONMENT; CERTAIN
PAYMENTS...............................
12.1. Methods of Termination...................
12.2. Procedure Upon Termination; Effect
of Termination.........................
ARTICLE XIII MISCELLANEOUS PROVISIONS.................
13.1. Amendment and Modification...............
13.2. Waiver of Compliance.....................
13.3. Expenses; Transfer Taxes.................
13.4. Value Added Tax..........................
13.5. Notices..................................
13.6. Assignment...............................
13.7. Governing Law............................
13.8. Submission to Jurisdiction...............
13.9. Counterparts.............................
13.10. Headings.................................
13.11. Entire Agreement.........................
13.12. Third Parties............................
13.13. Bulk Transfers...........................
13.14. Joint and Several Liability; Non-Party
Sellers................................
13.15. Representative...........................
13.16. Invalidity...............................
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated February 13, 1994
among Tiphook plc, Tiphook Container Rental Company Limited,
TFS Equipment Leasing Limited, TFS Leasing Limited, Tiphook
Financial Services Limited, each a company incorporated under
the laws of England, Tiphook Container Rental Inc., a Delaware
corporation, Tiphook Container Rental (Australasia) Ltd., a
company incorporated under the laws of New Zealand, Tiphook
Container Rental (South America) Ltda., a company incorporated
under the laws of Brazil, Tiphook Container Rental (Hong Kong)
Ltd., a company incorporated under the laws of Hong Kong,
Tiphook Container Rental S.R.L., a company incorporated under
the laws of Italy, and Tiphook Container Rental (Singapore) pte
Ltd., a company incorporated under the laws of Singapore, as to
sellers, and Transamerica Container Acquisition Corporation, a
Delaware corporation, as purchaser (the "Purchaser") and, as to
Sections 4.1, 4.2, 4.3 and 4.7 hereof, Transamerica Finance
Corporation, a Delaware corporation.
This Agreement sets forth the terms and conditions
upon which Tiphook plc, Tiphook Container Rental Company Lim-
ited, TFS Equipment Leasing Limited, Tiphook Financial Services
Limited, TFS Leasing Limited, Tiphook Container Rental Inc. and
certain of their subsidiaries will sell assets of their con-
tainer business, including without limitation dry cargo and
tank containers, and tank chassis and related assets to the
Purchaser and/or other entities designated by the Purchaser and
the Purchaser and/or such other entities designated by it will
purchase assets and assume certain specified liabilities of
such sellers' container business, as hereinafter set forth.
As used in this Agreement, capitalized terms have the meanings
ascribed to them in Article I or as elsewhere defined in this
Agreement.
In consideration of the mutual agreements contained
herein, intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND RELATED TRANSACTIONS
SECTION 1.1. Definitions. For purposes of this
Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
"Adjustment Amount" is defined in Section 1.4(e) of
this Agreement.
"Adjustment Escrow Account" is defined in Section
1.4(b) of this Agreement.
"Affiliate" means with respect to any person, a per-
son that directly or indirectly through one or more intermedi-
aries, controls, or is controlled by, or is under common con-
trol with such specified person. "Control" for purposes of
this definition means the possession, direct or indirect, of
the power to direct or cause the direction of the management
and policies of a person, whether through share ownership, by
contract or otherwise.
"Agency Agreements" means the agreements between the
Sellers and their agents in respect of the arrangement of rent-
als of Containers and Chassis in effect as of a specified date.
Agency Agreements as of February 11, 1994 are listed in Subpart
B of Part XVII of Exhibit A.
"Agreed Form" means the form agreed between the par-
ties and initialed on their behalves by their respective coun-
sel.
"Ancillary Documents" means the agreements to be ex-
ecuted at the Closing in connection with this Agreement.
"Amadeus House Licence" means the Licence by which an
Affiliate of the Purchaser shall be given access to the com-
puter room at Amadeus House, 33-39 Elmfield Road, Bromley, in
the form attached to Part 3 of the Transitional Services Agree-
ment.
"Applicable Accounting Principles" means the account-
ing policies and principles described in Schedule A to this
Agreement agreed by the Purchaser and the Sellers as to be ap-
plied in connection with the preparation of the Estimated Clos-
ing Balance Sheet and the Final Closing Balance Sheet and the
Adjusted Net Assets Statements derived therefrom.
"Assignment and Assumption of Agency Agreements"
means the assignment and assumption of Agency Agreements in
effect as of the Closing Date substantially in the Agreed Form
and delivered by the Sellers and the Purchaser pursuant to Sec-
tion 1.6 of this Agreement.
"Assignment and Assumption of Depot Agreements" means
the assignment and assumption of Depot Agreements substantially
in the Agreed Form and delivered by the Sellers and the Pur-
chaser pursuant to Section 1.6 of this Agreement.
"Assignment and Assumption of Management Agreements"
means the assignment and assumption of the Management Agree-
ments substantially in the Agreed Form and delivered by the
Sellers, the Purchaser and the relevant parties to the Manage-
ment Agreements pursuant to Section 1.6 of this Agreement.
93
"Assignment and Assumption of Equipment Hire Agree-
ments" means the assignment and assumption of equipment hire
agreements listed in Subpart C of Part XVII of Exhibit A sub-
stantially in the Agreed Form and delivered by the Sellers and
the Purchaser pursuant to Section 1.6 of this Agreement.
"Assignment and Assumption of Purchase Commitments"
means the assignment and assumption of Purchase Commitments in
existence as of the Closing Date substantially in the Agreed
Form and delivered by the Sellers and the Purchaser pursuant to
Section 1.6 of this Agreement.
"Assignment and Assumption of Sellers' Chassis
Leases" means the assignment and assumption of Sellers' Chassis
Leases substantially in the Agreed Form and delivered by the
Sellers and the Purchaser pursuant to Section 1.6 of this
Agreement.
"Assignment of Manufacturer Warranties" means the
assignment of the right, title and interest of Sellers and
their Affiliates in, to and under all seller's or
manufacturer's warranties and claims thereunder relating to the
Containers and Chassis, substantially in the Agreed Form and
delivered by the Sellers and the Purchaser pursuant to Section
1.6 of this Agreement.
"Assignments of Sellers' Receivables" means the as-
signments of the Sellers' right, title and interest in and to
the Sellers' Receivables as of the Closing Date substantially
in the Agreed Form and delivered by the Sellers and the Pur-
chaser pursuant to Section 1.6 of this Agreement.
"Associate", when used to indicate a relationship
with any person, means (1) any corporation or organization of
which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 per cent or more of any
class of equity securities, (2) any trust or other estate in
which such person has a substantial beneficial interest or as
to which such person serves as trustee or in a similar fidu-
ciary capacity, and (3) any relative or spouse of such person,
or any relative of such spouse, who has the same home as such
person or who is a director or officer of such person or any of
its parents or subsidiaries.
"Assumed Liabilities" is defined in Section 1.3 of
this Agreement.
"Automobile Leases" means the operating leases in
respect of automobiles leased by the Sellers and used by any
Employee as of the Closing Date, as listed in Subpart A of Part
XVII of Exhibit A.
"Available Unit" is defined in Section 1.4(b) of this
Agreement.
"Balance Sheets" means the Initial Balance Sheet, the
Estimated Closing Balance Sheet and the Final Closing Balance
Sheet.
"Bank Accounts" means the bank accounts of the Sell-
ers listed in Part XXVIII of Exhibit A.
"Bank Agreement" means the agreement between National
Westminster Bank plc, Barclays Bank plc, Commerzbank A.G.,
Lloyds Bank plc and Royal Bank of Canada, the Company and cer-
tain of its subsidiaries dated 13 February 1994.
"Bankruptcy" means the occurrence of any of the fol-
lowing events (whether such event shall occur or come about
voluntarily or involuntarily or by operation of law or regula-
tion or pursuant to, or in compliance with, any judgement, de-
cree or order of any court or other authority): (A) if the
subject is a company, (i) a petition is presented and not with-
drawn or set aside within 7 days or an order is made or a reso-
lution is passed for the winding-up or dissolution of such com-
pany or any of its subsidiaries, or (ii) such company or any of
its subsidiaries becomes insolvent or is deemed unable to pay
its debts within the meaning of section 123 of the Insolvency
Act 1986 (but without reference to the court for this purpose),
or under any similar law in the United States or elsewhere, or
such company or any of its subsidiaries becomes unable to pay
its debts as they fall due, or (iii) such company or any of its
subsidiaries stops making payments generally or declares a mor-
atorium or suspension of payments with respect to all or any
part of its debts or enters into any composition or other ar-
rangement with its creditors generally (or any class of them),
or (iv) proposals for a company voluntary arrangement or for a
scheme of arrangement are submitted to a court or to sharehold-
ers or creditors under the Insolvency Act 1986 or otherwise, or
under any similar law in the United States or elsewhere, or if
a receiver, administrative receiver or other official or credi-
tors' representative is appointed in respect of such company or
any of its subsidiaries or any of their respective assets or
property (or if any preparatory or other steps are taken with a
view to the appointment of a receiver, administrative receiver
or other creditors' representative), or (B) if the subject is
an individual, (i) a petition is presented for the making of a
bankruptcy order and not withdrawn or set aside within 7 days
or a bankruptcy order is made in respect of the individual, or
(ii) the individual becomes insolvent or is deemed unable to
pay his debts within the meaning of section 268 of the Insol-
vency Act 1986, or under any similar law in the United States
or elsewhere, or the individual becomes unable to pay his debts
as they fall due, or (iii) the individual stops or threatens to
stop making payments generally or declares or threatens to de-
clare a moratorium or suspension of payments in respect to all
or any part of his debts or enters into any composition or
other arrangement with his creditors generally (or any class of
them), or (iv) proposals are submitted to a court or to share-
holders or creditors for an individual voluntary arrangement,
or (v) a receiver, administrative receiver or other creditors'
representative is appointed over any assets or property of the
individual, or (C) in respect of any Person, an encumbrance
that takes possession of the whole or, any material part of
the assets of such Person or any of its subsidiaries or a dis-
tress, execution or other process is levied or enforced upon or
sued out against the whole or, a material part of the assets of
such Person; or, anything analogous to any of the foregoing
events occurs in any applicable jurisdiction anywhere in the
world; and "Bankrupt" shall be construed accordingly.
"Blue Containers" means Owned Containers included in
Subpart A of Part I of Exhibit A which were owned by any of the
Sellers as at the date of the Initial Balance Sheet but none of
which has any net book value attributable thereto reflected in
the Initial Balance Sheet.
"Books and Records" means (i) all books, records,
memoranda, files, tax returns, accounting records, agreements
and other documents and the like relating to the Container Op-
erations (other than minute books of the Sellers and their Af-
filiates), including, but not limited to, customer and supplier
lists, credit information, correspondence, other customer in-
formation, safety information, cost data, maintenance records,
operational and technical manuals, engineering and other draw-
ings, all records relating to the Employees (including, without
limitation, all National Insurance and PAYE records), all value
added tax returns, all engineering data and design, instruments
and agreements relating to the Sellers' Receivables, and engi-
neering specifications, technical information, specifications,
design drawings, accounts receivable ledgers (in each case,
whether printed or stored on magnetic disks or other computer
storage facilities) related to the Sale Assets or the Container
Operations and all market surveys, market plans, market re-
search data, advertising materials and plans, sales and promo-
tional literature of the Sellers, or copies thereof, used or
held for use in connection with the conduct of the Container
Operations and (ii) subject to the provisions of, and limita-
tions set forth in, the Transitional Services Agreement, any
computer software used in the Container Operations, any related
hardware similarly so used, and any specifications for the tank
certification and notification system computer software and
other such computer software not capable of being separated
from Sellers' mainframe computers.
"Break Fee Letter" means the letter dated November
19, 1993, from the Company to Transamerica Corporation relating
to the break fee payable to Transamerica Corporation by the
Company in certain circumstances.
"Buckingham Palace Road Sub-sub-underlease" means
that part of 123 Buckingham Palace Road currently occupied by
the Sellers which is to be sub-sub-underlet to the Purchaser,
substantially in the form set out in Part 1 of the Transitional
Services Agreement.
"Business Day" means a day on which banks are open
for business in the City of London.
"CAA" means the Capital Allowances Act 1990.
"Chassis" means, as of a specified date, the Owned
Chassis, the Leased Chassis and the Financed Chassis (and shall
include Disposal Chassis and Impaired Chassis). Chassis as of
the Initial Balance Sheet are listed and described in Subpart A
of Part II of Exhibit A.
"Claim" means any and all actual, pending or threat-
ened, civil, criminal or administrative action, claim, suit,
proceeding, demand, enforcement action, prosecution, prohibi-
tion or order and shall include any communication or notice to
any of the Sellers relating to the same.
"Closing" means the closing referred to in Section
1.6 of this Agreement.
"Closing Date" means the date on which the Closing
occurs.
"Commitments" is defined in Section 3.6(a) of this
Agreement.
"Company" means Tiphook plc, a company organized un-
der the laws of England.
"Confidentiality Agreement" means the letter agree-
ment dated October 20, 1993 between Transamerica Corporation
and the Company.
"Container Operations" means the ownership and leas-
ing of the Containers and Chassis by the Sellers and activities
related or incidental thereto.
"Container Records" means all Books and Records re-
lated primarily to the Sale Assets or the Container Operations
and with respect to tax returns, National Insurance and PAYE
records or accounting records of the Sellers and all other
Books and Records to the extent that they relate to the Sale
Assets or the Container Operations shall include only copies
thereof; provided, however, that Container Records shall not
include: (i) tax returns files and supporting schedules and
correspondence relating to the following companies: Tiphook
plc, Tiphook Financial Services Limited, TFS Leasing Limited,
and TFS Equipment Leasing Limited; (ii) schedules and cor-
respondence relating to Tiphook Group's overall tax position
including such items as group relief claims and elections; and
(iii) Tiphook Group's consolidated VAT returns, and supporting
files and schedules (except those relating to Tiphook Container
Rental Company Limited).
"Containers" means, as of a specified date, the Owned
Containers, the Financed Containers, the Leased-Out Containers,
the Sea Containers Containers and Containers subject to Manage-
ment Agreements (and shall include Disposal Containers and Im-
paired Containers). Containers as of the Initial Balance
Sheet are listed and described in Subpart A of Part I of Ex-
hibit A.
"Contingency Insurance Policy" means the insurance
policy maintained by the Sellers (Policy No. TIP040-4301), re-
lating to the Bankruptcy of lessees of Containers and Chassis.
"Cross Receipt" means the cross receipt to be deliv-
ered at the closing in the Agreed Form.
"Deemed Value" shall mean the value to be ascribed to
any Blue Container under the Applicable Accounting Principles
for purposes of determining Total Adjusted Net Assets.
"Depot Agreements" means the agreements between Sell-
ers and depot owners as at the Closing Date in relation to the
use of depots in connection with the Container Operations.
Depot Agreements as at the date hereof are listed in Part XIII
of Exhibit A.
"Disposal Chassis" means the Chassis which had been
earmarked for disposal as at the date hereof as described in
Subpart A of Part IX of Exhibit A (which Part also separately
sets forth a true and complete list of the Chassis which had
been earmarked for disposal as at 31 October 1993) together
with any further Chassis in respect of which the Purchaser on
or prior to Closing consents in writing to the Sellers' ear-
marking such Chassis for disposal less any Chassis so previ-
ously earmarked for disposal and disposed of by the Sellers
prior to Closing.
"Disposal Containers" means the Containers which had
been earmarked for disposal as at the date hereof as described
in Subpart A of Part IX of Exhibit A (which Part also sepa-
rately sets forth a true and complete list of the Containers
which had been earmarked for disposal as at 31 October 1993)
together with any further Containers in respect of which the
Purchaser on or prior to Closing consents in writing to the
Sellers' earmarking such Containers for disposal less any Con-
tainers so previously earmarked for disposal and disposed of by
the Sellers prior to Closing.
"Disputed Amount" is defined in Section 1.4(e) of
this Agreement.
"Dry Cargo Containers" means the Containers that are
dry cargo containers.
"DPP" is defined in Section 1.8(b) of this Agreement.
"DPP Option" is defined in Section 1.8(b) of this
Agreement.
"DPP Tail Coverage" is defined in Section 1.8(b) of
this Agreement.
"Employees" means those employees of the Sellers or
their Affiliates who are primarily engaged in the Container
Operations as of the Closing Date and shall be comprised only
of those employees who are listed as at the date of this Agree-
ment in Part XXIII of Exhibit A except insofar as they shall
have resigned or been dismissed (subject to Section 9.4) be-
tween the date hereof and the Closing Date and any further such
employees in respect of whom written consent to hire under Sec-
tion 9.4 or to inclusion as an Employee is given by the Pur-
chaser.
"Environment" means all or any of the following me-
dia: land (including without limitation any building, struc-
ture or receptacle in, over or on it); water (including with-
out limitation surface coastal and groundwaters); air (includ-
ing without limitation the atmosphere within any natural or
man-made structure or receptacle above or below ground); and
living organisms (including, without limitation, plants, human
beings and terrestrial and aquatic life forms).
"Environmental Concerns" means matters affecting, or
which may affect, the Environment including (without limita-
tion) all or any of noise, vibration, discharges or emissions
into the Environment; matters adversely affecting human health
and/or the health of other living organisms; the generation,
processing, refinement, recycling, use, ownership, possession,
storage, handling, manufacture, transfer, transport, disposal,
discharge, displacement, spillage, release, emission or threat
of release of any Hazardous Substance.
"Environmental Laws" means all and any treaty, con-
stitution, common or judge-made law, primary or subordinate
legislation, decree, order, ordinance, rule, regulation, reso-
lution, code, directive, bylaw or other legislative or quasi-
legislative measure, custom, practice, award of court, judicial
or other pronouncement, determination or order and having the
force of law in the country in which the relevant asset is reg-
istered or situate (and except in relation to Section 3.24,
whether the same is passed, enacted, made, decided, issued or
came into force or effect before or after Closing and, in each
case as the same is from time to time modified or re-enacted,
whether before or after Closing, so far as such modification or
re-enactment applies or to any circumstances existing prior to
Closing and in each case, so far as liability thereunder may
exist, including any past provision (as from time to time modi-
fied or re-enacted) which such provision has directly or indi-
rectly replaced) relating to any Environmental Concerns.
"Environmental Permit" means any consent, approval,
authorization, permission, licence, filing requirement,
records, registration or notification required under any Envi-
ronmental Law currently in effect.
"Environmental Standard" means any code of practice,
procedure or standard, compliance with which is required in
order to discharge any duty, under Environmental Law currently
in effect or to conform with any practice currently required by
any Government Authority in relation to Environmental Concerns.
"Escrow Accounts" is defined in Section 1.4(b) of
this Agreement.
"Escrow Agreement" is defined in Section 1.4(b) of
this Agreement.
"Estimated Adjusted Net Assets Statement" means the
statement to be delivered pursuant to Section 1.4(e) from which
the Initial Purchase Price is determined which is to be pre-
pared as described therein and in accordance with the Ap-
plicable Accounting Principles and derived from the Estimated
Closing Balance Sheet.
"Estimated Closing Balance Sheet" means the unaudited
estimated balance sheet of the Container Operations, except as
otherwise set forth in Section 1.4, as at the Closing Date (or
such other date as provided by Section 1.4) to be prepared as
described in Section 1.4 and in accordance with the Applicable
Accounting Principles.
"Excess Disposal Containers" means the Disposal Con-
tainers listed in Subpart C of Part IX of Exhibit A, together
with any further Containers in respect of which the Purchaser
on or prior to Closing consents in writing to the Sellers' ear-
marking such Containers for disposal.
"Excess Disposal Chassis" means the Disposal Chassis
listed in Subpart C of Part IX of Exhibit A, together with any
further Chassis in respect of which the Purchaser on or prior
to Closing consents in writing to the Sellers' earmarking such
Chassis for disposal.
"Excluded Assets" is defined in Section 1.2(b) of
this Agreement.
"Excluded Liabilities" is defined in Section 1.3(b)
of this Agreement.
"Exclusivity Letter" means the letter dated November
19, 1993, from the Company to Transamerica Corporation, as
amended by the letter dated January 31, 1994 from the Company
to Transamerica Corporation, in each case relating to the ex-
clusive negotiation obligations of the Company and others.
"Exhibit A" means Exhibit A to the Sellers' Disclo-
sure Letter.
"Expertise and Intellectual Property Rights" means
all rights and interests in and to any patents or patent ap-
plications, trade names, trademark or service mark registra-
tions or applications, common law trademarks, copyrights or
copyright registrations or applications (including reissues,
divisions or continuations and extensions thereof), logos, cus-
tomer information, registered or unregistered design rights, in
each case, relating to or used in connection with the Sale As-
sets or the Container Operations, which shall include those
listed or described in Part XI of Exhibit A, and all processes,
trade secrets, confidential or proprietary know-how, design,
manufacturing, engineering and other drawings, technology, in-
tellectual property rights, technical information, software
(whether owned or licensed), engineering data, design and engi-
neering specifications and similar materials recording or evi-
dencing proprietary expertise, including without limitation
internally developed computer technology, in each case, relat-
ing to or used in connection with the Sale Assets or the Con-
tainer Operations, which shall include those rights and inter-
ests in the foregoing listed or described in Part XI of Exhibit
A.
"Final Adjusted Net Assets Statement" means the ad-
justed net assets statement of the Container Operations as at
the Closing Date prepared in accordance with the Applicable
Accounting Principles and derived from the Final Closing Bal-
ance Sheet, as either agreed by the Sellers and the Purchaser
pursuant to Section 1.4 or resulting from the report of the
Independent Auditors in accordance with Section 1.4.
"Final Closing Balance Sheet" means the balance sheet
of the Container Operations as at the Closing Date prepared in
accordance with the Applicable Accounting Principles and either
agreed by the Sellers and the Purchaser pursuant to Section 1.4
or resulting from the report of the Independent Auditors in
accordance with Section 1.4.
"Final Purchase Price" is defined in Section 1.4 of
this Agreement.
"Financed Chassis" means the tank chassis leased or
hired by Sellers, as lessees, as of a specified date pursuant
to Secured Financing Agreements.
"Financed Containers" means the dry cargo and tank
containers leased or hired by Sellers, as lessees, as of a
specified date pursuant to Secured Financing Agreements.
"Finance Lease Debtors" means the hire purchase fi-
nance lease debtors of the Container Operations as of a speci-
fied date relating to Leased-Out Containers and Leased-Out
Chassis. Finance Lease Debtors as of 31 October 1993 are
listed on Part XIX of Exhibit A. Part XIX of Final Exhibit A,
which will be dated as of the Closing Date, will show the Fi-
nance Lease Debtors as of the Closing Date.
"Fixed Assets Register" means, with respect to a
Seller, the register maintained by such Seller with respect to
the fixed assets of such Seller as of a specified date.
"General Escrow Account" is defined in Section 1.4(b)
of this Agreement.
"Government Authority" means any government or state
(or any subunit thereof), whether domestic, foreign or multina-
tional (including the European Community), or any agency, au-
thority, bureau, commission, department or similar body or in-
strumentality thereof, or any governmental court or tribunal
and shall include the London Stock Exchange and the Panel on
Take-overs and Mergers.
"Hazardous Substance" means any substance which is
any one or more of the following:
(i) hazardous, volatile, flammable, toxic, radioac-
tive, explosive, mutagenic or carcinogenic;
(ii) capable of polluting the Environment, causing
harm to human health or causing harm to any living organism;
(iii) (in relation to any release to the relevant me-
dium of the Environment) is listed as a "prescribed substance"
for the purposes of Part I Environmental Protection Act 1990,
is "controlled waste" for the purposes of Part II of that Act
or is listed as a "Hazardous Substance" in Schedule 1 of the
Planning (Hazardous Substances) Regulations 1992;
(iv) any solid, liquid, gas, odour, pathogen, sub-
stance or form of energy, regardless of physical form that is
subject to or listed as having a deleterious property in any
Environmental Law;
(v) defined or listed as a hazardous, toxic or dan-
gerous substance under any Environmental Law;
(vi) regulated or subject to investigation or
remediation under any Environmental Law;
(vii) any "pollutant" or "contaminant" as defined in
42 United States Code Annotated Section 9601(33);
(viii) any material, waste or other substance that con-
tains petroleum or any fraction thereof, asbestos in friable
form, or polychlorinated biphenyls, or that is flammable, ex-
plosive or radioactive;
(ix) natural gas, natural gas liquids, liquefied
natural gas, and synthetic gas usable for fuel (or mixture of
natural gas and such synthetic gas).
"Holding Documents" means those documents which are
listed in Section 1 of Part XVI of Exhibit A under which the
Sellers currently occupy the Overseas Properties and Holding
Document shall mean any one of them.
"HSR Act" means the Hart-Scott-Rodino Antitrust Im-
provements Act of 1976, as amended.
"ICTA" means the Income and Corporation Taxes Act
1988.
"Impaired Chassis" means (a) the Chassis which as at
the date of the Initial Balance Sheet were leased to a lessee
which is listed in Part XXVI of Exhibit A, (b) the Chassis
which as at the date hereof were leased to a lessee which is
listed in Part XXVI of Exhibit A, (c) any additional Chassis
which as of the Closing Date are leased to any lessee referred
to in clause (a) or (b) above but only to the extent that the
total number of Chassis leased to such lessee as of the Closing
Date exceeds the total number of Chassis leased to such lessee
as of the date referred to in clause (a) or (b) above, as the
case may be, and (d) (i) in the event that the Closing Date
occurs on or before 15 March 1994, any Chassis which as of the
Closing Date are leased to a lessee not referred to in clause
(a) or (b) above which between the date hereof and the Closing
Date becomes Bankrupt and remains Bankrupt on the Closing Date
or (ii) in the event that the Closing Date occurs after 15
March 1994 any Chassis which as of the Closing Date is leased
to a lessee not referred to in clause (a) or (b) above and with
respect to which a Provisioning Event has occurred between the
date hereof and the Closing Date and is, as of the Closing
Date, outstanding or uncured. Subpart A of Part X of Exhibit
A lists the Chassis referred to in clause (a) above and Subpart
B of Part X of Exhibit A lists the Impaired Chassis referred to
in clause (b) above.
"Impaired Containers" means (a) the Containers which
as at the date of the Initial Balance Sheet were leased to a
lessee which is listed in Part XXVI of Exhibit A, (b) the Con-
tainers which as at the date hereof were leased to a lessee
which is listed in Part XXVI of Exhibit A, (c) any additional
Containers which as of the Closing Date are leased to any les-
see referred to in clause (a) or (b) above but only to the ex-
tent that the total number of Containers leased to such lessee
as of the Closing Date exceeds the total number of Containers
leased to such lessee as of the date referred to in clause (a)
or (b) above, as the case may be, and (d) (i) in the event that
the Closing Date occurs on or before 15 March 1994, any Con-
tainers which as of the Closing Date are leased to a lessee not
referred to in clause (a) or (b) above which between the date
hereof and the Closing Date becomes Bankrupt and remains Bank-
rupt on the Closing Date or (ii) in the event that the Closing
Date occurs after 15 March 1994 any Container which as of the
Closing Date is leased to a lessee not referred to in clause
(a) or (b) above and with respect to which a Provisioning Event
has occurred between the date hereof and the Closing Date and
is as of the Closing Date outstanding or uncured. Subpart A
of Part X of Exhibit A lists the Impaired Containers referred
to in clause (a) above and Subpart B of Part X of Exhibit A
lists the Impaired Containers referred to in clause (b) above.
"Independent Auditors" is defined in Section 1.4 of
this Agreement.
"Initial Adjusted Net Assets Statement" means the
statement of initial adjusted net assets as of 31 October 1993
of the Container Operations derived from the Initial Balance
Sheet and which is set out in Part XXVII of Exhibit A.
"Initial Balance Sheet" means the unaudited balance
sheet of the Container Operations as at 31 October 1993 and
which is set out in Part XXVII of Exhibit A.
"Initial Purchase Price" is defined in Section 1.4 of
this Agreement.
"Intellectual Property Assignment" means the assign-
ment of all the Sellers' right, title and interest in and to
the Expertise and Intellectual Property Rights substantially in
the Agreed Form and delivered by the Sellers and the Purchaser
pursuant to Section 1.6 of this Agreement.
"Leased Chassis" means the tank chassis as of a
specified date leased to the Sellers, as lessees, pursuant to
the Sellers' Chassis Leases, but shall not include any chassis
leased by the Sellers, as lessees, without prior written con-
sent of the Purchaser between the date of this Agreement and
the Closing Date. Leased Chassis as of the date of the Ini-
tial Balance Sheet are listed and described in Part III of Ex-
hibit A.
"Leased-Out Chassis" means the chassis as of a speci-
fied date leased out by the Sellers, as finance lessors, to
lessees under arrangements which provide for the acquisition of
the chassis subject thereto by the lessees, but shall not in-
clude any chassis so leased out by the Sellers, as lessors,
without prior written consent of the Purchaser, between the
date of this Agreement and the Closing Date. Leased-Out Chas-
sis as of the date of the Initial Balance Sheet are listed and
described in Subpart B of Part XX of Exhibit A.
"Leased-Out Containers" means the containers as of a
specified date leased out by the Sellers, as finance lessors,
to lessees under arrangements which provide for the acquisition
of the containers subject thereto by the lessees, but shall not
include any containers so leased out by the Sellers, as les-
sors, without prior written consent of the Purchaser, between
the date of this Agreement and the Closing Date. Leased-Out
Containers as of the date of the Initial Balance Sheet are
listed and described in Subpart A of Part XX of Exhibit A.
"Leased-Out Equipment" means the Leased-Out Chassis
and the Leased-Out Containers.
"Loss" means all and any losses, damages, li-
abilities, claims, costs and expenses including, without limi-
tation fines, penalties, judgments and awards, and with respect
to Environmental Matters shall include, among others, financial
responsibility for clean up activities and obligations, statu-
tory or other official contributions, legal fees, technical
consultancy, engineers' and experts' fees, and costs and ex-
penses of obtaining or retaining Permits or otherwise complying
with Environmental Law.
"Management Agreement for Encumbered Equipment" means
the management agreement in the Agreed Form and to be delivered
under which the Purchaser shall agree to manage certain Con-
tainers and Chassis which are subject to Security Interests as
of the Closing Date.
"Management Agreements" means the agreements of the
Sellers relating to the management of containers and chassis
owned by third parties to be assumed by the Purchaser pursuant
to the Assignment and Assumption of Management Agreements,
which agreements are listed in Part XXX of Exhibit A (which
Part includes complete and correct copies of such agreements
and all documentation related thereto).
"Non-Competition and Non-Solicitation Agreements"
means the agreements substantially in the Agreed Forms and de-
livered by the Sellers, the Purchaser, Robert Montague and
Christopher Palmer pursuant to Section 1.6 of this Agreement.
"Novation of Automobile Leases" means the novation of
Automobile Leases in effect as of the Closing Date substan-
tially in the Agreed Form and delivered by the Sellers and the
Purchaser pursuant to Section 1.6 of this Agreement.
"Operating Lease Assignments and Assumptions" means
the assignments and assumptions of the Operating Leases exclud-
ing Containers and Chassis referred to in Section 1.2(a)(i)(x)
and (z) as of the Closing Date and which will include the
transfer to the Purchaser of the benefit of any guarantees,
letters of credit and other security arrangements provided by
or on behalf of lessees under Operating Leases, in the Agreed
Form and delivered by the Sellers and the Purchaser pursuant to
Section 1.6 of this Agreement.
"Operating Leases" means the leases as of a specified
date related to the Containers or Chassis, pursuant to which
the Sellers lease such Containers or Chassis (other than Sea
Containers Containers) to their customers. Operating Leases as
of January 20, 1994 are listed and described in Part V of Ex-
hibit A.
"Organic Instruments" is defined in Section 3.2 of
this Agreement.
"Other Contracts" means the contracts, commitments,
leases and agreements referred to in Section 1.2(a)(vii).
"Overseas Properties" means those properties cur-
rently occupied by the Sellers which are listed in Section 2 of
Part XVI of Exhibit A and Overseas Property shall mean any one
of them.
"Owned Chassis" means the tank chassis owned by the
Sellers as of a specified date, including any tank chassis
owned by the Sellers as of such date which are subject to an
agreement by Sellers to sell to a third party (but excluding
(i) any chassis acquired by the Sellers between the date of the
Initial Balance Sheet and the date of this Agreement and not
disclosed in Part III of Exhibit A (ii) any chassis acquired by
the Sellers without the prior written consent of the Purchaser
between the date of this Agreement and the Closing Date or
(iii) any Leased-Out Chassis which are not owned by a Seller).
"Owned Containers" means the dry cargo containers and
tank containers owned by the Sellers as of a specified date,
including any dry cargo containers and tank containers owned by
the Sellers as of the Closing Date which are subject to an
agreement by Sellers to sell to a third party and any Blue Con-
tainers (but excluding (i) any containers acquired between the
date of the Initial Balance Sheet and the date of this Agree-
ment and not disclosed in Part I of Exhibit A or (ii) any con-
tainers acquired by the Sellers without the prior written con-
sent of the Purchaser between the date of this Agreement and
the Closing Date or (iii) any Leased-Out Containers which are
not owned by a Seller).
"Person" or "person" means any individual, corpora-
tion, partnership, joint venture, trust, unincorporated organi-
zation, other form of business or legal entity or Government
Authority.
"Provisioning Event" means a lessee or hirer of a
Container or Chassis (i) ceasing or substantially ceasing its
operations, (ii) becoming Bankrupt, (iii) being in material
breach of any contract or arrangement with any Seller, except
in accordance with such lessee's or hirer's normal payment
practices, (iv) becoming a defendant in any legal proceedings
with any lessor of container equipment relating to the payment
of accounts receivable or the recovery of any such lessor's
equipment, in either case, if any such proceedings involve
claims on the part of the lessor in excess of $25,000, (v) not
paying any account receivable owed to any of the Sellers within
60 days of the date that any lessee or hirer would have paid
any such amount if the account receivable had been paid in ac-
cordance with the average payment practices followed by any
such lessee or hirer during the twelve-month period ended 31
October 1993, excluding any lessee or hirer which would not be
classified as a problem account by the Purchaser or its Affili-
ates, (vi) not paying any account receivable owed to the Sell-
ers within 120 days of the end of the month for which the in-
voice was issued, (vii) failing to satisfy the terms of any
written arrangement rescheduling an account receivable with any
Seller, (viii) becoming a Person from whom the Purchaser or any
Seller is, by virtue of any decree, act or order of a Govern-
ment Authority prohibited from receiving any monies or other
benefit, and/or (ix) the Purchaser or any Seller receiving in-
formation relating to a material deterioration in the payment
practices or creditworthiness of the lessee or hirer in a
credit report prepared by Dynamar BV or another credit report-
ing service unaffiliated with the Purchaser (which report is
provided in the ordinary course of such third party's busi-
ness).
"Purchase Commitments" means the dry cargo container,
tank container and tank chassis purchase commitments of the
Sellers listed and described in Part VII of Exhibit A (without
giving effect to any amendments or modifications thereof not
listed in such Part not consented to in writing by the Pur-
chaser), and any additional purchase commitments (or amendments
of existing purchase commitments) with respect to such contain-
ers and chassis to which the Purchaser has consented in writ-
ing, including, in each case, any agreements or understandings
described in writing to the Purchaser which are related to such
purchase commitments.
"Purchase Price in Escrow" is defined in Section
1.4(b) of this Agreement.
"Purchaser" means Transamerica Container Acquisition
Corporation, a Delaware corporation, and/or such other entities
as may be designated pursuant to Section 13.6 hereof.
"Purchaser's Accountants" shall be Ernst & Young or
any successor appointed by the Purchaser.
"Purchaser's Closing Certificate" means the certifi-
cate of an authorized officer of the Purchaser to evidence com-
pliance with the conditions and compliance with the covenants
set forth in Article VI substantially in the Agreed Form to be
delivered by the Sellers pursuant and section 1.6 of the Agree-
ment.
"Qualifying Purpose" has the meaning ascribed to it
in section 39 CAA.
"Receipt and Acknowledgement of Delivery" means the
receipt and acknowledgement of delivery in respect of the Con-
tainers and the Chassis, in the Agreed Form and delivered by
the Sellers pursuant to Section 1.6 of this Agreement.
"Relief" means any allowance, charge, credit, loss,
deduction, right of repayment or other relief for any taxation
purpose.
"Repairs Escrow Account" is defined in Section 1.4(b)
of this Agreement.
"Requisite Period" has the meaning ascribed to it in
section 40 CAA.
"Revenue Authority" means the Inland Revenue or HM
Customs & Excise or any other authority in the United Kingdom
having power or duty to charge, administer or collect Taxation
of any kind or any equivalent or similar authority in any other
territory or jurisdiction throughout the world in which the
Sellers carry on business (whether or not through a branch or
agency), own or have any interest in any assets or otherwise
have a source of income, profits or gains.
"Sale Assets" means the assets and rights of the
Sellers and their Affiliates as described in Section 1.2(a).
"Sea Containers Agreement to Transfer Benefits and
Obligations of Sellers' Leases" means the agreement to transfer
benefits and obligations of Sellers' Leases dated as of April
2, 1990, by and among Sea Containers Ltd., Sea Containers Asia
Ltd., Sea Containers America Inc. and Strider 11 Ltd., as
transferors, and Lancaster Holdings Corp., Bromley Holdings
Corp., the Company and Alvery No. 954 Limited, as transferees,
pursuant to which the transferors transferred to the transfer-
ees the benefits and obligations of certain container and chas-
sis leases under which the transferors leased containers and
chassis from certain lessors, a copy of which agreement has
been delivered to the Purchaser.
"Sea Containers Containers" means the dry cargo con-
tainers as of a specified date subject to the Sea Containers
Agreement to Transfer Benefits and Obligations of Sellers
Leases and subject to Sea Containers Leases (including any
leases with Capital Associates, Inc.) in effect as of such
specified date. Sea Containers Containers as of 31 October
1993, are listed and described in Part IV of Exhibit A.
"Sea Containers Leases" means the leases with lessees
in effect as of a specified date relating to the containers
that are subject to the Sea Containers Agreement to Transfer
Benefits and Obligations of Sellers Leases. Such Sea Contain-
ers Leases as of 31 October 1993, are described in Part XIV of
Exhibit A.
"Sea Containers Leases Management Agreement" means
the agreement under which the Purchaser will manage the equip-
ment subject to the Sea Containers Leases as of the Closing
Date in the Agreed Form and delivered by the Sellers and the
Purchaser in accordance with Section 1.6 of this Agreement.
"Secondary Period Agreements" means the agreements
which confirm the transfer by the Sellers of title to the Con-
tainers and Chassis subject to the Secondary Period Sellers'
Leases in the Agreed Form to be delivered by the Sellers pur-
suant to section 1.6 of the Agreement and which may cover only
one or more of those leases which are listed in Part XXIX of
Exhibit A (which Part includes complete and correct copies of
all such agreements and all documentation related thereto).
"Secondary Period Sellers' Leases" means the finance
leases relating to Containers and Chassis between the Sellers
and finance lessors which are in secondary period and which are
as of the date hereof listed in Part XXIX of Exhibit A.
"Secured Financing Agreements" means the finance
leases and hire purchase arrangements in effect as of a speci-
fied date pursuant to which the Sellers, as lessees, lease or
hire Financed Containers and Financed Chassis and the loan
agreements as of a specified date under which certain Owned
Containers and Owned Chassis are collateral. The Secured Fi-
nancing Agreements as of the date of this Agreement are de-
scribed in Part XII of Exhibit A.
"Secured Indebtedness" means indebtedness of the
Sellers under the Secured Financing Agreements as of a speci-
fied date. Such Secured Indebtedness as of the date of the
Initial Balance Sheet is reflected on the Initial Balance
Sheet.
"Security Interests" means the recorded and unre-
corded interests of certain lenders and other financiers in
Containers, Chassis or other Sale Assets under mortgages, hire
purchase arrangements, finance leases and other financing or
security arrangements (including, without limitation, under
Secured Financing Agreements) and in effect as of a specified
date. Such Security Interests are described in Part XV of
Exhibit A.
"Self-Insured Units" means the Containers and Chassis
that were acquired from Sea Containers that are listed on Part
XXXII of Exhibit A but excluding such Containers or Chassis
that are redelivered to depots prior to the Closing Date.
"Sellers" means, as applicable, all or any one or
more of Tiphook plc, Tiphook Container Rental Company Limited,
TFS Equipment Leasing Limited, TFS Leasing Limited, Tiphook
Financial Services Limited, each a company organized under the
laws of England, Tiphook Container Rental Inc., a Delaware cor-
poration, Tiphook Container Rental (Australasia) Ltd., a com-
pany incorporated under the laws of New Zealand, Tiphook Con-
tainer Rental (South America) Ltda., a company incorporated
under the laws of Brazil, Tiphook Container Rental (Hong Kong)
Ltd., a company incorporated under the laws of Hong Kong,
Tiphook Container Rental S.R.L., a company incorporated under
the laws of Italy, and Tiphook Container Rental (Singapore) pte
Ltd., a company incorporated under the laws of Singapore.
"Sellers' Accountants" shall be Touche Ross or any
successor appointed by the Sellers.
"Sellers' Chassis Leases" means the finance leases as
of a specified date pursuant to which Sellers, as lessees,
lease Leased Chassis. Sellers' Chassis Leases as at the date
of the Initial Balance Sheet and as of 31 October 1993, are
listed and described in Part XXIV of Exhibit A.
"Sellers' Closing Certificate" means the certificate
of an officer of the Company on behalf of the Sellers confirm-
ing the truth and correctness of the representations and war-
ranties of the Sellers as of the Closing Date and evidencing
satisfaction of the conditions and compliance with the cov-
enants set out in this Agreement in the Agreed Form to be de-
livered by the Sellers pursuant to Section 1.6 of the Agree-
ment.
"Sellers' DPP" is defined in Section 1.8.
"Sellers' Disclosure Letter" means the letter deliv-
ered by the Sellers to the Purchaser on the date of this Agree-
ment, containing the information required to be included
therein pursuant to this Agreement.
"Sellers' Receivables" means (i) the trade debts at a
specified date billed by and owing to the Sellers (including
amounts due from and billed to Finance Lease Debtors) arising
out of goods and services provided by the Sellers prior to the
specified date relating to the Container Operations including,
without limitation, trade debts receivable in respect of rent-
als under Operating Leases (and including trade debts owing to
the Sellers in respect of containers or chassis not conveyed to
the Purchaser by the Sellers), it being understood that the
rentals, charges and other amounts receivable as at a specified
date with respect to goods and services, including, without
limitation, repair and maintenance, to be performed after the
specified date but billed prior to the specified date shall
constitute Sellers' Receivables for the purposes of this Agree-
ment and (ii) any additional receivables accrued under the
Applicable Accounting Principles. Sellers' Receivables shall
not include any account receivable at the Closing Date relating
to the Contingency Insurance Policy. Part VI of Exhibit A
shows the Sellers' Receivables referred to in clause (i) above
as at the date of the Initial Balance Sheet. Part VI of Final
Exhibit A, which will be dated as of the Closing Date, will
show the Sellers' Receivables referred to in clause (i) above
as of the Closing Date.
"SPO" means the Value Added Tax (Special Provisions)
Order 1992 (SI No. 3129)
"Standard IICL Guide" means, with respect to Chassis,
the standard set out in the Institute of International Con-
tainer Lessors Ltd. "Guide for Container Chassis Inspection
Second Edition."
"Standard IICL-4" means, with respect to Dry Cargo
Containers, the standards set out in the Institute of Interna-
tional Container Lessors Ltd. "Guide for Container Equipment
Inspection Fourth Edition (IICL-4, revised January 1992)".
"Standard for Tank Containers" means, with respect to
Tank Containers, the standards set out in Tiphook Container
"Tank Inspection Handbook", June 1993 (section titled Inspec-
tion Guidelines for Tanks Including Minimum Acceptable Con-
tainer Condition for Tanks (ACC)).
"Sublease for 123 Buckingham Palace Road" means the
six-month sublease substantially in the Agreed Form for a por-
tion of the premises leased by the Company located at 123
Buckingham Palace Road, London, delivered by the Company and
the Purchaser pursuant to Section 1.6 of this Agreement.
"Tank Containers" means the Containers that are tank
containers.
"Taxation", "Tax", or "Taxes" mean all forms of taxa-
tion including, without limitation, the following:
(a) any charge, tax, duty or levy upon income, prof-
its, gains, land, any interest in land or in any other prop-
erty, or documents or supplies or other transactions;
(b) income tax, corporation tax, capital gains tax,
inheritance tax, value added tax, sales tax, use tax, stamp
duty, capital duty, customs and other import duties, national
insurance; contributions, general rates, water rates or other
local rates;
(c) any liability for sums equivalent to any such
charge, tax, duty, levy or rates or for any related penalty,
fine or interest;
(d) any charge, tax, duty, levy or rates (of a simi-
lar nature) chargeable outside the United Kingdom or for any
related penalty, fine or interest; and
(e) any payments under any agreements relating to
the foregoing taxes.
"TEU" means twenty-foot equivalent unit, and ag-
gregate TEU is calculated as follows: one twenty-foot length
Dry Cargo Container equals one TEU; one forty-foot length Dry
Cargo Container equals two TEU; one forty-foot length "high-
cube" Dry Cargo Container equals two and one-half TEU; one
forty-five or forty-eight foot length Dry Cargo Container
equals three TEU; and one Tank Container equals ten TEU.
"Third-Party Claim" is defined in Section 11.5 of
this Agreement.
"Total Adjusted Net Assets" means the aggregate of
the specific amounts set forth on the relevant Adjusted Net
Assets Statement which is derived from the relevant Balance
Sheet in respect of the following categories of assets and li-
abilities and which reflects the Sale Assets and the Assumed
Liabilities: (a) Containers and Chassis (other than Leased-Out
Containers and Chassis and Disposal Containers and Chassis);
(b) the net book value of (1) the Disposal Containers and Dis-
posal Chassis included in the Sale Assets, (2) Other assets
under the category "Fixed Assets" (other than Investments), and
(3) Sellers' Receivables, Lease debtors, other debtors and pre-
payments (which shall include only prepaid assets relating
wholly and exclusively to the Container Operations to the ex-
tent reflecting a benefit to the Purchaser after the Closing)
under the category "Other Assets"; less the aggregate of (i)
amounts due to trade creditors, fixed assets creditors and
other creditors under the category "Current Liabilities", (ii)
accruals under the category "Current Liabilities", and (iii)
any other liability which in accordance with the Applicable
Accounting Principles and this Agreement reflects an Assumed
Liability which should be set forth in the relevant Balance
Sheet, in each case as of the relevant date and determined in
accordance with the Applicable Accounting Principles.
"Transitional Services Agreement" means the agreement
under which the Sellers will provide certain transitional ser-
vices to the Purchaser following the Closing Date substantially
in the Agreed Form and delivered by the Company and an Affili-
ate of the Purchaser in accordance with Section 1.6 of this
Agreement.
"UK Properties" means that part of 123 Buckingham
Palace Road, London SW1 to be sub-sub-underlet to an Affiliate
of the Purchaser and the computer room at Amadeus House, 33-39
Elmfield Road, Bromley, access to which will be given by li-
cence to an Affiliate of the Purchaser.
"Unrepaired Unit" means any Container or Chassis that
as of the Closing Date is (i) off-hire, (ii) not a Disposal
Container or Disposal Chassis, and (iii) not an Available Unit.
"VAT" means Valued Added Tax.
"VAT General Regulations" means the Value Added Tax
(General) Regulations 1985 (SI No. 886).
"VATA" means the Value Added Tax Act 1983.
Certain terms used principally in other Sections of
this Agreement are defined therein. The plural of any defined
term shall have a meaning correlative to such defined term.
Unless the context otherwise requires any reference
to statute or regulations or any part thereof shall be con-
strued as a reference to that statute or those regulations (or
part thereof) as amended, reenacted or replaced from time to
time.
SECTION 1.2. Purchase and Sale of Sale Assets. (a)
Subject to the terms and conditions of this Agreement, at the
Closing the Sellers will sell, transfer, convey and assign, and
the Purchaser will purchase, acquire and accept from the Sell-
ers, the legal and beneficial right, title and interest of the
Sellers and their Affiliates as of the Closing Date in and to
all the following properties, assets and other rights wherever
located (whether in the possession of the Sellers or other
third parties), of the Container Operations, or which are used
or held for use in the Container Operations as of the Closing
Date (the "Sale Assets"):
(i) all Containers and Chassis (including, without
limitation, the Sellers' rights with respect to the Financed
Containers, Financed Chassis, the Leased Chassis and the
Leased-Out Equipment), excluding (w) any Containers subject to
a Management Agreement, (x) any Container or Chassis subject to
a Security Interest which shall not have been released or with
respect to which other provisions for the release of any Secu-
rity Interests satisfactory to the Purchaser, in its sole dis-
cretion, shall not have been made, (y) the Sea Containers Con-
tainers and (z) any Container or Chassis to which Section
1.2(b)(ix) shall apply;
(ii) all Container Records;
(iii)all rentals, charges and other amounts owed
(whether or not invoiced as of the Closing Date) with respect
to goods and services, including without limitation, repair and
maintenance services, relating to the Container Operations or
the Sale Assets arising or to be performed or delivered on or
after the Closing Date;
(iv) all automobiles owned by any of the Sellers and
primarily used by any Employee and included in a Fixed Asset
Register of a Seller as of the Closing Date;
(v) all rights covered by the Assignment and Assump-
tion of Agency Agreements, the Novation of Automobile Leases,
the Assignment and Assumption of Depot Agreements, the Assign-
ment of Sellers' Receivables, the Assignment and Assumption of
Purchase Commitments, the Assignment of Manufacturer Warran-
ties, the Intellectual Property Assignment, the Assignment and
Assumption of Management Agreements, the Operating Lease As-
signments and Assumptions, the Assignment and Assumption of
Equipment Hire Agreements, the Sea Containers Leases Management
Agreement, the Management Agreement for Encumbered Equipment
and the Secondary Period Agreements;
(vi) all claims of the Sellers and their Affiliates
against third parties related to the Sale Assets (including,
without limitation, any assignment of rights under the Contin-
gency Insurance Policy other than in respect of claims made
under such policy prior to the Closing Date), except to the
extent such claims, including claims under manufacturers war-
ranties, relate to Excluded Liabilities or Excluded Assets;
(vii) (A) the contracts, commitments, leases and
agreements listed in Subpart C Part XVII of Exhibit A and of
which complete and accurate copies (including all documentation
related thereto) are attached as Annexure 3.6(b) to the Sell-
ers' Disclosure Letter and (B) any additional contracts, com-
mitments, leases of personal property or agreements relating to
the Container Operations to which the Purchaser has consented
in writing prior to the Closing Date (the "Other Contracts");
(viii) all machinery and equipment (other than
that which is covered by leases) and furniture located in any
space leased or otherwise occupied by, and which is used in,
the Container Operations and included in a Fixed Asset Register
of a Seller as of the Closing Date; provided, however, that
the Purchaser shall not acquire the assets recorded as "fix-
tures and fittings" in the Fixed Asset Register of Tiphook Con-
tainer Rental Company Limited which were transferred from
Amadeus House, Bromley or the Sellers' lease interest in the
Sellers' AS400 computer hardware (or assume any obligations
under any such lease), but shall have the rights in respect of
the AS400 computer hardware specified in the Transitional Ser-
vices Agreement;
(ix) all office supplies, production supplies, spare
parts, other miscellaneous supplies, and other tangible prop-
erty of any kind located in any space leased or otherwise occu-
pied by the Container Operations and used or held for use in
the Container Operations;
(x) except for marks on Containers or Chassis leased
on long-term leases bearing prefixes of lessees which are not
the Sellers', all the Sellers' and their Affiliates' rights,
title and interest in and to all of the prefixes imprinted on,
and used by the Sellers to identify, the Containers or Chassis,
which shall include the following BIC-registered prefixes:
"TPHU", "TPXU", "TPTU", "TPJU", "TPCZ", "SCIC", "SCUZ", "SCYZ",
"SCXU", "SCIU", "SCLC", "SCLU", "SCXC", "SCPU", and "SCPU" (the
"Prefixes") to the extent that such Prefixes relate to the Con-
tainers and Chassis, which Prefixes the Sellers jointly and
severally represent and warrant are all of the Prefixes im-
printed on, and used by the Sellers to identify, the Containers
or Chassis (other than those of lessees referred to above);
(xi) all right, title and interest in and to the As-
sumed Property Leases;
(xii) the Sellers' Receivables;
(xiii) any security deposits, prepayments or ad-
vances paid to or received by a Seller prior to the Closing
Date from lessees of Containers and Chassis with respect to
Containers and Chassis on hire as of the Closing Date which are
included in clause (i) or which are to be hired after the Clos-
ing Date (excluding Sea Containers Containers) and in respect
of leases the terms of which have been agreed and executed;
(xiv) all other prepaid assets relating wholly
and exclusively to the Container Operations to the extent re-
flecting a benefit to the Purchaser after the Closing;
(xv) the Bank Accounts; and
(xvi) except as otherwise specifically provided
herein, all other property, rights or other assets which are
reflected on the Initial Adjusted Net Assets Statement or are
acquired by the Container Operations after the date of the Ini-
tial Balance Sheet either in the ordinary course of business
or, if required by the terms of this Agreement, with the con-
sent of the Purchaser, except for such property which has been
sold or otherwise disposed of in the ordinary course of busi-
ness or as disclosed as having been sold in Section 3.4 of
Sellers' Disclosure Letter.
(b) Notwithstanding the foregoing, the parties agree
that the following are expressly excluded from this purchase
and sale and are not included in the Sale Assets (the "Excluded
Assets"):
(i) the Sellers' rights under or pursuant to this
Agreement and the other agreements with the Purchaser contem-
plated hereby;
(ii) the Sellers' minute books and shareholder and
transfer records, tax returns and accounting records; pro-
vided, however, that the Sellers shall deliver to the Purchaser
at the Closing copies of any such tax returns and accounting
records included in the definition of Container Records;
(iii) any of the Sellers' cash and cash equiva-
lents;
(iv) any Containers or Chassis subject to any Secu-
rity Interest unless provisions satisfactory to the Purchaser,
in its sole discretion, shall have been made for the release of
any such Security Interest simultaneously with the Closing;
provided, however, that any Containers or Chassis subject to
any Security Interest for which such provisions shall not have
been made as of the Closing Date shall become subject to the
Management Agreement for Encumbered Equipment immediately fol-
lowing the Closing;
(v) other than the Overseas Properties and the UK
Properties, any freehold, leasehold or other real property in-
terest whatsoever;
(vi) the Sellers' claims for and rights to receive
tax refunds and (except with respect to copies thereof to be
provided pursuant to this Agreement) all tax returns of the
Sellers and their Affiliates and any notes, worksheets, files
or documents related thereto;
(vii) any Sea Containers Containers (except such
rights as are provided with respect thereto pursuant to the Sea
Containers Leases Management Agreement);
(viii) all claims of the Sellers relating to Ex-
cluded Assets and Excluded Liabilities; and
(ix) any Containers or Chassis with respect to which
the Sellers are lessees under leases which expire within six
(6) months after the date hereof.
(c) The parties agree and acknowledge that the Pur-
chaser is not assuming and shall not be responsible or liable
for, and the Sellers shall perform and discharge as and when
due, and shall indemnify and hold harmless the Purchaser from
and against, any and all liabilities or obligations of the
Sellers (whether fixed, contingent or unliquidated, absolute or
otherwise and whether relating to any tort, statutory or regu-
latory obligation, product liability, Environmental Concern,
Taxation, contract, ordinary course operations of the Container
Operations or otherwise) except the Assumed Liabilities spe-
cifically assumed pursuant to Section 1.3 below. The purchase
price which this Agreement provides for is expressly premised
upon and attributable to the limited assumption of liabilities
which is set forth herein.
(d) The Sale Assets shall be conveyed free and clear
of all Claims, liabilities, obligations, liens or encumbrances,
except those which are expressly provided for pursuant to this
Agreement or the agreements executed in connection herewith.
SECTION 1.3. Assumption of Assumed Liabilities. (a)
Subject to the terms and conditions of this Agreement, at the
Closing the Purchaser will assume and agree to pay or dis-
charge, as and when due, or fulfil, and indemnify and hold
harmless the Sellers from and against, only the following li-
abilities and obligations, and only to the extent specified
herein ("Assumed Liabilities"):
(i) all obligations and liabilities assumed pursuant
to the Operating Lease Assignments and Assumptions, the
Assignment of Agency Agreements, the Assignment and Assumption
of Management Agreements, the Intellectual Property As-
signments, the Management Agreement for Encumbered Equipment
and the Sea Containers Leases Management Agreement, the Assign-
ment and Assumption of Equipment Hire Agreements, the Novation
of Automobile Leases and the Assignment and Assumption of Depot
Agreements;
(ii) all obligations and liabilities assumed pursuant
to the Assignment and Assumption of Purchase Commitments;
(iii) each obligation and liability of the Container
Operations reflected on the Final Closing Balance Sheet and
included in the Final Adjusted Net Assets Statement but only to
the extent of the accrual therefor reflected on the Final Ad-
justed Net Assets Statement;
(iv) all obligations and liabilities relating to the
Container Operations or the Sale Assets which arise as a result
of acts or omissions of the Purchaser after the Closing Date or
arising out of the operation by the Purchaser of the Container
Operations after the Closing Date (other than Excluded Li-
abilities);
(v) subject to Sections 5.2(c) and 6.9, all obliga-
tions and liabilities under the Holding Documents, the
Buckingham Palace Road Sub-sub-underlease and the Other Con-
tracts arising after the Closing Date (other than Excluded Li-
abilities);
(vi) all obligations and liabilities to Employees
arising after the Closing Date out of their employment with the
Purchaser, and any obligations undertaken by the Purchaser in
respect of Employees pursuant to this Agreement, excluding any
liabilities or obligations under any Benefit Plan or arising
out of any actions or omissions of any Seller or any Affiliate
thereof; and
(vii) any obligations of the Purchaser pursuant to the
terms of Sections 1.8(a) and (c) of this Agreement.
Except as expressly provided in the foregoing clauses
of this subsection (a), the Purchaser shall not assume any ob-
ligation or liability arising prior to or on the Closing Date
or relating to any such period prior to such date.
(b) The Purchaser will not assume or be liable for,
and the Sellers will indemnify and hold harmless the Purchaser
from and against, the following liabilities or obligations
(herein referred to as "Excluded Liabilities") and, notwith-
standing any implication to the contrary above, none of the
following liabilities or obligations are "Assumed Liabilities"
for purposes of this Agreement:
(i) any of the Sellers' liabilities or obligations
under this Agreement and the other agreements with the Pur-
chaser contemplated hereby;
(ii) any of the Sellers' liabilities or obligations
for expenses or fees incident to or arising out of the negotia-
tion, preparation, approval or authorization of this Agreement
or the consummation (or preparation for the consummation) of
the transactions contemplated hereby, including without limita-
tion, financial advisors, attorneys' and accountants' fees;
(iii) any indebtedness for money borrowed, of the
Sellers, including without limitation, indebtedness for money
borrowed secured by Sale Assets or any liability or obligation
resulting from any Seller being a guarantor, indemnitor, surety
or accommodation party of any other Person (including of any
other Seller or any Affiliate thereof);
(iv) any liability or obligation of the Sellers or
their Affiliates with respect to Taxation; and any liability
for interest, penalties or additions with respect to any such
Taxation;
(v) any liability or obligation of the Sellers or
their Affiliates which relates to the Excluded Assets;
(vi) any contingent liability of any nature whatso-
ever of the Sellers or their Affiliates arising at any time or
arising out of the Container Operations on or prior to the
Closing Date or due to circumstances therein on or prior to
such date;
(vii) any liability or obligation (whether contingent
or otherwise) of the Sellers or their Affiliates relating to
any Environmental Concern;
(viii) any liability or obligation arising in relation
to any Claim, litigation or proceeding by the shareholders of
the Company or the lenders to, or creditors or financiers of,
the Sellers, including without limitation, the holders of the
10 3/4% Notes Due 2002, the 8% Notes Due 2000 and the 7 1/8%
Notes Due 1998 issued by Tiphook Finance Corporation, or any
liability or obligation of the Sellers and their Affiliates
arising in respect of any other Claim, litigation or proceeding
involving or relating directly or indirectly to the Sellers or
any of their Affiliates, including, without limitation, any of
the foregoing which are disclosed by the Sellers in connection
with the execution of this Agreement (but excluding, for the
avoidance of doubt in each case, any liability or obligation
arising out of any litigation in respect of any act or omission
of the Purchaser);
(ix) any liability in respect of, or under, the Sell-
ers' lease of its AS400 computer hardware and obligations;
provided, however, that the Purchaser shall have the rights and
obligations in respect of the AS400 computer hardware specified
in the Transitional Services Agreement;
(x) any liability or obligation (whether contingent
or otherwise) which arises out of any breach or non-performance
on the part of any Seller or Affiliate thereof of any agree-
ment, covenant or obligation to which it is a party (except to
the extent resulting from any breach or non-performance by the
Purchaser hereunder) or under any Ancillary Document by which
it is obligated, or out of any failure to comply with any law,
rule, regulation or other requirement of Government Authority;
and
(xi) any other liability or obligation, fixed or con-
tingent, of the Sellers or their Affiliates not assumed by the
Purchaser under Section 1.3(a) of this Agreement or expressly
assumed pursuant to other agreements executed in connection
with this Agreement.
SECTION 1.4. Consideration. (a) Subject to the
terms and conditions of this Agreement, in reliance on the rep-
resentations, warranties and agreements of the Sellers con-
tained herein and in consideration of the sale, assignment and
transfer of the Sale Assets referred to in Section 1.2, at the
Closing the Purchaser will assume the Assumed Liabilities and
pay to the Sellers or the Escrow Agent, as appropriate, pound
sterling 757 million, reduced by pound sterling 6.5 million for
the decrease in working capital from 30 September 1993 to
31 October 1993 and as adjusted pursuant to the following sentence.
The amount determined pursuant to the previous sentence shall, except
as specified in the following proviso be either (i) increased by one
pound sterling for each pound sterling by which Total Adjusted
Net Assets, as shown on the Estimated Adjusted Net Assets
Statement, exceeds pound sterling 633,226,000 or (ii) decreased by
one pound sterling for each pound sterling by which the Total Adjusted
Net Assets, as shown on the Estimated Adjusted Net Assets
Statement, is less than pound sterling 633,226,000; provided
however that in the event that (x) the net book value of the
Containers and Chassis, other than Disposal Containers and Disposal
Chassis and Leased-Out Containers and Leased-Out Chassis, in each case
as of the Closing Date and reflected on the Estimated Adjusted
Net Assets Statement shall be less than pound sterling 598,247,000,
there shall (in addition to any adjustment made pursuant to sub-
clauses (i) or (ii) of this sentence) be a reduction by an
amount equal to 18.41 pence for each pound sterling of the de-
crease in such net book value (the total amount of cash to be
paid at Closing pursuant to this Section 1.4(a), including any
reduction required to be made pursuant to the last sentence of
this Section 1.4(a), is hereinafter referred to as the "Initial
Purchase Price"). If the Purchaser exercises the DPP Option
set forth in Section 1.6(b) hereof, the Initial Purchase Price
and the Final Purchase Price, without duplication, shall each
be reduced by pound sterling 1.167 million.
(b) At the Closing, the Initial Purchase Price (less
the amount of the Purchase Price in Escrow (as defined in the
following sentence)) shall be paid by wire transfer of im-
mediately available funds to such account on behalf of each of
the Sellers in the United Kingdom as the Sellers shall direct
on account of the Final Purchase Price for the Sale Assets as
finally calculated pursuant to this Section 1.4; provided,
however, that pound sterling 314,422,420 of such Initial
Purchase Price shall be paid to Sellers by transferring
US$ 460,000,000 to Sellers to such account in the United States
as Sellers shall direct, with the balance of such portion of the
Initial Purchase Price to be paid in Pounds Sterling. At the
Closing, the Purchaser shall deliver an aggregate of
pound sterling 44,250,000 of the Initial Purchase Price, plus
the Adjustment Amount, if any (the "Purchase Price in Escrow"),
by wire transfer of immediately available funds to three (3)
separate escrow accounts (the "Escrow Accounts") with an escrow
agent (the "Escrow Agent") (which shall be an entity of Bank of
America, or such other prime bank as may be reasonably required by
the Purchaser). The Purchase Price in Escrow shall be applied by
the Escrow Agent in accordance with this Agreement and the escrow
agreement substantially in the Agreed Form (or in such other form
as may be reasonably required by the Escrow Agent) (the "Escrow
Agreement"). Of the pound sterling 44,250,000 referred to in the
immediately preceding sentence, (i) pound sterling 37,250,000 (the
"General Escrow") shall be paid into an escrow account (the "General
Escrow Account") pursuant to the Escrow Agreement and disbursed in
accordance with the provisions of paragraph (x) of this Section 1.4(b)
and in accordance with such Escrow Agreement and
(ii) pound sterling 7,000,000 (the "Repairs Escrow") shall be paid
into an escrow account (the "Repairs Escrow Account") pursuant to the
Escrow Agreement and disbursed in accordance with the provisions of
paragraph (y) of this Section 1.4(b) and in accordance with such Escrow
Agreement. In addition to the amounts to be paid into the General
Escrow Account and the Repairs Escrow Account pursuant to the
immediately preceding sentence, at the Closing the Purchaser
shall deliver the Adjustment Amount, if any, into an escrow
account (the "Adjustment Escrow Account") pursuant to the pro-
visions of the Escrow Agreement, which amount shall be dis-
bursed in accordance with the provisions of paragraph (z) of
this Section 1.4(b) and in accordance with such Escrow Agree-
ment. Interest on the Purchase Price in Escrow earned from
and after the date of deposit thereof shall become part of the
Escrow Accounts. The Purchase Price in Escrow shall be trans-
ferred from the Escrow Accounts to the Purchaser or Sellers, as
appropriate, pursuant to the following provisions:
(x) the Purchaser shall be entitled to make a Claim
against the General Escrow Account (i) if the amount
of Total Adjusted Net Assets shown on the Estimated
Adjusted Net Assets Statement is greater than the
Total Adjusted Net Assets shown on the Final Adjusted
Net Assets Statement, in which case the Purchaser
may, under the circumstances set forth in Section
1.4(d) (but shall not be required to), make a claim
against the General Escrow Account for the amount of
any such differential, (ii) to the extent that any
amount is due to the Purchaser as a result of the
penultimate sentence of subsection (c) of this Sec-
tion 1.4, in which case the Purchaser may, under the
circumstances set forth in Section 1.4(d) (but shall
not be required to), make a claim against the General
Escrow Account for any amount so due to the Purchaser
or (iii) if the Purchaser shall make any claim for
indemnification pursuant to Article XI of this Agree-
ment or any claim under any Ancillary Document; or
(y) subject to sub-paragraphs (A) to (C) below (which
shall govern the particular circumstances set forth
therein), if the amounts required to repair Chassis
or Containers transferred to the Purchaser at the
Closing, including any Impaired Chassis or Impaired
Containers, to Standard IICL-4 (in the case of Dry
Cargo Containers), to Standard IICL Guide (in the
case of Chassis) or to Standard for Tank Containers
(in the case of Tank Containers), exceed the sum of
(i) the amount reflected in the accrual relating to
such repairs shown on the Estimated Closing Balance
Sheet and (ii) the amounts recovered by the Purchaser
from third parties (including, without limitation,
customers, depot owners, manufacturers and insurers),
the Purchaser shall be entitled to make a Claim
against the Repairs Escrow Account for the amount of
any such excess and any Losses arising in connection
with such excess, and the Purchaser covenants and
agrees to use reasonable endeavours to recover any
amounts due from third parties in a reasonably timely
fashion. The Purchaser shall also be entitled to
make a claim against the Repairs Escrow Account under
the circumstances set forth in clause (i) or (ii) of
paragraph (x) of this Section 1.4(b).
(A) Available Units. With respect to any Con-
tainer or Chassis transferred to the Purchaser
at the Closing which is (i) not on hire as of
the Closing Date and (ii) classified by Sellers
in Subpart A of Parts I and II of Exhibit A as
"available" (each an "Available Unit") as of the
Closing Date, the Purchaser shall be entitled to
make a Claim against the Repairs Escrow Account
to repair such Available Unit to the standards
set forth in the first sentence of this para-
graph (y) if any such Available Unit is declined
to be hired by any prospective lessee of any
such Available Unit during the six-month period
following the Closing Date. In the event that
the Purchaser shall make a Claim against the
Repairs Escrow Account, in respect of repairs to
Containers or Chassis covered by this
subparagraph (A), the Purchaser covenants and
agrees that, pursuant to Section 6.8 of this
Agreement, it shall use reasonable endeavours to
pursue any claim the Purchaser may have against
depots in respect of amounts so paid to the Pur-
chaser from the Repairs Escrow Account (but
without prejudice to the Purchaser's right to
make a claim against and receive payment from
the Repairs Escrow Account in respect of such
amount before or while pursuing the relevant
depot). Any amounts recovered by the Purchaser
from any depot relating to the repair of an
Available Unit in respect of which the Purchaser
shall have made and recovered a Claim against
the Repairs Escrow Account shall (i) if such
amount is recovered less than six months after
the Closing be paid into the Repairs Escrow Ac-
count by the Purchaser or (ii) if such amount is
recovered more than six months after the Closing
be paid directly to the Sellers by the Pur-
chaser. Following the six-month anniversary of
the Closing Date, the Purchaser shall have no
further recourse against the Sellers in respect
of the repair of any such Available Units, save
for any Claims against the Repairs Escrow Ac-
count which have not been resolved as of such
six-month anniversary;
(B) Unrepaired Units. With respect to any
Unrepaired Unit as of the Closing Date, the ref-
erence to a Standard in the first sentence of
this paragraph (y) shall be construed as a ref-
erence to that standard as increased so as to
cover fair wear and tear on that unit, provided
that the Purchaser shall not be entitled to re-
cover more than pound sterling 700,000 in aggregate
in respect of fair wear and tear. With respect
to any Unrepaired Unit as of the Closing Date where
the immediately preceding lessee of the Container
or Chassis is responsible for all or part of the
repair of the relevant Container or Chassis, the
Purchaser shall only be entitled to make a claim
under the first sentence of this paragraph (y)
following a period of 60 days from the date on
which such lessee was requested to approve the
repair of the relevant Container or Chassis.
During that period of 60 days, the Purchaser
shall use reasonable endeavours to pursue any
claim it may have against such lessee in respect
of the repair; and
(C) Excess Disposal Chassis and Excess Disposal Con-
tainers. With respect to any Container or Chas-
sis which is an Excess Disposal Container or an
Excess Disposal Chassis, the Purchaser shall be
entitled to make a claim against the Repairs
Escrow Account for the amount, if any, by which
the net book value of any such Excess Disposal
Container or any such Excess Disposal Chassis as
of the Closing Date, as reflected in Parts I and
II of Exhibit A as of that date, exceeds either
(i) the actual sale proceeds received by the
Purchaser or any of its Affiliates in respect of
any such Excess Disposal Container or Excess
Disposal Chassis or (ii) if not sold prior to
the five-month anniversary of the Closing Date,
the Purchaser's reasonable good faith estimate
of the proceeds which could be realized upon the
sale of any such Excess Disposal Container or
Excess Disposal Chassis;
provided that no claim may be made against the Re-
pairs Escrow Account for Chassis or Containers which
are on-hire at the Closing Date unless:
(i) the lessee of any on-hire Chassis or Container
is not obliged either to maintain such Chassis
or Container to the standards set forth in the
first sentence of this paragraph (y) (fair wear
and tear excepted) or to pay the lessor in re-
spect of the cost required to repair the Con-
tainer or Chassis to such standards (fair wear
and tear excepted) (but excluding for these pur-
poses Self Insured Units, or any Container or
Chassis covered by DPP);
(ii) the on-hire Chassis or Container requires repair
which would normally be covered by a manufactur-
ers warranty but for which no warranty is avail-
able to the Purchaser (save because the warranty
period has time expired);
and provided also that no claim may be made against
the Repairs Escrow Account for Disposal Chassis or
Disposal Containers unless they are Excess Disposal
Chassis or Excess Disposal Containers (in which case
sub-paragraph (C) above shall apply); or
(z) the Purchaser shall be entitled to make a Claim
against the Adjustment Escrow Account on or after the
date on which the Final Closing Balance Sheet and the
Final Adjusted Net Assets Statement shall have been
definitively determined pursuant to subsections (g)
through (m) of this Section 1.4, in which case the
amount, if any, with respect to which the Purchaser
shall be entitled to make a Claim against the Adjust-
ment Escrow Account shall be the amount resulting
from the Final Closing Balance Sheet or the Final
Adjusted Net Assets Statement in respect of any item
included in the Disputed Amount and the Adjustment
Escrow Account shall be exhausted before any Claim
for such amount can be made directly against the
Sellers. On or after the date of definitive resolu-
tion of the Final Closing Balance Sheet:
(A) if the part of the Disputed Amount in respect of
which it is definitively resolved (disregarding
the right to a payment of up to pound sterling
3.5 million by virtue of the penultimate sentence
of subsection (e) of Section 1.4) that the Sellers
had a valid claim to payment at Closing (by
reference to the facts as derived from the Final
Adjusted Net Assets Statement) (the "Valid Claim
Amount") is less than the part of the Disputed
Amount in respect of which it is definitively
resolved (on the same basis) that the Sellers did
not have a valid claim to payment at Closing (the
"Invalid Claim Amount"), the Sellers shall within two
Business Days of such definitive resolution pay
to the Purchaser one fifth of the excess of the
Invalid Claim Amount over the Valid Claim
Amount;
(B) if the Valid Claim Amount is greater than the
Invalid Claim Amount, the Purchaser shall within
two Business Days of such definitive resolution
pay to the Sellers one fifth of the excess of
the Valid Claim Amount over the Invalid Claim
Amount;
(C) if the amount actually paid to the Sellers on
Closing in respect of the Disputed Amount (by
virtue of the penultimate sentence of subsection
(e) of Section 1.4) is greater than the Valid
Claim Amount, the Sellers shall within two Busi-
ness Days of the definitive resolution of the
Final Closing Balance Sheet pay to the Purchaser
the amount of the excess (together with interest
at a rate per annum equal to two percent over
Barclays Bank PLC Base Rate in effect from time
to time during such period, based on a 365-day
year) and the balance of the Adjustment Escrow
Account shall be paid at the same time by the
Escrow Agent to the Purchaser (and, for the
avoidance of doubt, no amount of it shall be
paid to the Sellers) together with all interest
actually earned on it (after deduction or provi-
sion for all applicable Taxation in respect of
any such interest);
(D) if the amount actually paid to the Sellers on
Closing in respect of the Disputed Amount (by
virtue of the penultimate sentence of subsection
(e) of Section 1.4) is less than the Valid Claim
Amount, the shortfall shall within two Business
Days of the definitive resolution of the Final
Closing Balance Sheet be paid by the Escrow
Agent to the Sellers out of the Adjustment Es-
crow Account together with all interest actually
earned on that amount (after deduction or provi-
sion for all applicable Taxation in respect of
any such interest); and any balance of the
Adjustment Escrow Account shall be paid at the
same time by the Escrow Agent to the Purchaser
together with all interest actually earned on it
(after deduction or provision for all applicable
Taxation in respect of any such interest).
Notwithstanding any other provision of this Agree-
ment, no amount shall be payable out of any of the Escrow Ac-
counts to a party which has not fully discharged its obliga-
tion, if any, to make a payment to the other pursuant to sub-
paragraphs (A) or (B) of this paragraph (z); provided, how-
ever, that in such event, the amount, if any, payable pursuant
to sub-paragraphs (A) or (B) of this paragraph (z) shall be
payable out of any of the Escrow Accounts so as to discharge
the obligation of any such party.
If the liabilities, costs and expenses in respect of
the contingencies addressed in the Repairs Escrow Account shall
exceed pound sterling 7,000,000, any liabilities, costs or
expenses in excess of any such amounts shall (notwithstanding
any other recovery of the Purchaser) be payable to the Purchaser
from any amounts remaining in the General Escrow Account in
accordance with the provisions of paragraph (x) above and the
provisions of the Escrow Agreement. Notwithstanding the foregoing
or any other provision of this Section 1.4(b) and except as set
forth in Section 11.3(b), the Purchaser shall not be precluded from
seeking indemnification for any Claim under this Agreement or
any of the Ancillary Documents from any Seller whether or not
funds in any of the Escrow Accounts have been exhausted or oth-
erwise disbursed. For the avoidance of doubt, the parties
agree that (i) any Claims by the Purchaser under the Repairs
Escrow shall, in respect of the amount required to repair a
Container or Chassis to a particular standard, be conclusively
determined as the amount stated in a written estimate obtained
by the Purchaser from an independent third party contractor to
repair the Container or Chassis to that standard; (ii) Pur-
chaser shall have sole discretion in deciding whether to effect
any repair in respect of which a Claim has been made; and
(iii) notwithstanding any recovery by the Purchaser in respect
of the Repairs Escrow Account, in no event shall the Purchaser
be required to actually carry out any prospective repair in re-
spect of which any such recovery has been made.
If the Purchaser shall have made a claim against ei-
ther the General Escrow Account or the Repairs Escrow Account
(i) to recover the excess, if any, of (x) the Total Adjusted
Net Assets shown on the Estimated Adjusted Net Assets Statement
over (y) the Total Adjusted Net Assets shown on the Final Ad-
justed Net Assets Statement or (ii) to the extent that any
amount is due the Purchaser as a result of the penultimate sen-
tence of subsection (c) of this Section 1.4, the Sellers shall,
within two Business Days of the date that any such claim by the
Purchaser is paid from either of such Escrow Accounts, make a
further payment to the Escrow Agent equal to the amount so paid
from either such account, and the Escrow Agent shall forthwith
deposit such amounts in the Escrow Account(s) from which the
funds referred to in this paragraph were paid to the Purchaser.
Unless the Purchaser shall have theretofore delivered
to the Sellers and the Escrow Agent a written notice or notices
(individually, a "Claims Notice") stating that the Purchaser in
good faith has a claim or claims against the Sellers or any of
the Escrow Accounts pursuant to this Section 1.4(b) and an in-
dication of the basis for and, to the extent reasonably
ascertainable, the estimated amount thereof, the remaining Pur-
chase Price in Escrow together with interest actually earned on
such sum (after deduction or provision for all applicable Taxa-
tion) shall be delivered to the Sellers on the following dates:
(i) with respect to the General Escrow Account, on 31 March
1995; (ii) with respect to the Repairs Escrow Account, on the
six-month anniversary of the Closing Date; and (iii) with re-
spect to the Adjustment Escrow Account and subject always to
paragraph (z) above, on the date that each of the items in-
cluded in the Disputed Amount shall have been definitively re-
solved, which the parties hereto shall use best endeavours to
cause to be not later than the third Business Day following the
date on which the Final Adjusted Net Assets Statement and the
Final Closing Balance Sheet shall have been definitively deter-
mined pursuant to subsections (g) through (m) of this Section
1.4; provided, however, that, notwithstanding the foregoing,
no amount of the Purchase Price in Escrow remaining in the Gen-
eral Escrow Account, the Adjustment Escrow Account or, if the
amount in dispute in respect of a Claims Notice is greater than
(x) the aggregate of all amounts then remaining in each of the
General Escrow Account and the Adjustment Escrow Account which
are not subject to any Claim minus (y) pound sterling 3.5 million,
then the Repairs Escrow Account, shall be delivered to the Sellers
unless and until the Final Closing Balance Sheet and the Final
Adjusted Net Assets Statement shall have been definitively re-
solved and any resulting payments to the Purchaser from the
Sellers shall have been made. In the event that the Sellers
shall not have delivered to the Purchaser, within ten Business
Days in the case of the Repairs Escrow Account and the Adjust-
ment Escrow Account (and twenty Business Days in the case of
the General Escrow Account) after the receipt by the Sellers of
such Claims Notice, a written objection to the Purchaser's
claim or claims as set forth in the Claims Notice, the Escrow
Agent shall deliver to the Purchaser any such amount (net of
any applicable Taxation in respect of interest paid thereon),
which amount shall be received by the Purchaser free and clear
of any rights of the Sellers. Notwithstanding the foregoing,
two days after the date on which the Final Closing Balance
Sheet and the Final Adjusted Net Assets Statement shall have
been definitively determined pursuant to subsections (g)
through (m) of this section 1.4, the Purchaser and the Sellers
agree that fifty per cent. (50%) of any sums then remaining in
the Repairs Escrow Account, together with interest actually
earned on such sum (after deduction or provision for applicable
Taxation in respect of any such interest) with respect to which
no Claim Notice has then been delivered shall be delivered to
the Sellers on such date.
In the event the Purchaser shall have delivered to
the Sellers and the Escrow Agent one or more Claims Notices,
the Escrow Agent shall at the end of the relevant periods
specified in clauses (i), (ii) and (iii) of the first sentence
of the preceding paragraph, but subject to the proviso thereto,
deliver to the Sellers an amount equal to the excess, if any,
of (i) the funds then held in the relevant Escrow Account, to-
gether with all interest actually earned thereon (after deduc-
tion or provision for all applicable Taxation), over (ii) the
aggregate amount of the Purchaser's claim or claims theretofore
delivered but not resolved (including any interest thereon), if
any. The Escrow Agent shall continue to hold the balance of
the funds held in the relevant Escrow Account and all interest
actually earned on such balance until such claims of the Pur-
chaser against the Sellers specified in Claims Notices deliv-
ered prior to the end of the periods specified above shall have
been resolved.
A claim against an Escrow Account shall be deemed
resolved when the Purchaser and the Sellers shall so agree in
writing and shall deliver such written agreement to the Escrow
Agent or if the Purchaser and the Sellers cannot so agree
within thirty days of delivery of any Claims Notice, when a
final non-appealable court order of a court of competent juris-
diction has determined whether the claim is required to be paid
from the relevant Escrow Account pursuant to the terms of this
Agreement and the Escrow Agreement.
It is understood and agreed between the parties that
in the event the Purchaser has a legal claim against any third
party with respect to any amounts recovered from the Repairs
Escrow Account or the General Escrow Account, the Sellers shall
be subrogated to the rights of the Purchaser against any such
third party.
(c) The Initial Purchase Price shall be adjusted to
the Final Purchase Price to reflect the difference between the
amount and composition of the Total Adjusted Net Assets, as
shown on the Estimated Adjusted Net Assets Statement, and on
the Final Adjusted Net Assets Statement. Except as specified
in the following sentence, such further adjustment to the Ini-
tial Purchase Price shall be made by either (i) an increase by
one pound sterling for each pound sterling by which Total Ad-
justed Net Assets, as shown on the Final Adjusted Net Assets
Statement, exceed Total Adjusted Net Assets as shown on the
Estimated Adjusted Net Assets Statement, or (ii) decreased by
one pound sterling for each pound sterling by which Total Ad-
justed Net Assets, as shown on the Final Adjusted Net Assets
Statement, are less than Total Adjusted Net Assets as shown on
the Estimated Adjusted Net Assets Statement. In the event
that the amount of the net book value of the Containers and
Chassis, other than Disposal Containers and Disposal Chassis
and Leased-Out Containers and Leased-Out Chassis, in each case,
as of the Closing Date and included in the Final Adjusted Net
Assets Statement shall be less than the amount of the net book
value of the Containers and Chassis other than Disposal Con-
tainers and Disposal Chassis and Leased-Out Containers and
Leased-Out Chassis, in each case, as of the Closing Date and
respectively, and included in the Estimated Adjusted Net Assets
Statement, the Initial Purchase Price shall (in addition to any
adjustment made pursuant to the immediately preceding sentence
of this Section 1.4(c)) be reduced by an amount equal to 18.41
pence for each pound sterling of the decrease in such net book
value. It is understood and agreed that there shall not be
any purchase price adjustment which is solely attributable to
immaterial variations among types of Dry Cargo Containers or
among types of Tank Containers forming a part of the Sale As-
sets.
(d) Any difference between the final purchase price
as determined pursuant to Section 1.4(c) (the "Final Purchase
Price") and the Initial Purchase Price, shall, within five
Business Days after the Final Closing Balance Sheet and the
Final Adjusted Net Assets Statement are agreed by the Purchaser
and the Sellers or any remaining disputed items are ultimately
determined by the Independent Auditors, be paid by wire trans-
fer in immediately available funds to such account on behalf of
each of the Sellers in the United Kingdom as may be specified
in writing by the party to whom such payment is owed (if the
Sellers are required to make such payment but prohibited by law
from making such payment in whole or in part (or, without limi-
tation, if the Sellers do not actually make the payment for any
other reason), the Purchaser may make a claim against the Gen-
eral Escrow Account); provided, however, that any amount pay-
able by the Sellers to the Purchaser pursuant to this sentence
shall be reduced by any amounts which the Purchaser (i) is en-
titled to withdraw and which, in fact, is so withdrawn from the
Adjustment Escrow Account (other than with respect to any
amount provided in sub-paragraph (b)(z)(C) or (D) above), (ii)
has withdrawn from the Repairs Escrow Account or otherwise re-
covered from the Sellers in respect of Container or Chassis but
only to the extent that the accruals for such repairs included
on the Final Adjusted Net Assets Statement exceed the accruals
for such repairs included on the Estimated Adjusted Net Assets
Statement, (iii) has withdrawn from the General Escrow or oth-
erwise recovered in respect of warranty claims pursuant to Sec-
tion 11.3(a)(i) but only to the extent that the accruals in
respect of the matters giving rise to such claims included on
the Final Adjusted Net Assets Statement exceed the accruals for
such matters included on the Estimated Adjusted Net Assets
Statements, (iv) has withdrawn from the General Escrow Account
or the Repairs Escrow Account pursuant to the penultimate sen-
tence of this paragraph (d); and (v) has received a payment
from the Sellers and funds from the Adjustment Escrow Account
pursuant to paragraph (b)(z)(C) of this Section 1.4. Unless
an Adjustment Amount was paid into the Adjustment Escrow Ac-
count pursuant to Section 1.4(e) (in which case the provisions
set forth in sub-paragraphs 1.4(b)(z) (A) and (B) above shall
apply), any payment to be made pursuant to the preceding sen-
tence shall bear simple interest from and including the Closing
Date through and excluding the date of payment at a rate per
annum equal to two per cent over Barclays Bank PLC Base Rate in
effect from time to time during such period, based on a 365-day
year, and such interest shall be paid by either party at the
time of payment (or, where applicable, added to the claim
against the General Escrow). Any payment required to be made
by the Sellers pursuant to this subsection (d) shall first be
drawn from the Adjustment Escrow Account, if any. Any further
payment shall be a direct payment from the Sellers to Purchaser
which shall not be paid from the General Escrow Account or the
Repairs Escrow Account. Only if the Sellers are prohibited by
law or court order from making any such payment directly, or
otherwise do not make the required payment, shall the payment
be permitted to be made from any of such Escrow Accounts and in
such event only if the Purchaser so requests. For the avoid-
ance of doubt, any payment to be made pursuant to this subsec-
tion (d) shall take into account any payment made pursuant to
subparagraph (b)(z)(C) or (D), to the extent required to avoid
double counting.
(e) No later than ten Business Days prior to the
Closing Date, the Sellers shall jointly prepare, and the
Purchaser's Accountants and the Sellers' Accountants shall
jointly review, the Estimated Closing Balance Sheet and the
Estimated Adjusted Net Assets Statement (each of which shall
set forth the information required to be set forth therein by
the Applicable Accounting Principles and this Agreement and
shall respectively present the financial position and the ad-
justed net assets of the Container Operations as of the Closing
Date accompanied by a certificate in the Agreed Form from each
of the Chairman and the Finance Director of the Company certi-
fying their good faith belief that each of the Estimated Clos-
ing Balance Sheet and the Estimated Adjusted Net Assets State-
ment have been prepared in accordance with the Applicable Ac-
counting Principles and the provisions of this Agreement, as
modified by this section 1.4(e). Each of the Estimated Clos-
ing Balance Sheet and the Estimated Adjusted Net Assets State-
ment shall be prepared in accordance with the Applicable Ac-
counting Principles. During the period from the date of this
Agreement to Closing, the Sellers shall (i) provide the Pur-
chaser and the Purchaser's Accountants with full access to the
Container Records and the facilities and employees of the Con-
tainer Operations and to the Sellers' Accountants (including
their working papers), and (ii) cooperate fully with the Pur-
chaser and the Purchaser's Accountants, including, without lim-
itation, the provision on a timely basis of all information
reasonably requested in connection with the Estimated Closing
Balance Sheet and the Estimated Adjusted Net Assets Statement.
Notwithstanding any other provision of the Agreement, in the
event that the Purchaser shall dispute in good faith the amount
of any item reflected on the Estimated Closing Date Balance
Sheet or the Estimated Adjusted Net Assets Statement,
Purchaser's Accountants shall prepare a report (the "Estimated
Disputed Amount Report") estimating the aggregate amount of any
items disputed by the parties (the "Disputed Amount"), and
listing the adjustments by item and the estimated amounts
thereof, and the President and the Treasurer of the Purchaser
shall certify their good faith belief that the items disputed
in the Estimated Disputed Amount Report were not treated in
accordance with the Applicable Accounting Principles or other-
wise were not correct or not a best estimate, and the adjust-
ments set out therein are required to be made, for the reasons
set out in the Estimated Disputed Amount Report, for the Esti-
mated Net Assets Statement to be prepared in accordance with
the Applicable Accounting Principles and this Agreement, as
modified by this Section 1.4(e). A sum equal to the amount,
if any (the "Adjustment Amount") by which the Disputed Amount
exceeds pound sterling 3.5 million shall be paid into the
Adjustment Escrow Account at the Closing, which amount shall
be part of the Purchase Price in Escrow; provided that, for
the avoidance of doubt, it shall be clear that the first
pound sterling 3.5 million of the Disputed Amount, if any,
shall be paid to the Seller at Closing; provided, however,
that such sum shall be recoverable in accordance with the
provisions of Section 1.4(b) of this Agreement. The parties
agree to use reasonable endeavours to respond to any objections
with respect to the proposed Estimated Closing Balance Sheet,
Estimated Adjusted Net Assets Statement or any amounts to be
paid into the Adjustment Escrow Account and fairly to address
any such objections in a timely manner.
(f) From the Closing Date until the date on which
the Final Closing Balance Sheet and Final Adjusted Net Assets
Statement are agreed or determined pursuant to Section 1.4(l),
the Purchaser shall (i) provide Sellers and Sellers' Ac-
countants with full access to the books, records (including
work papers, schedules, memoranda and other documents), of the
Container Operations for the period prior to the Closing Date
and (ii) cooperate fully, and procure that the Purchaser's Ac-
countants cooperate fully, with Sellers and Sellers' Ac-
countants, including, without limitation, the provision on a
timely basis of all information, including Purchaser's Ac-
countants work papers, reasonably requested in connection with
the Final Closing Balance Sheet and the Final Adjusted Net As-
sets Statement and cooperation (so far as reasonably practi-
cable) in the reviews referred to in Section 1.4(g).
(g) As soon as practicable, but in no event later
than 90 days following the Closing Date, the Purchaser shall
prepare drafts of the Final Closing Balance Sheet and the Final
Adjusted Net Assets Statement (the "First Draft Statements")
and shall deliver them to the Sellers, the Sellers' Accountants
and the Purchaser's Accountants. For a period of 45 days from
such delivery, the Sellers' Accountants and the Purchaser's
Accountants shall conduct separate reviews of the First Draft
Statements.
(h) Once the period for review referred to in Sec-
tion 1.4(g) has elapsed, the Purchaser and the Purchaser's Ac-
countants shall continue to discuss with the Sellers and the
Sellers' Accountants any disputed items on the First Draft
Statements for a further period of 30 days.
(i) If at the end of the 30 day period referred to
in Section 1.4(h) no items on the First Draft Statements are in
dispute, the Purchaser and the Sellers shall be deemed to have
accepted and agreed to the First Draft Statements and such
statements shall constitute the Final Closing Balance Sheet and
Final Adjusted Net Assets Statement and shall be final, binding
and conclusive for the purposes of this Agreement and the An-
cillary Documents.
(j) If the 30 day period referred to in Section
1.4(h) has elapsed and any items on the First Draft Statements
remain in dispute, the Purchaser shall within 15 days of the
end of that period prepare a second draft of the Final Closing
Balance Sheet and Final Adjusted Net Assets Statement (the
"Second Draft Statements") and shall deliver them to the Sell-
ers and the Sellers' Accountants together with an opinion of
the Purchaser's Accountants (the "Purchaser's Accountants'
Opinion") that such Second Draft Statements have been prepared
in accordance with the Applicable Accounting Principles.
(k) If the Sellers dispute any item on the Second
Draft Statements, the Sellers shall, within 15 days of the de-
livery to them of the Second Draft Statements and the
Purchaser's Accountants' Opinion, deliver to the Purchaser and
the Purchaser's Accountants a list of adjustments setting out
in reasonable detail the characterization and amount of all
items disputed in the Second Draft Statements and the basis for
the dispute (the "Sellers' Dispute List"), together with an
opinion of the Sellers' Accountants (the "Sellers' Accountants'
Opinion") that (x) the items disputed in the Second Draft
Statements were not treated in accordance with the Applicable
Accounting Principles and (y) the adjustments set out in the
Sellers' Dispute List are required to be made, for the reasons
given in the Sellers' Dispute List, for the Second Draft State-
ments to be prepared in accordance with the Applicable Account-
ing Principles.
(l) If the Sellers shall not deliver a Sellers' Dis-
pute List and Sellers' Accountants' Opinion within 15 days of
the delivery to them of the Second Draft Statements and the
Purchaser's Accountants' Opinion, the Sellers shall be deemed
to have accepted and agreed to the Second Draft Statements and
such Second Draft Statements shall constitute the Final Closing
Balance Sheet and Final Adjusted Net Assets Statement and shall
be final, binding and conclusive for the purposes of this
Agreement and the Ancillary Documents. If at any time follow-
ing the Closing Date the Sellers and the Purchaser shall agree
in writing to a set of statements for such purpose, such state-
ments shall constitute the Final Closing Balance Sheet and Fi-
nal Adjusted Net Assets Statement and shall be final, binding
and conclusive for the purposes of this Agreement and the An-
cillary Documents.
(m) If within 10 days of the delivery to the Pur-
chaser of the Sellers' Dispute List and Sellers' Accountants'
Opinion there remain items in dispute, then all disputed items
shall be submitted to a firm of United Kingdom recognized ac-
countants of international repute (the "Independent Auditors")
selected by the Sellers and the Purchaser or (in the absence of
agreement as to the selection within a further period of 5
days) by the President for the time being of the Institute of
Chartered Accountants in England and Wales, on the application
of the Sellers or the Purchaser. All fees and expenses relat-
ing to the work, if any, to be performed by the Independent
Auditors shall be borne equally by the Sellers and the Pur-
chaser. The Independent Auditors shall act as experts and not
arbitrators to determine, based on the Second Draft Statements,
the Purchasers' Accountants' Opinion, the Sellers' Dispute
List, the Sellers' Accountants' Opinion and on written and oral
presentations by the Sellers and the Purchaser, only those is-
sues still in dispute. The determination of the Independent
Auditors shall be made as promptly as practicable after their
selection, shall be set out in a written report delivered to
the Sellers and the Purchaser and shall be final, binding and
conclusive for the purposes of this Agreement and the Ancillary
Documents.
(n) In the event that an Adjustment Amount was paid
into the Adjustment Escrow Account pursuant to Section 1.4(e),
then the First Draft Statements and, if relevant, the Second
Draft Statements and the Sellers' Dispute List shall each be
accompanied by a statement showing the amount, if any, of any
item contained in the Estimated Dispute Amount Report which
should be reflected on the Final Adjusted Net Assets Statement.
When the Final Adjusted Net Assets Statement is finally deter-
mined it shall be accompanied by a final statement showing the
original amount of any item contained in the Estimated Disputed
Amount Report and the amount of that item as reflected on the
Final Adjusted Net Assets Statement.
(o) As between the Purchaser and the Sellers, the
Initial Purchase Price and the Final Purchase Price (in each
case, including the Assumed Liabilities) received by the
Sellers shall be apportioned between each Seller in proportion
to the value of the Sale Assets or Assumed Liabilities being
transferred by each of them, such value to be calculated by
reference to the provisions of this Agreement.
SECTION 1.5. Allocation of Consideration. The Pur-
chaser and the Sellers agree that they shall enter into an
agreement (the "Allocation Agreement"), as soon as practicable
after the Closing concerning the allocation of the Purchase
Price (including Assumed Liabilities) among the Sale Assets as
of the Closing Date (the "Allocation"). If the Purchaser and
the Sellers shall not have agreed to the Allocation in ac-
cordance with the procedure set forth below, any disputed as-
pect shall be resolved within 30 days thereof by the Indepen-
dent Auditors to be selected (if not previously selected) in
accordance with Section 1.4 of this Agreement. Purchaser and
the Sellers agree that the Allocation shall be made pursuant to
the following procedure: Purchaser shall deliver to the Sell-
ers an allocation of the Purchase Price and Assumed Liabilities
among the Sale Assets ("Purchaser's Appraisal"). The Sellers
shall be deemed to have accepted and agreed to the allocation
based upon Purchaser's Appraisal in the Allocation Agreement,
unless the Sellers deliver written notice to Purchaser to the
contrary within 10 days after the Sellers' receipt of
Purchaser's Appraisal. If (i) the Sellers so object to the
allocation based upon Purchaser's Appraisal, and Purchaser and
the Sellers are unable to resolve all their differences within
15 days, or (ii) Purchaser fails to deliver Purchaser's Ap-
praisal, the Sellers shall have 30 days to deliver an alloca-
tion to Purchaser of the Purchase Price and Assumed Liabilities
among the Sale Assets ("Sellers' Appraisal"). In the event
the Sellers fail to deliver the Sellers' Appraisal within 45
days of receipt of Purchaser's Appraisal, the Sellers shall be
deemed to have accepted and agreed to the allocation based upon
Purchaser's Appraisal in the Allocation Agreement. Purchaser
shall be deemed to have accepted and agreed to the allocation
based upon the Sellers' Appraisal in the Allocation Agreement
unless Purchaser delivers written notice to the Sellers to the
contrary within 10 days after receipt of Sellers' Appraisal and
Purchaser has delivered an allocation based upon Purchaser's
Appraisal as provided herein. If Purchaser so notifies the
Sellers of its objection to the allocation based upon Sellers'
Appraisal, or if Purchaser and the Sellers each fail to deliver
Purchaser's Appraisal and Sellers' Appraisal, respectively,
Purchaser and the Sellers shall, within 15 days following such
notice, attempt to resolve their differences and any resolution
by them as to any disputed items or amounts shall be final,
binding and conclusive and made part of the Allocation Agree-
ment upon the conclusion of such 15-day period. Any disputed
aspects of the Allocation that remain shall be submitted to the
Independent Auditors within 10 days of the end of such 15-day
period and shall be resolved by the Independent Auditors within
30 days of submission. Purchaser, the Company and the Sellers
agree to act in accordance with the Allocation contained in the
Allocation Agreement in any relevant Tax Returns or similar
filings. All fees and expenses relating to the Purchaser's
Appraisal shall be borne by Purchaser, all fees and expenses
relating to the Sellers' Appraisal shall be borne by the Sell-
ers (unless Purchaser fails to deliver an allocation based upon
the Purchaser's Appraisal within the time periods set forth
herein, in which event such fees and expenses shall be borne by
Purchaser) and all fees and expenses relating to the work per-
formed by the Independent Auditors shall be borne equally by
Purchaser, on the one hand, and the Sellers, on the other hand.
In the event any taxing authority questions the allocation
agreed to by the Sellers and the Purchaser, the Company or the
Purchaser, as appropriate, shall promptly notify the other of
such event and shall inform and consult with the other as to
any such inquiry as it progresses.
SECTION 1.6. Closing. The closing of the transac-
tions contemplated by this Agreement (the "Closing") shall take
place (except where expressly provided otherwise) in London at
the offices of the Purchaser's counsel at 3:00 p.m., local
time, on the later of (i) March 15, 1994 and (ii) the date that
is three Business Days after each of the parties shall have
notice that each of the conditions set forth in Articles VII
and VIII (other than delivery of executed closing documents,
which shall be delivered at the Closing) has been satisfied or
waived, or at such other time and place as may be agreed upon
by the parties hereto. The documents referred to in subsec-
tions (i) through (v), (viii), (xviii) and (xxi) of Section
1.6(a) shall be delivered in Brussels, Belgium at the Offices
of the Purchaser's counsel simultaneously with the Closing in
London, England and shall be batched (as between the assets and
the rights referred to in any such documents) in the manner
reasonably requested by the Purchaser.
(a) At the Closing, the Sellers will deliver to the
Purchaser:
(i) duly executed Receipt and Acknowledgment of De-
livery;
(ii) all documents of title, if any, necessary to
transfer ownership or otherwise relating to a purchase of the
Containers and Chassis, including all certificates of title
endorsed in blank;
(iii) duly executed counterparts of the Operating
Lease Assignments and Assumptions, together with executed coun-
terparts or copies of all Operating Leases, and all security
therefor (including, without limitation, guarantees, letters of
credit and agreements governing any security or other deposits
relating to Containers or Chassis) and all daily rent and other
charges paid to Sellers and their Affiliates in respect of any
period after the Closing Date;
(iv) a duly executed counterpart of the Assignment of
Manufacturer Warranties, together with executed counterparts
(to the extent available) and/or copies of such sellers' or
manufacturers' warranties;
(v) duly executed counterparts of the Management
Agreement for Encumbered Equipment and Sea Containers Leases,
the Assignment and Assumption of Sellers' Chassis Leases, to-
gether with executed copies of all Sellers' Chassis Leases and
duly executed counterparts of the Secondary Period Agreements
(which shall also be signed by any finance lessors under the
Secondary Period Sellers' Leases);
(vi) executed copies of the consents referred to in
Section 8.8 hereof including executed copies of a Supplemental
Indenture and all documents required to be delivered to the
Indenture Trustee with respect to each series of the Bonds in
form and substance satisfactory to the Purchaser;
(vii) the opinions of counsel referred to in Section
8.7 hereof;
(viii) a duly executed counterpart of the Intellectual
Property Assignment and all further documents concerning or
relating to the Expertise and Intellectual Property Rights to
be transferred to the Purchaser;
(ix) duly executed counterparts of each of the As-
signment and Assumption of Depot Agreements, the Assignment of
Agency Agreements, the Novation of Automobile Leases (which to
the extent available shall also be signed by lessors under the
Automobile Leases), the Assignment and Assumption of Equipment
Hire Agreements and the Assignment of Sellers' Receivables;
(x) a duly executed counterpart of the assignment of
DPP payments contemplated by Section 1.8(b) hereof;
(xi) a schedule of Sellers' Receivables as of Closing
and as of the date of the Estimated Closing Balance Sheet;
(xii) all the Container Records;
(xiii) the Estimated Adjusted Net Assets Statement and
the Initial Adjusted Net Assets Statement, each accompanied by
certifications from the Company's Chairman and Finance Director
pursuant to Section 1.4(e) of this Agreement;
(xiv) all such other deeds, documents, certificates,
assignments, agreements and other instruments as, in the opin-
ion of the Purchaser, are necessary to vest in the Purchaser
legal and beneficial title to the Sale Assets, including with-
out limitation, evidence satisfactory to the Purchaser that the
Security Interests shall have been released and discharged (or
that a particular holder of a Security Interest or finance les-
sor has agreed to release and discharge such Security Interest
upon repayment and arrangements satisfactory to the Purchaser
in its sole discretion have been made to provide such repay-
ment), which would include, without limitation, (x) the deliv-
ery by any holder of a Security Interest or finance lessor to a
third party of an executed release releasing the Sale Assets
subject to such Security Interest from the lien and charge of
such Security Interest, together with instructions to deliver
such release to (or as directed by) the Sellers upon receipt of
payment in the amount referred to in clause (y) below, and (y)
the delivery to the Purchaser of a letter from such holder of a
Security Interest or finance lessor unconditionally agreeing
that, upon the payment of the amounts due upon termination in
respect of any Security Interest specified in such letter, such
holder of a Security Interest or finance lessor would cause the
execution and delivery of such release, together, in either
case, with an arrangement satisfactory to Purchaser, in its
sole discretion, to ensure payment by Sellers of all such
amounts on the Closing Date and evidence that all security reg-
istrations which relate (or could relate) to any Sale Assets
have been removed from official security registers in all rel-
evant jurisdictions;
(xv) a duly executed counterpart of the Assignment
and Assumption of Purchase Commitments (which to the extent
available shall also be signed by the sellers under such
commitments);
(xvi) a certified copy of the letter from Morgan
Grenfell and or Hambro Magan (as defined below) to the London
Stock Exchange pursuant to paragraph 2.14 of The Listing Rules
of the London Stock Exchange in respect of the working capital
statement in the Shareholder Circular;
(xvii) duly executed counterparts of the Non-
Competition and Non-Solicitation Agreements;
(xviii) duly executed counterparts of the Assignment and
Assumption of Management Agreements (which to the extent avail-
able shall also be signed by the owners of the Managed Leases)
and of the Management Agreement for Encumbered Equipment and
Sea Containers Leases;
(xix) a duly executed counterpart of the Escrow Agree-
ment;
(xx) duly executed counterpart of the Buckingham
Palace Road Sub-sub-underlease (if agreed and subject to the
provisions of the Transitional Services Agreement);
(xxi) duly executed copies of the Secondary Period
Agreements;
(xxii) duly executed Sellers' Closing Certificates;
(xxiii) duly executed solvency certificates from each
Seller which is a company incorporated under the laws of En-
gland or a Delaware corporation, in each case, in the Agreed
Form;
(xxiv) unless the DPP Option has been exercised by the
Purchaser, evidence satisfactory to the Purchaser that the DPP
Tail Coverage contemplated by Section 1.8(b) has been obtained
by the Sellers;
(xxv) the Sellers' Chassis Leases relating to all
Leased Chassis, the Sea Containers Leases relating to all Sea
Containers Containers and a duly executed counterpart of the
Sea Containers Leases Management Agreement;
(xxvi) a full and complete list of all of the Sale As-
sets to be purchased by the Purchaser which, in the case of all
Containers to be purchased, shall list each such Container by
serial number, unit number, date of manufacture, on-hire or
off-hire status, original cost, net book value and lessee, if
any;
(xxvii) a duly executed Sublease for 123 Buckingham Pal-
ace Road and, to the extent available as of the Closing Date, a
transfer or assignment of the Holding Documents;
(xxviii) a duly executed counterpart of the Transitional
Services Agreement;
(xxix) a duly executed Cross Receipt;
(xxx) evidence satisfactory to the Purchaser that the
Sellers and their Affiliates shall have seconded Mr. Palmer to
a company not engaged in the Container Operations in accordance
with Section 5.13 of this Agreement; and
(xxxi) all other previously undelivered documents re-
quired hereunder to be delivered by the Sellers to the Pur-
chaser at or prior to the Closing in connection with the trans-
actions contemplated by this Agreement.
(b) At the Closing, the Purchaser will deliver to
the Sellers:
(i) the consideration referred to and determined in
accordance with Section 1.4(a) hereof which is to be delivered
to the Sellers;
(ii) a duly executed counterpart of the Operating
Lease Assignments and Assumptions;
(iii) a duly executed counterpart of the Assignment of
Manufacturer Warranties;
(iv) a duly executed counterpart of the Sea Container
Leases Management Agreement;
(v) executed copies of the consents referred to in
Section 7.6 hereof;
(vi) the opinion of counsel referred to in Section
7.5 hereof;
(vii) a duly executed counterpart of the Intellectual
Property Assignment;
(viii) duly executed counterparts of the Assignment and
Assumption of Depot Agreements, the Assignment of Agency Agree-
ments, the Novation of Automobile Leases, the Assignment and
Assumption of Equipment Hire Agreements and the Assignment of
Sellers' Receivables;
(ix) a duly executed counterpart of the assignment of
DPP payments contemplated by Section 1.8(b) hereof;
(x) a duly executed counterpart of the Assignment
and Assumption of Purchase Commitments;
(xi) duly executed counterparts of the Assignment and
Assumption of Management Agreements with respect to the Managed
Leases and of the Management Agreement for Encumbered Equipment
and Sea Containers Leases;
(xii) a duly executed copy of the 123 Buckingham Pal-
ace Road Sub-sub-underlease (if agreed and subject to the pro-
visions of the Transitional Services Agreement);
(xiii) duly executed counterparts of the Non-
Competition and Non-Solicitation Agreements;
(xiv) duly executed counterparts of the Assignment and
Assumption of Sellers' Chassis Leases and Secondary Period
Agreements;
(xv) a duly executed counterpart of the Escrow Agree-
ment;
(xvi) a duly executed counterpart of the Transitional
Services Agreement;
(xvii) a duly executed copy of the guarantee in the
form set out in Part 2 of the Transitional Services Agreement;
(xviii) a duly executed Purchaser's Closing Certificate;
(xix) all other previously undelivered documents re-
quired hereunder to be delivered by the Purchaser to the Sell-
ers at or prior to the Closing in connection with the transac-
tions contemplated by this Agreement.
SECTION 1.7. Tiphook Trademarks and Trade Names.
(a) Pursuant to the Intellectual Property Assign-
ment, the Sellers will assign to the Purchaser, without charge,
all registered and unregistered trademarks, service marks,
trade names and logos used by any of the Sellers solely in con-
nection with the Container Operations.
(b) Pursuant to the Intellectual Property Assign-
ment, the Sellers will grant the Purchaser, without charge,
royalty-free exclusive perpetual license to utilize the trade
name "Tiphook" or any derivations thereof and any logo, trade-
mark, service mark or trade name owned or used by the Sellers
other than those covered by paragraphs (a) above or (c) below
(the "Names" and "Marks"), which exclusivity shall be in re-
spect of the use of the Names and Marks in the business of
leasing containers (on a worldwide basis) and tank chassis (in
the United States) (and not for use in the business of leasing
over-the-road trailers and rail wagons). The Purchaser and
the Sellers and the Company acknowledge and agree that the
Sellers will continue to use the Names and Marks which include
"Tiphook" in connection with the Sellers' trailer and rail
wagon businesses; but from and after the Closing, the Sellers
and their Affiliates shall not use any Names or Marks which
include "Tiphook" or any confusingly similar name or mark in
connection with the sale or leasing of containers (on a world-
wide basis) or tank chassis (in the United States).
(c) Pursuant to the Intellectual Property Assign-
ment, the Sellers will assign to the Purchaser all right, title
and interest of the Sellers to use the trade name "Sea Contain-
ers" or any derivations thereof or logo, trademark, service
mark or trade name (the "Sea Containers Names and Marks") li-
censed to the Sellers pursuant to the License Agreement dated
as of April 2, 1990 (the "Sea Containers License"), by and
among Sea Containers Ltd., Sea Containers Asia Ltd., Sea Con-
tainers America, Inc., Sea Containers British Isles Ltd. and
Strider II Ltd, as licensors, and Lancaster Holdings Corp.,
Bromley Holdings Corp., Tiphook plc and Alnerny No. 954 Lim-
ited, as licensees. The Purchaser's right to use the Sea Con-
tainers Names and Marks shall be limited to those rights previ-
ously held by Sellers and the Purchaser will use reasonable
commercial endeavours to remove, at its expense, the Sea Con-
tainers Names and Marks and the owner identification plate if
and when any Owned Container bearing any logo, trademark, ser-
vice mark or trade name of Sea Containers is delivered to the
Purchaser or its agent for major repair, but, in any event,
such removal shall be accomplished if and when such container
is repainted by the Purchaser or its agent (it being agreed
that the Purchaser shall be under no obligation to repaint any
such container) or at least prior to the time of sale or dispo-
sition of such container (other than to any of its Affiliates).
The Purchaser shall assume all the obligations and liabilities
of the licensees under the Sea Containers License which are to
be performed during the period following the Closing Date and
indemnify the Sellers against any and all claims, liabilities,
suits or actions that may arise out of the use by the Purchaser
of the Sea Containers Names and Marks as a result of acts or
omissions of the Purchaser (other than infringement or similar
claims relying on an allegation that the Sellers could not law-
fully assign the license described herein or that the use of
the Sea Containers Names and Marks in accordance with such as-
signment infringed on any third party's rights).
SECTION 1.8. Maintenance and Repair; DPP; Commis-
sion, Storage and Handling Charges. (a) As between the Pur-
chaser and the Sellers, the Purchaser will be liable for the
costs of repairing and restoring Containers and Chassis leased
prior to the Closing Date, which are redelivered to a depot
after the Closing Date, except that the Sellers will be liable
for the costs of repairing and restoring any such Containers
and Chassis redelivered after such date which are not covered
by DPP if Sellers or any of their Affiliates have waived the
lessee's obligation to repair. The Sellers shall not be li-
able for the costs of repairing and restoring any Self-Insured
Units redelivered after such date which are listed as Part VIII
of Exhibit A, notwithstanding that the Sellers' insurance
policy in respect of the DPP (the "Sellers' DPP") no longer
covers, and the DPP Tail Coverage will not cover, such Self-
Insured Units. The Sellers will, at their own cost, continue
to repair and restore, in the ordinary course of the business
of the Container Operations, Containers and Chassis which are
redelivered to depots on or prior to the Closing Date, to Stan-
dard IICL-4 (in the case of Dry Cargo Containers), to Standard
IICL Guide (in the case of Chassis) or to Standard for Tank
Containers (in the case of Tank Containers), provided, however,
any Seller may, with the prior written consent of the Pur-
chaser, declare any such Container or Chassis a Disposal Con-
tainer or Disposal Chassis and elect not to repair it. Any
repairs to Containers and Chassis which are redelivered to de-
pots on or prior to the Closing Date which have not been made
as of the Closing Date but for which an accrual is to be made
in the Estimated Closing Balance Sheet and the Final Closing
Balance Sheet shall be the responsibility of the Purchaser to
the extent of such accrual. The Repairs Escrow shall apply to
the extent the costs of repairing any such Container or Chassis
exceeds any such accrual and nothing in this Section 1.8 shall
affect or in any way alter the Purchaser's rights against the
Repairs Escrow.
(b) Part III of Exhibit A identifies each Dry Cargo
Container lessee participating in a damage protection plan or
which is otherwise the beneficiary of any program or arrange-
ment offered by any Seller or any Affiliate thereof ("DPP"),
and Part VIII of Exhibit A identifies each Tank Container or
Chassis lessee participating in the DPP. On the Closing Date,
the Sellers and any Affiliate of any of the Sellers will assign
to the Purchaser pursuant to the Operating Leases Assignments
and Assumptions all of their right, title and interest in and
to the right to receive payments under the DPP, whether identi-
fied directly as a DPP payment or included indirectly as part
of the payments under Operating Leases, with respect to the
Containers and Chassis in respect of the period commencing on
and following the Closing Date. Prior to the Closing, the
Sellers covenant and agree to cause the insurer under the Sell-
ers' DPP as of the date hereof, to continue the policy of DPP
insurance, a copy of which is attached hereto as part of Part
VIII of Exhibit A, for the Containers and Chassis on hire on
the Closing Date, which were covered by such insurance on terms
satisfactory to the Purchaser (the "DPP Tail Coverage"). Such
DPP Tail Coverage shall name Purchaser as the insured party.
The Purchaser shall have the right to participate in the nego-
tiation and drafting of the terms of the policy. The Pur-
chaser shall have the option (exercisable in its sole discre-
tion) to elect, on or prior to the fifth day preceding the
Closing Date, not to have the Sellers purchase the DPP Tail
Coverage (the "DPP Option"). In the event that the Purchaser
exercises the DPP Option, the Initial Purchase Price and the
Final Purchase Price, without duplication shall be reduced by
pound sterling 1.167 million as provided in Section 1.4(a) hereof,
and Seller shall assign to the Purchaser all of Sellers' right,
title and interest in the Sellers' DPP.
(c) The Purchaser shall assume the payment to the
Sellers' agents of commissions relating to the Containers or
Chassis which relate to any period of hire subsequent to the
Closing Date (but only to the extent that any such commissions
are payable ratably over the entire on-hire period for any such
period which include on-hire periods both prior to and follow-
ing the Closing Date), and the Sellers will be responsible for
and will defend, indemnify and hold the Purchaser harmless
against any claims by the Sellers' agents which relate to any
period ending on or prior to the Closing Date and the Sellers
will be responsible for such agents' commissions, except that
the Purchaser shall be responsible for any such commissions to
the extent reflected in an accrual which is to be included in
the Final Closing Balance Sheet.
(d) The Sellers shall pay and discharge all storage
and handling charges and any other depot fees relating to the
Containers and Chassis, to the extent they relate to any period
on or prior to the Closing Date, except to the extent reflected
in an accrual which is to be included in the Final Closing Bal-
ance Sheet. The Purchaser shall pay and discharge all such
storage and handling charges, to the extent they relate to any
period after the Closing Date or, if they relate to any period
on or prior to the Closing Date, the Purchaser shall pay and
discharge such charges to the extent reflected in an accrual
which is included in the Final Closing Balance Sheet.
(e) Any amounts to be earned under any Operating
Lease prior to the Closing Date but not invoiced on or prior to
such date shall be reflected in the Estimated Closing Balance
Sheet and the Final Closing Balance Sheet and included on the
Estimated Adjusted Net Assets Statement and Final Adjusted Net
Assets Statement as a current asset under "Other debtors" and
any amounts paid to the Sellers on or prior to the Closing Date
in respect of any period commencing after the Closing Date
shall be reflected on the Estimated and Final Closing Balance
Sheets and included on the Estimated and Final Adjusted Net
Assets Statement as a current liability under "Other Accruals".
SECTION 1.9. Sellers' Receivables. In determining
the net book value of the Sellers' Receivables for the purpose
of the Estimated Closing Balance Sheet, the Estimated Adjusted
Net Assets Statement, the Final Closing Balance Sheet or the
Final Adjusted Net Assets Statement, the principles set out in
the Applicable Accounting Principles shall be applied.
SECTION 1.10. Impaired Containers. (a) Pursuant to
Sections 1.2 and 1.4 hereof, the Purchaser shall on the Closing
Date purchase all the Impaired Containers and Impaired Chassis
as of that date.
(b) Any Container or Chassis reflected as an Im-
paired Container or Impaired Chassis on the Estimated Closing
Balance Sheet, the Estimated Adjusted Net Assets Statement, the
Final Closing Balance Sheet, or the Final Adjusted Net Assets
Statement shall be valued in accordance with the principles set
out in the Applicable Accounting Principles.
SECTION 1.11. Title. Title to all of the Sale As-
sets (including without limitation the Containers and Chassis)
being sold and purchased hereunder which is capable of being
transferred by delivery shall pass by delivery at the Closing.
SECTION 1.12. Further Assurances. (a) After the
Closing, the Sellers shall (and shall procure that their re-
spective Affiliates shall) from time to time, at the request of
the Purchaser and without further cost or expense to the Pur-
chaser, execute and deliver such other necessary instruments of
conveyance and transfer or other documents and to vest in the
Purchaser the full legal and beneficial title to the Sale As-
sets (or in respect of the Overseas Properties such rights and
title as the Sellers possess) being transferred hereunder.
(b) Each of the Sellers hereby constitutes and ap-
points the Purchaser as its true and lawful attorney to perform
on its behalf all acts required by that Seller under Section
1.12(a). The powers of attorney granted by the Sellers under
this Section 1.12(b) are given by way of security for their
obligations under Section 1.12(a) and shall be irrevocable in
accordance with section 4 of the Powers of Attorney Act 1971.
(c) Within 5 days of the Closing Date, the Purchaser
shall prepare and deliver an updated Exhibit A to the extent
required by this Agreement and shall provide the Sellers with
access to its facilities to assist in such preparation and de-
livery.
ARTICLE II
SECTION 2.
RELATED MATTERS
SECTION 2.1. Full Access to Books and Records. (a)
On and after the Closing, the Sellers will permit the Purchaser
and its auditors, attorneys and other agents to have full ac-
cess to and examine and make copies of all Books and Records of
Sellers or their Affiliates which are not delivered to the Pur-
chaser pursuant to Section 1.6.
(b) Each of the Sellers will cause its employees to
render such assistance as the Purchaser may request in examin-
ing or utilizing records referred to in this Section 2.1. For
a period of ten years following the Closing Date, none of the
Sellers will destroy any Container Records without giving at
least 60 days notice to the Purchaser, and within 60 days of
receipt of such notice, the Sellers shall deliver to the Pur-
chaser or to its order, at the Purchaser's expense, such Books
and Records intended to be destroyed.
SECTION 2.2. Amendment of Exclusivity Letter. The
Sellers, and in particular the Company, hereby agree to amend
the exclusivity arrangements set forth in the Exclusivity Let-
ter by extending the period of exclusivity thereunder until l
May 1994 and to effect such extension by replacing the refer-
ence to "31 January 1994" in Sections 4(a) and (b) of such let-
ter with a reference to "1 May 1994".
SECTION 3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as disclosed (it being understood that implied
disclosures shall not be given effect) in the corresponding
Section of the Sellers' Disclosure Letter, each of the Sellers,
jointly and severally, hereby represents, covenants and war-
rants to the Purchaser, as follows:
SECTION 3.1. Corporate Organization, Etc. (a) Each
of the Sellers is a corporation duly organized and validly ex-
isting (and where such concept exists, in good standing) under
the laws of its respective jurisdiction of incorporation, and
has full corporate power and authority to own and lease the
Sale Assets it now owns or leases. Each of the Sellers is
duly qualified to do business (and, where such concept exists,
is in good standing) in each jurisdiction where such concepts
exist and where the character of the properties owned or leased
by it or the nature of the business conducted by it makes such
qualification necessary.
(b) All jurisdictions in which the Sellers conduct
the Container Operations, directly or through agents are set
forth in Part XXI of Exhibit A.
SECTION 3.2. Authorization, Etc. Each of the Sell-
ers has full corporate power and authority to enter into this
Agreement and each of the Ancillary Documents and to carry out
the transactions contemplated hereby and thereby. Each of the
respective boards of directors of the Sellers has taken all
action required by law, its Memorandum and Articles of Associa-
tion, Certificate of Incorporation, By-Laws or other organic
instruments (collectively "Organic Instruments") or otherwise
required to be taken by it to authorize the execution and de-
livery of this Agreement and the consummation of the transac-
tions contemplated hereby, and this Agreement is, and each of
the Ancillary Documents to which it is a party will be, a valid
and binding agreement enforceable in accordance with its terms.
Except as contemplated by this Agreement, no other corporate
action by the Sellers is necessary to consummate the transac-
tions contemplated hereby.
SECTION 3.3. No Violation. Neither the execution
and delivery of this Agreement and the Ancillary Documents nor
the consummation of the transactions contemplated hereby and
thereby will (a) violate any provision of the Organic Instru-
ments of any of the Sellers, or (b) except as specified in Sec-
tion 3.3 of the Sellers' Disclosure Letter, violate or be in
conflict with, or constitute a default (or any event which,
with notice or lapse of time or both, would constitute a de-
fault) under, or result in the termination of (or give rise to
a right of termination of), or result in the creation or impo-
sition of any security interest, lien or other encumbrance upon
all or any part of the Sale Assets under, any agreement to
which any of the Sellers is a party or by which any of them is
bound, or to which any of the Sale Assets or the Container Op-
erations is subject, or (c) except as specified in Section 3.3
of the Sellers' Disclosure Letter, violate any statute or law
or judgment, decree, order, regulation or rule of any court or
other Government Authority applicable to the actions of the
Sellers (it being agreed that no representation is made hereby
with respect to the execution and delivery of this Agreement
and the Ancillary Documents or the consummation of the transac-
tions contemplated hereby or thereby under any antitrust or
competition legislation or regulation), or (d) give rise to any
right of rescission or similar remedy under any law. Other
than as disclosed in Section 3.3 of the Sellers' Disclosure
Letter and other than pursuant to this Agreement, there are no
rights of first refusal with respect to, options or rights to
acquire, all or any of the Sale Assets.
SECTION 3.4. Interim Operations. (a) Since April
30, 1993, the Container Operations have been conducted only in
the ordinary and usual course consistent with the Sellers' past
practice over the course of the fiscal year ended on said date.
Since April 30, 1993, there has not been any material adverse
change in the assets, liabilities, results of operations, busi-
ness prospects or conditions (financial or otherwise) of the
Container Operations or in the Sale Assets, taken as a whole,
and the Sellers are not aware of any circumstances that, prior
to Closing, could reasonably be expected to result in such a
material adverse change. Since April 30, 1993, the Sale As-
sets have not been materially affected in any way as a result
of flood, fire, explosion or other casualty (whether or not
covered by insurance).
(b) Except as disclosed in Section 3.4 of the Sell-
ers' Disclosure Letter, since April 30, 1993, there has not
been:
(i) any change in the course of dealing with any of
the Sellers' suppliers, customers, employees or labor unions,
or any change in any Seller's method of doing business which
has had or could reasonably be expected to have a material ad-
verse effect on the Container Operations or the Sale Assets;
(ii) any sale, lease, abandonment, licensing, trans-
fer or other disposition of any assets or the rights of the
Container Operations, except for transactions in the ordinary
course of business of the Container Operations on commercially
reasonable terms, and dispositions of other assets which are
immaterial to or no longer usable in the Container Operations;
(iii) any new Operating Lease or series of Operating
Leases with the same party in respect of Dry Cargo Containers
that carries or is likely to carry, 500 or more TEU, or any new
Operating Lease or series of Operating Leases with the same
party in respect of Tank Containers that carries or is likely
to carry, 30 or more units entered into by any of the Sellers;
(iv) any indebtedness for borrowed money (or any con-
tingent obligation as guarantor, surety or otherwise with re-
spect to any indebtedness or other obligation whatsoever of any
other Person) incurred by a Seller which result in the creation
of any direct or indirect Security Interest in respect of any
of the Sale Assets;
(v) any Commitment (as hereinafter defined) other
than an Operating Lease entered into by any of the Sellers re-
lating to, or otherwise affecting in any way, the Container
Operations, which was not entered into in the ordinary course
of business of the Container Operations on commercially reason-
able terms;
(vi) except in the ordinary course of business of the
Container Operations commercially reasonable terms (including,
without limitation, rates), any amendments, modifications or
changes in the terms of any of the Commitments (other than an
Operating Lease) of any Seller, except as consented to in writ-
ing by the Purchaser;
(vii) any amendments, modifications or changes in the
material terms of any Operating Lease or series of Operating
Leases with the same party in respect of Dry Cargo Containers
that carried, or would carry (after such amendment, modifica-
tion or change), 500 or more TEU, or any Operating Lease or
series of related Operating Leases with the same party in re-
spect of Tank Containers that carried, or would carry (after
such amendment, modification or change), 30 or more units; or
(viii) any settlement, compromise or cancellation of
any debts owed to, or claims of, any Seller in respect of the
Sale Assets or the Container Operations, except in the ordinary
course of business;
(ix) any waiver, surrender or release by or on behalf
of any Seller of any rights in respect of the Sale Assets or
the Container Operations which have any material value;
(x) any change in the policies or practices of any
Seller relating to extensions of credit to any Person or to the
sale of any Sale Assets held by the Sellers;
(xi) any transaction or arrangement between any
Seller, on the one hand, and any shareholder of the Company or
any director or officer of any of the Sellers, on the other
hand, and which relates to or affects the Sale Assets or the
Container Operations, other than pursuant to the arrangements
listed in Section 3.14 of Sellers' Disclosure Letter;
(xii) any material increase or modification in the
compensation arrangements for any Employee or any consultant or
agent of any Seller employed or retained at or in connection
with the Container Operations;
(xiii) any change in respect of Sellers' policies or
practices relating to the collection of accounts receivable or
the payment of accounts payable;
(xiv) any change in the maintenance or repair policies
or practices of Sellers in respect of any Containers or Chas-
sis;
(xv) any other material transaction by or involving
the Container Operations other than in the ordinary and usual
course of business; or
(xvi) any arrangement, understanding or agreement,
whether written or oral, to take any action described in this
Section 3.4(b).
SECTION 3.5. Title to Properties, Encumbrances, Etc.
(a) The Sellers have, as of the date hereof, legal and benefi-
cial title to all of the Owned Containers and Owned Chassis
(subject, in the case of Leased-Out Equipment, to the rights of
the relevant Lease Purchase Debtor), have valid and binding
interests as bailees in the Financed Containers and the Fi-
nanced Chassis pursuant to valid and binding Secured Financing
Agreements, have valid and binding leasehold interests in the
Leased Chassis pursuant to the Sellers' Chassis Leases and the
rights to the Sea Containers Containers specified in the Sea
Containers Agreement to Transfer Benefits and Obligations of
Sellers' Leases. The Sellers will have, as of the Closing
Date, legal and beneficial title to all the Owned Containers
and Owned Chassis (subject, in the case of Leased-Out Equip-
ment, to the rights of the relevant Lease Purchase Debtor),
valid and binding interests as bailees in all Financed Contain-
ers and Financed Chassis pursuant to valid and enforceable Se-
cured Financing Agreements, and valid and binding leasehold
interests in the Leased Chassis pursuant to the Sellers Chassis
Leases and the rights to the Sea Containers Containers speci-
fied in the Sea Containers Agreement to Transfer Benefits and
Obligations of Sellers' Leases. All Sale Assets are free and
clear of all title defects, liens, claims, charges, security
interests, pledges, or other encumbrances of any nature whatso-
ever including, without limitation, options, leases, chattel
mortgages, conditional sales contracts, collateral security
arrangements and other title or interest retention arrange-
ments, except (i) materialmen's, mechanics', carriers',
workmen's, repairmen's or other like liens arising in the ordi-
nary course of business and not yet subject to foreclosure
which do not impair the Purchaser's ability to hold, own, uti-
lize or sell any Container or any Chassis; (ii) liens for cur-
rent taxes not yet due; (iii) Security Interests under Secured
Financing Agreements which shall be released, at the sole cost
and expense of the Sellers, at or before the Closing; (iv) the
Operating Leases; (v) the Sellers' Chassis Leases; and (vi)
claims or encumbrances arising out of the Bankruptcy of the
lessees of Impaired Containers and Impaired Chassis.
Subpart A of each of Parts I and II of Exhibit A ac-
curately and completely set forth the type of Container or
Chassis and the serial number, ownership, disposal or active
status, original cost and net book value with respect to the
Containers and Chassis as of October 31, 1993.
Subparts A and B of each of Parts I and II of Exhibit
A will, when produced on the fifth day after the Closing Date,
accurately and completely set forth the type of Container or
Chassis and the serial number, ownership, status, original
cost, net book value, location and DPP with respect to the Con-
tainers and Chassis as of the Closing Date.
(b) All of the tangible real or personal property
owned or leased by a Seller which is part of the Sale Assets
and used in the Container Operations is presently utilized by
the Seller in the ordinary course of its business.
SECTION 3.6. Contracts and Leases; Commercial Dis-
putes. (a) Section 3.6(B) of the Sellers' Disclosure Letter
contains accurate and complete listings of all Operating
Leases, all Sellers' Chassis Leases, all Purchase Commitments,
all Secured Financing Agreements, Depot Agreements and all
other contracts, commitments, leases, agreements or understand-
ings, whether written or oral, relating to the Container Opera-
tions or the Sale Assets and (i) relating to the use or opera-
tion of depots, (ii) involving the payment of pound sterling
75,000 or more (but excluding any contract of indebtedness for
borrowed money (or any contingent obligation or guaranty,
surety, or otherwise with respect to any indebtedness or other
obligation whatsoever of any other Person) incurred by a Seller
unless such contract or other obligation results in the
creation of any direct or indirect Security Interest in respect
of the Sale Assets) (iii) purporting to limit the freedom of
any Seller or any of its Affiliates to compete in any line of
business in any geographic area or purporting to so limit any
other person for the benefit of a Seller or any of its
Affiliates or to require any Seller or any of its Affiliates to
refrain from hiring any individual or group of individuals, or
(iv) which are otherwise material to the business, prospects or
condition (financial or otherwise) of the Sale Assets or the
Container Operations (the items to be listed in response to
this sentence are collectively referred to hereinafter as the
"Commitments"), to which any of the Sellers or any of its
Affiliates is a party and relating to or affecting or by which
any of the Sale Assets, the Container Operations or any
purchasers thereof may be bound (including, without limitation,
with respect to the Operating Leases and the Leased-Out
Equipment, number and type of the Containers or Chassis
currently leased, customer or lessor identity, and for each
lease, the Seller or Sellers who are the lessors, or lessees,
as the case may be, and rental).
(b) Each Purchase Commitment listed in Part VII of
Exhibit A has been made in the ordinary course of the Sellers'
business. The Purchase Commitments constitute all purchase
commitments of Sellers and their Affiliates for dry cargo con-
tainers, tank containers and tank chassis as at the date of the
Initial Balance Sheet, and neither Sellers nor any of their
Affiliates have any option agreement to purchase dry cargo con-
tainers, tank containers or tank chassis other than pursuant to
the Purchase Commitments. Neither Sellers nor any of their
Affiliates have entered into additional purchase commitments
for dry cargo containers, tank containers or chassis between
the date of the Initial Balance Sheet and the date of this
Agreement or, without the prior written consent of the Pur-
chaser, will enter into any such purchase commitments between
the date of this Agreement and the Closing Date.
(c) Each Commitment is valid, binding and enforce-
able in accordance with its terms and is in full force and ef-
fect; there are no existing defaults by any of the Sellers
thereunder and so far as Sellers are aware no other party to
any Commitment is in default under any of the Commitments
(other than delays in payment by lessees under Operating Leases
which are set forth in Section 3.6(c) of the Sellers' Disclo-
sure Letter), and so far as Sellers are aware no event has
occurred which (whether with or without notice or lapse of
time) would constitute a default by any of the Sellers' there-
under.
(d) Except as set forth in Part X of Exhibit A, so
far as the Sellers are aware, none of the Operating Leases are
held by persons (or their agents) who have ceased operations or
are Bankrupt.
(e) No consent of any person, including, without
limitation, the lessee under any Operating Lease or the lessor
under any Sellers' Chassis Lease, is required in connection
with the assignment by any Seller to the Purchaser of its
right, title and interest in and to such Operating Lease or
Sellers' Chassis Lease, as the case may be. No consent of the
manufacturer or supplier is required in connection with the
assignment by the Sellers under the Assignment of Manufacturer
Warranties. The Sellers have not agreed to the termination or
modification of any manufacturer warranty the term of which had
not expired before November 1993.
(f) There are no pending or, as far as the Sellers
are aware, threatened disputes or any past disputes which could
reasonably be expected to have an adverse effect on the Con-
tainer Operations (other than, in any such case, disputes in-
volving less than pound sterling 25,000) with any of the lessees
of the Containers or Chassis, any agent of Sellers (with respect
to the Containers or Chassis), any depot owners or operators or any
manufacturers and suppliers of the Containers or Chassis, in-
cluding, without limitation, with respect to warranty or simi-
lar claims relating to any known or potential defects in any
containers or chassis.
(g) Part XVIII of Exhibit A sets out all claims made
or resolved by Sellers or their Affiliates in respect of any
manufacturer's warranty relating to any Containers or Chassis
in excess of pound sterling 50,000 since 1 February 1991.
(h) The Sellers are not aware of any matter which
materially contradicts any of the terms of the Holding
Documents.
SECTION 3.7. Litigation. There is no action, suit,
inquiry, proceeding or investigation by or before any court or
other Government Authority against any of the Sellers or, so
far as the Sellers are aware, threatened against any of the
Sellers (i) which relates to the Container Operations or Sale
Assets, (ii) which questions or challenges the validity of this
Agreement or any of the Ancillary Documents or any action taken
or to be taken by any of the Sellers pursuant to this Agreement
or any of the Ancillary Documents or in connection with the
transactions contemplated hereby or thereby, or (iii) by any of
Sellers' security holders, in their capacity as security-
holders, including, without limitation, any shareholders or
former shareholders of the Company or any bondholders of,
former bondholders of, or lenders to the Sellers or to Tiphook
Finance Corporation of any kind. None of the Sellers is sub-
ject to any judgment, order or decree entered in any lawsuit or
proceeding which may have a material adverse effect on the Sale
Assets or the Container Operations. For purposes of this Sec-
tion 3.7, shareholders and bondholders, whether present or
former, shall include any Person having (or having had) any
direct or indirect interest in any equity or debt securities of
the Company or any of the other Sellers or their Affiliates.
SECTION 3.8. Consents and Approvals of Government
Authorities. No consent, approval or authorization of, or fil-
ing with, any Government Authority is required in connection
with the execution, delivery and performance of this Agreement
or any of the Ancillary Documents by the Sellers or the consum-
mation of the transactions by them contemplated hereby or
thereby, other than as set forth herein (it being agreed that
no representation is made hereby with respect to the execution
and delivery of this Agreement and the Ancillary Documents or
the consummation of the transactions contemplated hereby or
thereby under any antitrust or competition legislation or regu-
lation).
SECTION 3.9. Consents. Except as set forth in Sec-
tion 3.9 and Section 3.6(e) of the Sellers' Disclosure Letter
and in relation to the Holding Documents, no consent of any
Person is necessary to the consummation of the transactions by
the Sellers contemplated hereby, including, without limitation,
consents from parties to loans, contracts, leases or other
agreements, including the Commitments.
SECTION 3.10. Compliance with Law. The Sellers are
in compliance with all laws, regulations, standards and other
requirements applicable to the Container Operations and the
Sale Assets of all national and multinational governmental au-
thorities, and of all states, municipalities and other politi-
cal subdivisions and agencies thereof, having jurisdiction over
any of the Sellers, the Container Operations or the Sale As-
sets. None of the Sellers or any of their Affiliates has re-
ceived any notification of any asserted or past failure of any
of the Sellers or any of their Affiliates to comply with such
laws, regulations or other requirements. Nothing herein shall
be deemed to be a representation or warranty by any Seller as
to compliance with any law by any third party.
SECTION 3.11. Good Title Conveyed. At the Closing,
the Sellers shall have (i) complete and unrestricted power and
the unqualified right to sell, assign, transfer and deliver to
the Purchaser, and upon consummation of the transactions con-
templated by this Agreement and the Ancillary Documents, the
Purchaser will acquire legal and marketable title to the Owned
Containers, Owned Chassis (subject, in the case of Leased-Out
Equipment, to rights of the relevant Lease Purchase Debtor) and
the other Sale Assets which are owned by Sellers or any of
their Affiliates, free and clear of all title defects, claims,
charges, options (except as aforesaid), conditional sales con-
tracts, collateral security arrangements, mortgages, pledges,
liens, security interests or encumbrances of any kind, as con-
templated by Section 3.5 hereof (other than (a) materialmen's,
mechanics', carriers', workmen's, repairmen's or other like
liens arising in the ordinary course of business and not yet
subject to foreclosure and which do not impair the Purchaser's
ability to hold, own, utilize or sell any Container, (b) liens
for current taxes not yet due, (c) the Security Interests, each
of which, shall have been released and discharged or with re-
spect to which enforceable and irrevocable arrangements shall
have been entered into to effect such release and discharge, in
each case, at the Sellers' expense and (d) the Operating
Leases) and (e) claims or encumbrances arising out of the Bank-
ruptcy of the lessees of the Impaired Container and the Im-
paired Chassis and, (ii) legal and valid leasehold interests
in the Sellers' Chassis Leases and the other Sale Assets which
are leased by Sellers or their Affiliates. The deeds, en-
dorsements, assignments, other agreements and other instruments
to be executed and delivered to the Purchaser by the Sellers at
the Closing will be valid and binding obligations of the Sell-
ers and their Affiliates enforceable in accordance with their
terms. Such instruments and agreements to be executed and
delivered to the Purchaser by the Sellers and their Affiliates
will effectively transfer to, and vest in the Purchaser, all of
the Sellers' and their Affiliates' right, title and interest in
and to the Sale Assets.
SECTION 3.12. Permits, Licenses, Etc. No licenses,
or orders of, or filings with, any Government Authority are
required in order to permit each Seller to carry on the Con-
tainer Operations as presently conducted. All such licenses
and orders are in full force and effect and, to the extent per-
mitted under applicable law and otherwise transferable, on the
Closing Date will have been assigned or otherwise transferred
to Purchaser or its designee. Nothing contained in this Sec-
tion shall be deemed to be a representation or warranty by any
Seller as to compliance by any Person (other than a Seller or
any of its Affiliates) with any law regarding the obtaining of
permits, licenses or orders or the making of any filing by any
Person (other than a Seller or any of its Affiliates).
SECTION 3.13. Collections. Except for amounts to be
reflected on the Estimated Closing Balance Sheet and the Final
Closing Balance Sheet in accordance with the Applicable Ac-
counting Principles and included in the Estimated Closing Bal-
ance Sheet and the Final Adjusted Net Assets Statement, no
Seller has collected or will collect any amounts (including
charges for DPP) under the Operating Leases (or any other
agreements which relate to the Sale Assets) with respect to any
period of time extending beyond the Closing Date or in advance
of any rental period (or portion thereof) after the Closing
Date for the provision of equipment or services to which such
amounts properly relate.
SECTION 3.14. Affiliate Transaction. Set forth in
Section 3.14 of Sellers' Disclosure Letter is a complete and
correct list of all current transactions or arrangements be-
tween any Seller, on the one hand, and any shareholder of the
Company or any director or officer of any of the Sellers, on
the other hand, and which relate to or affect the Sale Assets
or Container Operations.
SECTION 3.15. Operating Leases. (a) No Operating
Lease has been terminated before its expiration (other than in
accordance with its terms), repudiated or rescinded by any of
the Sellers, or terminated before its expiration (other than in
accordance with its terms), or, as far as the Sellers are
aware, repudiated or rescinded by the relevant lessee under an
Operating Lease and no written notice, or so far as the Sellers
are aware, oral notice, has been received by the Sellers of any
intention or threat by the relevant lessee to do any of the
above. The Sellers are selling the benefit of the Operating
Leases free from all claims, liens, charges, securities, encum-
brances and equities and there is no option, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance or equity on, over or affecting the benefit of the
Operating Leases.
(b) The Sellers have not consented to any sublease
by any lessee of Containers or Chassis under any Operating
Lease and no written notice, or so far as the Sellers are
aware, oral notice, has been received by the Sellers of any
intention by a relevant lessee to grant any such sublease.
(c) The letting of each Container or Chassis pursu-
ant to the relevant Operating Lease complies with all the im-
plied conditions and warranties (if any) arising under the Sup-
ply of Goods and Services Act 1982 (if applicable) or under any
other United States or English law (if applicable), the ap-
plication of which has not been effectively excluded by the
terms of the relevant Operating Lease and complies with any
express warranties given under the relevant Operating Lease.
(d) Each of the Containers or Chassis complied at
the time of delivery to the relevant lessee under an Operating
Lease with the terms of the Operating Lease and with all ap-
plicable terms implied by law including without limitation the
Supply of Goods and Services Act 1982 (to the extent that such
terms have not been validly excluded by the Operating Lease or
otherwise) and at the time of delivery of each Container or
Chassis to a lessee under an Operating Lease the Sellers were
in compliance with their obligations, if any, under the Health
& Safety at Work Act 1974 or similar legislation in other rel-
evant jurisdictions.
SECTION 3.16. Brokers and Finders. None of the
Sellers nor any of their respective officers, directors or em-
ployees has employed any broker or finder or incurred any li-
ability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement
which could result in any liability being imposed on the Pur-
chaser.
SECTION 3.17. Insurance. Section 3.17 of the Sell-
ers' Disclosure Letter contains an accurate and complete de-
scription of all forms of insurance owned or held by the Sell-
ers or their Affiliates with respect to any of the Sale Assets
or the Container Operations, the coverages provided thereunder
and the applicable deductibles and exclusions. All such poli-
cies are in full force and effect, all premiums with respect
thereto covering all insurable events occurring in the periods
up to and including the Closing Date have been or will be paid,
and no notice of cancellation or termination has been received
with respect to any such policy. Each general liability in-
surance policy provides insurance against claims on an occur-
rence basis.
SECTION 3.18. Financial Information. (a) The Ini-
tial Balance Sheet presents the assets and liabilities of the
Container Operations as at 31 October, 1993 in conformity with
generally accepted accounting principles applied in the United
Kingdom ("U.K. GAAP"). The Container Operations did not have,
as of 31 October 1993, any obligations or liabilities, whether
direct or contingent, which were not reflected, or were in ex-
cess of the liabilities reflected, on the Initial Balance Sheet
that would have been required to be so reflected on such Ini-
tial Balance Sheet under U.K. GAAP.
(b) When prepared by the Sellers, the Estimated
Closing Balance Sheet and the Estimated Adjusted Net Assets
Statement, will have been prepared based on the best available
information as of the date thereof and will be presented in
conformity with the principles set forth in the Applicable Ac-
counting Principles and this Agreement.
SECTION 3.19. Intellectual Property. A Seller is
the owner of the Expertise and Intellectual Property Rights,
none of such Expertise or Intellectual Property Rights has been
or is the subject of any pending adverse claim or, so far as
the Sellers are aware, any threatened litigation or claim of
infringement. So far as the Sellers are aware, no other per-
son has infringed, misappropriated or otherwise has used with-
out proper authority any of such intellectual property rights.
The rights and interests in and to any patents or patent ap-
plications, trade names, trademark or service mark registra-
tions or applications, common law trademarks, copyright regis-
trations or applications (including reissues, divisions or con-
tinuations and extensions thereof), logos, software (whether or
not licensed) and registered design rights which are part of
the Expertise and Intellectual Property Rights listed in Part
XI of Exhibit A are all of the Expertise and Intellectual Prop-
erty Rights used in connection with the Sale Assets or in the
Container Operations.
SECTION 3.20. Employees. (a) Part XXIII of Exhibit
A contains a true, correct and complete list of all the Employ-
ees, indicating the rate of pay and all other entitlements un-
der Benefit Plans (as defined in Section 3.20(b)) of each Em-
ployee as of the date hereof, the employing company, the length
of notice required to terminate employment, the date on which
employment commenced (or is deemed to have commenced for statu-
tory purposes), the date of birth and the location of such Em-
ployee. There are no Persons who are not Employees whose con-
tracts of employment shall transfer to the Purchaser on the
Closing Date by virtue of the Transfer of Undertakings (Protec-
tion of Employment) Regulations 1981 (in respect of those em-
ployees located in the UK) and by national legislation giving
effect to the EC Council Directive 77/87 (in respect of those
employees located in the European Community outside the United
Kingdom). The Employees shall remain on their current pay-
rolls until the Closing Date (except for those Employees who
resign or whose employment is terminated, subject always to
Section 9.4) and shall continue to be paid by their employers
all amounts of wages, bonuses and other remuneration payable to
such Employees with respect to periods on or prior to the Clos-
ing Date pursuant to their employment. No Employee shall have
any legal right to any severance, redundancy, termination, dis-
missal, bonus or other payment or claim or other rights arising
solely by reason of the transactions contemplated hereby. No
employee or former employee of the Sellers or any of their Af-
filiates who is not an Employee shall have any legal right to
any severance, redundancy, termination, dismissal, bonus or
other payment from or claim against the Purchaser or any of its
Affiliates on or following the Closing Date.
(b) Section 3.20(b) of the Sellers' Disclosure Let-
ter lists and provides full particulars of each employee wel-
fare benefit plan, pension plan, compensation plan, unemploy-
ment compensation plan, vacation pay, severance pay, benefit
arrangement, car scheme, insurance or hospitalization program
or any other fringe or other employment benefit or remuneration
arrangements which any Seller or Affiliate maintains, partici-
pates in or otherwise has any liability under or provides ben-
efits or compensation to any Employee (the "Benefit Plans").
Except as disclosed in Section 3.20(b) of the Sellers' Disclo-
sure Letter, each Benefit Plan has been administered in compli-
ance with all applicable legal requirements, including record
keeping and filing requirements, and in accordance with the
terms of the relevant plans or other arrangements.
(c) Appropriate accruals under U.K. GAAP for all
obligations in respect of Employees under any Benefit Plans are
reflected in the Initial Balance Sheet.
(d) Section 3.20(d) of the Sellers' Disclosure Let-
ter lists each union, collective bargaining and similar agree-
ment with groups of employees applicable to any Employee and
states whether it is recognized by any of the Sellers and their
Affiliates. The Seller and any Affiliate party to any such
agreement is in compliance with the terms and conditions
thereof. Except as disclosed in Section 3.20(d) of the Sell-
ers' Disclosure Letter, since 1 January 1993, there has been no
strike, work stoppage or slowdown, industrial action or mate-
rial labor dispute involving or affecting any Employee and the
employers of the Employees have complied with all applicable
employment legislation relating to the Employees and with re-
spect to the transactions contemplated hereby.
(e) Save as disclosed on Exhibit J no Employee has
given or received notice terminating his employment and no ac-
tion has been taken by any Seller which could result in con-
structive dismissal of any such Employee.
(f) Since the date of the Initial Balance Sheet, no
change has been made in the rate of remuneration, emoluments,
pension benefits or other terms of employment of any Employee.
(g) No negotiations for any increase in the remu-
neration or benefits of any Employee are current.
(h) Except as set forth in Section 3.20 of the Sell-
ers' Disclosure Letter, no Benefit Plan is subject to the pro-
visions of the United States Employee Retirement Income Secu-
rity Act of 1974, as amended ("ERISA"). No Benefit Plan is
subject to Title IV of ERISA. Any Benefit Plan intended to be
qualified under Section 401 of the Code is so qualified, and
its related trust is exempt from tax under Section 501 of the
Code.
SECTION 3.21. Taxes. (a) All Federal, national,
state, local and other tax returns and reports (including in-
formation returns and reports) of each Seller (insofar as such
returns and reports relate to the Sale Assets) and any affili-
ated group (or any combined, consolidated or unitary group)
that includes or included any Seller for any period required by
law to be filed as of the Closing Date have been duly filed,
and all Taxes imposed upon such Seller or such affiliated group
or any of its properties or assets (whether owned or leased) or
income which are due and payable or claimed by any Government
Authority to be due and payable have been paid as of the Clos-
ing Date.
(b) There are no claims for Taxes pending against
any of the Sellers or with respect to any of the Sale Assets
and there is no threatened claim for Tax deficiencies or any
basis for any such claim, and there are not now in force any
waivers or agreements by any of the Sellers or with respect to
the Sale Assets for the extension of time for the assessment of
any Tax, nor has any such waiver or agreement been requested by
any taxing or other governmental authority.
(c) None of the Sale Assets constitute a "United
States real property interest" within the meaning of Section
897(c) of the Internal Revenue Code of 1986, as amended.
(d) In relation to the Container Operations the
Sellers have made all proper returns required to be made and
have supplied all information required to be supplied to any
Revenue Authority.
(e) There is no dispute or disagreement outstanding
nor is any contemplated at the date of this Agreement with any
Revenue Authority concerning the proper method of computing the
income, profits and gains of (including any Reliefs) and in
respect of the Container Operations (or any part thereof) for
any Taxation purposes or the proper treatment for VAT purposes
of any supplies of goods or services made (or treated as made)
or other transactions carried out in the course of the Con-
tainer Operations or method of attribution of input tax for
such purposes.
(f) In relation to the Container Operations and the
Sale Assets the United Kingdom is the only jurisdiction or ter-
ritory where the Revenue Authorities seek to charge, administer
or collect Taxation on the income, profits or gains of the
Sellers and the Sellers have never paid or been liable to pay
Taxation on any income, profit or gains to any other Revenue
Authorities.
(g) All documents relating to the Container Opera-
tions or the Sale Assets (including without limitation the
Sellers' Chassis Leases or assignments of any of the Sellers'
Chassis Leases) in which the Purchaser is or may be interested
as a purchaser of the Container Operations or the Sale Assets
have been duly stamped or certified; except for documents ex-
ecuted in connection with this Agreement none of the Sellers is
a party to any document held outside the United Kingdom which
relates to the Container Operations or Sale Assets (or any part
thereof) and which, if brought into the United Kingdom, would
be liable to stamp duty under section 14(4) Stamp Act 1891;
there is no Inland Revenue charge (as defined by section 237
Inheritance Tax Act 1984) over any of the Sale Assets.
(h) PAYE. In relation to the Employees, the Sell-
ers' Disclosure Letter contains details of all PAYE dispensa-
tions or other special arrangements concerning PAYE and NIC
which have been agreed with the Inland Revenue or DSS in rela-
tion to the Employees and particulars with respect to any de-
faults concerning PAYE and NIC which have arisen during any
PAYE audits carried out by the Inland Revenue within the past
two years.
(i) Value Added Tax. (i) None of the Sales Assets
is the subject of any security in favor of HM Customs & Excise
under paragraph 5 Schedule 7 VATA.
(ii) All records required to be kept by the
Sellers or the representative member of the group of companies
of which any Seller is treated as a member under section 29
VATA under and pursuant to paragraph 7 Schedule 7 VATA have
been duly kept and preserved and are complete, up to date and
accurate and in a legible form and will be delivered to the
Purchaser (or as it may direct) at the Closing Date and the
Sellers or representative member has not and will not make any
request to HM Customs & Excise to direct otherwise.
(iii) None of the Sale Assets is a capital item
to which Part VA VAT General Regulations applies.
(iv) All customs duties and VAT payable to any
Revenue Authorities upon the importation of any of the Sale
Assets and all excise duties including any interest or penal-
ties thereon payable to any such Revenue Authorities in respect
of any of the Sale Assets have been paid in full and none of
the Sale Assets is liable to confiscation or forfeiture
(whether by virtue of nonpayment or underpayment of any taxa-
tion or duty or by virtue of any noncompliance with any legis-
lation or regulation relating to any such taxation or duty or
otherwise howsoever).
SECTION 3.22. Condition and Sufficiency of Sale As-
sets. (a) The Sale Assets consisting of Containers and Chas-
sis have been maintained, and repaired in accordance with the
practices and policies set forth in Part XXI of Exhibit A for
such time as such policies and practices have been in effect
and prior to such time were maintained and repaired in ac-
cordance with the Sellers then existing practices and policies.
Each Container and each Chassis which as of the Clos-
ing Date is leased by a Seller to a customer was, as of the
date of commencement of the applicable Operating Lease, in con-
formity with Standard IICL-4 (if a Dry Cargo Container), in
conformity with Standard for Tank Containers (if a Tank Con-
tainer) and in conformity with Standard IICL Guide (if a Chas-
sis). Each Container and each Chassis which as of the Closing
Date is not leased to a customer will be in conformity with
Standard IICL-4 (if a Dry Cargo Container), in conformity with
Standard for Tank Containers (if a Tank Container) and in con-
formity with Standard IICL Guide (if a Chassis), (i) unless
such Container or Chassis is a Disposal Container or Disposal
Chassis or (ii) except to the extent the cost of such repair
has been accrued and will be reflected on the Estimated Closing
Balance Sheet and included in the Estimated Adjusted Net Assets
Statement.
The Sellers have not agreed to or made any arrange-
ments with any lessee of any Container or Chassis not covered
by DPP permitting such lessee to return such Container or Chas-
sis to the Sellers in a condition other than that in which it
was delivered to such lessee or waiving or modifying any of
Sellers' rights against any such lessee if such Container or
Chassis is returned by such lessee other than in such condi-
tion.
(b) The Sale Assets together with the Purchaser's
rights under the Intellectual Property Assignment and the other
Ancillary Agreements constitute (together with the Excluded
Assets) all of the assets which are used in, and are sufficient
for, the operation of the Container Operations as they are cur-
rently conducted. The Sale Assets include all assets which
are set forth or reflected in the Initial Adjusted Net Assets
Statement, except for such assets which shall have been dis-
posed of in the ordinary course of business since 31 October
1993 or are Excluded Assets under this Agreement.
SECTION 3.23. Customer Relationships. Section 3.23
of the Sellers' Disclosure Letter lists the 50 largest customer
relationships (in US$ volume) of the Sellers with respect to
Dry Cargo Containers, and the 38 largest customer relationships
(in US$ volume) of the Sellers with respect to Tank Containers,
in each case determined by reference to billing to customers
during the month of December 1993. Except as set forth in
Section 3.23 of the Sellers' Disclosure Letter, no such cus-
tomer has cancelled, terminated or otherwise modified in any
respect adverse to the Container Operations, or, so far as the
Sellers are aware, made any written threat to any Seller to
cancel, terminate or otherwise modify in any respect adverse to
the Container Operations, its relationship with any Seller or
the Container Operations, or has at any time since 30 April
1993 decreased materially, or made any written threat to de-
crease materially, its business with the Sellers or the Con-
tainer Operations. The Sellers have no knowledge that any
such customer intends to cancel, terminate or otherwise modify
in any respect adverse to the Container Operations, its rela-
tionship with any Seller or the Container Operations, or to
materially decrease its business with the Sellers or the Con-
tainer Operations.
SECTION 3.24. Environmental Matters. (a) The con-
duct by the Sellers of the Container Operations has in all ma-
terial respects complied with all Environmental Laws and Envi-
ronmental Standards applicable to the Container Operations;
and to the possession, transport, leasing, maintenance, cleans-
ing, testing or use of the Sale Assets by the Sellers; and the
Sellers do not and have not held, transported, disposed,
treated or processed any Hazardous Substances which any of the
Sale Assets contain or have contained.
(b) There is with reference to any of the Sale As-
sets, (i) no Claim as to which the Sellers have notice result-
ing from or in any way relating to the presence, discharge or
emission into the Environment of any Hazardous Substance; any
failure to discharge or comply with, or any breach or violation
of any Environmental Permit, Environmental Law or Environmental
Standard or any withdrawal, revocation, variation, absence of,
or failure or refusal to renew any Environmental Permit, and
(ii) so far as the Sellers are aware no circumstance which
might give rise to any such Claim.
(c) The Sellers have obtained all Environmental Per-
mits required by applicable Environmental Laws to be obtained
by them for the operation by them of the Container Operations
and for the possession, transport, use, repair, leasing, main-
tenance or cleansing of all Sale Assets by them and have com-
plied with such Environmental Permits in all material respects.
Such Environmental Permits are not subject to the threat of
variation, revocation, modification, refusal to renew or en-
forcement action as to which the Sellers have notice and, are
readily transferable to the Purchaser. The Sellers will use
their best endeavours to effect such transfer within 6 months
of Closing. Nothing contained herein shall be deemed to be a
representation or warranty by any Seller as to compliance with
or the obtaining of any Environmental Permit by any Person
which is not a Seller or an Affiliate thereof.
(d) The Sellers are not, with respect to the Sale
Assets or any of the Container Operations, subject to any ap-
plicable Environmental Law requiring the performance of assess-
ments, the removal or remediation of Hazardous Substances, the
giving of notice to any Governmental Authority or the recording
or delivery of an environmental disclosure document or state-
ment by virtue of the transactions contemplated by this Agree-
ment. Nothing contained herein shall be deemed to be a repre-
sentation or warranty by any Seller as to compliance with or
the obtaining of any Environmental Permit by any Person which
is not a Seller or an Affiliate thereof.
(e) There is under no Depot Agreement, agency agree-
ment, equipment lease, Operating Lease, Sellers' Chassis Lease
or any other contract, agreement or commitment, written or oral
(including any Commitment), or any obligation whatsoever en-
tered into by or binding (other than by virtue of laws, rules
and regulations) upon a Seller and relating to the Sale Assets
or the Container Operations that does or would require the pay-
ment by the Purchaser or any of its Affiliates following this
Agreement of any costs in connection with any past, present or
future release of any Hazardous Substance or any other costs
incurred in connection with compliance with any Environmental
Standard or Environmental Law.
(f) Under each Operating Lease in respect of Tank
Containers the lessee has agreed not to use the Tank Containers
for any purpose for which they are not designed or suitable and
will ensure that such Containers will be used in compliance
with all applicable laws and regulations.
SECTION 3.25. Shareholder Circular etc. The Share-
holder Circular (as hereinafter defined), as amended or supple-
mented from time to time, (including, without limitation, the
financial information set forth therein), at the time of the
date scheduled for the Shareholders Meeting or any adjournment
date (as hereinafter defined), and the Offer (as hereinafter
defined) as amended and supplemented from time to time, at the
time of the Closing, or if the Closing shall not occur, at the
date of termination of this Agreement, will not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading for
purposes of United States Federal securities laws.
SECTION 3.26. Disclosure. None of the information
furnished to the Purchaser pursuant to the representations and
warranties by the Sellers in this Agreement and the Sellers'
Disclosure Letter contains any untrue statement of material
fact or omits to state a material fact necessary to make the
information stated therein, in light of the context in which it
is made, not misleading. Each certificate to be furnished by
the Sellers pursuant to this Agreement, when delivered, will
contain the information required to be stated therein and such
information will not include any untrue statement of a material
fact or omit to state a material fact necessary to make the
information stated therein, in light of the context in which it
is made, not misleading.
SECTION 3.27. Statutory Restrictions. (a) None of
the Sellers has committed or omitted any act or thing in rela-
tion to the Container Operations which could give rise to any
fine or penalty.
(b) None of the Sellers is nor has been a party in
relation to the Container Operations to any agreement, practice
or arrangement which in whole or in part (i) contravenes or
is subject to registration under the Restrictive Trade Prac-
tices Acts 1976 and 1977; (ii) would or might result in a
reference of a "consumer trade practice" within the meaning of
the Fair Trading Act 1973 s13 and be liable to reference to the
Consumer Protection Advisory Committee under Part II of the
said Act; (iii) contravenes the provisions of the Trade De-
scriptions Acts 1968 and 1972; (iv) contravenes any provi-
sions of the Treaty of Rome; or (v) contravenes any anti-
trust, antimonopoly or anti-cartel legislation or other regula-
tions in any jurisdiction.
(c) None of the Sellers is nor has engaged in any
anticompetitive practice, as defined in the Competition Act
1980, in relation to the Container Operations.
(d) So far as Sellers are aware, no investigations
or enquiries by or on behalf of any governmental or other body
in respect of the Sellers, the Container Operations or any of
the Sale Assets is pending or in existence.
SECTION 3.28. Operations Manuals. The operations
manuals and technical manuals set forth in Part XXII of Exhibit
W are true, complete and correct copies of the existing guide-
lines and practices adopted and/or applied by the Sellers in
the Container Operations, and except as disclosed in Section
3.28 of Sellers' Disclosure Letter, the Sellers have not mate-
rially departed from the provisions thereof.
SECTION 3.29. Depot Agreements. The Depot Agree-
ments listed in Part XIII Exhibit A are in full force and ef-
fect on the date hereof, such list is a list of all Depot
Agreements to which the Sellers are parties and the terms of
such Depot Agreements provide for (i) free assignability and
transferability without the consent of the counterparty thereto
and (ii) cancellability without penalty to Sellers upon not
more than 60 days notice in the case of Depot Agreements with
respect to Dry Cargo Containers and 90 days notice in the case
of Depot Agreements with respect to Tank Containers.
SECTION 3.30. Sellers' Receivables. (a) Part VI of
Exhibit A contains an accurate and complete listing of all the
Sellers' Receivables as at the date of the Initial Balance
Sheet and Part VI of Exhibit A as of the Closing Date will con-
tain an accurate and complete listing of all the Sellers' Re-
ceivables at the Closing Date including, without limitation,
details of the debtor, amount and age of debt.
(b) At the date of this Agreement there are, and as
of the Closing Date there will be, no past or pending disputes
with any of the lessees of the Containers or Chassis or other
debtor relating to the Sellers' Receivables.
(c) No part of the amount included in the Sellers'
Receivables in the Initial Balance Sheet has been, nor will any
part of the amount included in the Sellers' Receivables in the
Estimated Closing Balance Sheet be released on terms that the
debtor or lessee of any Container or Chassis pays less than the
full book value of its debts, or is being written off.
(d) None of the Sellers' Receivables is subject to
any counterclaim or set-off, except to the extent reflected in
the Initial Balance Sheet, the Estimated Closing Balance Sheet
or the Final Closing Balance Sheet.
(e) In addition to, and without limiting any other
representation or warranty of the Sellers in this Section 3.30
relating to Sellers' Receivables, the Sellers further represent
and warrant that any Sellers' Receivable accrued pursuant to
paragraph 21 of the Applicable Accounting Principles can be
validly billed or invoiced to the extent of the accrual there-
for.
SECTION 3.31. Affiliate Transactions. Save as con-
templated by this Agreement or any Ancillary Document, as of
the Closing Date there shall not be any lease, transaction or
other arrangement relating to the Container Operations or any
of the Sale Assets with any of the Sellers or any of their Af-
filiates or Associates.
SECTION 3.32. Disposal Containers. Since 18 January
1994, the Sellers have not sold or otherwise agreed to trans-
fer, directly or indirectly, any Disposal Containers or Dis-
posal Chassis.
SECTION 3.33 Spacewise Units and Lessees. The Oper-
ating Leases which are in respect of certain duty-paid domesti-
cated Containers (the "Spacewise Leases") are listed in Subpart
A of Part XXXI of Exhibit A. Subpart B of Part XXXI of Exhibit
A is a true, correct and complete list of all of the lessees
under the Spacewise Leases.
ARTICLE IV
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser (and, with respect to Sections 4.1,
4.2, 4.3 and 4.7 hereof, Transamerica Finance Corporation
("TFC")) hereby represents, covenants and warrants to the Sell-
ers as follows:
SECTION 4.1. Corporate Organization. The Purchaser
and TFC are, and as of the Closing Date will be, corporations
duly organized, validly existing and in good standing under the
laws of the state of Delaware.
SECTION 4.2. Authorization, Etc. The Purchaser and
TFC have and, as of the Closing Date will have, full corporate
power and authority to enter into this Agreement and (in the
case of the Purchaser) the Ancillary Documents to which it is a
party and to carry out the transactions contemplated hereby and
thereby. The Boards of Directors of the Purchaser and TFC have
taken all action required by law, their Organic Instruments or
otherwise to authorize the execution and delivery of this
Agreement and (in the case of the Purchaser) the Ancillary
Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby, and this Agree-
ment is, and each of the agreements to be executed by the Pur-
chaser at the Closing in connection with this Agreement will
be, a valid and binding agreement of the Purchaser enforceable
in accordance with its terms. No other corporate action by the
Purchaser, TFC or any of their respective Affiliates is neces-
sary to consummate the transactions contemplated hereby.
SECTION 4.3. No Violation. Neither the execution
and delivery of this Agreement and (in the case of the Pur-
chaser) the Ancillary Documents nor the consummation of the
transactions contemplated hereby or thereby will (i) violate
any provisions of the Organic Instruments of the Purchaser or
TFC; (ii) violate or be in conflict with, or constitute a de-
fault (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination
of, or acceleration of the maturity of any debt or obligation
pursuant to, any material agreement to which the Purchaser or
TFC is a party or by which the Purchaser or TFC is bound; or
(iii) violate any statute or law or any judgment, decree, or-
der, regulation or rule of any court or governmental authority
binding the Purchaser or TFC, except in respect of any anti-
trust, competition or similar legislation or regulation and
except for such conflicts or violations which would not prevent
the consummation of the transactions contemplated hereby.
SECTION 4.4. Consents and Approvals of Governmental
Authorities. No consent, approval or authorization of, or fil-
ing with, any foreign, federal, state or local Government Au-
thority is required in connection with the execution, delivery
and performance of this Agreement or any of the Ancillary Docu-
ments by the Purchaser or the consummation by it of the trans-
actions contemplated hereby or thereby, except any antitrust,
competition or similar legislation or regulation.
SECTION 4.5. Litigation. There is no material ac-
tion, suit, inquiry, proceeding or investigation by or before
any court or governmental or other regulatory or administrative
agency or commission pending or, to the best knowledge of the
Purchaser, threatened against the Purchaser or any of its Af-
filiates which questions or challenges the validity of this
Agreement or any of the Ancillary Documents or any action taken
or to be taken by the Purchaser pursuant to this Agreement or
any of the Ancillary Documents or in connection with the trans-
actions by the Purchaser contemplated hereby or thereby.
SECTION 4.6. Consents. Except for consents and ap-
provals required to be obtained from the shareholders, lenders
and holders of publicly issued debt securities of the Company
or otherwise by the Company or any of its Affiliates (including
any of the Sellers), no consent of any person is necessary to
the consummation by the Purchaser of the transactions contem-
plated hereby (including, without limitation, consents from
parties to loans, contracts, leases or other agreements),
which, if not obtained, would prevent the Purchaser from per-
forming its obligations under this Agreement.
SECTION 4.7. Sufficient Funds. The Purchaser has or
will have sufficient funds to permit the Purchaser to consum-
mate the transactions contemplated hereby.
SECTION 4.8. Brokers and Finders. Neither the Pur-
chaser nor any of its officers, directors or employees has in-
curred any liability for any brokerage fees, commission or
finders' fees in connection with the transactions contemplated
by this Agreement which could result in any liability being
imposed on the Sellers.
ARTICLE V
SECTION 5.
COVENANTS OF THE SELLERS
The Sellers hereby jointly and severally covenant and
agree with the Purchaser:
SECTION 5.1. Full Access. In order that the Pur-
chaser may have full opportunity to make such investigations as
it shall desire to make of the affairs of the Sellers with re-
spect to the Sale Assets and the Container Operations, each
Seller will afford to the Purchaser, its counsel, accountants
and other representatives full access prior to the Closing Date
to the offices, properties and Container Records of the Sellers
and their Affiliates and an opportunity to interview management
personnel and advisors of Sellers and their Affiliates; pro-
vided, however, that any such investigation shall be conducted
in such a manner as not to interfere unreasonably with the op-
eration of the Container Operations and the Sellers' other
businesses. Each Seller agrees that no investigation by the
Purchaser or its representatives shall affect or be deemed to
modify any representations and warranties made in this Agree-
ment or the conditions to the obligations of the parties to
consummate the transactions contemplated by this Agreement or
Sellers' liability for any breach thereof. Any information or
documentation provided to the Purchaser pursuant to this Sec-
tion shall be subject to the terms of the Confidentiality
Agreement.
SECTION 5.2. Consents. (a) Each Seller will use
best endeavours, prior to the Closing to (i) obtain the con-
sents of the owners and lessors under the Sellers' Chassis
Leases to the assignment and assumption of such Sellers' Chas-
sis Leases to and by the Purchaser, and (ii) obtain all other
consents necessary to be obtained by the Sellers under any of
the Commitments, Holding Documents or any other matter referred
to in Section 8.8. All such consents will be in writing, and
executed counterparts thereof, reasonably satisfactory in form
and substance to Purchaser, will be delivered to the Purchaser
at or prior to the Closing.
(b) Notwithstanding anything to the contrary and
save as expressly provided in any Ancillary Document or in Sec-
tion 5.2(c) below, to the extent the assignment of any right or
asset to be assigned to the Purchaser pursuant hereto shall
require the consent or waiver of any other party, this Agree-
ment shall not constitute an agreement to assign any such asset
or right without such consent or waiver. If any consent or
waiver (other than in respect of Assumed Secured Financing
Agreements) is not obtained, Sellers shall, at their expense,
cooperate with the Purchaser in any reasonable arrangement re-
quested by the Purchaser and designed to provide for the Pur-
chaser the benefit of any such right (and any associated obli-
gations), including without limitation a Seller acting as the
Purchaser's agent in order to obtain for the Purchaser the ben-
efits thereof (and any associated obligations) and enforcement
of any and all rights of any Seller against the other party to
any contract arising out of the breach or cancellation thereof
by such party or otherwise.
(c) Where any of the Holding Documents cannot be
transferred, assigned or vested in the Purchaser on the Closing
Date the Sellers undertake following the Closing Date to con-
tinue to use best endeavours to procure the transfer or assign-
ment to or vesting in the Purchaser of all such interest as the
Sellers possess in the Overseas Properties by virtue of the
Holding Documents (which endeavours shall include the obtaining
of any and all consents necessary to effect such transfer, as-
signment or vesting) and to the extent that the benefit of any
of the Holding Documents cannot be assigned or transferred to
or vested in the Purchaser then the Sellers undertake to hold
such of the Holding Documents as cannot be assigned, trans-
ferred to or vested in the Purchaser in trust for the Purchaser
until either (i) the term granted by the relevant Holding Docu-
ments expires or (ii) the Holding Documents are (with any con-
sents or approvals necessary for same) novated to the Purchaser
(whichever is earlier) and in any such case the Purchaser shall
from the Closing Date occupy and use the relevant Overseas
Properties until the expiry of the term granted by the relevant
Holding Documents or until such novation has taken place on the
basis that the Purchaser pays all rents, licence fees and other
outgoings from the Closing Date if the Sellers cannot obtain
any necessary consents or approvals for any such transfer, as-
signment, vesting or novation and if any such person having the
right to do so requires that any occupational use of any rel-
evant Overseas Property by the Purchaser must cease then the
Purchaser will vacate the same but shall otherwise have no ob-
ligation or liability whatsoever to the Sellers or any other
person in respect of any such occupation or use by it (except
as to payment of all rents, licence fees and other outgoings in
respect of the period after the Closing Date and prior to the
Purchaser's vacation of the relevant Overseas Property as
aforesaid).
SECTION 5.3. Supplements to Sellers' Disclosure Let-
ter and Exhibit A thereto. From time to time prior to the
Closing, the Sellers will promptly supplement or amend the
Sellers' Disclosure Letter with respect to any matter hereafter
discovered or arising which, if existing or occurring at the
date of this Agreement, would have been required to be set
forth or described in the Sellers' Disclosure Letter. No
supplement or amendment of the Sellers' Disclosure Letter made
pursuant to this Section 5.3 that is made after the date such
representation or warranty is made shall be effective or shall
be deemed to cure any breach of any such representation or war-
ranty of the Sellers when made in this Agreement.
SECTION 5.4. Covenant to Satisfy Conditions. Each
Seller will use best endeavours, so far as within its respec-
tive power and influence, to ensure that the conditions set
forth in Sections 8.2, 8.5, 8.8(a) and 8.9, hereof are satis-
fied, insofar as such matters are within the control of, or
which can be affected by, the Sellers. Each Seller shall use
reasonable endeavours in respect of the Conditions set forth in
Articles VII and VIII hereof to which the preceding sentence
does not apply.
SECTION 5.5. Certificates. At the Closing the Sell-
ers will furnish the Purchaser with the Sellers' Closing Cer-
tificate and solvency certificates from each Seller referred to
in Section 1.6(a) (xxiii).
SECTION 5.6. HSR Act and Other Filings. If ap-
plicable, the Sellers shall make any and all filings which are
required under the HSR Act or any antitrust, restricted prac-
tices, foreign investment or other law of any jurisdiction.
The Sellers will furnish to the Purchaser such necessary infor-
mation (other than confidential information) and reasonable
assistance as the Purchaser may request in connection with its
preparation of necessary filings or submissions under provi-
sions of the HSR Act or any necessary or, in the Purchaser's
reasonable opinion, desirable filings under the laws of any
other jurisdiction. The Sellers will supply the Purchaser
with copies of all correspondence, filings or communications
(or memoranda setting forth the substance thereof) between any
of the Sellers or their representatives, on the one hand, and
the Federal Trade Commission, the Antitrust Division of the
U.S. Department of Justice or any other governmental agency or
authority or members of their respective staff, on the other
hand, with respect to this Agreement and any of the Ancillary
Documents or the transactions contemplated hereby or thereby.
The Sellers shall use reasonable endeavours to obtain an early
termination of the applicable waiting period under the HSR Act,
and shall use reasonable endeavours promptly to make any fur-
ther filing pursuant thereto that may be necessary, proper or
advisable.
SECTION 5.7. Shareholder Circular. The Company
shall within five Business Days of the date of this Agreement
mail to its shareholders a definitive shareholder circular,
substantially in the Agreed Form (the "Shareholder Circular")
together with a form of proxy. For the purposes of the Break
Fee Letter, the Company confirms that the recommendation of the
Board of Directors of the Company is given, on the terms set
forth in the Shareholder Circular, on and from the date of this
Agreement. The Company shall not publish any amendment or
supplement to the Shareholder Circular unless required by ap-
plicable law or by the Listing Rules of the London Stock Ex-
change (the "Listing Rules") in which case the Company shall
provide the Purchaser with drafts of the amendment or supple-
ment a reasonable time in advance of its mailing.
SECTION 5.8. Shareholder Approval. The Company will
take all action necessary, in accordance with English law and
its Articles of Association, to convene and cause to be held an
extraordinary general meeting of its shareholders (the "Share-
holder Meeting") within 19 Business Days of posting of the
Shareholder Circular to consider and vote upon a single pro-
posal (the "Proposal") to approve this Agreement and the trans-
actions contemplated hereby and to put the Proposal to a vote.
No matters other than approval of the Proposal will be pre-
sented to the Shareholder Meeting without the Purchaser's prior
written approval. The affirmative vote of shareholders re-
quired for approval of the Proposal shall be no greater than
the affirmative vote of the holders of a majority of the votes
cast at the Shareholder Meeting.
The Shareholder Circular will contain (subject to
their fiduciary duties) a statement that the Board of Directors
of the Company, who have been advised by Morgan Grenfell & Co.
Ltd. ("Morgan Grenfell") and Hambro Magan & Co. Ltd. ("Hambro
Magan") considers the Proposal to be in the best interests of
the Company and its shareholders and recommending that the
shareholders of the Company vote in favor of the Proposal and a
statement by the Board of Directors of the Company to the
effect that the working capital available to the Company and
its Affiliates after such sale of the Sale Assets will be suf-
ficient for their present requirements. The Company shall use
its reasonable endeavours to solicit from the shareholders of
the Company proxies in favor of such adoption and approval and
to take all other action necessary or, in the reasonable judge-
ment of the Purchaser, helpful to secure the vote or consent of
shareholders required to effect the transactions contemplated
hereby. Save as required by court order (which the Company
shall use its best endeavours expeditiously to contest), or
save as consented to by a representative of the Purchaser, the
Company and its Board of Directors shall not take any action to
delay, defer or postpone the Shareholders Meeting or to change
the proposals relating to this Agreement and the transactions
contemplated hereby to be presented to shareholders in any re-
spect from those to be contained in the Shareholder Circular
when it is first mailed to the shareholders of the Company
which could adversely affect the consummation of the transac-
tions contemplated hereby. In the event that the Proposal is
not passed when put to a vote on a show of hands, the Company
shall procure that the Chairman of the Shareholder Meeting (the
"Chairman") shall call for an immediate poll, the results of
which shall be announced as soon as possible after the poll,
and shall exercise any votes at his disposal in favor of the
Proposal on any such poll and against any resolution to adjourn
the Shareholders Meeting and otherwise that the Chairman shall
exercise any votes at his disposal so as to secure the vote as
consent of shareholders required to effect the transactions
contemplated hereby as expeditiously as possible.
SECTION 5.9. Mail Payments. (a) On and after the
Closing Date, each Seller authorizes and empowers the Purchaser
to receive and open all mail and to deal with respect to such
communications in such manner as the Purchaser may elect to the
extent that such communications relate to the Purchaser or the
Sale Assets or, if such communications do not relate to the
Purchaser or the Sale Assets or the Container Operations, to
forward the same promptly to such Seller. If any communica-
tions relate to the Purchaser or the Sale Assets but also re-
late to the Sellers, the Excluded Assets or the Excluded Li-
abilities, the Purchaser shall promptly notify the Sellers of
such communications and provide them with copies thereof.
Each Seller shall promptly transfer or deliver to the Purchaser
any funds, cash, cheques or other instruments of payment to
which the Purchaser is entitled within three days after receipt
thereof by such Seller. The Purchaser shall promptly forward
or deliver to the relevant Seller any funds, cash, cheques or
other instruments of payment to which such Seller is entitled
within three days of receipt thereof by the Purchaser.
(b) Each Seller agrees that the Purchaser has the
right and authority to endorse, without recourse, the name of
such Seller on any cheques or other evidence of indebtedness
received by the Purchaser in respect of any account receivable
included in the Sale Assets and each Seller shall furnish the
Purchaser such evidence of this authority as the Purchaser may
reasonably request.
(c) Each Seller undertakes to procure that on or
before the Closing each of the bank accounts of any of the
Sellers into which payments are made from time to time under
Operating Leases are transferred by the relevant bank abso-
lutely to the Purchaser on terms satisfactory to the Purchaser
in its absolute discretion.
(d) Each Seller undertakes to procure that any
cheques or other instruments of payment representing payments
to which the Purchaser is entitled under the terms of this
Agreement but which are in the name of a Seller shall be pay-
able into one of the bank accounts referred to in Section
5.9(c) of this Agreement or another bank account in the name of
the Purchaser.
(e) The Purchaser shall assist, to the extent rea-
sonably necessary, the Sellers in complying with the undertak-
ings contained in Sections 5.9(c) and (d) of this Agreement.
SECTION 5.10. Sellers' Receivables. The Sellers
shall supply to the Purchaser full details of the Sellers' Re-
ceivables as at the date of the delivery of the Estimated Clos-
ing Balance Sheet in accordance with Section 3.30 and as at the
Closing Date.
SECTION 5.11. DPP Coverage. The Sellers covenant
and agree that, prior to the Closing Date, unless the Purchaser
elects the DPP Option they will purchase the DPP Tail Coverage
described in Section 1.8(b) of this Agreement.
SECTION 5.12. Bondholder Consents. The Company
shall within five Business Days of the date of this Agreement
cause Tiphook Finance Corporation to mail to the holders of its
10 3/4% Notes Due 2002, its 8% Notes Due 2000 and its 7 1/8%
Notes Due 1998 (collectively, the "Bonds"), an offer to pur-
chase substantially in the Agreed Form (the "Offer") and will
seek approval of the Supplemental Indenture in the form set
forth in the Offer.
SECTION 5.13. Certain Employee Matters. The Sellers
shall procure that, in the event that as at the seventh day
prior to Closing there shall be any employees of the Sellers or
their Affiliates who are not Employees and who are as at that
date engaged in the Container Operations, the Sellers or their
Affiliates (as appropriate) shall on that date second any such
employee (other than Mr Palmer) to a company not engaged in the
Container Operations and shall ensure that any such employee
shall not be engaged in any way in the Container Operations at
any time prior to Closing. For the avoidance of doubt this
obligation shall apply to any employee engaged by the Sellers
and their Affiliates in the Container Operations between the
date of this Agreement and Closing without the prior consent of
the Purchaser. The Sellers shall procure no less than seven
days prior to Closing that, pursuant to paragraph 1(1) of the
service agreement between Mr Palmer and the Company dated 24
June 1985 the Company shall, with effect from the Closing, sec-
ond Mr Palmer to perform his duties for a company which has not
been engaged in the Container Operations at any time prior to
the Closing.
SECTION 5.14. Contingency Insurance Policy. At
least ten days prior to the Closing Date, the Purchaser shall
notify the Sellers in writing of its desire to take an assign-
ment of the Contingency Insurance Policy. If the notice con-
templated by the immediately preceding sentence shall have been
given, then at or prior to the Closing Date, the Sellers cov-
enant and agree to use reasonable endeavours to assign to the
Purchaser their rights under the Contingency Insurance Policy
provided, that such assignment can be made without additional
expense to the Company. If the insurer under the Contingency
Insurance Policy consents to such assignment, the Sellers shall
make claims against such policy up to the amount beyond which
an additional premium would be payable under such Policy, and
Sellers shall retain any amounts paid under such claims.
Thereafter, the Purchaser may, at its option, pay to the in-
surer under the Contingency Insurance Policy any additional
premiums payable pursuant to the terms thereof and shall there-
after become the sole named insured under such policy with the
exclusive right to make claims thereunder and to recover
amounts payable by the insurer in respect of such claims. If
the insurer under the Contingency Insurance Policy does not
consent to the assignment to the Purchaser of such policy, the
Company shall cancel the Contingency Insurance Policy and shall
pay to the Purchaser one half of any amount received by the
Sellers in respect of any such cancellation within two Business
Days of receipt of any such amount from the insurer.
SECTION 5.15. PAYE. The Sellers will furnish to the
Purchaser at the Closing Date such particulars as may be neces-
sary to enable the Purchaser after the Closing Date to comply
with Regulation 80 of the Income Tax (Employments) Regulations
1993 (SI. No. 744).
SECTION 5.16. Waiver of Certain Rights Among the
Sellers. Each Seller hereby, with effect from the Closing
Date, waives any rights which it may have against any of the
other Sellers in respect of any leasing or hire arrangements
which it may now or which it may have had in the past in rela-
tion to any of the Sales Assets and any such arrangements, to
the extent that they now subsist, shall be deemed to have ter-
minated with effect from the Closing Date.
SECTION 5.17. Bank Agreement. Prior to or simulta-
neously with the execution and delivery of this Agreement, the
Company and certain of its Affiliates shall execute and deliver
the Bank Agreement.
ARTICLE VI
SECTION 6.
COVENANTS OF THE PURCHASER
SECTION 6.1. Covenant to Satisfy Conditions. The
Purchaser will use best endeavours, so far as within its re-
spective power and influence, to ensure that the conditions set
forth in Sections 7.2, 7.4 and 7.7 hereof are satisfied, inso-
far as such matters are within the control of, or can be af-
fected by, the Purchaser. Such efforts shall include cooper-
ating with the Sellers in seeking the consent of the lessors,
lenders and owners under the Sellers' Chassis Leases to the
assignment and assumption thereof as contemplated by Section
1.6, including furnishing such lessors, lenders and owners with
audited financial statements of the Purchaser, and such offic-
ers' certificates, opinions of counsel and other instruments
and documents as such lessors, lenders and owners may reason-
ably require; provided, however, that all fees and expenses
incurred in obtaining any consents sought to be obtained by the
Sellers pursuant to this Agreement shall be paid by the Com-
pany, and nothing herein shall require the Purchaser or any of
its Affiliates to divest or hold separate or otherwise agree to
any limitations with respect to any of the Sale Assets or any
of its own operations. The Purchaser shall use reasonable
endeavours in respect of the Conditions set forth in Articles
VII and VIII hereof.
SECTION 6.2. Certificates. At the Closing, the Pur-
chaser will furnish the Company with the Purchaser's Closing
Certificate.
SECTION 6.3. HSR Act Filings. If applicable, the
Purchaser shall make any and all filings which are required
under the HSR Act or any antitrust, restricted practices, for-
eign investment or other law of any jurisdiction. The Pur-
chaser will furnish to the Sellers such necessary information
(other than confidential information) and reasonable assistance
as the Sellers may request in connection with their preparation
of necessary filings or submissions under provisions of the HSR
Act or any necessary or, in the Sellers' reasonable opinion,
desirable filings under the laws of any other jurisdiction.
The Purchaser will supply the Sellers with copies of all cor-
respondence, filings or communications (or memoranda setting
forth the substance thereof) between the Purchaser or its rep-
resentatives, on the one hand, and the Federal Trade Commis-
sion, the Antitrust Division of the U.S. Department of Justice
or any other Government Authority or members of their respec-
tive staffs, on the other hand, with respect to this Agreement
or any of the Ancillary Documents or the transactions contem-
plated hereby or thereby. The Purchaser shall use reasonable
endeavours to obtain an early termination of the applicable
waiting period under the HSR Act, and shall promptly make any
further filing pursuant thereto that may be necessary, proper
or advisable.
SECTION 6.4. Consents. The Purchaser will use rea-
sonable endeavours to obtain prior to the Closing all consents
necessary to be obtained by the Purchaser in connection with
the consummation of the transactions contemplated by this
Agreement. All consents will be in writing and executed coun-
terparts thereof will be delivered to the Sellers at or prior
to the Closing.
SECTION 6.5. Post-Closing Tax and Accounting Mat-
ters. Following the Closing, the Purchaser will furnish to the
Sellers such necessary and available information and access to
employees of the Purchaser and its Affiliates as the Sellers
may reasonably request in connection with tax and accounting
matters of the Sellers relating to the Sale Assets and the Con-
tainer Operations prior to or after the Closing Date. The
Sellers shall pay all of the Purchaser's out-of-pocket expenses
actually and reasonably incurred in connection with such re-
quest. For a period of ten years following the Closing Date,
the Purchaser will not destroy any information which is subject
to this Section 6.5 without giving at least 60 days' notice to
the Company, and, if the Company so requests, within 60 days of
receipt of such notice, the Purchaser shall deliver to the Com-
pany or to its order, at the Company's expense, such informa-
tion intended to be destroyed.
SECTION 6.6. Employees. (a) It is understood and
agreed that the sale of the Sale Assets pursuant to this Agree-
ment is intended to constitute a "relevant transfer" for pur-
poses of the Transfer of Undertakings (Protection of Employ-
ment) Regulations 1981 so that, upon Closing, the contracts of
employment of Employees located in the U.K. and states where it
is recognized will be transferred to the Purchaser as provided
in such Regulations.
(b) It is understood and agreed that the Purchaser
shall, with effect from the Closing Date, be responsible for
employing and, in the case of each employee, shall either ex-
tend to that employee such contractual and employment benefits
as are comparable in the aggregate to those currently offered
to employees of Transamerica Leasing Inc. or as are required to
be provided under applicable law or, if any employee shall not
have been extended any such contractual and employment benefits
or shall have been constructively dismissed, shall offer the
right to receive the severance payable to them under any em-
ployment contract with the Sellers or under applicable law in
lieu of the foregoing. For the purposes of this Section 6.6,
constructive dismissal shall mean a material diminution in re-
sponsibilities or in base salary of any employee.
(c) All wages, salaries, bonuses or emoluments of
any nature whatsoever (including, without limitation, pension
contributions and accrued holiday pay) due to the Employees
shall be discharged by the Sellers and their Affiliates in re-
spect of the period up to the Closing Date (whether or not the
same shall fall due for payment prior to the Closing Date), and
all necessary apportionments shall be made; provided, however,
that all amounts to be paid by the Sellers pursuant to this
Section 6.6 in respect of which amounts (other than amounts
with respect to pension benefits) shall have been reserved on
the Final Closing Balance Sheet and shall be reflected on the
Final Adjusted Net Assets Statement shall be paid by the Pur-
chaser on behalf of the Seller to the extent of any such re-
serve.
SECTION 6.7. Capital Allowances. The Purchaser
shall not claim or disclaim any capital allowances under CAA
with respect to the Containers or Chassis.
SECTION 6.8. Claims in Respect of Available Units.
The Purchaser covenants and agrees to use reasonable endeavours
to pursue any claims the Purchaser may have against depots in
respect of amounts paid to Purchaser from the Repairs Escrow
Account and to pay any amounts recovered from any such depots
into the Repairs Escrow Account or to Sellers, whichever may be
required pursuant to Section 1.4(b)(y). The Purchaser further
covenants and agrees that, pursuant to the request of any
Seller, it will assign to any such Seller any rights of recov-
ery it may have against any depot in respect of any Available
Unit and that any such Seller shall thereupon be subrogated to
the rights of Purchaser in respect of any such claim.
SECTION 6.9. Overseas Properties. From the Closing
Date, the Purchaser shall observe and perform all the covenants
conditions and obligations set out in the Holding Documents and
shall comply with all laws, regulations, obligations, duties
and any other matters whatsoever affecting the Overseas Proper-
ties and shall indemnify the Sellers against any actions pro-
ceedings, costs, claims, demands and liabilities whatsoever
arising by reason of any breach, non-observance or non-
performance of any such matters provided, that the Sellers
shall indemnify the Purchaser against any such liabilities
arising by reason of any such breach, non-observance or non-
performance by Sellers prior to the Closing Date.
ARTICLE VII
SECTION 7.
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this
Agreement to be performed on or before the Closing Date shall
be subject to the satisfaction, on or before the Closing, of
each of the following conditions, unless waived in writing by
the Sellers.
SECTION 7.1. Representations and Warranties True.
Each of the representations and warranties contained in Article
IV hereof, the Purchaser Disclosure Letter and in all certifi-
cates delivered and to be delivered by the Purchaser to the
Sellers or their representatives pursuant hereto or in connec-
tion with the transactions contemplated hereby, shall be in all
material respects true, complete and accurate as of the date
when made and as of the Closing Date as though such representa-
tions and warranties were made at and as of such date, except
for representations and warranties that speak as of a specific
date or time other than the Closing Date (which need only be
true and correct as of such date or time).
SECTION 7.2. Performance. The Purchaser shall have
performed and complied with all agreements, obligations and
conditions required by this Agreement to be performed or com-
plied with by it on or prior to the Closing which, in the rea-
sonable opinion of the Seller, are material to the transactions
contemplated hereby taken as a whole.
SECTION 7.3. No Injunction, Etc. On the Closing
Date, there shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court
of competent jurisdiction or regulatory body prohibiting or
enjoining the consummation of the transactions provided for
herein, or any material part of them, or any material related
transaction or action; nor shall there be in effect any stat-
ute, rule, regulation or executive order promulgated or enacted
by any Government Authority which prohibits or enjoins the con-
summation of transactions contemplated herein.
SECTION 7.4. Certificates. The Purchaser shall have
furnished the Sellers with the Purchaser's Closing Certificate.
SECTION 7.5. Opinion of the Purchaser's Counsel.
The Purchaser shall have delivered to the Sellers opinions of
counsel to the Purchaser, dated as of the Closing Date, sub-
stantially in the Agreed Form.
SECTION 7.6. Consents Obtained. Holders of each of
the three series of the Bonds shall have given the requisite
consents pursuant to the Offer to approve the Supplemental In-
denture, and the Supplemental Indenture shall have been ex-
ecuted and shall be in full force and effect.
SECTION 7.7. Other Agreements. The Purchaser shall
have delivered to the Sellers on the Closing Date duly executed
counterparts of all of the documents stated in this Agreement
to be required to be delivered on or prior to the Closing Date
in the Agreed Form.
SECTION 7.8. Payment. The Purchaser shall have made
the payments referred to in Section 1.4(a).
SECTION 7.9. Shareholder Approval. This Agreement
shall have been approved by the shareholders of the Company.
ARTICLE VIII
SECTION 8.
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this
Agreement to be performed on or before the Closing shall be
subject to the satisfaction, on or before the Closing, of each
of the following conditions, unless waived in writing by the
Purchaser.
SECTION 8.1. Representations and Warranties True.
Each of the representations and warranties contained in this
Agreement, in the Sellers' Disclosure Letter and in all cer-
tificates delivered and to be delivered by the Sellers to the
Purchaser or its representatives pursuant hereto or in connec-
tion with the transaction contemplated hereby shall be in all
material respects true, complete and accurate as of the date
when made and as of the Closing Date as though such representa-
tions and warranties were made at and as of such date, except
for representations and warranties that speak as of a specific
date or time other than the Closing Date (which need only be
true and correct as of such date or time) and except that the
representations and warranties contained in Sections 3.1(b),
3.14, 3.16, 3.17, 3.20(a), (b), (d), (e) and (g), 3.28, 3.30(a)
and 3.33 shall be true, complete and accurate as of the date
when made and as of the Closing Date as though such representa-
tions and warranties were made at and as of such date, except
where the failure of such representations and warranties to be
true, complete and accurate shall not have, and could not rea-
sonably be expected to have a material adverse effect on the
financial condition, business prospects or conditions (finan-
cial or otherwise) of the Container Operations or in the Sale
Assets, taken as a whole or on the ability of the Sellers to
consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing, the representations and warran-
ties of the Sellers set forth in Section 3.25 of this Agreement
need only be true on the date scheduled for the Shareholders
Meeting, or any adjournment date, in the case of the Share-
holder Circular, or on the date of the Closing or, if the Clos-
ing shall not occur, at the date of termination of this Agree-
ment, in the case of the Offer.
SECTION 8.2. Performance. Each of the Sellers shall
have performed and complied with all agreements, obligations
and conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing which, in the
reasonable opinion of the Purchaser, are material to the trans-
actions contemplated hereby taken as a whole.
SECTION 8.3. No Governmental Proceeding or Litiga-
tion. (a) No suit, action or other proceeding by any Govern-
ment Authority shall have been instituted or threatened which
challenges the validity or legality of the transfer of the Sale
Assets or otherwise challenges any of the transactions (other
than any insignificant transactions) contemplated by this
Agreement.
(b) It being established, in terms satisfactory to
the Purchaser:
(i) that the proposed acquisition of the Container
Operations by the Purchaser, or any matters arising from it,
will not be referred to the Monopolies and Mergers Commission,
and/or
(ii) (a) that the conditions for prohibition under
section 24 GWB (German Act against Re-
straints on Competition) are not fulfilled
or
(b) that the Federal Cartel Office has not no-
tified the parties within one month after
receipt of the complete pre-merger notifi-
cation in accordance with section 24 a (2)
sentence 1 GWB that it has commenced a for-
mal investigation on the proposed acquisi-
tion, or
(c) that the term for a prohibition of the
transaction in accordance with section 24 a
(2) sentence 1 GWB has expired without a
decision of the Federal Cartel Office.
SECTION 8.4. No Injunction, Etc. On the Closing
Date, there shall be no effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court
of competent jurisdiction or regulatory body prohibiting or
enjoining the consummation of the transactions provided for
herein, or any material part of them, or any material related
transaction or action, nor shall there be in effect any stat-
ute, rule, regulation or executive order promulgated or enacted
by any Government Authority which prohibits or enjoins the con-
summation of transactions contemplated herein.
SECTION 8.5. Certificates. The Sellers shall have
furnished the Purchaser with the Sellers' Closing Certificate
and with the solvency certificates referred to in Section
1.6(a)(xxiii).
SECTION 8.6. Material Change. From the date hereof
to the Closing Date, there shall not be any material adverse
change in the assets, liabilities, results of operations, busi-
ness prospects or conditions (financial or otherwise) of the
Container Operations or in the Sale Assets, taken as a whole
(whether or not such change is or has been referred to or de-
scribed in the Sellers Disclosure Letter, any supplement
thereto or any other document or statement).
SECTION 8.7. Opinion of the Sellers' Counsel. The
Sellers shall have delivered to the Purchaser opinions of coun-
sel to the Sellers, dated as of the Closing Date, substantially
in the Agreed Form relating to Tiphook plc, Tiphook Container
Rental Company Limited, TFS Equipment Leasing Limited, TFS
Leasing Limited, Tiphook Financial Services Limited and Tiphook
Containers Rental, Inc.
SECTION 8.8. Consents Obtained. (a) The following
consents shall have been obtained and shall be in full force
and effect:
(i) consents from each Tiphook customer under the
lease purchase agreements and lease plan agreements
referred to in paragraphs 4, 5 and 6 of Annexure
3.3(b)a to the Sellers' Disclosure Letter to the as-
signment of the benefit of such agreements to the
Purchaser substantially in the Agreed Form;
(ii) consents from each bank which has given a let-
ter of credit as security for any of the Operating
Leases to the assignment of the benefit of each such
letter of credit to the Purchaser substantially in
the Agreed Form;
(iii) consents from each guarantor which has given a
guarantee in connection with any of the Operating
Leases to the assignment of the benefit of each such
guarantee to the Purchaser substantially in the
Agreed Form; and
(iv) a consent in the form of a novation from
Leasecon International Inc. to the assignment of the
benefit and burden of the Management Agreement
between Tiphook Container Leasing Company Limited and
Leasecon International Inc. dated July 15, 1983 to
the Purchaser substantially in the form of the
Assignment and Assumption of Management Agreements;
provided, however, that this condition shall be deemed satis-
fied if any failure to obtain consents required to be obtained
under this Section 8.8(a) involves less than 3,500 TEU.
(b) Holders of each of the three series of the
Bonds shall have given the requisite consents pursuant to the
Offer to approve the Supplemental Indenture and the Supplemen-
tal Indenture shall have been executed and shall be in full
force and effect.
SECTION 8.9. Other Instruments and Agreements. The
Sellers shall have delivered to the Purchaser on the Closing
Date duly executed counterparts of all of the documents stated
in this Agreement to be required to be delivered on or prior to
the Closing Date in the Agreed Form.
SECTION 8.10. Shareholder Approval. This Agreement
shall have been approved by the shareholders of the Company.
SECTION 8.11. Litigation. There shall not be any
suit, action or other proceeding pending or threatened by any
person other than a Government Authority which challenges the
validity or legality of the transfer of the Sale Assets or
challenges any of the transactions contemplated by this Agree-
ment or which seeks to obtain from the Purchaser or any Affili-
ate thereof damages of any substantial amount in connection
with any of the foregoing (whether or not such matter is or has
been referred to or described in the Sellers Disclosure Letter,
any supplement thereto or any other document or statement).
SECTION 8.12. DPP Coverage. Unless the Purchaser
shall have exercised the DPP Option, on or prior to the Closing
Date, the Sellers shall have purchased the DPP Tail Coverage
described in Section 1.8(b) of this Agreement.
SECTION 8.13. Advisors' Letter. The Purchaser shall
have received a certified copy of an extract from the minutes
of the meeting of the Board of Directors of the Company held on
February 14, 1994 recording the advice of Hambro Magan and Mor-
gan Grenfell that the sale of the Sale Assets to the Purchaser
is in the best interests of the Company and its shareholders.
ARTICLE IX
SECTION 9.
CONDUCT OF THE BUSINESS PENDING THE CLOSING
The Sellers jointly and severally agree, from the
date hereof until the Closing, and except as otherwise ex-
pressly consented to or approved by the Purchaser in writing:
SECTION 9.1. Regular Course of Business. The Sell-
ers will carry on the Container Operations diligently and sub-
stantially in the same manner as heretofore conducted, includ-
ing, without limitation, paying any accounts payable in a man-
ner consistent with past practice and continuing historic main-
tenance and repair practices, and none of the Sellers shall
institute any new methods of purchase, sale, lease, management,
accounting or operation or engage in any transaction or activ-
ity, enter into any agreement or make any commitment, which
would relate to or affect any of the Sale Assets, except in
accordance with this Agreement. The Sellers shall make all
necessary reserves and accruals in respect of their repair
practices so as to reserve amounts sufficient to repair all Dry
Cargo Containers to Standard IICL-4, all Chassis to Standard
IICL Guide and all Tank Containers to Standard for Tank Con-
tainers, in each case, which are redelivered to depots between
the date of this Agreement and the Closing Date. Notwith-
standing any other provision of this Agreement, Sellers shall
pay all amounts under, or in respect of, all Sellers' Chassis
Leases which relate to any periods through and including the
Closing Date when such amounts are due and payable.
Without limiting the generality of the foregoing,
none of the Sellers or the Company shall without the
Purchaser's prior written consent:
(i) make, or enter into any new agreements or com-
mitments providing for, capital expenditures in respect of
the Container Operations (including, without limitation,
the purchase of dry cargo containers, tank containers or
chassis);
(ii) permit or allow any of the Sale Assets to be
subjected to any mortgage, pledge, lien or encumbrance,
except those referred to in Section 3.5, those existing on
the date hereof to the extent listed in Schedule 3.5 of
the Sellers' Disclosure Letter and subject to Section 3.5
hereof and those arising in respect of obligations to be
paid by the Sellers prior to the Closing Date pursuant to
this Agreement;
(iii) cause to occur prior to Closing any of the mat-
ters or events set out in Section 3.4(b);
(iv) incur any Secured Indebtedness;
(v) sell, transfer, or otherwise dispose of, or de-
clare as a casualty and elect not to repair, any of the
Containers or Chassis, other than pursuant to the terms of
existing contracts or agreements or Section 1.8 of this
Agreement;
(vi) (A) no lease in or hire purchase or commitment
to lease in or hire purchase shall be entered into by or
on behalf of any of the Sellers with respect to any con-
tainers or chassis, (B) no current Operating Lease shall
be extended beyond its original term, other than as re-
quired pursuant to the terms of such Operating Lease or in
the ordinary course of business of the Container Opera-
tions and on terms no less favorable to the Sellers, (C)
no new Operating Lease or series of Operating Leases with
the same party or (to Sellers' knowledge) affiliated par-
ties (or renewal of any current Operating Lease) in re-
spect of Dry Cargo Containers that carries, or is likely
to carry (after such renewal), 500 or more TEU, or any
Operating Lease in respect of Tank Containers that car-
ries, or is likely to carry (after such renewal), 30 or
more units shall be entered into, and (D) no further Con-
tainers or Chassis shall be leased to (or otherwise made
available to) any lessee listed in subparts A or B of Part
XXVI of Exhibit A or to any lessee with respect to which a
Bankruptcy has occurred since the date of this Agreement,
whether or not such lessee shall be entitled to request
the provision of such equipment pursuant to any Operating
Lease or other arrangement with any Seller;
(vii) waive or modify any provision of any confidenti-
ality or similar agreement entered into by any Seller or
the Company with any third party;
(viii) modify any current Operating Lease or series of
Leases to the same party or (to Sellers' knowledge) af-
filiated parties in respect of Dry Cargo Containers that
carries, or is likely to carry (after such modification),
500 or more TEU, or any current Operating Lease or series
of Operating Leases to the same party or (to Sellers'
knowledge) affiliated parties in respect of Tank Contain-
ers that carries or is likely to carry (after such modifi-
cation), 30 or more units; or
(ix) sell or otherwise agree to sell, directly or
indirectly, any Disposal Container or Disposal Chassis;
(x) earmark any Container or Chassis as a Disposal
Container or a Disposal Chassis which is not listed as a
Disposal Container or Disposal Chassis in Part IX of Ex-
hibit A; or
(xi) restore or attempt to restore to the non-
disposal fleet any Container or Chassis which is listed as
a Disposal Container or Disposal Chassis in Part IX of
Exhibit A.
SECTION 9.2. Organization. Each Seller shall pre-
serve its corporate existence and shall use reasonable
endeavours to preserve its business organization intact and to
preserve for the Purchaser its relationships with licensors,
suppliers, distributors, customers and others having business
relations with it with respect to the Container Operations and
the Sale Assets.
SECTION 9.3. Clear Title. The Sellers shall take
all necessary and advisable actions to ensure that on or prior
to the Closing Date, the Security Interests shall be released
and discharged or enforceable and irrevocable arrangements sat-
isfactory to the Purchaser and its counsel in their sole dis-
cretion have been entered into to effect such release and dis-
charge; provided, however, that any Containers or Chassis sub-
ject to any Security Interest not released or discharged as of
the Closing Date shall become subject to the Management Agree-
ment for Encumbered Equipment immediately following the Clos-
ing.
SECTION 9.4. Employees. Unless approved in writing
in advance by the Purchaser, each of the Sellers and Sellers'
Affiliates shall refrain from entering into any new employment
contract or new employment arrangements (including, without
limitation, hiring new employees) in respect of the Container
Operations or giving any increase or permitting any other mate-
rial change in the compensation arrangements (including sever-
ance, pension, bonus and fringe and other employment benefit
arrangements) of the Employees from the compensation arrange-
ments as of the date hereof or from terminating (or giving no-
tice to terminate) the employment of any Employee, whether or
not for cause.
SECTION 9.5. Collection of Debts. Prior to the
Closing Date each of the Sellers shall continue to collect all
debts owed to it in a manner consistent with the practices
which it applied prior to the date of this Agreement and with-
out limitation shall not except in accordance with such prac-
tices (or as agreed in writing by the Purchaser) (i) settle,
compromise or cancel any debt on terms inconsistent with its
normal practices, (ii) offer any debtor or lessee of a Con-
tainer or Chassis any discount for prompt or early payment,
(iii) refrain or withhold from seeking to collect any trade
debt pursuant to the Sellers' normal collection practices, (iv)
endeavor to collect trade debts which have been outstanding for
periods of less than 90 days ahead of and to the detriment of
trade debts overdue for more than 90 days.
ARTICLE X
SECTION 10.
POST-CLOSING TRANSITION
SECTION 10.1. Transitional Services Agreement. Sub-
ject to the terms and conditions of this Agreement, at the
Closing the Company and an Affiliate of the Purchaser will en-
ter into the Transitional Services Agreement.
SECTION 11.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
SECTION 11.1. Survival of Representations and War-
ranties. The representations and warranties made in this
Agreement shall survive for two years after the Closing hereun-
der other than the representations and warranties set forth in
Sections 3.21 and 3.24, which shall survive until expiry of the
relevant limitation period under applicable law. The repre-
sentations and warranties referred to in the preceding sentence
shall automatically terminate upon the expiration of the ap-
plicable survival period, except that if a claim shall have
been made for indemnification hereunder in accordance with Sec-
tion 11.4 within such period, the representations and warran-
ties to which such claim relates shall survive until such claim
is disposed of as provided in Article XI, provided such claim
is made in good faith by such Indemnified Party. All cov-
enants and agreements contained in this Agreement shall survive
Closing.
SECTION 11.2. Statements as to Representations. All
statements contained herein or in the Disclosure Letters or in
the Exhibits thereto delivered pursuant hereto (except as spe-
cifically stated) shall be deemed representations and warran-
ties within the meaning of Sections 7.1, 8.1, 11.1, 11.3 and
11.6 hereof.
SECTION 11.3. Agreement to Indemnify by the Sellers.
(a) Subject to the conditions and provisions herein set forth,
the Sellers, jointly and severally, shall indemnify, defend and
hold harmless the Purchaser and each Affiliate of the Purchaser
and each Associate, director, employee or agent of any of them
(an "Indemnified Party") from and against all demands, claims,
actions or causes of action, assessments, losses, damages, li-
abilities, costs and expenses, including, without limitation,
interest, penalties and attorneys' fees and disbursements, as-
serted against or imposed upon or incurred by an Indemnified
Party resulting from (i) a breach of any then surviving repre-
sentation or warranty of any of the Sellers contained in or
made pursuant to this Agreement (other than any such breach of
any representation or warranty which refers to the "business
prospects" of the Container Operations or the Sale Assets, to
the extent such breach is attributable to the "business pros-
pects" not being as warranted), (ii) save in respect of the
Overseas Properties as set out in Section 6.9 any obligation,
responsibility, claim or liability of or against the Sellers
(including, without limitation, any indemnification or similar
arrangement under any lease), whether known or unknown, contin-
gent, absolute or otherwise, existing prior to, on or after the
Closing or resulting from actions taken or events occurring
prior to, on or after the Closing, other than Assumed Li-
abilities, (iii) any claim (including interest, additions to
tax and penalties) asserted against an Indemnified Party with
respect to any Taxes levied against or relating to the Sale
Assets, including the leasing of the Containers or Chassis, in
respect of any period ending on or prior to the Closing, or in
respect of any Taxation payable by the Sellers or their Affili-
ates, (iv) the ownership by the Sellers or any of their Affili-
ates of the Sale Assets, including the Owned Containers and the
Owned Chassis, and the conduct by the Sellers or any of their
Affiliates of the Container Operations other than Assumed Li-
abilities, (v) any breach or default by the Sellers (or any of
them) or any of their Affiliates of any of their covenants or
agreements contained herein or in any Ancillary Document, (vi)
any breach of any Environmental Law or Environmental Permit
arising out of the Container Operations or any circumstances
relating to the Container Operations prior to the Closing Date,
(vii) the presence of any Hazardous Substance in, on or under
any of the Sale Assets or migrating thereto or therefrom, in
any case at or prior to Closing, (viii) (except as referred to
in (vii), any acts or omissions, or circumstances existing at
or prior to Closing, which give rise to Environmental Concerns
in relation to the Container Operations or any of the Contain-
ers or Chassis or other Sale Assets or activities carried on
from them at or prior to Closing, (ix) any work carried out by
or on behalf of the Purchaser which is reasonably required to
avoid, mitigate, abate or prevent any Loss which is the subject
matter of (vii) or (x), (x) subject to subsection (e) of this
Section 11.3, any loss suffered by the Purchaser as a result of
any person who is, as at the Closing Date, treated by the Sell-
ers and the Purchaser as being a lessee under a valid Operating
Lease, not having entered into properly executed lease documen-
tation with any of the Sellers, or (xi) any liability or obli-
gation to any employee or to any agent of Sellers or any of
their Affiliates arising prior to the Closing Date (col-
lectively, "Damages") (whether or not any such matter is or has
been referred to or described in the Sellers' Disclosure Let-
ter, any supplement thereto or any other document or state-
ment). In the event that the Purchaser has a legal claim
against any third parties with respect to the Damages claimed,
the Purchaser shall use reasonable endeavours to pursue any
such rights against such third parties. If any Damages are
paid to the Purchaser pursuant to this Section, the Sellers
shall be subrogated to the rights of the Purchaser against any
such third party.
(b) The Sellers shall indemnify and keep indemnified
the Purchaser and its Affiliates against any claims, demands,
orders, damages, awards or judgments for or relating to redun-
dancy payments, protective awards, racial or sexual discrimina-
tion, wrongful dismissal or unfair dismissal, personal injuries
or work-related illnesses, any matter arising out of the Ben-
efit Plans or (without limitation) any other breach or claimed
breach of contract, in each case, in connection with the em-
ployment or former employment of any of the Employees (other
than following the Closing Date) or of any employee of any of
the Sellers or their Affiliates who is not an Employee: (i) by
the Sellers or their Affiliates or (ii) which relate to or
arise out of any act or omission by the Sellers or their Af-
filiates prior to the Closing Date; and expenses reasonably
incurred by the Purchaser in settling, contesting or dealing
with any such claim referred to in (i) or (ii) above.
(c) Notwithstanding any other provision of this
Agreement (but subject always to the Purchaser's ability to
claim against sums standing to the credit of the Escrow Ac-
counts in accordance with the terms of the Escrow Agreement and
this Agreement), Sellers' liability for indemnification hereun-
der shall be limited to the aggregate amount paid by the Pur-
chaser to the Sellers under this Agreement and to the Escrow
Agent under the Escrow Agreement.
(d) For the avoidance of doubt, (i) the Sellers
and the Purchaser acknowledge and agree that the Sellers shall
not be liable for indemnification under this Section 11.3 in
respect of (but only to the extent of) any Claim for any item
for which an accrual has been made on the Initial Adjusted Net
Assets Statement, if made on or prior to the date the Final
Purchase Price has been determined in accordance with Section
1.4, and the Final Adjusted Net Assets Statement, if made fol-
lowing the date the Final Purchase Price has been determined,
provided, however, that to the extent that the liability in
respect of any item for which an accrual has been so made ex-
ceeds the amount of any such accrual, the Purchaser shall not
be limited in its ability to seek indemnification for any such
excess hereunder and (ii) the Purchaser shall not be pre-
cluded from asserting claims for indemnification hereunder fol-
lowing the date the Final Purchase Price has been determined.
(e) The Sellers shall not be liable to indemnify the
Purchaser under subsection (a)(x) of this Section 11.3 (i) to
the extent that the loss arises from the non-payment of rent
under an Operating Lease; or (ii) for the costs of repairs to
a Container or Chassis to which such subsection (a)(x) applies,
provided that the lessee has paid some but not all of the re-
pair costs.
SECTION 11.4. Notification Procedure. In the event
of any claim by the Purchaser under this Article XI, the Pur-
chaser shall notify the Company in writing of such claim, which
notice shall set forth the basis of the claim for Damages and,
if then reasonably determinable by the Purchaser, an estimate
of the amount thereof, provided that the failure by the Pur-
chaser to give such notice promptly shall not relieve the Sell-
ers of their obligations hereunder, except to the extent the
Sellers are materially prejudiced thereby.
SECTION 11.5. Indemnification Procedure. The obli-
gations and liabilities of the Sellers under Section 11.3
hereof with respect to claims for Damages resulting from the
assertion of liability by third parties ("Third Party Claims")
shall be subject to the following:
(a) Upon notice of any Third Party Claim asserted or
imposed upon or incurred by an Indemnified Party, subject to
Section 11.5(c), the Sellers will undertake the defense thereof
by counsel of their own choosing reasonably satisfactory to the
Indemnified Party.
(b) In the event that the Sellers, within 30 days
after notice of any such Third Party Claim, fail to notify the
Purchaser of their intention to defend or fail to defend within
a reasonable time thereafter, the Purchaser or such Indemnified
Party will have the right to undertake the defense of such
Third Party Claim for the account of the Sellers, jointly and
severally, subject to the right of the Sellers to assume the
defense of such Third Party Claim with counsel reasonably sat-
isfactory to the Indemnified Party.
(c) Anything in the Section 11.5 to the contrary
notwithstanding, the Sellers shall not, without the Purchaser's
written consent, settle or compromise any Third Party Claim or
consent to entry of any judgment (i) which does not include as
an unconditional term thereof the release by the claimant or
the plaintiff of all Indemnified Parties from all liability in
respect of such Third Party Claim or (ii) which includes in-
junctive or equitable remedies against the Purchaser or any
Indemnified Party.
(d) With respect to any Third Party Claim as to
which the Sellers shall have assumed the defense, the Indemni-
fied Party shall have the right to participate therein and re-
tain its own counsel at its own expense unless (i) any of the
Sellers shall have agreed in writing to pay the expense of re-
taining such counsel by such Indemnified Party or (ii) the
named parties to any such action, suit or proceeding (including
impleaded parties) include both such Indemnified Party and one
or more of the Sellers, their respective Affiliates and Associ-
ates, and representation of such parties by the same counsel
would, in the view of the Indemnified Party, be inappropriate
due to actual or potential conflicting defenses, and in either
such case, such separate counsel may be retained by such Indem-
nified Party at the Sellers' expense.
(e) The Purchaser shall make reasonably available to
the Sellers, at the Sellers' expense, any of the personnel of
Purchaser reasonably required by Seller in anticipation of,
preparation for, or the conduct of, existing or future litiga-
tion or other matters in which Sellers are involved.
SECTION 11.6. Agreement to Indemnify by the Pur-
chaser. (a) Subject to the conditions and provisions herein
set forth, the Purchaser hereby agrees to indemnify, defend and
hold harmless the Sellers and each of their Affiliates and each
Associate, director, employee and agent of any of them (an "In-
demnified Party") from and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest,
penalties and attorneys' fees and disbursements, asserted
against or imposed upon or incurred by any then Indemnified
Party resulting from (i) a breach of any surviving representa-
tion or warranty of the Purchaser contained or made in this
Agreement; (ii) any failure to perform or assume any Assumed
Liability; or (iii) the ownership by the Purchaser or its Af-
filiates of the Owned Containers and Owned Chassis and the con-
duct by the Purchaser of the leasing of the Containers and
Chassis after the Closing, except to the extent resulting from
a breach of any representation, warranty, covenant or agreement
made by Sellers hereunder or under the Ancillary Documents or
out of any breach or non-performance on the part of any Seller
or Affiliate thereof (save to the extent that the breach or
non-performance results directly from a breach or non-
performance of the Purchaser's obligations to the Seller) of
any agreement, covenant or obligation to which it is a party or
by which it is obligated, or out of any failure by the Sellers
to comply with any law, rule, regulation or other requirement
of Government Authority; or (iv) any breach or default by the
Purchaser of any of its covenants or agreements contained
herein or in any Ancillary Document, except to the extent re-
sulting from a breach of any representation, warranty, covenant
or agreement made by Sellers hereunder or under any such other
agreements (save to the extent that the breach or non-
performance results directly from a breach or non-performance
of the Purchaser's obligations to the Seller) (collectively,
"Damages"). The procedures set forth in Sections 11.4 and
11.5 shall apply to this Section 11.6, except that the Pur-
chaser shall have the rights and obligations of the Sellers,
and the Sellers shall have the rights and obligations of the
Purchaser, set forth in such Section.
(b) The Purchaser shall indemnify and keep indemni-
fied the Sellers and their Affiliates against any claims, de-
mands, orders, damages, awards or judgments for or relating to
redundancy payments, protective awards, racial or sexual dis-
crimination, wrongful dismissal or unfair dismissal, personal
injuries or work-related illnesses, any matter arising out of
any breach or claimed breach of contract in connection with the
employment of any of the Employees (other than prior to and
including the Closing Date): (i) by the Purchaser or its Af-
filiates or (ii) which relate to or arise out of any act or
omission by the Purchaser or its Affiliates following the Clos-
ing Date; and expenses reasonably incurred by the Sellers in
settling, contesting or dealing with any such claim referred to
in (i) or (ii) above.
SECTION 11.7. Treatment of Indemnity Payments. In-
demnity payments made by the Sellers to the Purchaser pursuant
to Section 11.3(a)(i) shall be treated as a reduction in the
consideration for the Sale Assets. Indemnity payments made by
the Purchaser to the Sellers pursuant to Section 11.6(i) shall
be treated as an increase in the purchase price.
SECTION 11.8. Limitation on Recovery in Respect of
Shareholder Circular and Offer. (a) Notwithstanding anything
in this Article XI to the contrary, the Purchaser acknowledges
and agrees that, from and after the Closing Date (but not prior
to the occurrence of the Closing), the Purchaser's right to
assert a claim for indemnification under this Article XI or for
breach of contract under Article III in either case in respect
of the representations and warranties set forth in Section 3.25
of this Agreement shall be limited to those circumstances in
which a third party not affiliated with the Sellers has as-
serted a Claim against the Purchaser or any of its Affiliates
which relates directly or indirectly to the transactions con-
templated by this Agreement. For the avoidance of doubt, the
Purchaser and the Sellers agree that the limitations on
Purchaser's rights set forth in the immediately preceding sen-
tence shall not be of any force and effect unless and until the
Closing shall have occurred.
(b) Notwithstanding anything in this Article XI to
the contrary, the Purchaser and the Seller acknowledge and
agree that, prior to the Closing Date , the damages that the
Purchaser may recover in respect of the representations and
warranties set forth in Section 3.25 of this Agreement shall be
limited to pound sterling 25 million, in the case of any
misstatement of material fact or omission of material fact in the
Shareholder Circular or the Offer, as amended or supplemented,
unless such misstatement of material fact or omission of a
material fact is intentional, in which case the Purchaser's damages
shall not be so limited.
SECTION 11.9. Limitation on Recovery in Respect of
Location of Containers Chassis. Notwithstanding anything in
this Article XI to the contrary, the Purchaser acknowledges and
agrees that its right to recover Damages in respect of the
Seller's representation and warranty in Section 3.5(a) of this
Agreement relating to the location of any Container or Chassis
as of the Closing Date shall be limited to the Purchaser's rea-
sonable costs of locating or finding any Container or Chassis
with respect to which such representation or warranty is
breached and shall not include any repositioning costs incurred
by the Purchaser in respect of any such Container or Chassis.
SECTION 12.
ARTICLE XII
TERMINATION AND ABANDONMENT; CERTAIN PAYMENTS
SECTION 12.1. Methods of Termination. The transac-
tions contemplated herein may be terminated and/or abandoned at
any time, but not later than the Closing:
(a) By mutual consent of the Purchaser and the Com-
pany;
(b) By the Purchaser (i) on or after 1 May, 1994, if
any of the conditions provided for in Article VIII of this
Agreement shall not have been met or waived in writing by the
Purchaser prior to such date, unless such failure is due to the
act or failure to act of the Purchaser, (ii) if the Company
fails to, resolves not to, announces that it intends not to, or
withdraws or changes in any manner adverse to Purchaser its
decision to, recommend to its shareholders approval of the Pro-
posal or recommends any proposal inconsistent with the Proposal
or such recommendation or the Company fails to convene or fails
to cause to be held the shareholders meeting on or before March
15, 1994 for the purpose, among other things, of voting on the
Proposal, or (iii) this Agreement shall not have been approved
by the shareholders of the Company;
(c) By the Company on or after 1 May 1994, if any of
the conditions provided for in Article VII of this Agreement
shall not have been met or waived in writing by the Company
prior to such date, unless such failure is due to the act or
failure to act of the Sellers or the Company;
(d) By notice from the Purchaser or the Company, as
the case may be, of any material default hereunder by any of
the Sellers (in the case of a notice from the Purchaser) or the
Purchaser (in the case of a notice from the Company) and the
continuance thereof for ten days after notice thereof has been
received; or
(e) By the Purchaser if any representation or war-
ranty made by the Sellers in this Agreement, other than those
made in Sections 3.1(b), 3.14, 3.16, 3.17, 3.20(a), (b), (d),
(e) and (g), 3.28, 3.30(a) and 3.33 if made as of any date be-
tween the date hereof and the Closing Date, would not have been
true in any material respect if such representation or warranty
had been made by the Sellers on and as of any such date pro-
vided that the Purchaser may not terminate this Agreement by
reason of those representations or warranties in Sections 3.10,
3.17, 3.21(a), 3.25 being untrue in respect of the Overseas
Properties and the UK Properties or by reason of the represen-
tation in Section 3.5 relating to title defects being untrue in
respect of the Overseas Properties and the UK Properties. The
Sellers shall have the duty to promptly inform the Purchaser if
any such representation or warranty of Sellers herein shall
cease to be true in any material respect on and as of any date
between the date hereof and the Closing Date.
SECTION 12.2. Procedure Upon Termination; Effect of
Termination. In the event of termination and abandonment pur-
suant to Section 12.1 hereof, written notice thereof shall
forthwith be given to the other parties and the transactions
contemplated by this Agreement shall be terminated and aban-
doned, without further action by the parties hereto, except as
provided below. If the transactions contemplated by this
Agreement are terminated and abandoned as provided herein pur-
suant to Section 12.1, then:
(a) Each party will redeliver all documents, work
papers and other material of any other party (including all
copies) relating to the transactions contemplated hereby, pre-
pared or obtained after the execution hereof, to the party fur-
nishing the same;
(b) All confidential information and documentation
received by the Purchaser with respect to the Sale Assets and
the Container Operations shall be treated in accordance with
the Confidentiality Agreement; and
(c) No party hereto shall have any liability or fur-
ther obligation to any other party to this Agreement except (i)
as provided in Section 13.3, (ii) in respect of breaches of
this Agreement occurring prior to termination of this Agreement
and (iii) if applicable, as provided in the Confidentiality
Letter, the Exclusivity Letter (as extended herein) and the
Break Fee Letter.
SECTION 13.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment and Modification. Subject
to applicable law, this Agreement may be amended, modified and
supplemented by written agreement of the Sellers and the Pur-
chaser at any time prior to the Closing with respect to any of
the terms contained herein.
SECTION 13.2. Waiver of Compliance. Any failure of
the Sellers, on the one hand, or the Purchaser, on the other,
to comply with any obligation, covenant, agreement or condition
herein may be expressly waived on behalf of the Purchaser, in
writing by its Chairman of the Board, President or any Vice
President and, on behalf of the Sellers, in writing by the
Chairman or any Executive Director of the Company. Any such
waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or
other failure. The Purchaser's execution of this Agreement
shall not be deemed to be a waiver of any rights or claims of
the Purchaser hereunder as a result of any breach or alleged
breach by the Sellers or any of their Affiliates of any repre-
sentation, warranty or covenant contained herein prior to the
execution of this Agreement.
SECTION 13.3. Expenses; Transfer Taxes. Except as
otherwise expressly provided in this Agreement, whether or not
the transactions contemplated by this Agreement shall be con-
summated, the Sellers agree that all fees and expenses incurred
by them in connection with this Agreement shall be borne by the
Sellers and the Purchaser agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne
by the Purchaser, including, without limitation, all fees of
counsel, actuaries and accountants. The Sellers and the Pur-
chaser each agree to pay fifty percent (50%) of any other simi-
lar tax payable in the United Kingdom and any sales, stamp,
transfer or other similar taxes which may be payable in connec-
tion with the execution, delivery and performance of this
Agreement and the Ancillary Documents, and sale and transfer of
the Sale Assets.
SECTION 13.4. Value Added Tax. (a) The Sellers and
the Purchaser hereby declare that the sale of the Container
Operations and Sale Assets pursuant to this Agreement is the
transfer of a business as a going concern for the purposes of
section 33 VATA and article 5(1)(a) SPO ("TOGC").
(b) The Purchaser shall be under no obligation to
dispute or appeal (or assist in the dispute or appeal by any of
the Sellers) to any court or tribunal against any determination
of HM Customs and Excise that the transfer is not a TOGC
(including without limitation any application for judicial
review).
(c) Where notwithstanding Section 13.4(a) the trans-
fer of the Sale Assets involves a taxable supply or supplies,
all consideration payable by the Purchaser to the Sellers (or
any of them) in respect of any taxable supply or supplies under
or pursuant to this Agreement shall be inclusive of VAT and
subject only to section 13.4(d), the Purchaser shall not be
liable on any account whatsoever to pay to the Sellers or any
of them any additional amount in respect of VAT. Nothing
herein shall be construed to suggest that VAT is not payable
under the Transitional Services Agreement or the Buckingham
Palace Road Sub-sub-underlease
(d) If, notwithstanding Section 13.4(a), any of the
Sellers issues to the Purchaser a valid and proper tax invoice
for VAT purposes in respect of a supply or supplies referred to
in (c) above, and the Purchaser actually recovers all or any
part of such VAT, the Purchaser will, if and when it is com-
pletely satisfied that such recovery is absolute and the ben-
efit thereof cannot be withdrawn or otherwise clawed-back in
any manner whatsoever), pay to the Sellers or the relevant
Seller an amount equal to the VAT as recovered. The Purchaser
shall be under no obligation whatsoever to pursue any recovery
in respect of such VAT and shall not be liable in any circum-
stances whatsoever if it pursues such recovery but fails to
obtain it or the recovery is delayed for any reason. For the
purpose of this clause, VAT shall be treated as recovered on
the later of the date upon which the VAT in question is repaid
unconditionally by HM Customs to the Purchaser in cash or the
date upon which the Purchaser obtains and HM Customs agree that
the Purchaser is entitled to credit in full for the VAT as in-
put tax deductible from output tax for which the Purchaser is
liable to account and would, but for such input tax, be re-
quired to pay to HM Customs. The entitlement to credit shall
not arise at the earliest until 30 days after the end of the
prescribed accounting period for VAT purposes for which a re-
turn is made to HM Customs claiming the deduction.
SECTION 13.5. Notices. All notices, requests, de-
mands and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given
if delivered by hand or mailed, certified or registered mail
with postage prepaid or communicated by facsimile transmission
(receipt confirmed) or by tested telex:
(a) If to the Sellers, to:
Tiphook plc
123 Buckingham Palace Road
London SW1W 9TG
England
Attention: Company Secretary
Fax No: 071-396-7957
with a copy to:
Freshfields
65 Fleet Street
London EC4Y 1HS
ENGLAND
Attention: James Davis
Fax No: 071-832-7001
Cravath, Swaine & Moore
825 Eighth Avenue
New York, N.Y. 10019
U.S.A.
Attention: James M. Edwards
Fax No: (212) 474-3700
or to such other person or address as the Sellers shall furnish
to the Purchaser in writing.
(b) If to Purchaser:
Transamerica Container Acquisition Corporation
100 Manhattanville Road
Purchase, New York 10577
U.S.A.
Attn: General Counsel
Fax No.: (914) 697-2526
with a copy to:
Transamerica Corporation
600 Montgomery Street
San Francisco, California 94111
U.S.A.
Attention: General Counsel
Fax No.: (415) 983-4164
Berwin Leighton
Adelaide House
London Bridge
London EC4R 9HA
England
Attention: Daniel P. Rosenberg
Fax No.: 071-623-4416
Wachtell, Lipton, Rosen & Katz
51 West 52 Street
New York, NY 10019
Attention: Daniel A. Neff
Fax No.: (212) 403-2000
or such other person or address as the Purchaser shall furnish
to the Company in writing.
SECTION 13.6. Assignment. This Agreement and all of
the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be as-
signed by any of the parties hereto without the prior written
consent of the other parties, except (a) by operation of law,
and (b) that the Purchaser may be substituted, for any or all
purposes under this Agreement, by one or more Affiliates of the
Purchaser. If any such substitution shall be made by any Af-
filiate of the Purchaser, such Affiliate shall be entitled to
such of the rights and shall assume such of the obligations of
the Purchaser hereunder as the Purchaser shall provide, pro-
vided that the Purchaser shall remain personally liable for the
performance of the Purchaser's obligations under this Agree-
ment. The Purchaser shall be liable to the Sellers for any
increased out-of-pocket expenses to the Sellers resulting from
such assignment.
SECTION 13.7. Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of
England applicable to agreements to be performed wholly within
England.
SECTION 13.8. Submission to Jurisdiction. Each of
the parties hereto irrevocably submits to the nonexclusive ju-
risdiction of the courts of England, and hereby waives any ob-
jections it may have to such jurisdiction on the grounds of
lack of personal jurisdiction of any such court or the laying
of venue of any such court or on the basis of forum non-
conveniens or otherwise. The Purchaser hereby designates
Transamerica Leasing Limited Roding House, Two Cambridge Road,
Barking, Essex, IG11 8NL, England as agent for service of pro-
cess. Each of the Sellers which is not incorporated in the
United Kingdom hereby designates Tiphook plc as agent for ser-
vice of process.
SECTION 13.9. Counterparts. This Agreement may be
executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
SECTION 13.10. Headings. The headings of the Sec-
tions and Articles of this Agreement are inserted for conve-
nience only and shall not constitute a part thereof or affect
in any way the meaning or interpretation of this Agreement.
SECTION 13.11. Entire Agreement. (a) This Agree-
ment, including the Exhibits hereto, the Sellers' Disclosure
Letter, the Purchaser Disclosure Letter and the other documents
and certificates delivered pursuant to the terms hereof, the
Confidentiality Agreement, the Exclusivity Letter and the Break
Fee Letter set forth the entire agreement and understanding of
the parties hereto in respect of the subject matter contained
herein, and supersede all prior agreements, promises, cov-
enants, arrangements, communications, representations or war-
ranties, whether oral or written, by any officer, employee or
representative of any party hereto. The Company agrees that
(for itself and on behalf or its Affiliates), after the Closing
Date, the Confidentiality Agreement (other than in respect of
any information provided thereunder that relates exclusively to
operations or financial information of the Company or any of
Affiliates which information does not relate to the Container
Operations) shall be null and void and have no further force
and effect to the extent the Confidentiality Agreement relates
to the Purchaser or any of its Affiliates.
(b) The rights and remedies of the Purchaser in re-
spect of any breach of any warranty, representation or covenant
in this Agreement shall not be affected by the Closing, by any
investigation made by or on behalf of the Purchaser or any of
its Affiliates into the affairs of the Sellers, the Company or
any of their Affiliates, by the Purchaser terminating or fail-
ing to terminate this Agreement or by any other event or matter
whatsoever except a specific and duly authorized written waiver
or release.
SECTION 13.12. Third Parties. Except as specifi-
cally set forth or in Article XI with respect to Indemnified
Parties, nothing herein expressed or implied is intended to be
construed to confer upon or give to any person or corporation,
other than the parties hereto and their successors or assigns,
any rights or remedies under or by reason of this Agreement.
SECTION 13.13. Bulk Transfers. The parties hereto
agree that they will comply with the bulk transfer provisions
of Article 6 of the Uniform Commercial Code in connection with
the sale of the Sale Assets to the Purchaser, including, with-
out limitation, any requirements relating to notification of
creditors of the Sellers or of any other third parties to whom
the Purchaser reasonably requests that notice of the Sale As-
sets be given.
SECTION 13.14. Joint and Several Liability; Non-
Party Sellers. All obligations of the Sellers hereunder are
joint and several, and may be enforced against any one or more
of the Sellers whether or not enforced against any other such
party. In the event that the Company or any Affiliate of the
Company which is not a Seller hereunder owns any Sale Assets,
the Company agrees that it shall, or shall cause such Affiliate
to, perform all of the obligations of a "Seller" hereunder with
respect to such Sale Assets and each representation and war-
ranty made by the Sellers with respect to a Seller shall also
be construed as a representation and warranty of the Company
with respect to such Affiliate, as though it were a "Seller"
hereunder.
SECTION 13.15. Representative. (a) Each of the
Sellers undertakes with the Company to take all action required
under this Agreement and the Ancillary Documents or which may
otherwise be required by the Company in connection therewith.
(b) Each of the Sellers hereby constitutes and ap-
points the Company, acting alone, as its true and lawful at-
torney to perform on its behalf all acts which by the provi-
sions of this Agreement or the Ancillary Documents are to be
performed by it; to execute and give on its behalf all no-
tices, requests, consents, amendments, designations, receive
payments and give receipts, demands and other communications
required or permitted to be given by it hereunder or under the
Ancillary Documents and to receive on its behalf all notices,
requests, consents, amendments, demands and other communica-
tions to it hereunder or thereunder; to exercise all rights
hereunder and under any Ancillary Documents on its behalf; and
generally to act for such Seller and on such Seller's behalf in
all matters connected with this Agreement and the Ancillary
Documents as fully and with the same force and effect as such
Seller might act in person. The powers of attorney granted by
the Sellers under this Section 13.15(b) are given by way of
security for the obligations of the Sellers under Section
13.15(a) and shall be irrevocable in accordance with section 4
of the Powers of Attorney Act 1971.
SECTION 13.16. Invalidity. If any term or provision
in this Agreement or the Ancillary Documents shall in whole or
in part be held to any extent to be illegal or unenforceable
under any enactment or rule of law, that term or provision or
part shall to that extent be deemed not to form part of this
Agreement or such documents and the enforceability of the re-
mainder of this Agreement or the Ancillary Documents shall not
be affected.
IN WITNESS WHEREOF, the Purchaser and TFC have caused
this Agreement to be duly executed, under hand and the Sellers
have caused this Agreement to be executed as a deed and deliv-
ered all on the day and year first above written.
Sealed with the common seal of
TIPHOOK plc
in the presence of:
N H SMITH
Director
C A PALMER
Director
Sealed with the common seal of
TIPHOOK CONTAINER RENTAL COMPANY
LIMITED
in the presence of:
C A PALMER
Director
N H SMITH
Secretary
Sealed with the common seal of
TFS EQUIPMENT LEASING LIMITED
in the presence of:
N H SMITH
Director
C A PALMER
Director
Sealed with the common seal of
TFS LEASING LIMITED
in the presence of:
N H SMITH
Duly authorised
C A PALMER
Duly authorised
Sealed with the common seal of
TIPHOOK CONTAINER RENTAL
(AUSTRALASIA) LTD.
in the presence of:
N H SMITH
Duly authorised
C A PALMER
Duly authorised
Executed as a Deed by
TIPHOOK CONTAINER RENTAL
(SOUTH AMERICA) LTDA.
acting by:
N H SMITH
Duly authorised
C A PALMER
Duly authorised
Sealed with the common seal of
TIPHOOK CONTAINER RENTAL
(HONG KONG) LTD.
in the presence of:
N H SMITH
Director
C A PALMER
Secretary/Director
Executed as a deed by
TIPHOOK CONTAINER RENTAL S.R.L.
acting by:
N H SMITH
Duly authorised
C A PALMER
Duly authorised
Executed as a deed by
TIPHOOK CONTAINER RENTAL
(SINGAPORE) PTE. LTD.
acting by:
N H SMITH
Director
C A PALMER
Director
Sealed with the corporate seal of
TIPHOOK CONTAINER RENTAL INC.
in the presence of:
N H SMITH
Duly authorised
C A PALMER
Duly authorised
Sealed with the common seal of
TIPHOOK FINANCIAL SERVICES
LIMITED in the presence of:
N H SMITH
Director
C A PALMER
Director
TRANSAMERICA CONTAINER
ACQUISITION CORPORATION
By ANTONY GROSSMAN
Attorney on behalf of
Transamerica Container
Acquisition Corporation
TRANSAMERICA FINANCE CORPORATION
(For purposes of Sections 4.1,
4.2, 4.3 and 4.7 only)
By ANTONY GROSSMAN
Attorney on behalf of
Transamerica Container
Acquisition Corporation
AMENDMENT AND SUPPLEMENT TO ASSET PURCHASE AGREEMENT
AMENDMENT AND SUPPLEMENT TO ASSET PURCHASE AGREEMENT
dated March 15, 1994 (this "Agreement"), amending and
supplementing the Asset Purchase Agreement dated February 13,
1994 (the "Asset Purchase Agreement") by and among Tiphook plc,
Tiphook Container Rental Company Limited, TFS Equipment Leasing
Limited, TFS Leasing Limited, Tiphook Financial Services Limited,
each a company incorporated under the laws of England, Tiphook
Container Rental Inc., a Delaware corporation, Tiphook Container
Rental (Australasia) Ltd., a company incorporated under the laws
of New Zealand, Tiphook Container Rental (South America) Ltda., a
company incorporated under the laws of Brazil, Tiphook Container
Rental (Hong Kong) Ltd., a company incorporated under the laws of
Hong Kong, Tiphook Container Rental S.R.L., a company
incorporated under the laws of Italy, and Tiphook Container
Rental (Singapore) pte Ltd., a company incorporated under the
laws of Singapore, as sellers, and Transamerica Container
Acquisition Corporation, a Delaware corporation, as purchaser,
and, as to Sections 4.1, 4.2, 4.3 and 4.7 hereof, Transamerica
Finance Corporation, a Delaware corporation. Terms used but not
defined herein shall have the meaning ascribed thereto in the
Asset Purchase Agreement.
This Agreement sets forth certain amendments and
supplements to the Asset Purchase Agreement under which, subject
to the satisfaction of certain conditions, the Sellers have
agreed to sell, and the Purchaser has agreed to purchase, assets
of the Sellers' container business, including without limitation
dry cargo and tank containers, and tank chassis and related
assets.
In consideration of the mutual agreements contained
herein, intending to be legally bound hereby, the parties hereto
agree as follows:
SECTION 1. The Asset Purchase Agreement is hereby
amended and supplemented by adding to Article I thereof the
following Section 1.13:
"SECTION 1.13 Further Closing Arrangements. Notwithstanding any
other provision of this Agreement:
(a) On Closing:
(A) the Sellers shall give a direction in the Agreed Form to the
Purchaser to make the payments referred to in Parts A and B
of the payment schedule in the Agreed Form (the "Closing
Payments Schedule"), and the making of such payments by the
Purchaser and the receipt of such payments by the relevant
payees shall discharge the obligations of the Purchaser
under Section 1.4(b) to pay the Initial Purchase Price to
the Sellers and to pay the Purchase Price in Escrow to the
Escrow Agent;
(B) the Purchaser shall (i) make the payments referred to in
Part A of the Closing Payments Schedule and (ii) give
irrevocable instructions in the Agreed Form to its bankers
for the making (either immediately or as soon as normal
banking hours for the relevant currency permit) of the
payments referred to in Part B of the Closing Payments
Schedule;
(C) the Sellers shall give (or procure to be given) irrevocable
instructions in the Agreed Form to their bankers for the
making (either immediately or as soon as normal banking
hours for the relevant currency permit) of the payments
referred to in Part C of the Closing Payments Schedule and
shall procure that such payments are made and received for
value on the Closing Date (or otherwise as required by the
payees).
(b) Save for the element of the payments referred to in the
Closing Payments Schedule which relates to the purchase price
payable to third party lessors in respect of those Sale Assets
the subject of finance leases, including the VAT charged (or
purportedly charged) on such purchase price (the "FL Equipment
Price"), the payments referred to in Section 1.13(a)(B)(ii) shall
be made on behalf of all of the Sellers. The Purchaser shall not
be liable to the Sellers or to any third party for the late
arrival of the payments referred to in Section 1.13(a)(B)(ii),
provided that the irrevocable instructions in respect of those
payments are given on Closing as required by that Section. In
the event that any of the payments referred to in Section
1.13(a)(B)(ii) is not received for value on the Closing Date (or
otherwise by the time agreed with the payee pursuant to the
documents in the Agreed Form relating to certain Sale Assets the
subject of finance leases, hire purchase agreements or charges
(the "Financed Equipment Documentation")), the Sellers shall
immediately pay to the payee any amounts remaining due pursuant
to the relevant Financed Equipment Documentation (including,
without limitation, all interest accrued) and shall indemnify the
Purchaser against all additional costs, claims and expenses
incurred as a result of such late receipt or non-receipt by the
payee. The Sellers confirm and undertake that the bank account
of Tiphook Finance Corporation numbered 273264.01 with Swiss Bank
Corporation shall have a nil balance immediately before the
receipt of the payment made by Transamerica Container Acquisition
II Corporation into that account and that all funds in that
account, from whatever source, will be transferred to the account
of The First National Bank of Boston for the benefit of Tiphook
Finance Corporation.
(c) Notwithstanding Section 1.2(a), the parties agree that
legal and beneficial title to those of the Sale Assets referred
to in Financed Equipment Documentation which are expressed to be
subject to finance leases (the "FL Sale Assets") shall be
conveyed to the Purchaser by the relevant finance lessors
pursuant to the Financed Equipment Documentation (and not by the
Sellers, but free of any right, title or interest of the
Sellers). The Sellers shall on Closing deliver or procure the
delivery to the Purchaser of the Financed Equipment Documentation
duly executed by all parties (other than the Purchaser), together
with the invoices for VAT from the relevant finance lessors
selling the FL Sale Assets (such invoices being valid and proper
invoices for VAT purposes assuming all the sales are supplies of
goods in the United Kingdom), in lieu of the Sellers' obligations
to convey legal title to the FL Sale Assets to the Purchaser on
Closing. The Purchaser shall, where appropriate, deliver
counterparts of such documentation duly executed by the Purchaser
to the Sellers on Closing or as soon as practicable following
Closing (in the case of any documentation to be delivered to the
relevant finance lessors). The Purchaser acknowledges to the
Sellers that the Purchaser shall not receive legal and beneficial
title free from all liens, charges and encumbrances to those Sale
Assets which are the subject of the Financed Equipment
Documentation until the receipt by the relevant payees of the
payments to be made to them in respect of the particular Sale
Assets pursuant to Section 1.13(a)(B)(ii). The Purchaser
acknowledges to the Sellers that the Sellers' obligation to
deliver title in accordance with the terms of this Agreement to
those Sale Assets which are the subject of the Financed Equipment
Documentation will be discharged by delivery of the Financed
Equipment Documentation executed as set forth in this paragraph
and (in the case of Sale Assets subject to charges) by the
delivery of such Sale Assets either at Closing or (in the case of
Sale Assets subject to hire purchase agreements) at the time that
the relevant Seller itself acquires title.
(d) For the avoidance of doubt, the FL Sale Assets shall
remain Sale Assets for the purposes of this agreement and,
without limitation:
(A) they shall continue to be treated as Sale Assets for the
purposes of the Applicable Accounting Principles; and
(B) all warranties, representations and indemnities of the
Sellers relating to the Sale Assets shall continue to apply
to the FL Sale Assets (but save that reference to the title
to such assets shall be construed so as to recognise that
such title is to be conveyed to the Purchaser from the
relevant finance lessors rather than from the Sellers).
(e) The Sellers have agreed to bear the cost of any VAT
charged or purportedly charged in respect of the sale of the FL
Sale Assets to the extent that the Purchaser does not recover it.
The aggregate amount of the VAT included within the FL Equipment
Price has however been deducted from the amount to be paid to the
Escrow Agent on Closing in respect of the General Escrow Account.
(f) The Purchaser shall use all reasonable endeavours to
recover from HM Customs & Excise the VAT paid to the finance
lessors as part of the FL Equipment Price as soon as practicable
and the Sellers shall use all reasonable endeavours to assist the
Purchaser in the making of such a claim for the repayment of such
VAT. Whilst the Purchaser shall be under no obligation to incur
any costs (unless the Sellers (i) request that costs be incurred
and (ii) advance to the Purchaser the funds necessary to pay such
costs) in seeking recovery or entering into any dispute with HM
Customs and Excise (or any other fiscal authority) or making any
appeal to any court or tribunal in relation to the recovery of
the VAT, the Sellers shall indemnify and keep indemnified the
Purchaser on demand against any reasonable costs, claims and
expenses which it shall in fact incur in seeking recovery.
Section 13.4(d) shall apply for the purposes of Section 1.13(e)
and (f) in relation to the VAT charged or purportedly charged in
respect of the sale of the FL Sale Assets as it would apply
mutatis mutandis to any VAT charged by the Sellers to the
Purchaser. Any such VAT recovered by the Purchaser shall be paid
by the Purchaser forthwith into the General Escrow Account and
shall become part of the General Escrow (or, in the event that
the repayment is received after the date on which, pursuant to
Section 1.4(b), the remaining sums held in the General Escrow
Account are to be (or would be, but for the exhaustion of that
account) paid to the Sellers, such recovered VAT shall be paid
to the Sellers).
(g) Each of the Sellers shall procure statutory memoranda
of satisfaction to be sworn in respect of each outstanding charge
appearing as at Closing on the file relating to them maintained
by the Registrar of Companies and which relates (or could relate)
to any of the Sale Assets, immediately on being reasonably
satisfied that the relevant payment referred to in Part B of the
Closing Payments Schedule which is being made to (or to the order
of) the person having the benefit of such charge (a "Discharging
Payment") has been received as required by the relevant Financed
Equipment Documentation with that person (or otherwise that the
charge has been satisfied). For the purposes of this Agreement,
the Live Charge Release List in the Agreed Form relates payments
to be made to charges in respect of which memoranda are to be
sworn. The Sellers confirm that, provided that they receive
written confirmation on the Closing Date from the Purchaser's
bankers that they have been informed by the bankers to the
relevant payee that a Discharging Payment has been received, by
the time (or for value) on the Closing Date provided by the
relevant Financed Equipment Documentation, the relevant
memorandum of satisfaction shall be sworn on the Closing Date.
The Sellers shall file each memorandum of satisfaction with the
Registrar of Companies on the Business Day after it is sworn and
shall on the same day provide evidence of such filing to the
Purchaser. The Sellers shall immediately on being reasonably
satisfied that all of the payments referred to in Parts A and B
of the Closing Payments Schedule have been received by the
relevant payees deliver to the Purchaser the receipts in the
Agreed Form in lieu of their obligation in Section 1.6(a)(xxix).
(h) For all purposes of this Agreement, the payment referred
to on the Closing Payments Schedule to be made to the Escrow
Agent at the Closing shall comprise pound sterling 7 million in
respect of the Repairs Escrow and the balance in respect of the
General Escrow."
SECTION 2. The Asset Purchase Agreement is hereby
amended by making the following amendments to the Sections and
pages referred to below:
(i) the definition of "Buckingham Palace Road
Sub-sub-underlease" and the definition of "Sublease for 123
Buckingham Palace Road" on pages 6 and 22 respectively shall
be deleted;
(ii) the words ", the Buckingham Palace Road Sub-sub-underlease"
in Section 1.3(a)(v) shall be deleted;
(iii) Section 1.6(a)(xx) shall be deleted and each of the
following sub-sections in Section 1.6(a) shall be
renumbered accordingly;
(iv) Section 1.6(a)(xxvi) (as renumbered) shall be amended by the
deletion of the words "a duly executed Sublease for 123
Buckingham Palace Road";
(v) Section 1.6(b)(xii) shall be deleted and each of the
following sub-sections in Section 1.6(b) shall be renumbered
accordingly;
(vi) Section 13.4(c) shall be amended by deletion of the words
"the Buckingham Palace Road Sub-sub-underlease" and the
insertion of "any agreement referred to in the Transitional
Services Agreement" in their place.
SECTION 3. The parties acknowledge and agree that the Final
Adjusted Net Assets Statement and the Final Closing Balance Sheet
shall reflect payments and receipts as at midnight on the Closing
Date. Between the time of Closing and midnight on the Closing
Date, the Purchaser agrees that it shall conduct the Container
Operations consistent with the past practice of the Container
Operations.
IN WITNESS WHEREOF, the Purchaser has caused this
Agreement to be duly executed, under hand and the Sellers have
caused this Agreement to be executed as a deed and delivered all
on the day and year first above written.
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK plc in the presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL )
COMPANY LIMITED in the presence of)
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TFS EQUIPMENT LEASING )
LIMITED in the )
presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TFS LEASING LIMITED in the )
presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK FINANCIAL SERVICES )
LIMITED in the presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL INC. )
in the presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL )
(AUSTRALASIA) LTD. in the )
presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL )
(SOUTH AMERICA) LTDA. in the )
presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL )
(HONG KONG) LTD. in the )
presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL S.R.L.)
in the presence of )
Signed as a deed by )
)
(acting as an attorney) on behalf )
of TIPHOOK CONTAINER RENTAL )
(SINGAPORE) PTE. LTD. in the )
presence of )
TRANSAMERICA CONTAINER
ACQUISITION CORPORATION
By
Title
EXHIBIT 12
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991 1990 1989
------ ----- ------ ------ ------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Fixed charges:
Interest and debt expense $414,556 $459,518 $514,230 $620,626 $659,114
One-third of rent expense 18,266 20,095 20,966 22,460 19,670
Total $432,822 $479,613 $535,196 $643,086 $678,784
Earnings:
Income (loss) from continuing operations
before income taxes, extraordinary loss
on early extinguishment of debt in 1993,
and cumulative effect of change in
accounting for post employment benefits
other than pensions in 1991 $218,238 $283,724 $(123,599) $181,104 $285,002
Fixed charges 432,822 479,613 535,196 643,086 678,784
Total $651,060 $763,337 $411,597 $824,190 $963,786
Ratio of earnings to fixed charges 1.50 1.59 0.77 1.28 1.42
</TABLE>
EXHIBIT 23
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-3, Nos. 33-40236 and 33-49763) of Transamerica
Finance Corporation and subsidiaries and in the related
Prospectus of our report dated February 16, 1994, except for Note N,
as to which the date is March 15, 1994, with respect to the
consolidated financial statements and schedules of
Transamerica Finance Corporation and subsidiaries included in the
Annual Report on Form 10-K for the year ended December 31, 1993.
ERNST & YOUNG
Los Angeles, California
March 15, 1994
